Application for Crown Employees (Public Sector – Salaries 2022) Award [2022] NSWIRComm 1057

Matters for determination

1. It was common ground that the increases in salaries and salary-related allowances anticipated by the Proposed Awards are the maximum which the Commission is empowered to award, having regard to s 146C of the Act and cl 6A of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 ("Regulation"). It was not in question that the Commission ought to award those increases.
2. There are three matters requiring determination by the Full Bench: 1. the term of any new awards to be made by the Commission, and indeed whether the 2021 Awards should instead be varied to provide for a one-off increase in salaries; 2. whether the salary increases will take effect from 1 July 2022 or the date of the Full Bench's decision; and 3. whether any new award made by the Commission should contain a no extra claims provision.

Applicable legislation and principles

1. There was no controversy as to the principles that the Full Bench ought to apply in determining the Applications. Consequently, we will not for the sake of "form" reiterate those principles or reproduce extracts from the authorities from which they are derived. We limit ourselves to drawing attention to the observations of the Full Bench in Applications for Variations to Crown Employees (Police Officers - 2017) Award and Paramedics and Control Centre Officers (State) Award [2021] NSWIRComm 1040 at [17]-[32].
2. We also assume familiarity with the Act and Regulation. We will not reproduce the provisions to which we refer.
3. We are mindful of the Commission's jurisdiction under s 10 of the Act, and the matters to which we must by s 146(2) have regard in exercising that jurisdiction (including the objects in s 3). We note the constraints imposed on our jurisdiction by s 146C of the Act and the Regulation.

Evidence

1. In support of the Applications, the Applicants read an affidavit of Samuel Walker, the Executive Director, Budget Division, New South Wales Treasury affirmed on 20 July 2022. Mr Walker deposed that there are approximately 84,645 full-time equivalent employees who would be covered by the Proposed Awards, comprising approximately 24% of the non-executive New South Wales public sector workforce.
2. In apparent support for the Applicants' claims that the Proposed Awards have nominal terms of two years, Mr Walker deposed: "Nominal term of the awards 8. Many of the Government's largest programs and projects extend beyond one year. 9. It is generally recognised that the public financial management framework of a government should similarly have a medium-term focus. … 10. The Government's wages policy seeks, in part, to promote medium-term stability of Government expenditure. The policy provides Government decision makers, employees and the public with a degree of predictability. One benefit is that it allows Government more confidence in making long-term expenditure and revenue decisions. 11. In general terms: a. Employee-related expenses make up the largest share of the State Government's expenses. For the current financial year (2022-23), employee expenses including superannuation are projected to account for 42% of total expenses. Volatility in employee expenses adds volatility to the State Budget. b. The NSW Government's wages policy is currently recognised in regulation, which provides a degree of planning certainty. In an environment where the regulation can be disallowed or changed, the tenure of specific awards can also provide additional planning certainty. c. In the context of the current applications and the timing of the next State election, one-year awards could create a scenario where the subsequent award is finalised either very close to, concurrent with, or even after completion of the 2023-24 Budget."
3. Mr Walker acknowledged, however, that there are circumstances in which the greater flexibility afforded by a one year award is beneficial for public financial management, including by providing what he described as "the Government" with greater flexibility to respond to unexpected changes in the economic or fiscal environment.
4. The PSA read an affidavit of Alison Louise McRobert, a solicitor in its employ. Ms McRobert deposed as to the attempts made by the PSA since February 2022 to negotiate a wages outcome for its members with the Premier and other members of Cabinet. It is not necessary to traverse all of that history. It suffices to say that Ms McRobert described a set of circumstances in which she claimed that "the Government" did not engage, or engage in any meaningful way, with the PSA.
5. Ms McRobert deposed: "18. On 6 June 2022, the NSW Government issued a Media Release announcing a two­year wages policy that 'offered a 3.0 per cent remuneration increase per annum in 2022-23 and 2023-24, with a possible further 0.5 per cent on offer in 2023-24 for employees that make a substantial contribution to productivity enhancing reforms' ('the Media Release'). The Media Release also announced a one-off payment of $3,000 to NSW Health employees 'in recognition of their work on the frontline of the COVID-19 pandemic'. The PSA was not made aware of the new wages policy or one-off payment prior to the announcement in the Media Release. The $3,000 one­off payment did not apply to PSA members. …" (Emphasis in original)
6. Ms McRobert further deposed that: 1. the headline inflation rate in Australia rose 2.1% in the March 2022 quarter to 5.1%; 2. the underlying inflation rate was 3.7%; 3. on 21 June 2022 the Governor of the Reserve Bank of Australia, Phillip Lowe, in a speech to the American Chamber of Commerce in Australia, stated that headline inflation is forecast to peak at around 7% in the December quarter; and 4. even allowing for a 3% increase (including superannuation), the average public servant is forecast to experience a real wage cut up to June 2024 of $7,300 per year.
7. Ms McRobert stated that since the introduction of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011, the predecessor to the Regulation, the Industrial Relations Secretary has only ever sought awards with the PSA with one year terms, despite the PSA requesting multi-year awards. Ms McRobert exhibited to her affidavit submissions that had been filed by the Industrial Relations Secretary in earlier proceedings before the Commission, matter 2020/79899. In those submissions the Industrial Relations Secretary had contended: "In light of the unforeseen significant changes that have occurred in the last 4 months it is very difficult to predict the state of the economy in 12 months time. Now is not the time to depart from the recent practice of 1 year terms. Whether on 1 July 2021 there should be an increase of 2.5% or a lesser amount is a matter that is more appropriate to consider closer to that date, in light of what is then known about the state of the NSW economy and the impact any increase in salaries would have on that economy." (Emphasis added)
8. We digress to observe that these submissions were alluded to in a decision of the Full Bench which resulted from those proceedings: Application for Crown Employees (Public Sector - Salaries 2020) Award and Other Matters (No 2) [2020] NSWIRComm 1066 at [152].

