Hello {{First name}},
Welcome to another issue of The Employers’ Briefing – short insights and guidance on employment, safety and business law for Australian employers.
In this issue:
📌 Quick updates – Failure to manage psychosocial risk in a performance improvement process results in a $190,000 fine; dismissal upheld where a WFH clause was not an unconditional right; and NSW passes major workers compensation reforms tightening access to psychological injury claims.
⚖️ The Long read – A practical Q&A guide to paid personal leave, covering accrual, evidence requirements and common misunderstandings.
✏️ From my desk – Reflections on the increasing intersection between workers compensation and employment claims, and what the recent NSW reforms do (and do not) fix.
Let’s get into it ⬇️
Quick Updates
Failure to manage psychosocial risk in performance improvement process results in $190,000 fine
Under the Work Health and Safety Act 2011 (Cth), PCBUs must ensure, so far as is reasonably practicable, the health and safety of workers - including from psychosocial risks. That duty extends to workplace systems such as performance management processes.
The Department of Defence was fined almost $190,000 after pleading guilty to breaching that duty following the suicide of a Royal Australian Air Force technician during an extended performance management process. The Court found that supervisors were not adequately trained and failed to respond appropriately to escalating signs of distress.
👉 Why it matters: Performance management processes can themselves create psychosocial risk. Policies and procedures are not enough - supervisors must be trained to recognise distress, pause processes where necessary, and escalate concerns before risk becomes harm.
WFH clause not an “unconditional” right - dismissal upheld
A dismissal is generally not harsh, unjust or unreasonable under the 𝘍𝘢𝘪𝘳 𝘞𝘰𝘳𝘬 𝘈𝘤𝘵 2009 (Cth) if there is a valid reason (for example, related to conduct) and the employer follows a fair termination process.
In Johnson v PaperCut Software Pty Ltd [2026] FWC 178, the Fair Work Commission upheld the dismissal of an employee who refused to comply with a hybrid policy requiring three days per week in the office. He argued that the contract, by permitting work from his “personal residence”, conferred on him an unconditional right to work from home. However, the contract also required compliance with lawful and reasonable directions and company policies. The Commission found that the direction to attend the office was lawful and reasonable, and that the employee’s refusal constituted a valid reason for dismissal in the circumstances.
👉 For employers: Work-from-home clauses will be interpreted objectively and in context. Clear contractual wording, genuine consultation, staged implementation and documented warnings are important when enforcing attendance policies.
NSW tightens access to workers compensation for psychological injury
Under the NSW workers compensation scheme, employees may access weekly payments and, in some cases, common law damages depending on their degree of permanent impairment. Parliament has now passed significant reform legislation aimed at addressing the scheme’s financial sustainability, with a particular focus on psychological injury claims.
The Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 introduces a staged increase to the permanent impairment threshold required for ongoing compensation and common law damages for psychological injuries. From 1 July 2026, access to compensation beyond 130 weeks will generally require at least 25% permanent impairment, increasing to 26% in 2027 and 28% in 2029. A limited pathway remains for injuries assessed between 21% and 25%, subject to work capacity conditions. By contrast, the threshold for common law damages for physical injury remains at 15%.
👉 Takeaway: psychological injury claims in NSW will become harder to pursue beyond 130 weeks, but early-stage liability, injury management and return-to-work obligations remain unchanged. Employers should ensure that psychosocial risk controls, documentation and injury management processes remain robust, as disputes are likely to shift toward threshold and work capacity assessments rather than disappear altogether.
Paid Personal Leave: A Practical Q&A for Employers
Questions around paid personal/carer’s leave (referred to here as paid personal leave, for brevity) can become more frequent after holiday periods. This guide summarises the key provisions of the Fair Work Act 2009 (Cth) (the FW Act) and the Fair Work Regulations 2009 (Cth) (the Regulations), and address common areas of confusion in practice.
Q: Where are the relevant legislative provisions?
A: The key provisions are contained in sections 95 to 101 of the FW Act. Additional rules are contained in Part 3-6 of the Regulations, and in modern awards.
Q: What is the entitlement?
A: The FW Act refers to “paid personal/carer’s leave”. Essentially, employees other than casuals are entitled to 10 days of paid leave for each year of service, if they are not fit for work and/or to provide care or support to a member of their immediate family (more on this below).
Contrary to what many think, there is not a separate entitlement or category for “sick” or “stress” leave.
Q: When can paid personal leave be taken?
A: An employee may take paid personal leave if the leave is taken:
because the employee is not fit for work due to a personal illness or injury; or
to provide care or support to a member of the employee’s immediate family, or a member of the employee’s household, who requires care or support because of an illness, injury or unexpected emergency.
