Australian Salaried Medical Officers' Federation (NSW) v The Secretary, NSW Health

Legislation and relevant legal principles

1. The dispute before the Commission is commenced pursuant to s 130 of the IR Act, which relevantly provides: 130 Notification of industrial dispute to Commission (1) Any of the following may notify the Commission of an industrial dispute for the purpose of resolving the dispute - (a) an industrial organisation of employees or employers
2. Section 136 of the IR Act provides: 136 Arbitration of dispute (1) The Commission may, in arbitration proceedings, do any one or more of the following - (a) make a recommendation or give a direction to the parties to the industrial dispute, (b) make or vary an award under Part 1 of Chapter 2, … (d) make any other kind of order it is authorised to make (including an order made on an interim basis). (2) Any such action may be taken by the Commission on its own initiative or on application by any person authorised to notify the Commission of the industrial dispute. (Emphasis added)
3. When the Commission varies an award in resolution of a dispute between parties, it is subject to the same requirements as if the application for variation had been made pursuant to s 17 of the IR Act: s 17(4).
4. Section 17 of the IR Act relevantly provides: 17 Variation or rescission of award (1) The Commission may vary or rescind an award. (2) Sections 11, 13 and 15 apply to any such variation or rescission. The other provisions of this Division continue to apply to the award as varied. (3) An award may be varied or rescinded in any of the following circumstances only - (a) at any time with the mutual consent of all the parties to the making of the original award, … (c) during its nominal term if the Commission considers that it is not contrary to the public interest to do so and that there is a substantial reason to do so, (d) after its nominal term if the Commission considers that it is not contrary to the public interest to do so. (4) This section extends to a variation or rescission of an award in the course of an arbitration by the Commission under Chapter 3 to resolve an industrial dispute.
5. Relevantly, s 15 of the IR Act provides: 15 Commencement of award (1) An award comes into force on the date specified by the Commission. … (3) An award may be expressed to apply retrospectively, but not earlier than the date on which - … (c) the industrial dispute giving rise to the award was notified to the Commission. (4) Despite subsection (3), the following awards may, with the consent of the parties to the making of the award, apply retrospectively from a date, specified in the award, that is earlier than any date referred to in that subsection - … (b) an award that sets conditions of employment for employees of a single employer or for employees of two or more associated employers.
6. Section 146C of the IR Act requires the Commission, when varying an award, to give effect to certain aspects of government policy on public sector employment. It states: 146C Commission to give effect to certain aspects of government policy on public sector employment (1) The Commission must, when making or varying any award or order, give effect to any policy on conditions of employment of public sector employees - (a) that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission, and (b) that applies to the matter to which the award or order relates. (2) Any such regulation may declare a policy by setting out the policy in the regulation or by adopting a policy set out in a relevant document referred to in the regulation. … (7) This section has effect despite section 10 or 146 or any other provision of this or any other Act.
7. The Regulations declared for the purposes of s 146C of the IR Act relevantly provide: 6 Other policies (1) The following policies are also declared, but are subject to compliance with the declared paramount policies: (a) Public sector employees may be awarded increases in remuneration or other conditions of employment, but only if employee-related costs in respect of those employees are not increased by more than 2.5% per annum as a result of the increases awarded together with any new or increased superannuation employment benefits provided (or to be provided) to or in respect of the employees since their remuneration or other conditions of employment were last determined. (b) Increases in remuneration or other conditions of employment can be awarded even if employee-related costs are increased by more than 2.5% per annum, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs beyond 2.5% per annum. For this purpose- (i) whether relevant savings have been achieved is to be determined by agreement of the relevant parties or, in the absence of agreement, by the Commission, and (ii) increases may be awarded before the relevant savings have been achieved, but are not payable until they are achieved, and (iii) the full savings are not required to be awarded as increases in remuneration or other conditions of employment. … (d) Awards and orders are to resolve all issues the subject of the proceedings (and not reserve leave for a matter to be dealt with at a later time or allow extra claims to be made during the term of the award or order). However, this does not prevent variations made with the agreement of the relevant parties.