Submissions

1. We have had the benefit of written submissions filed on behalf of the Applicants and the PSA. Contrary to directions which had been made, the Applicants' submissions were filed some time after those of the PSA, and consequently purport to respond to the PSA's submissions. It is convenient, although perhaps unorthodox, to outline first the submissions advanced by the PSA before turning to those of the Applicants.

The PSA

1. The PSA contends that the Commission should not make new awards with terms of two years for several reasons. First, there is significant uncertainty as to the economic, political and regulatory circumstances which will pertain in 12 months' time. The PSA notes that inflation has risen much faster and higher than had been expected; that changes in the Government's wages policy, and to the Regulation, since 2020 could leave the Commission with no confidence that the constraints on increases in public sector salaries will be the same by June 2023; and that the Government's position, and indeed the Government, may change over the next 12 months.
2. Second, cll 6A(3) and 6A(5) of the Regulation provide the potential for increases above 3% in the 2023-2024 year, which are not provided for in the Applications. Where there is an unresolved question as to whether higher increases might be available in the second year, a two year award should not be made.
3. As to the operative date of any new awards, the PSA presses for commencement from 1 July 2022. It contends that exceptional circumstances exist within the meaning of cl 6(2) of the Regulation to permit a retrospective commencement. These include: 1. the current high levels of inflation being experienced. Any delay in employees being awarded increases leaves them bearing the brunt of these inflationary pressures; 2. the failure by the Government to engage meaningfully with the PSA from February to June 2022, and the Government's announcement of its position by way of media release without any prior notice to the PSA; 3. the failure by the Government to abide by its own wages policy, which contemplates bargaining parameters being settled no later than three months prior to the expiry of the current industrial instrument "to enable sufficient time for bargaining"; 4. members of the PSA largely being excluded from the payment of $3,000 offered to employees in the health service; and 5. the delay in the gazettal of the amended Regulation until 24 June 2022 and in filing the Applications until 1 July 2022, meaning that there was no opportunity for the Commission to determine the matter prior to 1 July 2022.
4. On the question of a no extra claims provision, the PSA "formally submitted" that: "24. …it is beyond power to insert a no extra claims clause without agreement as to do so would be inconsistent with the Act which expressly permits awards to be made and varied upon application. If the proposed no extra claims provisions go further than clause 6(1)(d) and constrain applications that the Act permits, the clauses would be ultra vires and void." (Footnote omitted)
5. In any event, the PSA argues that the Commission would not as a matter of discretion include a no extra claims clause. It submitted: "22. The traditional rationale for the inclusion of no extra claims provisions is that the matters agreed or arbitrated upon represent a 'settled arrangement' for the term of the award or agreement. It is not accurate to describe the terms and conditions of relevant employees as having been 'settled' by any determination of the Full Bench. The PSA's claim is to an increase in salaries of 5.2%. That is not a claim that the Commission is able to consider or determine having regard to the constraints imposed by the Regulation. The extent of the jurisdiction of the Commission is to award a 2.53% increase in salaries. That does not 'settle' the dispute. It merely exhausts the Commission's jurisdiction. 23. In those circumstances, assuming the Full Bench can do so, it should not impose a no extra claims provision as a matter of discretion. Given the claims made by the PSA are not within the Commission's jurisdiction to resolve and the outcome of the proceedings will, on any view, still result in a cut in real wages for employees, the capacity of the PSA to pursue claims industrially or through proceedings (to the extent it can) should not be constrained. To the extent the proposed no extra claims clauses are said to merely reflect the requirements of clause 6(1)(d), the terms also have little practical utility."

