Performance Management as Psychosocial Hazard: The $188,000 Lesson South Australian Businesses Cannot Ignore

In December 2025, the Department of Defence was convicted and fined $188,000 for failing to manage psychosocial risks during a performance management process. There was no allegation of harassment, unfair dismissal or any breach of employment law. The charge was simpler: Defence did not take reasonably practicable steps to manage the risks that the performance management process itself created for a worker.

The case was brought under Commonwealth law, but it matters in South Australia too. SA's own psychosocial hazard regulations, in force since December 2023, impose the same core duty: to identify psychosocial hazards and eliminate or minimise the risks, so far as reasonably practicable.

The case shows an uncomfortable truth: performance management itself can be a psychosocial hazard, not only when it is done badly, but as a routine business process that needs to be managed like any other risk.

For South Australian businesses, this has profound implications. Performance reviews, restructures, redundancy processes, promotion decisions, and capability management are no longer purely HR matters, they are work health and safety risks subject to the same rigorous identification, assessment, control, and documentation requirements as physical hazards. Directors and senior officers who fail to ensure appropriate systems are in place face personal criminal liability.

The Defence Conviction: What Actually Happened

The Defence case is the clearest Australian example yet of a regulator prosecuting psychosocial failures in a performance management process.

The Facts

The worker was a 34-year-old technician with the Royal Australian Air Force at RAAF Base Williamtown, near Newcastle in NSW, who took his own life while on duty in July 2020. Comcare's investigation found that in the months before:

• He had been placed on four separate Work Plans, Defence's performance management tool, over six months
• He showed increasing signs of distress and ill-health during that process
• His supervisors at no point referred him for support, placed him on leave, or took other steps to relieve the stress and pressure
• Defence's own policies identified these risks, but supervisors had not been adequately trained to recognise that performance management processes can themselves be psychosocial hazards

The court found the risks were serious and foreseeable: Defence knew the worker was struggling with both work and personal issues.

The Charge and the Outcome

Following Comcare's investigation, Defence pleaded guilty to a single charge under section 33 of the Commonwealth Work Health and Safety Act, a Category 3 offence of failing to comply with its health and safety duty. The plea was an admission that it had not taken reasonably practicable measures to eliminate or minimise the risks to the worker's health and safety.

On 19 December 2025, the NSW Local Court convicted Defence, fined it $188,000 and made an adverse publicity order. It was the first time a Commonwealth employer had been convicted of failing to manage psychosocial risks under federal WHS laws. The prosecution was of Defence as the organisation, no individual officer was charged.

What the Case Shows

Because Defence pleaded guilty, there was no contested trial. But the facts point to four lessons for any organisation that manages performance:

Performance management can itself be a psychosocial hazard, and needs to be risk-managed like any other.

A policy is not a control unless it is applied in practice and supported by training.

Visible distress calls for action, referral for support, leave, or pausing the process.

The standard is what was reasonably practicable, and the regulator will test whether it was done.

The case shows that performance management processes carry psychosocial risk that must be actively managed, and that an organisation's own policies protect it only if they are applied in practice.

What This Means for South Australian Businesses

The Defence conviction has direct implications for South Australian businesses operating under SafeWork SA's December 2023 psychosocial hazard regulations. Those regulations impose the same core duty that underpinned the Defence prosecution: to identify psychosocial hazards and eliminate or minimise the risks, so far as reasonably practicable.

Performance Management Is Explicitly a Psychosocial Hazard

Performance management processes trigger at least seven of the fourteen recognized psychosocial hazards:

1. Poor organisational change management, Restructures, role changes, promotion processes, and performance improvement plans all constitute organizational change.
2. Poor organisational justice, Performance ratings, promotion decisions, redundancy selections, and discipline processes must be, and be perceived to be, fair and consistent.
3. Inadequate reward and recognition, Unfair performance ratings and denial of promotion opportunities create psychosocial risk.
4. Job demands, Restructures and performance processes often increase workload, sometimes requiring employees to compete for their own positions.
5. Lack of role clarity, Ambiguous role expectations and shifting reporting lines during restructures create significant risk.
6. Poor support, Employees undergoing performance management require managerial guidance, counseling access, and clear feedback.
7. Low job control, Performance management processes often reduce employee autonomy over decisions made about them.

For South Australian businesses, this means that every performance review cycle, every restructure, every redundancy process must be treated as a WHS issue requiring formal risk identification, assessment, control, and review.

SafeWork SA's Stepped-Up Enforcement

SafeWork SA's 2024–25 enforcement figures show a regulator stepping up its activity:

• 7,715 workplace site visits (up from 6,813 the previous year)
• Record fines totalling $2.37 million, across 18 convictions, the most in more than a decade
• Specific targeting of professional services firms where poor organisational change management is prevalent

South Australian directors who oversee restructures, major performance management exercises, or redundancy programs without formal psychosocial risk controls are personally exposed: SA's WHS Act provides for personal fines of hundreds of thousands of dollars and, for the most serious offences, imprisonment. Where a death results, industrial manslaughter carries up to 20 years' imprisonment for individuals and fines of up to $18 million for corporations.

Common Performance Management Scenarios That Create Psychosocial Hazards

Scenario 1: Annual Performance Reviews and Forced Rankings

A mid-sized Adelaide professional services firm conducts annual performance reviews using a forced ranking system, managers must rate 10% of staff as “exceeds expectations,” 80% as “meets expectations,” and 10% as “needs improvement.” Poor performers receive performance improvement plans; continued poor performance results in termination.

