A former contestant on a Channel Seven reality television program has won a landmark compensation case against the network for psychological injury suffered while filming the show.

In a decision with potentially far-reaching ramifications for reality franchises across Australia, first reported by the website TV Blackbox, the New South Wales Compensation Commission found Nicole Prince was legally an employee of Channel Seven when she appeared on the reality show House Rules in 2017.

The commission ordered the network to pay Prince compensation for psychological injury suffered after she was “harassed and bullied” during the filming of the hit renovation program.

Prince said in a statement of claim that she had been subjected to “isolation, bullying and harassment” throughout the filming of the program and had received threats of physical abuse on Seven’s social media channels after she was portrayed as a “bully” by the show’s producers.

“I feel devastated and worthless about the loss of my career and working life,” Prince said. “After my episode aired I wanted to kill myself and I started drinking more alcohol in an attempt to self-medicate my injury.”

Hosted by Johanna Griggs, the House Rules series follows six state-based couples who renovate each other’s homes and then rate one another.

In her statement, Prince told the commission that she and her friend Fiona Taylor had been instructed by the show’s producers to be more critical of other contestants, and had subsequently been “harassed and bullied” by the other contestants on the show.

She claimed the bullying was “not only condoned by the producer, but it was aggravated, even encouraged, by them”, saying the pair were deliberately isolated from the other contestants.

Prince filed a workers’ compensation claim in May 2017, stating she had suffered adjustment disorder, anxiety disorder, depression and post-traumatic stress disorder as a result of injury caused by Seven’s “systematic isolation of myself and encouragement of bullying by co-competitors”.

But the network’s insurer denied liability on the basis that Prince was “not a worker”. After the insurer again denied liability after a review of the decision, Prince filed an application in the compensation commission.

Seven argued the compensation claim should be rejected because Prince was not an employee, but rather a contestant vying for the show’s $200,000 prize.

“The respondent’s primary contention was there was no service which Channel Seven required of the applicant,” commission arbitrator Cameron Burge wrote in his judgement. “Rather, the applicant applied [with] the hope of winning a windfall of $200,000 which would be paid to them if and only if they were successful in the competition.”

Seven argued the arrangement “did not constitute a service of any kind” and pointed to the terms of the show’s contract which stated that “your participation in the program is not employment”.

The contract stated appearing on the program “does not create an employer/employee relationship between Seven and you” and did entitle contestants to any workplace agreements, wages, salary, corporate benefits, superannuation, workers compensation benefits or any other compensation.

But in a decision which could have widespread ramifications for the responsibility broadcasters and production companies have to reality show contestants, Burge found in favour of Prince, whose lawyers argued the contract was merely “an attempt by the respondent to oust any rights as a worker which the applicant may have had”.

Prince’s lawyers had argued the contract “does not detract from the reality of the situation, which was one of employer and employee” and that the relationship had to be viewed in totality.

Burge agreed, finding Seven had “derived benefit from the applicant giving her time and engaging in the home renovations for the television show” and that Seven would “derive benefit” from their participation because of the advertising revenue associated with its screening.

He also pointed to the rate of remuneration – $500 per week plus a $500 allowance during filming – Seven’s “exclusive use of the applicant for every hour of every day during which the show was being filmed” and its power to “veto the applicant wearing certain clothes” as further evidence of a relationship between an employer and employee.

Burge said while it was not necessary to find fault with Seven’s treatment of Prince, there was “little doubt” she was placed in an “hostile and adversarial environment” during the show.

He said there was evidence that the program had been edited “in such a selective manner as to portray them in a certain negative light” and said he found it “extraordinary” that Seven had failed to remove “hateful comments” made about her from its social media pages.

“The failure to do so represents, in my view, a factor to which the applicant has reacted and which has contributed to her injury,” he wrote in his judgement.

Burge ordered Seven to pay compensation to Prince, who has been referred to a medical specialist to determine the level of permanent impairment arising from the injury.

Seven has been contacted for comment.