A NSW parliamentary committee has delivered a blistering assessment of the Minns Labor Government’s controversial workers’ compensation reforms, accusing it of pursuing “inconceivably lazy and unfathomably cruel measures” that could put psychologically injured workers at risk of self-harm and suicide.

The 162-page report from the Public Accountability and Works Committee, tabled on November 4, reserves its harshest criticism for proposed cuts that would dramatically increase the threshold for workers with psychological injuries to access long-term support and compensation.

Committee chair Greens MLC Abigail Boyd warned that leaving workers with serious psychological injuries without access to required supports “carries a significant risk of self-harm and death by suicide.”

The inquiry examined two pieces of legislation introduced by Treasurer Daniel Mookhey that would fundamentally reshape how NSW handles workplace psychological injury claims, which have doubled over the past six years and now constitute 38 percent of total scheme costs despite representing just 12 percent of claims Lockton.

The Controversial Reforms

At the heart of the controversy is a proposal to dramatically increase the whole-person-impairment (WPI) threshold for psychological injuries. Under the reforms, the threshold for lump sum compensation and extended weekly payments would rise from 15 percent to 25 percent in October 2025, then to 30 percent from July 2026 BPC Lawyers.

The reforms would also:

• Limit compensable psychological injuries to a narrow list of “relevant events” including violence, sexual or racial harassment, bullying, and excessive work demands
• Create a tougher “reasonable management action” defence for employers
• Introduce an expedited eight-week claims assessment process
• Require workers alleging bullying or harassment to first obtain findings from the NSW Industrial Relations Commission

Mookhey has warned that without reform, the state insurer iCare expects an additional 80,000 psychological injury claims over the next five years, and that premiums for claim-free businesses could rise 36 percent by 2027-28 NSW Government.

Committee Findings: “Wilful Distortion”

The committee’s report pulls no punches in its critique. Boyd accused the Treasurer of using misleading statistics to support his case, specifically calling out the government’s repeated reference to 2021-22 claims data as “a wilful distortion of the facts” since that year saw claims numbers drop more than 15 percent due to COVID-19 impacts.

Perhaps most damning, the report contradicts Mookhey’s central justification for the cuts. Boyd noted that despite the Treasurer’s claims that psychologically injured workers with a WPI between 21 and 30 percent are capable of working, evidence showed that “most” injured workers within this range “are not fit to work in any capacity.”

The committee stressed that the answer to the scheme’s sustainability “is not to cut entitlements but rather to handle claims better, starting with treating injured workers not with suspicion and hostility but rather with dignity and respect.”

A Political Backflip?

The report highlighted that when in Opposition, Mookhey and other current Labor Government Ministers “spoke strongly and passionately” against similar amendments because of their likely impact on vulnerable workers.

Chris McCann, a former iCare whistleblower who helped expose problems in the compensation scheme, told a parliamentary hearing he felt “totally betrayed” by Mookhey’s approach, warning the government would have “blood on its hands” if the changes proceed Katherine TimesNewcastle Herald.

The One Area of Agreement

In a surprising twist, the committee endorsed one aspect that the government had actually softened: the “reasonable management action” test. The report found that the government could eliminate “ill-founded claims” and reduce costs by restoring its initial plan to bar psychological injury claims where reasonable management action is “a significant cause” of the injury, calling this “a fair and balanced approach.”

The original bill required reasonable action to be merely “a” cause of injury, but this was amended in the Lower House to allow a wider range of claims. The committee suggests reversing this change.

Government Doubles Down

In a dissenting statement, three Labor committee members contended the committee agreed the system “is in dire need of reform” and complained that the final report “engages in political commentary, rather than maintain an objective and constructive analysis throughout.”

Mookhey has previously warned the scheme is at risk of insolvency, holding only 82 cents in assets for every dollar it expects in future claims, with total claim costs reaching $5.3 billion in 2023-24 Newcastle Herald.

In an attempt to bypass the indefinite parliamentary inquiry process, the government controversially reintroduced the reforms in a different piece of legislation—the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025.

Stakeholder Divide

The reforms have sharply divided stakeholders. Business NSW has strongly supported the changes, particularly the higher impairment threshold, arguing the scheme has become too easily exploited in performance management contexts Jake McKinley.

However, the Australian Lawyers Alliance has warned the 30 percent threshold means few claims will qualify, leaving genuinely injured workers without long-term benefits Jake McKinley. The NSW Law Society proposed a compromise threshold of 21 percent, which would allow claims from severely impacted workers while easing pressure on insurance premiums The Mandarin.

Unions NSW launched an advertising campaign against the reforms, with NSW Labor Left secretary Rosie Ryan warning they would “impact essential workers suffering from conditions like PTSD, burnout and vicarious trauma the most.” The Mandarin

What Happens Next

The report makes 14 recommendations and 19 formal findings, though the government is not bound to accept them. With legislation already introduced and the government determined to push through reforms, the battle over NSW workers’ compensation appears far from over.

The stakes are high: the financial sustainability of a scheme protecting 3.6 million workers, balanced against the welfare of some of the state’s most vulnerable psychologically injured workers.

If you or someone you know needs support: Lifeline 13 11 14, Beyond Blue 1300 224 636

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Key Statistics:

• Psychological injury claims have doubled over six years while other injury types increased just 16 percent Lockton
• Average cost per psychological injury claim nearly doubled from $146,000 in 2019-20 to $288,542 in 2024-25 Lockton
• Only 50 percent of workers with psychological injuries return to work within a year, compared to 95 percent for physical injuries Jake McKinley
• The system currently operates at a daily deficit of approximately $5 million Jake McKinley