Q: Are there any notice or evidence requirements?
A: Yes. In relation to notice, the employee must give notice of taking paid personal leave as soon as practicable (which may be after the period of leave has already started; that is, after the employee has already been absent from work for some time), and of the expected period of the leave.
In relation to evidence, the employee must - if required by the employer - give “evidence that would satisfy a reasonable person” that the leave is taken for the reasons set out above. The FW Act does not specify what this evidence is, but medical certificates and statutory declarations are generally acceptable.
If the above requirements are not complied with, the employee may not be eligible to paid personal leave.
Q: What happens if the accrued paid personal leave runs out and the employee is still unable to return to work?
A: Generally speaking, the employee can remain absent on other forms of leave (such as annual leave or unpaid leave); and will be protected from dismissal under certain circumstances.
Q: Can employers prevent employees from taking paid personal leave?
A: No. In certain circumstances however, employers may avoid paying employees purporting to take this leave - such as for failure to comply with evidence requirements (see above).
Q: How does paid personal leave accrue?
A: Paid personal leave accrues progressively during a year of service, beginning on commencement of employment. For example, if a full-time employee starts on 1 January 2026 and takes no leave, by 31 December 2026 the employee will have accrued 10 days of paid personal leave. Part-time employees accrue leave on a pro-rata basis.
Q: When does paid personal leave does/does not accrue?
A: Paid personal leave accrues only during a period of “service”. Under the FW Act, “service”:
includes any period during which an employee is employed by the employer; but
does not include any period of authorised unpaid absence (except for community service leave, stand-downs under an industrial instrument, and any other period prescribed by the Regulations) and unauthorised absences.
For example, if a full-time employee takes one month as unpaid leave in a year, paid personal leave will accrue over 11 months, resulting in ~9.16 days of accrued paid personal leave that year (assuming no other absences).
Q: Does paid personal leave accrue while an employee is on workers compensation?
A: Generally no, unless the applicable State or Territory workers compensation legislation allows it.
Q: How is this leave paid?
A: Paid personal leave is paid at the employee’s base rate of pay for the ordinary hours they would have worked had they not been on leave. The “base rate of pay” is defined in the FW Act as excluding incentive-based payments, loadings, allowances, overtime and penalty rates, and any other separately identifiable amount.
Q: What is “negative” paid personal leave?
A: This occurs when an employer agrees to let an employee take paid personal leave in advance of accrual.
For example: Tom commences employment on 1 January 2026 and takes 10 days of paid personal leave in July 2026. By then he has accrued only 5 days, so the balance becomes -5 days. If he takes no further leave, his balance will return to nil by 31 December 2026.
Q: Can accrued but unused paid personal leave be cashed out?
A: Generally speaking, no – unless the cashing out occurs in accordance with specific terms in an award or enterprise agreement.
Q: Can an employee take paid personal leave while on annual leave?
A: Yes. If an employee becomes ill or injured during a period of annual leave, the affected days can be treated as paid personal leave instead of annual leave, provided the applicable notice and evidence requirements are met.
Example: Jerry takes two weeks’ annual leave but becomes sick for 5 days during the second week. He can use 5 days’ annual leave and 5 days’ paid personal leave, rather than days’ annual leave.
Q: What if a period of personal leave includes a public holiday?
A: A public holiday does not count as personal leave. For example, if Tom and Jerry are absent on paid personal leave for two weeks and one day is a public holiday in their work location, they will use 9 days of paid personal leave, not 10.
Q: Are there any record-keeping requirements?
A: Yes. Under the Regulations, employers must keep records of:
the leave taken by each employee; and
the balance of accrued but unused annual leave (if any).
Additional records must also be kept in certain circumstances, such as in case of agreements to cash out paid personal leave.
From my desk
One trend I have noticed in recent years is the increasing frequency of lodging workers compensation claims for psychological injury in close proximity to other workplace disputes, such as general protections claims.
Many claims are, of course, genuine and serious. But in practice, workers compensation can also become part of a broader litigation strategy, particularly where termination is contemplated. Once a claim is on foot, the legal and practical landscape shifts significantly.
The recent NSW reforms tighten access to compensation for psychological injury and introduce higher impairment thresholds over time. While these reforms address some immediate pressure points in the scheme, they do not resolve the deeper structural issues.
If underlying claim patterns and cost drivers are not addressed more comprehensively, the eventual reforms required to ensure the scheme’s long-term financial viability will need to be far more drastic.
Thanks for taking the time to read this edition of The Employers’ Briefing.
If you think someone in your network would find it useful, feel free to share the subscription link.
Until next time,
