Many psychological injury claims that an employer may choose to defend may typically examine reasonable management action and was it appropriate and, did it cause psychosocial harm. In every Australian workers compensation scheme, a work-related psychological injury is not compensable where reasonable management action, taken in a reasonable manner, caused the psychosocial matter to materialise. For psychosocial claims arising from performance management, discipline, restructures and similar processes, this exclusion ultimately decides the outcome of the claim. This briefing sets out how the reasonable management action exclusion works, why the manner of the action often decides the outcome, how the test differs between states, and why a successful exclusion is not a defence to the work health and safety duty.
Two elements for reasonable management action
The exclusion for reasonable management action has two fundamental elements. The management action must be, of course reasonable, and it must be carried out in a reasonable manner. Both elements must be satisfied if the employer is to defend the claim. If the action is reasonable in substance and the manner in which the action was taken is not, the exclusion does not apply and the claim proceeds.
Employers rarely fail on the first element of the process. A performance process, a demotion or a redundancy is sometimes defensible in substance. Disputes typically turn on the second element, the manner in which the action was taken, and that is where these claims are commonly won or lost.
Reasonable manner is decided on records made at the time
Reasonable manner is assessed on what the employer did and recorded during the process. The relevant facts are the notice given to the worker, the opportunity to respond, the support offered, the order in which steps were taken, and whether the action followed the employer’s own procedures. A decision-maker weighs the whole course of conduct rather than a single step in isolation. A significant unreasonable step, such as denying the worker a chance to respond before a decision, can make the action unreasonable overall.
The evidence is contemporaneous. File notes, emails and meeting records created during the process carry weight. Accounts reconstructed after a claim is lodged carry little. Frontline managers create or fail to create that record in the weeks before anyone contemplates a claim, which places the practical control with line management rather than the policy library. Training managers to run and document performance, conduct and change conversations at the time is the control that decides these claims.
What counts as management action
Management action typically covers the ordinary decisions of running a workplace. The workers compensation schemes typically list transfer, demotion, promotion, performance appraisal, counselling, discipline, redeployment, retrenchment, dismissal, and decisions about employment benefits. Victoria sets out the widest statutory list, at section 40(7) of the Workplace Injury Rehabilitation and Compensation Act 2013, which also names suspension, reclassification, training, investigation of alleged misconduct, and the communications connected with these actions.
The causal test differs by jurisdiction
The exclusion applies only where management action caused the injury, and the workers compensation schemes set that causal threshold at different levels. New South Wales requires the injury to be caused wholly or predominantly by the action. Tasmania applies the exclusion where the disorder of the mind arose substantially from it. The Australian Capital Territory applies it where the mental injury was completely or mostly caused by the action. The Northern Territory applies it where the mental injury was caused wholly or primarily by reasonable management action. Comcare applies it where the injury was due to reasonable administrative action taken in a reasonable manner. The same facts meet one threshold and fail another. Annexe A gives the provision and causal test for each scheme.
Four schemes reach the worker’s expectation of management action
Several workers compensation schemes extend the exclusion beyond the action itself. Queensland, Western Australia, Victoria and the Northern Territory each exclude a psychological injury caused by the worker’s expectation that management action would, or would not, be taken. A worker who reacts to an anticipated performance process that has not yet occurred therefore has less room to claim in those four schemes. Queensland reaches furthest, excluding injury caused by the worker’s expectation or perception of the action, a broader form of words than the other three use. Queensland also excludes injury from action taken by the Regulator or the insurer on the worker’s compensation application. New South Wales and the Australian Capital Territory do not reach the worker’s expectation, but their exclusions extend to action that is proposed to be taken, not only action already taken.
Further limits in some workers compensation schemes
Several schemes add further limits around the exclusion. Victoria excludes a mental injury caused predominantly by work-related stress or burnout arising from events that are usual or typical and reasonably expected in the role. Western Australia frames its test around administrative action that is not unreasonable and harsh on the employer. South Australia requires employment to be the significant contributing cause of a psychiatric injury before a claim succeeds at all, and Queensland requires employment to be the major significant contributing factor. Annexe A notes these features by scheme.
