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It was unreasonable to keep an employee "in the dark" after concluding serious misconduct allegations weren't substantiated, a tribunal has found in psychological injury proceedings.

NSW Personal Injury Commission Member Diana Benk said she "wholeheartedly" agreed with the employer that protecting the complainant – in this case, a child – was paramount, but she found the nature of the allegations nonetheless required following its investigation policies "to the letter".

Instead, the employer "sat on its hands" for several days after finalising its investigation, during which time the employee's psychological injury and distress became "manifest".

The employer's insurer had denied liability for the childcare worker's psychological injury – namely adjustment order and anxiety – on the basis that it was caused by reasonable action with respect to discipline...