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It was "incumbent" on an employer to investigate allegations an employee had been spreading rumours at work, but its process was "most inappropriate", and caused a psychological injury, a commission has ruled.

The Douglass Hanly Moir Pathology laboratory technician sought weekly and permanent impairment compensation for a psychological injury, which she alleged was caused by "unfounded" claims she was having an affair with a supervisor.

After the employer denied liability on the basis her injury was wholly or predominantly caused by reasonable actions related to discipline, she applied to the NSW Personal Injury Commission to resolve a dispute.

The Commission heard that in March 2020, the supervisor and a manager met with the employee on two occasions, to discuss allegations she had been spreading rumours that, among other things, she was in a relationship with the supervisor...