ILARS funding for IRC relevant conduct disputes from 1 July 2026

The Independent Review Office Amending Instrument published in June 2026 updates the ILARS Funding Guidelines so they align with the workers compensation reforms commencing on 1 July 2026. One practical change is that ILARS funding can now cover legal and associated costs for some matters in the Industrial Relations Commission, where the matter concerns relevant conduct for a NSW workers compensation claim.

This is important because the 2026 reform creates a special pathway for certain primary psychological injury claims caused by relevant conduct. The conduct question can be determined in the IRC, while the workers compensation claim still sits within the wider compensation scheme.

The change is not a blank cheque for all workplace disputes. It is tied to the statutory relevant-conduct pathway and the IRO funding criteria.

For this pathway, relevant conduct means bullying, excessive work demands, racial harassment or sexual harassment. The pathway is directed to a relevant injury, meaning a primary psychological injury caused by that conduct.

A worker should be careful not to treat every difficult workplace event as an IRC relevant-conduct matter. The factual issue is whether the conduct alleged fits the statutory category and whether the evidence supports that it caused the claimed psychological injury.

• Bullying allegations usually need a clear chronology, examples, witnesses or documents, and medical evidence connecting the events to injury.
• Excessive work demands usually need evidence about workload, hours, staffing, duties, escalation, health impact and contemporaneous records.
• Racial harassment and sexual harassment allegations may involve complaints, messages, witness evidence, incident records and medical evidence.
• Employment stress, interpersonal conflict or performance management may still need careful legal analysis before being framed as relevant conduct.

The 2025 amending legislation provides for an IRC application where, after insurer review, the insurer still disputes a claim or an aspect of a claim for a relevant injury. The IRC question is about whether the conduct the subject of the claim was relevant conduct.

That means workers should keep the insurer decision, the internal review material, and the exact disputed issue. Those documents often shape whether an IRC relevant-conduct funding request can be properly assessed.

• Keep the original claim documents and the insurer dispute notice.
• Keep the internal review request and the insurer's internal review outcome.
• Prepare a dated chronology of alleged conduct, complaints, witnesses and medical treatment.
• Separate the conduct issue from other claim issues such as capacity, treatment, WPI or weekly payments.

The new ILARS funding criteria are central. The IRO must not provide funding unless satisfied that funding is justified having regard to the likely benefit, that the person has reasonable prospects of success having regard to necessary investigations and entitlement issues, and that a prudent self-funding person with adequate resources would use their own funds for that purpose.

For IRC relevant-conduct claims, the Amending Instrument says the IRO will be guided by factual information from the lawyer, information in the insurer internal review, and relevant comparable case law in other courts and tribunals. In practice, this makes early evidence organisation very important.

• The funding request should explain the likely benefit to the worker or workers generally.
• It should address why the claim has reasonable prospects after the necessary investigations.
• It should show why a prudent self-funding person would spend their own money on the step.
• It should give the IRO enough factual material to assess the IRC conduct issue, not just a broad complaint about unfair treatment.

A relevant-conduct matter needs a different evidence pack from an ordinary treatment or weekly payments dispute. The worker still needs medical evidence, but the conduct evidence and internal review material are especially important.

• Insurer decision and internal review outcome.
• A dated chronology of alleged bullying, excessive work demands, racial harassment or sexual harassment.
• Complaints, emails, messages, rosters, workload records, meeting notes or witness details.
• GP, psychologist or psychiatrist material connecting the alleged conduct to the psychological injury.
• Certificates of capacity and notes about symptoms, capacity, treatment and work impact.
• Any documents showing what issue remains disputed after the insurer review.

The Amending Instrument states that where proceedings have commenced in the PIC or IRC, or an appeal has been lodged, without a grant of funding, legal costs incurred before approval will not be paid. This is a practical trap for workers who start proceedings first and ask about ILARS funding later.

If the dispute may need IRC steps, get funding and legal-position advice before lodging or responding to procedural directions wherever possible.