8. In Secretary of The Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of NSW [2014] NSWCA 138; 89 NSWLR 688; 244 IR 44 Meagher JA described the limit the Regulations imposed on the Commission in the following way ([65]-[68]): "The Regulation was made under s 407 of the Industrial Relations Act 1996 (NSW). Section 146C(l) of that Act requires that when making or varying any award or order, the Commission "give effect to any policy on conditions of employment of public sector employees: (a) that is declared by the Regulations to be an aspect of government policy that is required to be given effect to by the Commission". The validity of that provision was upheld in Public Service Association v Director of Public Employment (2012) HCA 58; 87 AUR 162. The text of cl 6(1) makes clear that its purpose is to impose a limit on the exercise of the power of the Commission to make or vary an award that increases the remuneration or other conditions of employment of "public sector employees". That limit adopts as its reference point the costs to the employer of employing those employees and those costs are defined as "employee-related costs". They are costs to the employer related to the salary or other remuneration payable to the employee or to benefits, including superannuation, which may be payable to or in respect of the employee." (Emphasis added)
9. In respect of the employee-related costs issue, the Commission must establish the employee-related costs that may flow from the proposed award variation in this matter. The onus falls on both parties to assist the Commission in this regard, as was confirmed by the Full Bench of the IRC Secretary, NSW Ministry of Health v Health Services Union NSW [2018] NSWIRComm 1007 where it was stated at [47]: "The issue of onus in award making, as the authorities recognise, differs from that in other forensic proceedings see for example Transport Industry-General Carriers Contract Determination [2016] NSWIRComm 3; 257 IR 294 at [34]- [35]. There is an evidentiary onus on an applicant to establish a case under s 10 of the Act. The onus in relation to the restriction on the operation of s 10 imposed by s 146C is in a different category. We consider even in contested matters such as the present, the onus falls on both the applicant and respondent to assist the Commission to establish the outer limits of employee-related costs having regard to any agreed or determined quantified cost savings available to offset any increase employee-related costs beyond the 2.5% cap. We do not regard that proposition as in any way inconsistent with the decision of the Full Bench in NSW Fire Brigade (Retained Firefighting Staff) Award 2008." (Emphasis added)

Evidence and submissions

1. In respect of the substantive matter, the notifier filed an outline of submissions on 10 February 2021 (applicant's outline of submissions). The Health Services Union NSW (HSU) filed an outline of submissions on 26 February 2021 (the intervenor's submissions). The respondent filed an outline of submissions on 19 April 2021 (respondent's outline of submissions). The respondent's outline of submissions raised the preliminary issues.
2. The notifier filed written submissions with respect to its position on the preliminary issues on 21 May 2021 (the notifier's submissions on preliminary issues). On 21 May 2021, the HSU confirmed its support of the notifier's submissions indicating that they did not seek to add to them or to make further submissions in relation to the preliminary issues.
3. The parties made submissions on the preliminary issues before the Commission on 24 May 2021.
4. The respondent's outline of submissions deals with the preliminary issues at paragraphs [46] - [98]. After referring to a number of decisions where the Regulations have been considered, the respondent submitted at [64] that in respect of this matter, the Commission must determine: "(a) which public service employees, or class of employees the variation would affect (Relevant Employees); (b) whether the variation would have the effect of increasing, or result in an increase in employee related costs for the Relevant Employees (as defined in Regulation 8) and whether the employee related costs in respect of the Relevant Employees exceeds 2.5%; and (c) whether sufficient employee-related cost savings (as defined in Regulation 9) have been identified to fully offset the increased employee-related costs beyond 2.5% per annum in respect of the Relevant Employees."
5. The respondent argued that when the Commission considers whether the proposed variation would increase employee-related costs by 2.5% or more, the "class of employees" against whom that assessment should take place is restricted to those Medical Officers with less than 3 years' experience, provided the Medical Officers performed the duties of a "registrar": [65]-[70] of the respondent's outline of submissions. It was not in dispute that the Medical Officers occupying the role of registrar who would receive an increase in remuneration, should the variation sought by the notifier be made, are those classified as Post Graduate Year 2 and 3 (PGY2 and PGY 3) and/or Resident Medical Officer 1 and Resident Medical Officer 2 positions (RMO1 and RMO2). The RMO1/PGY2 and RMO2/PGY3 positions were referred to interchangeably in these proceedings.
