Mental Injuries and the Modernised WorkCover Scheme

Mental injury claims accounted for 16% of all WorkCover claims in 2022–2023, increasing to 18% in 2023–2024.1 As mental injury claims rise, this article explores how the WorkCover scheme currently supports affected workers.

To understand the present framework, it is important to first consider the legislative changes introduced last year. These amendments prompted considerable discussion among injured workers, legal professionals, employers and the broader community as the scheme was ‘modernised.’

Background

On 31 March 2024, significant changes were made to the WorkCover scheme to improve its sustainability. A brief summary of the key changes relating to mental health injuries include:

1. The establishment of ‘Return to Work Victoria’ – a new body that will assist injured Victorians (including workers experiencing work related stress) with returning to work.
2. The introduction of a ‘Whole Person Impairment Test’ for claims that receive weekly benefits beyond two-and-a-half years. If an injured worker is assessed as having whole person impairment of 21% or more, they will continue to receive payments beyond two and-a half years.
3. A new definition of mental injury was established, and therefore, an injured worker can receive compensation for a mental injury if it meets the following the following definition:
   Cause significant behavioural, cognitive or psychological dysfunction, and are diagnosed by a medical practitioner in accordance with the latest version of the Diagnostic and Statistical Manual of Mental Disorders (DSM).2
4. Mental injuries must predominantly arise out of or in the course of employment to be compensable.
5. Injured workers who sustain a mental injury predominantly caused by work-related stress or burnout are not entitled to compensation if the injury arises from events considered usual, typical, and reasonably expected to occur in the workplace.
6. Workers experiencing stress and burnout will be eligible for provisional payments for 13 weeks to cover medical treatments (as opposed to accessing weekly benefits from WorkCover). However, psychosocial support will be provided to facilitate their return to work.

Comparing the old test with the new test

Prior to 31 March 2024

To have a WorkCover claim for a mental injury accepted, the eligibility test required injured workers to establish that their mental injury arose out of or in the course of their employment.

Where the mental injury involved a recurrence, aggravation, acceleration, exacerbation or deterioration of a pre-existing mental injury, the test was whether the employment was a significant contributing factor. In such cases, the key consideration was that employment needed to be the strongest or most substantial contributing cause of the mental injury.

Current Test (for injuries sustained on or after 31 March 2024)

Under the legislative amendments, the current eligibility test requires an injured worker to establish that the mental injury predominantly arose out of or in the course of their employment. This same test also applies to pre-existing mental injuries (e.g. a recurrence, aggravation, acceleration, exacerbation or deterioration). The word ‘predominantly’ is given its ordinary meaning.

In determining whether a mental injury predominantly arose out of, or in the course of employment, or, whether non-work related factors contributed, an injured worker’s medical history may be reviewed, and they may be assessed by an independent medical examiner. While this process may feel intrusive to the injured worker, it is a necessary safeguard. The WorkCover scheme must strike a balance between fair access to compensation and ensuring appropriate checks are in place to prevent the opening of the floodgates.

Unlike physical injuries, which can often be substantiated through radiological imaging, mental injuries are inherently more challenging to prove due to their less visible nature. In some cases, ample evidence exists to support such claims. However, in situations involving allegations of workplace bullying, where there may be conflicting accounts of an event, it makes it significantly more complex to assess and resolve.

If an injured worker has an accepted WorkCover claim, they may be entitled to the following benefits (noting that additional eligibility criteria applies to the entitlements listed below):

• Weekly payments
• Treatment expenses
• Superannuation payments
• Impairment Benefits claim
• Claim for damages (also known as a common law or negligence claim).

The current state

With reports indicating that rejection rates for mental health injury claims have doubled since the recent amendments took effect, alongside firsthand accounts from injured workers whose claims have been denied, several important questions emerge.3 Is the WorkCover scheme able to properly support workers experiencing genuine mental health injuries? Are the amendments too harsh? Are employers doing enough to prevent such injuries from occurring in the first place? Should more attention shift away from the WorkCover scheme and toward the critical role employers play in fostering psychologically safe workplaces?

Moreover, given that Australians are considered among the most burnt-out employees in the world, the question remains: should employers be doing more to address the root causes of workplace stress and burnout in light of the current law?4

While the true impact of the amendments remains unclear due to their recent implementation, it is difficult not to consider the many injured Victorian workers who may now find themselves in a challenging position, with limited support as a result of stricter laws around mental health injuries. Hopefully, future data will provide clearer insight into how the current WorkCover scheme is impacting injured workers with mental health injuries, and prompt a renewed conversation about whether reforms are needed to better support these individuals.

What’s next?

In 2027, an independent review of the 2024 amendments will be conducted by a panel of experts. The review will assess the efficacy of the changes and examine whether they have achieved the government’s intended goal of making the scheme more sustainable.

Navigating a mental injury and the WorkCover system can feel complex and overwhelming. Our work injury lawyers are here to provide clear advice and compassionate support. Contact us to discuss your situation and the options available to you.

—

[1] WorkSafe Victoria, WorkSafe Annual Report 2023-24 (October 2024) (https://content-v2.api.worksafe.vic.gov.au/sites/default/files/2024-10/WorkSafe-annual-report-2024-10.pdf).

[2] WorkSafe Victoria, Practice Directive – Mental injury eligibility (https://www.worksafe.vic.gov.au/practice-directive-mental-injury-eligibility).

[3] Kieran Rooney, ‘Workers’ mental health compo claims being rejected at twice the rate’, The Age (25 August 2025) (https://www.theage.com.au/politics/victoria/workers-mental-health-compo-claims-being-rejected-at-twice-the-rate-20250805-p5mkmb.html).

[4] OECD Better Life Index (https://www.oecd.org/en/data/tools/oecd-better-life-index.html).