Employers are at increasing risk of costly legal action if they fail to address mental health issues in the workplace properly.
Mental health expert Tasha Broomhall said many employers were unaware that they could face discrimination claims if they refused jobs or promotions to those with mental health problems.
Employers could also be taken to court under occupational health and safety laws if they failed to provide a safe workplace for a staff member with mental illness. Mentioning the mental health problem as part of workplace gossip could also breach privacy laws.
Ms Broomhall, of mental health consultancy Blooming Minds, said employees were becoming more aware of their rights and protections, but employers were remaining ignorant about their obligations.
"If nearly six out of 10 of managers don't understand the signs, symptoms and indicators of mental illness, they're unlikely to respond appropriately in the workplace, unlikely to support staff and, critically, are likely to increase the personal impact on the worker involved," she said.
A Blooming Minds survey of 102 people, two-thirds interviewed from WA, showed only one in 10 workplaces had a clear understanding of mental health policy.
The survey showed 42 per cent of respondents had been diagnosed with a condition and of those who revealed this information to their employer, 85 per cent claimed the manager's reaction made their illness worse.
Beyondblue says Australian businesses lose $10.9 billion a year by failing to address mental health issues in the workplace.