The NSW WHS Digital Work Systems Act 2026: What AI-Using Businesses Need to Know

A New Compliance Obligation Most NSW Employers Have Not Registered

The Work Health and Safety Amendment (Digital Work Systems) Act 2026 came into effect in NSW in March 2026. It extends the existing WHS Act framework to address AI and automated systems used in the management, monitoring, and direction of workers.

Most employers using AI tools in their operations have not yet assessed whether the Act applies to their situation. Many who are in scope have not begun the documentation work the Act requires.

SafeWork NSW has indicated that the initial compliance monitoring period will focus on awareness and education, with enforcement action expected to follow in the second half of 2026.

What the Act Covers

The WHS Digital Work Systems Act introduces obligations for businesses that use what the legislation terms a "digital work system" - defined as any software, algorithmic tool, or AI-enabled system that is used to:

• •Assign, allocate, or schedule work for workers
• •Monitor or evaluate worker performance
• •Make or assist in making decisions that affect the terms and conditions of a worker's engagement
• •Provide directions or instructions to workers in real time

The definition is intentionally broad. Systems that fall within scope include but are not limited to:

• •AI-powered scheduling and rostering tools
• •Performance monitoring software that uses AI to generate ratings or rankings
• •Gig economy platform algorithms that allocate tasks and determine pay rates
• •AI tools that generate performance reviews or inform disciplinary decisions
• •Automated systems that direct worker activity in real time, including in logistics, warehousing, and customer service contexts

A business does not need to build or own the system for obligations to apply. If you use a third-party platform that functions as a digital work system, the Act's obligations apply to your use of that platform.

The Core Obligations

Transparency requirements

Section 12A of the amended Act requires that workers be informed when a digital work system is being used in connection with their work. The notice must include: what system is being used, what functions it performs in relation to their work, what data it collects, and how outputs from the system are used in employment or engagement decisions.

This is a documented disclosure requirement. A verbal mention at onboarding does not satisfy it. The disclosure must be in writing and must be provided before the system is used in connection with the worker's engagement.

Risk assessment obligations

Section 12B requires that employers conduct a risk assessment of any digital work system before it is introduced and at intervals of not more than 12 months thereafter. The risk assessment must address:

• •The potential for the system to produce decisions that are unfair, discriminatory, or inconsistent with the worker's legal entitlements
• •The potential for the system to adversely affect worker health and safety through excessive monitoring, unrealistic performance targets, or automated direction that creates psychosocial hazards
• •The adequacy of human oversight over system outputs that affect workers
• •The data inputs and their accuracy

The risk assessment must be documented and retained for a minimum of five years.

Right to explanation

Section 12C gives workers the right to request an explanation of any decision made wholly or substantially by a digital work system that affects their terms of engagement. The employer must provide a written explanation within 14 days of the request.

This obligation requires that employers understand, and can articulate, how the AI systems they use make the decisions they make. Organisations that cannot explain AI-generated performance ratings, work allocation decisions, or engagement changes will face difficulty meeting this obligation.

Consultation requirements

Section 12D requires that employers consult with workers and their health and safety representatives before introducing a digital work system or making material changes to an existing one. The consultation must address the risk assessment findings and must occur before the system is deployed.

Who Is Most Exposed

Five categories of businesses face the highest exposure under the Act:

Gig economy platforms and their enterprise users. Any NSW-based platform or business using a platform that algorithmically allocates work, sets prices, or evaluates workers is directly in scope. The Act explicitly addresses platform work in its definition of digital work systems.

Logistics, warehousing, and distribution. Operations that use AI-assisted systems to direct picker or driver activity, set performance benchmarks, or monitor productivity metrics have significant obligations under the Act.

Customer contact centres. AI tools that monitor call quality, evaluate agent performance, or generate coaching recommendations create obligations under sections 12A through 12D.

Professional services firms using AI for work allocation. Law firms, consulting firms, and accounting practices that use AI to allocate matters, assess utilisation, or inform performance reviews are in scope.

HR software users. Any business using an HR platform with AI-powered features - including automated CV screening, engagement surveys with AI analysis, or performance management tools - needs to assess whether those features constitute a digital work system under the Act.

What SafeWork NSW Is Looking For

SafeWork NSW has published initial compliance guidance indicating that inspectors assessing WHS Digital Work System compliance will ask for:

• •A register of digital work systems in use
• •Evidence of worker disclosure documentation
• •Copies of risk assessments conducted under section 12B
• •Evidence that the consultation requirements of section 12D were met
• •A process for responding to worker requests under section 12C

Businesses that cannot produce this documentation on request face improvement notices and, where non-compliance is systemic, infringement notices carrying penalties of up to $12,000 for individuals and $60,000 for body corporates per breach.

The Intersection With Other Frameworks

The NSW WHS Digital Work Systems Act does not exist in isolation. Businesses assessing their obligations under the Act should note that:

The Fair Work Act's general protections provisions apply to adverse action taken against workers based on AI-generated outputs. A dismissal or demotion that follows an AI-generated performance assessment without adequate human review creates Fair Work exposure in addition to WHS exposure.

The Privacy Act 1988 applies to the collection and use of biometric and performance data by digital work systems. Organisations using monitoring tools that capture keystroke data, video, or biometric information have overlapping obligations.

The EU AI Act applies if you have EU-resident workers or if you are a subsidiary of an EU group. High-risk AI system obligations under the EU Act overlap significantly with the NSW WHS regime's risk assessment and transparency requirements.

A structured AI compliance assessment that addresses these frameworks in parallel is significantly more efficient than treating each as a separate project.

What to Do Now

For NSW businesses that are in scope, the compliance steps in priority order are:

• •Conduct an inventory of digital work systems in use - include third-party platforms
• •Review worker disclosure documentation and update to meet section 12A requirements
• •Schedule and complete a risk assessment for each system in scope
• •Establish a documented process for responding to section 12C explanation requests
• •Consult with health and safety representatives about any systems not yet subject to consultation

The window before active enforcement is measured in months, not years. The documentation requirements are not technically complex, but they require deliberate effort to produce.