How ‘reasonableness’ is judged
A decision-maker tests reasonableness objectively, against what a reasonable employer would have done in the circumstances, rather than against the worker’s own view. Good faith alone does not make an action reasonable. An action does not become unreasonable only because the worker found it distressing. The assessment returns, in each case, to the documented conduct of the process.
A successful exclusion is not a WHS defence
A successful reasonable management action defence resolves the compensation claim. It typically does not answer the work health and safety question. Since 1 December 2025, when Victoria’s Occupational Health and Safety (Psychological Health) Regulations 2025 commenced, every Australian jurisdiction requires employers to identify psychosocial hazards and control them so far as is reasonably practicable.<sup>2</sup> The Model Code of Practice: Managing psychosocial hazards at work lists poor organisational change management and poor support among those hazards.<sup>3</sup> A performance process or restructure is therefore a psychosocial hazard the employer must manage, whatever the compensation outcome.
WHS regulators assess whether the employer identified and controlled the psychosocial risk the process created. An employer that defeats the compensation claim under the exclusion still risks an improvement or prohibition notice, or prosecution, for the same process. In New South Wales the exposure rose on 1 July 2026, when section 26A of the Work Health and Safety Act 2011 commenced. From that date a person conducting a business or undertaking must follow an approved code of practice, including the psychosocial Code, or manage the risk to a standard that is equivalent or higher. The Code is now the benchmark the regulator measures against, so an employer that falls short of it, without showing an equally safe alternative, can breach its safety duty even where no one has been harmed.<sup>4</sup> Relying on the exclusion as evidence of a safe system of work confuses two separate obligations.
What employers should do
The exclusion protects an employer only when the process was fair and the fairness is documented. The same discipline serves both systems.
Run management processes to a single standard across the organisation: notice, a genuine opportunity to respond, support for the worker, a defensible sequence, and a decision consistent with policy. Set that standard to the most demanding jurisdiction the workforce touches.
Record the process as it happens in real time where possible. Contemporaneous file notes and correspondence are the evidence that supports the exclusion and demonstrates the WHS control. Train managers to document at the time, not after a claim is foreshadowed.
Design the process to control psychosocial risk. A restructure or performance process managed under a psychosocial risk management framework addresses the hazard the WHS duty targets and produces the record the exclusion needs.
Treat a defended claim as a compensation outcome, not as safety assurance, and report psychosocial prevention to the board separately from claims results. For a contested or high-value claim, obtain expert and medico-legal advice early, because the result turns on the documented conduct of the process.
For safety and HR leaders, the reasonable management action exclusion rewards fair and documented process. The employer that earns the exclusion has usually controlled the psychosocial hazard as well, because the same conduct satisfies both tests. The employer that runs processes loosely tends to lose the claim on the manner limb and to face the WHS regulator on the same facts.
This article is general information and professional commentary. It is not legal advice. Scheme provisions are drawn from the Safe Work Australia comparison and the current Acts, and reflect arrangements as at 31 December 2025, with work health and safety references current to July 2026. Both areas are under reform. Check any specific claim or decision against the current Act, regulation, code and case law for the jurisdiction.
You might like to read Regulating Psychosocial Health & Safety at work
Frequently asked questions
What is the reasonable management action exclusion?
It is a provision in every Australian workers compensation scheme that a psychological injury is not compensable where reasonable management action, taken in a reasonable manner, caused it. It covers performance management, discipline, transfer, redeployment, retrenchment, dismissal and similar decisions.
Does reasonable management action stop a psychological injury claim?
It stops the claim only if both limbs are met. The action must be reasonable in substance and carried out in a reasonable manner. If the manner was unreasonable, the exclusion does not apply and the claim proceeds.
What makes management action reasonable in a psychosocial claim?
Reasonableness is judged on the documented conduct of the process: notice to the worker, a genuine opportunity to respond, support, a defensible sequence of steps, and consistency with the employer’s own procedures. It is assessed objectively, against what a reasonable employer would have done.
Is performance management a reasonable management action?
Performance management is a recognised category of management action in every scheme. Whether it attracts the exclusion depends on how it was conducted. A performance process run without notice, support or a fair opportunity to respond can still ground a compensable injury.
Does a worker’s perception of management action count?
