I spend a lot of time around workplaces, psychologists, employers and people trying to stay in work. And in doing so, I hear the same quiet concern from business leaders, HR teams and managers who are often too nervous to say it publicly
When an employment relationship starts to fail, the issue rarely stays contained to performance, conduct or communication. It becomes a story.
And stories have impact and a deeper context - capability conversation can become culture issue, feedback turns into harm, or a difficult conversation becomes psychological injury. And by the time the matter reaches a formal workplace dispute, what may have begun as a management issue can take form of a mental health claim, often without the level of clinical rigour we would expect in almost any other part of the health system.
Psychological injury at work is serious, real and it can change a person's life. A person experiencing poor management, bullying, unsafe workloads and badly handled performance processes can experience genuine harm. While we know the injuries of this type are serious, we also need to treat psychological evidence seriously.
Australia has moved quickly to recognise psychosocial risk at work and that is a good thing. However, has the pace of methodology followed the pace of recognition?
Part of the process is making sure we look at is what caused employee distress. Was work the primary cause, or was the response proportionate? Was there a pre-existing vulnerability? Those questions need clinical discipline and lens, in addition to the legal process.
Currently available systems are built to resolve disputes and encourage settlement, but not necessarily to dig deep and answer those questions. If the process doesn’t require clinical testing, doesn’t properly examine causation, and does not weigh competing psychological explanations, it may resolve the dispute without ever understanding the injury that the claim is based on.
Employers can often feel pressured to settle because cost and reputational risk, while employees, on the other hand, may feel heard by the process, but not necessarily helped by it. It’s far from what we’d like to see for either side. And what we are currently seeing is that the system risks rewarding the most compelling narrative, rather than the most accurate account.
This is why the phrase "payout on the way out" has taken hold in parts of corporate Australia. When a workplace relationship deteriorates, performance concerns are raised and an employee becomes distressed, the employer is advised that settlement may be cheaper than testing the claim.
A claim can be entirely legitimate, especially when the employer has managed the situation badly, and they should be held accountable. There are also cases when a situation being presented as psychological injury may be better understood as conflict, disappointment or a difficult, but lawful employment decision. The current process, unfortunately, does not always have the tools to separate those things with enough confidence.
Without clarity on what evidence looks like, a number of workplace interactions can be recast through a psychological lens. Was it a firm performance conversation or intimidation? A change in duties or exclusion? Understanding what has actually happened and its impact is the challenge we are standing in front of.
When we have no baseline psychological profile, no structured assessment of stress reactivity or conflict style, no clear differentiation between the event and whether the experience amounts to a clinical injury caused by work, the truth can be hidden behind the narratives. And we would not accept that level of ambiguity in most other health settings.
Strong workplace protections certainly need to stay, what we need to do is make the evidence strong as well.
Forward-thinking employers are already investing in psychological insights at an earlier stage of recruitment, to better understand how people communicate, respond to stress and experience conflict. Used properly and ethically, psychometric and behavioural tools can help identify stress patterns, support needs and likely conflict triggers before a situation deteriorates.
When a workplace issue first becomes psychologically charged, organisations should bring in independent psychological expertise early, before both sides are locked into accusation and defence. That means structured interviews, objective workplace evidence, and a serious attempt to distinguish between situational distress, interpersonal conflict and clinical injury. Instead of asking "how do we make this go away?", employers can ask "what is happening here, what does the evidence look like and what intervention is most likely to help?" That is better for business, but it is also better for people.
Where psychological harm is central to a formal dispute, there should be greater emphasis on clinical evidence, causation analysis and proper consideration of context, before stories and settlement ranges. The danger is that the system is not yet equipped to reliably distinguish harm from interpretation, injury from conflict, and vulnerability from strategy.
For boards and executive teams, workplace mental health can no longer sit inside HR as a wellbeing program. It is now a risk, compliance, productivity and culture issue affecting insurance, litigation, reputation and the confidence of managers to lead, while understanding the importance of psychological evidence.
Fred Cicchini is the CEO of Humanity Health Group