Psychosocial hazards created: poor organisational justice (forced rankings create perceptions of unfairness), conflict or poor workplace relationships (competitive rather than collaborative culture), inadequate reward and recognition, and job demands.

Required controls: document the business rationale, implement clear transparent rating criteria, train managers on constructive feedback, establish appeal mechanisms, monitor wellbeing through pulse surveys, and review ReturnToWorkSA and turnover data to verify effectiveness.

Scenario 2: Major Restructure with Redundancies

A South Australian manufacturing company closes a regional facility and consolidates operations to Adelaide. Sixty employees are affected, some offered relocation, some made redundant, some required to reapply for redesigned roles, over a six-month process.

Psychosocial hazards created: poor organisational change management, job demands, lack of role clarity, poor support, poor organisational justice, and inadequate reward and recognition.

Required controls: formal psychosocial risk assessment before announcing the restructure, consultation with affected workers and HSRs, shortened timelines where possible, temporary workload relief, structured communication, career transition support, documented selection criteria, and ongoing monitoring of wellbeing and ReturnToWorkSA claims. Generic employee assistance programs alone are unlikely to be enough, the Defence case turned on policies that existed but were not applied in practice.

Scenario 3: Performance Improvement Plans and Capability Management

An Adelaide-based healthcare organization places an employee on a formal performance improvement plan (PIP) due to concerns about clinical errors and communication failures, with specific targets over a 90-day period and termination as the consequence of failure to improve.

Psychosocial hazards created: job demands, poor organisational justice, poor support, conflict or poor workplace relationships, and inadequate reward and recognition.

Required controls: objective and achievable criteria, adequate coaching and resources, regular constructive check-ins (not just monitoring for failure), workload adjustments where appropriate, clear access to EAP support, and documentation of the rationale and wellbeing assessment throughout.

PIPs are particularly high-risk from a psychosocial perspective because they combine job insecurity, increased scrutiny, and potential stigma. Employers must recognize that the PIP process itself is a psychosocial hazard requiring active management, regardless of whether the underlying performance concerns are legitimate.

What South Australian Directors Must Do Now

1. Integrate Psychosocial Risk Management into Performance Processes

Before any major performance management activity, identify the psychosocial hazards the process will create, assess severity and likelihood, design and implement specific controls, monitor implementation throughout, and review outcomes afterward. This cannot be an afterthought, the Defence prosecution succeeded because psychosocial risk management was treated as separate from the “real work” of organizational change.

2. Improve Visibility Into Performance-Related Psychosocial Risks

Directors cannot exercise due diligence without visibility into psychosocial risks across the organization. Traditional HR systems capture fragments, grievances here, exit interview feedback there, ReturnToWorkSA claims elsewhere, without integrated visibility. Directors need ways to see correlations between performance activities and psychosocial harm indicators, give employees a way to raise concerns confidentially, and generate audit-ready documentation of due diligence.

3. Train Managers on Psychosocial Risk Management in Performance Processes

Line managers deliver performance reviews, manage PIPs, and oversee redundancies, yet most have no training in psychosocial risk management. Businesses must provide ongoing training on identifying hazards, delivering difficult feedback constructively, recognising distress, implementing controls, and escalating concerns appropriately.

4. Document Everything for SafeWork SA Compliance

The Defence conviction hinged on the inability to demonstrate that psychosocial risks were identified, assessed, or controlled. Even where informal controls existed, the lack of documentation proved fatal. Documentation must be contemporaneous, detailed, and audit-ready, manual processes are both burdensome and unreliable.

How Salus Supports Performance-Related Psychosocial Risk Management

Guided reporting for performance-related concerns

An employee with a concern about a performance process, a PIP that feels unfair, a restructure creating unmanageable workload, is guided through compiling a clear report by an AI-led conversation, never a form, anonymous or identified, informed by relevant legislation and the organisation's own policy.

Obligation mapping for officers

The moment a report is received, the responsible person is shown exactly what they're required to do for that report type, sourced from legislation and policy, directly relevant to the due diligence failures the Defence case turned on.

Evidentiary logging

Every action taken on a report is timestamped and individually signed, building the documented record of referral and response that was missing in the Defence case.

Policy gap analysis

Existing policies are assessed against current legislation to surface gaps before a restructure or PIP begins, not after.

Conclusion: Performance Management Is a Psychosocial Hazard, Manage It Like One

The December 2025 Defence conviction fundamentally changed how Australian businesses, including South Australian organizations, must approach performance management. Restructures, performance reviews, PIPs, and redundancies are no longer purely HR matters. They are psychosocial hazards requiring systematic identification, assessment, control, and documentation under work health and safety law.

For South Australian directors and senior officers, the implications are significant: personal fines of hundreds of thousands of dollars and, for the most serious offences, imprisonment; up to 20 years' imprisonment under industrial manslaughter provisions; corporate fines up to $18 million; and SafeWork SA enforcement action including improvement notices, prohibition notices, and prosecution.

The Defence conviction demonstrated that regulators will prosecute for performance management psychosocial failures. Generic employee assistance programs do not constitute adequate controls. Policies that are not applied in practice do not protect an organisation.