AI in the Workplace: What NSW’s New Digital Works Laws Mean for Employers and Employees

Co-Authored by Vishaal Kudupudi

KEY TAKEAWAYS:

• NSW has passed landmark workplace laws that make employers responsible for health and safety risks arising from AI, algorithms and other digital work systems

• The reforms recognise psychosocial harms caused by technology as workplace health and safety risks, such as stress and burnout from automated scheduling

• Unions will have expanded powers to inspect digital systems used to manage workers where a WHS breach is suspected, subject to notice requirements

• Businesses using AI or automated systems should review their workplace practices now, as the new obligations will commence once SafeWork NSW releases supporting guidelines

Your AI Scheduling Tool Could Now Be a WHS Liability

If your business uses software to roster staff, track performance, schedule shifts or manage workloads, there is now a law in NSW that specifically regulates the health and safety risks those systems may create for workers.

NSW has become the first Australian state to specifically regulate the use of artificial intelligence, algorithms and automated systems under work health and safety legislation.

The Work Health and Safety Amendment (Digital Work Systems) Act 2026 (the “Act”) passed on 12 February 206 and received assent on 18 February 2026. While some provisions will not commence until SafeWork NSW publishes supporting guidelines, businesses that use digital work systems should begin considering how those systems may affect their WHS obligations.

Unions Will be Able to Inspect Your Digital Systems 

The Union entry and inspection provisions of the Act will not legally commence until at least one month after SafeWork NSW finalises and publishes its official guidelines. However, once established, WHS entry permit holders may be able to access and inspect digital work systems where they suspect a breach of WHS laws.

This does not create an unrestricted right of access. At least 48 hours’ notice must be given before an inspection, and any access to digital work systems will be subject to guidelines to be issued by SafeWork NSW.

Whilst the inspection powers have not yet commenced, businesses that use digital work systems should start considering how those systems operate, what information they contain, and how they may respond to a request for access or inspection once the new guidelines commence. Businesses that refuse to cooperate with an authorised inspection face penalties of up to $13,310 for an individual and approximately $70,000 for a corporation.

Unions Will be Able to Inspect Your Digital Systems 

Under the new section 21A of the Act, employers must assess whether their digital systems create any of the following risks

1. Excessive or unreasonable workloads: If your scheduling software is generating workloads that no reasonable person could sustain, that is now a WHS issue, and not just a management problem

2. Impossible performance targets: AI-generated KPIs that are unachievable in practice are a potential legal liability. Employers must assess whether the metrics their systems use to evaluate workers are fair and reasonable.

3. Constant monitoring and surveillance: Being watched continuously causes real psychological harm. Surveillance anxiety is now recognised psychosocial risk that employers are legally required to manage

4. Discriminatory algorithmic decision-making: Algorithms are not neutral. If your system produces discriminatory outcomes in rostering, task allocation, or performance assessment, that is now caught under your WHS obligations.

Recommended Next Steps

Whilst the Act is not yet in force, it will be activated at any time once SafeWork NSW publishes its guidelines. As a business, you should focus your preparation on the following:

• Audit your digital systems: Map every algorithm, AI tool, automation and platform your business uses to allocate, monitor or evaluate work, including third-party software you have licensed.

• Update your WHS risk assessments: Include digital work systems. Pay particular attention to psychosocial risks, excessive workloads, monitoring stress and discriminatory outputs.

• Review your vendor contracts: Understand how third-party systems work, what data they use, and ensure you have documentation to support your due diligence. Keep records

• Make sure managers understand how these systems work: Not relying on automated outputs without appropriate human oversight and training.

Businesses that act now will be far better placed when the new requirements commence.

How Can Coutts Help

Whether you are an employer trying to understand your new obligations, or a worker who believes a digital system is affecting your health and wellbeing, our employment law team can help you understand where you stand. Contact us today.

This is new law, in a fast-moving area, with real consequences for getting it wrong. Early intervention is always recommended to become proactive, rather than reactive.

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