The Applicants

1. The Applicants seek that the Proposed Awards provide for a two year nominal term. In support of this claim they relied on the evidence of Mr Walker. They submitted: "9. The term of the Proposed Awards will thereby provide industrial certainty to all stakeholders. It is consistent with the medium-term focus for fiscal management adopted by the government, will assist with the planning of other facets of the economy and will help avoid possible disruption with the government's 2023-2024 economic dealings."
2. The Applicants resist the PSA's submissions that a two year term would disentitle the relevant employees from potential additional increases under cll 6A(3) or 6A(5) of the Regulation. They contend that "it is open for the parties, by agreement, to vary the Proposed Awards, in due course, to give effect to such clauses".
3. As to whether any new award ought to contain a no extra claims provision, the Applicants observe that the 2021 Awards include such a provision, and that the 2021 Awards were made with the consent of the Respondents. They contend that the no extra claims clause in the Proposed Awards is consistent with and gives effect to cl 6(1)(d) of the Regulation. They disagree with the PSA's contention that this robs the clause of any utility, citing Application for Crown Employees (Public Sector - Salaries 2020) Award and Other Matters (No 3) [2020] NSWIRComm 1077 at [18]-[19].
4. The Applicants submit that the Full Bench ought to reject the PSA's submissions that the making of new awards will not "settle" the PSA's claim. They argue that the Commission's jurisdiction is established by instruments such as the Act and the Regulation. Those instruments cannot be construed as rendering less final or binding decisions of the Commission made in accordance with them.
5. As to the operative date of the Proposed Awards, the Applicants drew our attention to authorities which had considered the term "exceptional circumstances", namely San v Rumble (No 2) [2007] NSWCA 259 at [59]-[69] and Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66]-[67]. The Applicants contend that "there is no such exceptional basis to invoke the Commission's exceptional power at cl 6(2) of the 2014 Regulation".

The AWU and AMWU

1. The AWU and the AMWU supported the position advanced by the PSA.
2. In relation to the term of any new awards, four points were made. First, a two year term would create a precedent that might have a detrimental impact on the unions' members under other awards. Second, even with the increases proposed by the Applicants, members of the unions will suffer a reduction in their real wages. A two year term would compound that prejudice. Third, the evidence demonstrates an uncertain and volatile economic environment, which calls for a shorter rather than a longer term. Fourth, in the event that there is a change in government in 2023 which results in a new wages policy or indeed the abolition of the Regulation, the unions' members may not be able to take immediate advantage of that if they were bound to a two year term.
3. This last point was further relied on by the AWU and the AMWU in resisting a no extra claims clause being included in any new award. The unions further contended that in light of the Regulation such a provision would have no utility.
4. On the question of the commencement date, the AWU and the AMWU submitted that even without levelling any criticism at the Applicants, the delay in the Government announcing its position on wages in 2022 was unprecedented. It was submitted that the Government had never before waited until June to announce its wages position. This was said to amount to an exceptional circumstance in itself.