6. Relying upon the evidence of Ms Clark, the respondent submitted that the resultant effect of the variation sought by the notifier would be (based on Medical Officers employed in the NBMLHD during the 2020/2021 Clinical Year): 1. Medical Officers employed as RMO1 would receive a 24.57 % increase in remuneration; and 2. Medical Officers employed as RMO2 would receive a 13.36 % increase in remuneration.
7. The respondent ultimately submitted that extrapolating this data out to the whole of NSW Health, the outer limit of employee-related costs in respect of all employees who might receive the benefit of the variation sought by the notifier is approximately $37.66 million in a single clinical year.
8. With respect to the no extra claims argument, the respondent argued that although the Medical Officers Award is beyond its nominal term, the Commission made orders on 15 December 2020 determining an application by the notifier for employees covered by the Medical Officers Award to receive a 2.5% increase to their salaries and salary-related allowances from the first pay period to commence on or after 1 July 2020 (the 2020 wages decision). The outcome of those proceedings was a 0.3% increase in salaries.
9. They argued that where the subject matter of earlier proceedings concerned remuneration of employees in existing classifications or "touched on employee-related costs", then they cannot be the subject of a variation application within the term of an award or order: see [88] of the respondent's outline of submissions.
10. The respondent's argument with respect to the no extra claims argument was summarised in its submissions as follows ([94]-[96] of the respondent's outline of submissions): "The subject matter of the Wage Freeze Proceedings plainly included the remuneration of medical officers, including in respect of the relevant medical officers in these proceedings. The Commission made orders increasing the remuneration and allowances of those medical officers by 0.3% and applied after the nominal expiry of the Award. Both ASMOF and the HSU now advance a claim which has the practical effect of increasing remuneration for residents in PGY2 and PGY3 (from 1 July 2020) whose remuneration was considered and ruled on in December 2020. There was nothing to prevent that claim being made in the Wage Freeze Proceedings where the Commission could have dealt with it together with the economic and other evidence presented to it. It follows that the present application for variation to the Medical Officers Award falls squarely within the clause 6(1)(d) of the Regulations and the Commission has no power to deal with it."
11. The notifier's case with respect to the preliminary issues can be summarised as follows: 1. the argument raised by the respondent in respect of employee-related costs is not a "threshold point"; 2. the relevant class of employees for the purpose of the Commission's consideration of the application of reg 6 is not each individual employee who might be affected by the variation, nor the particular employees whose classification would be affected, but instead is the entire cohort of Medical Officers who are covered by the Medical Officers Award, being the interns, residents and registrars employed pursuant to the terms of that award; 3. the respondent's evidence does not establish that the variation would result in an increase to "employee-related costs" in respect of that group of more than 2.5% per annum; 4. Regulation 6(1)(d) does not operate as a bar to the application because the question raised in the present proceeding was not the subject of the proceeding before the Commission in the 2020 wage case.
12. The notifier submitted that s 146C operates at the point when the Commission is making or varying any award or order and does not operate to prevent the bringing or hearing of a dispute before the Commission, or the entertaining of any application for relief. Further, they submitted that the Commission should not dismiss the matter unless it was satisfied that it would not grant any relief in the proceedings, even relief not sought by the notifier, and it would therefore be inappropriate for the Commission to dismiss the application without first hearing the merits of the case: [6]-[9] of the notifier's submissions on the preliminary issues.
13. In respect of the employee-related costs argument, the notifier submitted that the approach suggested by the respondent of considering the increased employee-related costs on the basis of analysis of the individual public sector employee should be rejected, stating that ([17]-[18] of the notifier's outline or submissions on the preliminary issues): "It cannot be seriously suggested that on each occasion where a variation or increase in awarded, the Commission would be obliged to make an assessment of cost increase at the level of the individual employee, or any particular group of employees, as to whether the variation or increase determined resulted in an increase of employee related costs in respect of that particular employee or group which is greater than 2.5%. The regulation would not be taken to have intended to impose such a task upon the Commission. Rather, both section 146C of the Industrial Relations Act 1996, and the Regulation are directed at fiscal restraint at the State level. That restraint is achieved in circumstances where the overall costs of a variation do not increase, by more than 2.5%, the employee related costs for the entire cohort covered by the relevant Award. The same amount of fiscal restraint may be achieved where a higher percentage increase is awarded to a smaller [group] of relevant Award covered employees as where a lower percentage increase is awarded across the entire cohort."