In several schemes, yes. Queensland, Western Australia, Victoria and the Northern Territory each exclude a psychological injury caused by the worker’s expectation that management action would, or would not, be taken, in addition to the action itself. Queensland reaches furthest, extending to the worker’s expectation or perception of the action. The remaining schemes focus on the action taken, though New South Wales and the Australian Capital Territory also reach action that is proposed to be taken.
Does a successful reasonable management action defence satisfy the WHS duty?
No. Compensation and work health and safety are separate. An employer can defeat the claim under the exclusion and still face an improvement notice, prohibition notice or prosecution for failing to manage the same process as a psychosocial hazard.
Reasonable management action exclusions by schemes
How the reasonable management action exclusion applies in each Australian scheme. Confirm each cell against the current Act before relying on it.
| Scheme | Statutory provision | Causal test for the exclusion | Worker expectation / perception | Notable feature |
|---|---|---|---|---|
| NSW | s11A, Workers Compensation Act 1987 | Wholly or predominantly caused by the action | No | Exclusion reaches action taken or proposed to be taken |
| Vic | s40, Workplace Injury Rehabilitation and Compensation Act 2013 | Management action limb. Predominant cause for aggravation (s40(2A)) | Yes (expectation) | Widest list of management action (s40(7)). Burnout carve-out (s40(1A)) |
| Qld | s32(5), Workers’ Compensation and Rehabilitation Act 2003 | Arising out of reasonable management action taken in a reasonable way | Yes (expectation and perception) | Also excludes Regulator or insurer action. Psychiatric injury needs employment as the major significant contributing factor |
| WA | s7, Workers Compensation and Injury Management Act 2023 | Wholly or predominantly from administrative action | Yes (expectation) | Test: action not unreasonable and harsh on the employer |
| SA | s7(4), Return to Work Act 2014 | Wholly or predominantly caused by the action | No | Psychiatric injury also needs employment as the significant contributing cause (s7(2)(b)) |
| Tas | s25(1A), Workers Rehabilitation and Compensation Act 1988 | Arising substantially from the action | No | Applies to a disease that is an illness or disorder of the mind |
| ACT | s4(2), Workers Compensation Act 1951 | Completely or mostly caused by the action | No | Mental injury defined to include stress |
| NT | s3A(2), Return to Work Act 1986 | Wholly or primarily caused by management action taken on reasonable grounds and in a reasonable manner | Yes (expectation) | Management action defined at s3(1) |
| Comcare | s5A, Safety, Rehabilitation and Compensation Act 1988 | Due to reasonable administrative action in a reasonable manner | No | Non-exclusive list of administrative action at s5A(2) |
| NZ | Accident Compensation Act 2001 (ACC) | n/a | n/a | No standalone RMA exclusion. Standalone work-related mental injury generally not covered |
Sources: Comparison 2025, Table 4.22 (exclusionary provisions for psychological injuries), and the Acts cited. Arrangements as at 31 December 2025. Cells summarise the provisions.
References
- Safe Work Australia, Comparison of Workers’ Compensation Arrangements in Australia and New Zealand 2025 (30th edition), Table 4.22 (exclusionary provisions for psychological injuries). Reasonable management action exclusions: s11A Workers Compensation Act 1987 (NSW); s40 Workplace Injury Rehabilitation and Compensation Act 2013 (Vic); s32(5) Workers’ Compensation and Rehabilitation Act 2003 (Qld); s7 Workers Compensation and Injury Management Act 2023 (WA); s7 Return to Work Act 2014 (SA); s25(1A) Workers Rehabilitation and Compensation Act 1988 (Tas); s4(2) Workers Compensation Act 1951 (ACT); s3A(2) Return to Work Act 1986 (NT); s5A Safety, Rehabilitation and Compensation Act 1988 (Cth).
- Occupational Health and Safety (Psychological Health) Regulations 2025 (Vic), in force 1 December 2025; model Work Health and Safety Regulations, regulations 55A to 55D.
- Safe Work Australia, Model Code of Practice: Managing psychosocial hazards at work.
- Work Health and Safety Act 2011 (NSW), s26A, inserted by the Industrial Relations and Other Legislation Amendment (Workplace Protections) Act 2025 (NSW) and commenced 1 July 2026.