NSW safety regulator halts redundancy process because of psychosocial safety

The University of Technology Sydney was forced to halt its redundancy process after SafeWork NSW issued a prohibition notice, preventing the university from continuing until it took steps to minimise the psychological impact of the process on employees. SafeWork NSW, on the prohibition notice, stated that it was concerned that some workers “are and will be” exposed to a serious and imminent risk of psychological harm from the way the process was being managed.

University management met with the regulator shortly after the prohibition notice was issued and agreed to extend consultation timelines and change the nature of the communications. These changes resulted in SafeWork NSW lifting the prohibition notice shortly afterwards, allowing the consultation process to continue.

Prohibition notices for psychological safety  

Prohibition notices are commonly used by safety regulators in circumstances where, for example, a piece of factory machinery has injured a worker or a certain activity on a worksite has created a risk of serious injury.  The purpose of a prohibition notice is to prevent further risks while the safety regulator works with the employer to implement satisfactory control measures.

For a prohibition notice to be issued, the safety regulator must have conducted investigations or inquiries into the workplace by an inspector. The inspector must reasonably believe that:

• an activity is occurring at the workplace that involves or will involve a serious risk to the health or safety of a person emanating from an immediate or imminent exposure to a hazard; or 
• an activity may occur at the workplace that, if it occurs, will involve a serious risk to the health or safety of a person emanating from an immediate or imminent exposure to a hazard.

Since the introduction of the psychosocial hazard regulations under the Work Health and Safety legislation in 2022, first in NSW and then rolled out across other Australian states and territories, safety regulators have the specific power to treat psychological safety issues in the same way as physical safety issues, however, the use of a prohibition notice to halt a managerial process such as an organisational restructure involving redundancies has not been reported previously in New South Wales.

Redundancy as a psychosocial hazard  

The possible involvement of the safety regulator in potential redundancies is another new compliance consideration that employers will have to consider when navigating organisational restructures.

It comes after a recent High Court decision, which found that the Fair Work Commission can make inquiries into whether an employee could have been redeployed into a role held by a contractor as an alternative to retrenchment. In this context, the obligations on employers when conducting redundancy processes, which are for the purposes of improving operational effectiveness, are becoming increasingly complex and challenging.

In a related decision, the NSW Personal Injury Commission has awarded compensation and medical expenses to an employee who incurred a psychological injury because of an organisational restructure.  The Commission found that the employee incurred a psychological injury during the redundancy process and rejected the employer’s defence that it had taken reasonable management action because it was carried out over a short period of time. The Commission said that “'reasonableness' is objective and must weigh the rights of the employees against the object of the employment.”

This case demonstrates the very real risk to employers of successful psychological injury claims by employees from simply conducting an otherwise genuine redundancy process. Coupled with SafeWork NSW’s intervention in UTS’s restructure, implementing psychological safety risk mitigation measures in a redundancy process is a critical requirement.

Union involvement 

The National Tertiary Education Union (NTEU) was involved in the UTS redundancy and consultation process, and made public statements welcoming SafeWork’s decision to issue the prohibition notice. Overlapping regulatory regimes, involving both workplace safety and industrial relations requirements, can lead to further complexity, confusion and uncertainty for managers and employers. This can increase the risk of psychosocial safety being weaponised to further an industrial relations agenda.

Psychological safety as an industrial strategy is becoming increasingly prevalent. Unions are using psychological safety as the basis for officials being able to enter work premises to assist health and safety representatives, with no right of entry permits. Once onsite, union officials can use the opportunity to speak to workers and promote union membership. There have also been psychological safety-based disputes raised during enterprise bargaining periods to put pressure on employers to agree to proposed enterprise agreement terms.

While it’s not clear in the UTS case how SafeWork became involved, the prospect of more pressure on safety regulators to issue prohibition notices to – and possible prosecutions against – employers considering redundancies is high.

What this means for employers  

When planning any organisational restructure, employers should keep accurate and detailed records of the steps taken to help ensure psychological safety for affected employees and other workers, such as:

•  conducting risk assessments to identify psychosocial hazards and implementing control measures to mitigate the risks, before and during the consultation process;  
•  consulting with workers about psychosocial hazards arising from consultation processes;  
•  ensuring workers have adequate supports in place, such as employee assistance program access, and the opportunity for support persons in meetings; and  
• setting timelines for consideration of restructure, redeployment and other consultation information that are reasonable in the circumstances and do not place undue stress and pressure on workers.