Employer Liable for Psych Injury Caused by "Misperceived" Work Events

Why It Matters

The ruling broadens workers' compensation liability to include mental injuries triggered by workplace dynamics, prompting employers to reassess mental‑health risk management.

Key Takeaways

• Employee’s bipolar disorder aggravated by workplace stressors
• Commission found employer contributed substantially to injury
• Misperceived events deemed “attack” but still work‑related
• Ruling expands workers’ comp coverage for mental health claims

Pulse Analysis

Employers are increasingly facing scrutiny over how workplace culture impacts employee mental health. While physical injuries have long been covered under workers' compensation schemes, psychological claims have lagged behind, often dismissed as unrelated to job duties. Recent legal developments in Australia, particularly the NSW Personal Injury Commission’s decision, signal a shift toward recognizing that chronic stressors, bullying, and perceived attacks can constitute occupational hazards deserving compensation.

In the PSGA Pty Ltd case, the security guard’s “odd and difficult” behavior sparked personality clashes with supervisors, intensifying his bipolar disorder. Although the employer argued that prior drug use and a 2018 psychotic episode were primary causes, the commission focused on the cumulative effect of workplace interactions. By deeming the employee’s misperception of events as a legitimate factor, the ruling emphasizes that subjective experiences, when linked to a hostile environment, meet the threshold for a compensable mental injury.

The broader implication for businesses is clear: proactive mental‑health policies are no longer optional. Companies must implement robust reporting mechanisms, provide training to mitigate interpersonal conflicts, and document stress‑related incidents. Failure to do so could expose them to costly compensation claims and reputational damage. As courts continue to interpret mental‑health injuries through the lens of workplace causation, organizations that prioritize psychological safety will gain a competitive advantage while reducing legal exposure.