Determination

1. We have determined, pursuant to s 10 of the Act, to make awards in respect of each of the Applications. Those awards ("New Awards") will be in the terms of the Proposed Awards, subject to the following: 1. each New Award will commence from the first full pay period on or after 1 July 2022; 2. each New Award will have a nominal term of one year; and 3. the no extra claims provision in each New Award will be in the same form as appears in the counterpart 2021 Award with "30 June 2022" being replaced with "30 June 2023".
2. In consequence of and subject to the making of the New Awards, pursuant to s 17 of the Act the Commission will rescind the 2021 Awards.
3. Our reasons are as follows.
4. The Regulation has had a significant bearing on our decision to limit the term of the New Awards to one year. Clauses 6A(3) and 6A(5) allow for the possibility of additional increases in the financial year 2023-2024. The Applicants submitted that nothing in the Applications "hinders" the capacity of those provisions to operate. They cavilled, though, with the PSA's submissions that there existed a capacity for the Commission to arbitrate in respect of any claims arising under those clauses.
5. While cl 6A(5) is subject to agreement, we consider that there may be scope for the Commission to intervene to resolve any dispute as to whether an additional increase under cl 6A(3) ought to be awarded to employees. On the terms of the Proposed Awards, particularly in light of the no extra claims clauses that they contain, the Respondents and their members might be disentitled to, or be perceived to be disentitled to, pursue any additional increases under cl 6A(3).
6. We acknowledge that this concern could potentially be addressed in the drafting of the New Awards, including by not containing a no extra claims provision, but we remain troubled by the possibility of a two year term being construed, by either the Applicants or the Respondents and their members, as a barrier to claiming a potential benefit under cl 6A(3). In light of the dealings between the Government and the PSA in 2022, as described by Ms McRobert, the Respondents could take little comfort from the Applicants' submission that it is "open for the parties, by agreement, to vary the Proposed Awards, in due course" (our emphasis).
7. We are mindful of the evidence of Mr Walker as to the desirability of medium-term certainty of costs, but nothing suggests that this is new to 2022. He did not depose that there was anything specific to the current financial environment which warranted two year terms in respect of the Proposed Awards, in a manner which departed from the approach which has historically been adopted by the Crown in the majority of cases. The uncontroverted evidence of Ms McRobert is that the Industrial Relations Secretary has, since 2011, only ever sought one year terms in awards with the PSA.
8. Mr Walker accepted under cross-examination that the Regulation itself allows for predictability in terms of wages outcomes without the need for longer award terms. He was aware that at least since 2018 the Crown has generally resisted award terms longer than one year, and was not aware of the Government having been provided with advice to seek longer award terms to achieve greater fiscal or economic predictability.
9. In respect of the commencement date of the New Awards, we agree with the PSA that exceptional circumstances exist within the meaning of cl 6(2) of the Regulation so as to allow for a retrospective commencement date for the New Awards. We observe that in responding to the PSA's submissions, the Applicants submitted in part that the delay in determining and announcing the Government's position in respect of wages to be paid to public sector employees, and subsequently in filing the Applications, was brought about by particular and unusual events. Those submissions suggest to us, as contended by the PSA, the AWU and the AMWU, that the present circumstances are "exceptional".
10. In addition to the matters to which the PSA drew our attention, we have had regard to the fact that the proceedings in respect of each Application were commenced on 1 July 2022. In their original terms, the Applications sought that the Proposed Awards commence on 1 July 2022. The Applicants filed amended applications on 19 July 2022 seeking that the Proposed Awards commence from the date on which they are made by the Commission. No reason was offered for the change in the Applicants' position.
11. We consider that the prevailing high levels of inflation constitute an exceptional circumstance. Any delay in employees covered by the New Awards receiving an increase to their remuneration following the nominal expiry of the 2021 Awards will have a greater negative impact on them than may have been the case in the past years.
12. Finally, we turn to the question of no extra claims provisions. As noted, the PSA contended that "it is beyond power to insert a no extra claims clause without agreement as to do so would be inconsistent with the Act". It cited Public Service Association and Professional Officers' Association Amalgamated Union (NSW) v Roads and Maritime Services (2015) 250 IR 412; [2015] NSWIRComm 16 in support of that contention.
13. We do not consider that that case stands as authority for the proposition advanced. In that case, the Full Bench dismissed an appeal against a decision of Staff J to insert a no extra claims provision into an award over the objections of the union. The Full Bench determined at [38] that the Commission has the power to include no extra claims clauses in awards. However, having regard to the principles as to the construction of awards and statutory instruments (which the Full Bench examined), the Full Bench determined that the words "except as provided by the Industrial Relations Act 1996" can be implied into the provision: at [39].
14. Relevant to the PSA's submissions as to the utility of a no extra claims provision, particularly in the context of cl 6(1)(d) of the Regulation, we note that the Full Bench further observed at [42] that "the utility of such clauses in reminding parties of the settled nature of the award during its nominal term has long been recognised". Further in this regard, we endorse the observations of the Full Bench in Application for Crown Employees (Public Sector - Salaries 2020) Award and Other Matters (No 3), to which the Applicants drew our attention. We observe, however, that in that case the Full Bench determined not to include a no extra claims provision in the subject awards.
15. The rationale for the inclusion of no extra claims clauses in awards was articulated by the Full Bench in Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award and Crown Employees (Teachers in TAFE and Related Employees) Salaries and Conditions Award [2008] NSWIRComm 209 at [15]-[16]. Those passages have guided our approach in these proceedings.
16. There is considerable force to the arguments advanced in pars 22-23 of the PSA's submissions referred to above. They take on added weight in light of the dealings between the Government and the PSA in 2022, as described by Ms McRobert.
17. However, each of the 2021 Awards contains a no extra claims provision in the terms sought by the Applicants. Those awards are presumed to set fair and reasonable terms of employment. We are not satisfied that that presumption has been rebutted.

Directions

1. We propose to make orders to give effect to the determinations of the Full Bench as set out at [35]-[36] above.
2. The Applicants are to file and serve draft Short Minutes of Order to that end, by 4.00pm on Friday, 29 July 2022.

Endnote

1. The registered name of the union in New South Wales is "Construction, Forestry, Mining and Energy Union (New South Wales Branch)". The Crown Employees (Public Sector - Salaries 2022) Award to be made pursuant to this decision should reflect the proper name on the union. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 July 2022