Navigating Psychosocial Risk in Workplace Restructuring: A Health and Safety Imperative

Psychosocial risk is a Health and Safety issue

Under the Health and Safety at Work Act 2015 (HSWA), a PCBU must ensure, so far as is reasonably practicable, the health and safety of workers. Importantly, “health” is defined to include both physical and mental health. 

WorkSafe’s guidance reinforces that psychosocial risks including stress, uncertainty, and poor workplace relationships must be identified, assessed, and managed like any other workplace hazard. 

These risks commonly arise from the way work is designed and managed, organisational change processes, and communication practices and leadership behaviours.  Restructuring, by its nature, engages all of these factors.  WorkSafe guidance suggests that businesses are required to identify psychosocial hazards, assess the risks of harm, implement effective control measures, and consult with workers throughout the process. This consultation obligation is particularly significant in a restructuring context.

Why Restructures create psychosocial risk

Restructures frequently give rise to job insecurity and fear of redundancy, increased workloads and role ambiguity, uncertainty, and a perceived lack of procedural fairness (“organisational justice”). Poorly managed change can therefore create a foreseeable risk of psychological harm, not merely dissatisfaction. This is not just a “wellbeing” concern it is a legal risk under HSWA. A failure to manage these risks can expose employers to regulatory scrutiny, and potentially enforcement action.

The Australian experience: A warning signal

Developments in Australia demonstrate how quickly this area is evolving. In 2025, the New South Wales safety regulator, SafeWork NSW, issued a prohibition notice halting a proposed restructure at the University of Technology Sydney (UTS). The regulator found that the process exposed workers to a “serious and imminent risk of psychological harm.” This intervention required the employer to cancel scheduled restructuring meetings, pause the release of the change proposal, and address deficiencies in how psychosocial risks were being managed.  Interestingly, the concerns identified included that there was inadequate consultation with staff, short notice for meetings (increasing stress and uncertainty), communication framed in “finalistic” terms suggesting predetermination, and a failure to properly engage with feedback.

This was an unprecedented use of health and safety powers in a white-collar restructure, and it reflects a broader shift. Psychosocial hazards are now being treated with the same regulatory seriousness as physical risks. While the prohibition notice was later lifted after changes were made, the message to employers is clear. Employers need to run processes in a manner that takes account of health and safety obligations.  

Implications for New Zealand employers

Although New Zealand has not yet seen an equivalent intervention, the legal framework already supports similar scrutiny.  Key points for employers include understanding that restructures are not carved out from health and safety obligations. If the way a restructure is conducted exposes workers to risk of psychological harm, that risk must be managed.  Arguably consultation has a dual function and employers must consult under employment law (fair process), and consult under HSWA (health and safety engagement). These obligations overlap but are distinct. Meaningful engagement with employees about health and safety impacts of change is required.

Conclusion

The integration of psychosocial risk into health and safety law represents a fundamental shift in how restructuring should be approached. What was once primarily an employment law exercise is now also a health and safety risk management exercise.

The Australian intervention in the UTS restructure demonstrates that regulators are willing to act where psychological harm is foreseeable and unmanaged. New Zealand employers should assume that similar expectations apply under the HSWA.

Ultimately, the lesson is simple: A lawful restructure is no longer just about reaching the right decision, it is about how that decision is reached, communicated, and experienced by workers.