14. The notifier then submitted that the respondent does not have a proper evidentiary basis to substantiate its claim that the increase in employee-related costs associated with the variation sought would exceed 2.5%.
15. With respect to the no extra claims argument, the notifier submitted that the present matter is not a claim to increase remuneration for a group of workers. It is a claim to rectify an anomaly in the award which is not defensibly consistent with fundamental principles of equity and industrial justice: [23] of the notifier's outline of submissions on the preliminary issues. Accordingly, the notifier argues that there is no basis for the respondent's argument that reg 6(1)(d) precludes the matter from proceeding, with reference to the decision of Commissioner Sloan in NSW Ministry of Health v Health Service Union New South Wales and anor [2019] NSWIRComm 1035 (the Non-Paramedic Duty Operations Centre Officer case).

Consideration

1. It is convenient to first consider the no extra claims argument.
2. Regulation 6(1)(d) relevantly provides: "Awards and orders are to resolve all issues the subject of the proceedings (and not reserve leave for a matter to be dealt with at a later time or allow extra claims to be made during the term of the award or order)." (Emphasis added)
3. Both parties referred to and sought to rely upon the decision of Sloan C in the Non-Paramedic Duty Operations Centre Officer case in support of their positions relating to the no extra claims argument. That decision related to an application pursuant to s 17 of the IR Act by the Ministry of Health to vary the Operational Ambulance Officers (State) Award 2018. The variation sought to include a new classification into that award namely, a Non-Paramedic Duty Operations Centre Officer Role, to allow for rates of pay for that position and to make consequential amendments to the award. The second respondent in that matter, the Australian Paramedics Association (NSW) (APA NSW), filed a notice of motion in those proceedings seeking that it be struck out, including on the basis that the Ministry of Health was not able to proceed pursuant to reg 6(1)(d) of the Regulations. In addition, the respondents relied upon a no extra claims clause contained within the relevant award as a basis upon which they sought that the matter be struck out: see [16] of the Non-Paramedic Duty Operations Centre Officer case.
4. Relevantly, Sloan C stated at [24]; [27]-[29] of that decision: "[24] The Ministry contended, and I accept, that cl 6(1)(d) cannot be construed in such a way as to prohibit absolutely the Commission from exercising its power to vary an award under s 17 of the Act, other than with the agreement of the parties. This was made clear in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v State of New South Wales [2014] NSWCA 116 at [65] - [67] (Bathurst CJ, with whom Emmett JA agreed at [131]) and [113] (Basten JA). …. 27. It is necessary, therefore, to determine the meaning and effect of cl 6(1)(d). The principles of statutory interpretation are well-established. In this regard, and again for convenience, it is sufficient to refer to the comments of the Full Bench in the Rates of Pay Case as follows: "16. We see no reason to depart from or modify the relevant principles of statutory interpretation as the Commission expressed them in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Department of Education and Communities [2013] NSWIRComm 32; (2013) 233 IR 345 at [24]. Without setting those paragraphs out again here, the critical proposition is this: the fundamental object of statutory construction is to ascertain legislative intention. This must be understood as the intention that the courts - and here the Commission - will impute to the legislature by a process of construction which focusses primarily upon the text of a provision." 28. Applying those principles, clause 6(1)(d) seeks to achieve resolution, for the life of the relevant award or order, of "all issues the subject of the proceedings". It does not permit an award to contain "leave reserved" provisions (which would be familiar to many industrial relations practitioners) or to allow for extra claims to be made during the term of the award. 29. The phrase "all issues the subject of the proceedings" is important. It qualifies the extent to which the Commission's jurisdiction under s 17 might be constrained by the Regulation. In particular, it informs the meaning of the words in parenthesis in cl 6(1)(d) - that is, what "matters" in relation to which leave cannot be reserved, and what "extra claims" cannot be allowed by the award. They are, respectively, matters which were the subject of the proceedings, or extra claims in relation to matters which were the subject of the proceedings."
