Digital tools are supposed to make life easier for SME owners but a new legislative push suggests the software that helps businesses run smoothly could also be a source of safety risks.

The NSW government is set to redefine the safety landscape with a new duty in the Work Health and Safety Act that places digital work systems – algorithms, AI, automation and scheduling software – directly under the regulatory microscope. This is not just a technical update but rather a shift in employer responsibility.

Businesses will soon be legally accountable for ensuring their digital architecture does not generate unsafe outcomes such as unreasonable workloads, intrusive electronic monitoring or discriminatory decision-making. 

As technology drives workflows across industries, NSW is spelling out that digital tools require the same duty of care applied to physical machinery. While the legislation is state-specific, the regulatory momentum is national, as focus shifts from physical risks to the invisible danger posed by modern work methods.

Putting Small Businesses Under The Microscope

The NSW reforms, which are still before parliament, aim to bring digital environments under the same rigorous WHS scrutiny as physical hazards. Legal analysis of the proposed changes define ‘digital work systems’ as the entire suite of automated processes used to manage a workforce. This includes everything from AI recruitment filters to workforce analytics and automated task allocation.

Under the proposal, businesses must actively manage:

• Algorithmic Pressure: Ensuring automated systems do not set a pace of work that leads to physical or mental burnout.
• Digital Surveillance: Mitigating the stress and ‘performance anxiety’ caused by automated tracking of keystrokes or location.
• Systemic Bias: Monitoring whether automated tools are making invisible decisions that unfairly impact specific staff members or groups.

Significantly, the proposal would grant regulators the power to step inside a business’s digital architecture, allowing inspectors to audit systems for compliance just as they would a faulty piece of equipment.

The Pushback: Why Business Groups Are Concerned

While the intent is worker safety, the proposal has sparked significant criticism from major industry bodies. 

Business Council of Australia CEO Bran Black warned, “These new laws hand unions unprecedented access to any business or worker’s computer system, without notice, to go through emails, personal data and more. The proposed changes risk slowing Australia’s digital and AI adoption by making everyday business technology harder and riskier to use. 

Australian Retailers Association CEO Chris Rodwell described the Bill as “a backward step on privacy and security that would not be allowed to occur in any other setting,” while COSBOA described it as a “trojan horse” for unions that failed to understand how small businesses used technology. “The Bill makes small business owners liable for work allocation, and anything from a standard spreadsheet to a basic off-the-shelf system is caught up in this overreach,” said COSBOA chair Matthew Addison. 

Another criticism is the ‘compliance burden,’ with lobby groups arguing it’s unfair to hold SMEs liable for black box software design choices made by global tech giants. Business groups claim the legislation is overly broad and could stifle innovation by making owners too risk-averse to adopt new productivity-boosting technologies.

This Change Matters Beyond NSW

While NSW plans to go further with its proposed law, in intent is covered in other states and territories which follow the model WHS laws maintained by Safe Work Australia.

These laws already mandate the management of psychosocial risks. Whether you are in Sydney, Perth or Darwin, you are already legally obligated to protect your team from mental harm. Victoria remains the only state outside the model framework, yet its OHS laws carry the same weight regarding employer duty of care.

The NSW proposal simply draws a circle around technology, making it impossible for businesses to claim that “the software did it.” This signals a regulatory convergence where digital safety will eventually become a standard part of HR compliance nationwide.

Small Steps Towards A Safer Workplace

Pending legislation aside, it makes sense for small business operators to move toward proactive system audits to ensure staff safety and compliance. This involves a review of how automated tools dictate the rhythm of work. For example, businesses could identify whether rostering tools are inadvertently scheduling “clopenings” – back-to-back shifts that negate mandatory rest periods – which could be flagged as a breach of duty.

Staff consultation remains critical to identifying digital hazards. Employees often act as the first warning system when digital tools transition from productivity aids to sources of distress. Internal policies should also be updated to address the ‘right to disconnect’ and the limits of surveillance.

By leveraging mental health and wellbeing resources, businesses can address digital burnout before it escalates. Treating digital systems with a safety-first mindset is now essential to future-proofing businesses against this changing legal tide.