5. Commissioner Sloan then continued, referring to the Full Bench matter of Child Protection (Working with Children) Award 2014 (2015) 249 IR 420; [2015] NSWIRComm 8, before concluding: "31. Adopting the reasoning of the Full Bench, in my view the effect of ss 146C(1) and (7) of the Act, coupled with cl 6(1)(d) of the Regulation, is that the Commission cannot use its power to vary an award under s 17(3) if to do so would allow a party, without the agreement of the other party, to benefit from making an extra claim in respect of the subject of the proceedings giving rise to the award. That is the extent of the constraint on s 17(3) that arises from cl 6(1)(d). The Commission's powers to vary awards under that subsection in respect of matters that were not "the subject of the proceedings" are not affected."
6. Although the Commissioner decided not to dismiss the matter on the basis that the creation of the new classification was not the subject of the proceedings giving rise to the relevant award, he determined to dismiss the notice of motion on the basis that he was not satisfied from the material before him that the variation application would result in a change to the terms or conditions of employment for any employee to whom the award already applied: [33]-[34]. The factual circumstances of the present matter are different to the matter before Sloan C in that regard, although I respectfully agree with the Commissioner's analysis of the relevant legal principles to apply where an application is made to dismiss a matter on the basis of reg 6(1)(d).
7. In determining whether reg 6(1)(d) precludes the notifier from pursuing this dispute, consideration must be given to the scope of the proceedings brought by the notifier which was resolved by the 2020 wages decision.
8. On 20 December 2019, the Commission made an award entitled "Health Professional and Medical Salaries (State) Award 2019" (the Salaries Award) and on 6 March 2020, the Commission made an award entitled "Public Hospital Medical Officers (State) Award 2019", both taking effect from 1 July 2019 with nominal expiry dates of 30 June 2020.
9. On 29 May 2020, the notifier filed applications with the Commission to vary the Medical Officers Award, Salaries Award and the Staff Specialist (State) Award 2019 to provide for employees covered by each of these awards to receive a 2.5% increase to their salaries and salary-related allowances from the first pay period commencing on or after 1 July 2020. The HSU was a respondent to the notifier's applications. The Full Bench set out a summary the notifier's case at [57] of the 2020 wages decision: "16. A number of matters are relevant to the consideration of what constitutes fair and reasonable terms and conditions of employment, including (at least) the following: a. the long period of wage restraint achieved by the limitation on annual increases to 2.5% (of total wages cost) for public sector employees since 2011 as a consequence of s.146C of the Act and the operation of the Regulation; b. the need to maintain the real value of the wages and salaries of public sector employees over the medium and longer terms; c. the productivity and efficiency gains in the health sector, to which those covered by the awards in which ASMOF has an interest, have contributed; d. the frontline role of salaried medical officers, along with their colleagues in the health sector ([and] no doubt many others in public sector roles), in effectively implementing the State government's healthcare response to the COVID-19 pandemic, and the likelihood that through the 2020/2021 financial year (and further) there will be significant demands upon that workforce as a consequence of the pandemic; e. the need to maintain the salaries of doctors at rates comparable to their interstate counterparts to ensure that the New South Wales health system attracts and retains the best qualified doctors possible; and f. the desirability of awarding increases which are at least consistent with those determined by the Fair Work Commission in the Annual Wage Review Decision ([2020] FWCFB 3500) where a 1.75% wage increase was determined in respect of frontline health care workers, such increase to take effect 1 July 2020."
10. During the 2020 wages case, the Commission considered evidence and submissions from the notifier and intervenor concerning Medical Officers' remuneration, including extensive economic evidence on the real value of the employees' earnings over the two-year period to 30 June 2021.
11. Having considered the evidence, the Commission ordered that there be a 0.3% increase to the salaries and salary-related allowances in each of the Medical Officers Award and the Salaries Award (amongst other awards), with such increase to take effect from the first full pay period on or after 1 July 2020.
12. In its decision the Full Bench referred to the "broad consensus that uncertainty in the economic environment argued against any consideration of changes to the Relevant Awards to operate beyond the current financial year" a reference to the circumstances as they existed and could be understood at that time, given the impact of the global pandemic: at [87] to [88] .
13. On 15 December 2020, Chief Commissioner Constant made consequential orders varying the Medical Officer's Award and Salaries Award to increase salaries and salary-related allowances by 0.3% to apply from 1 July 2020.
14. The subject matter of the 2020 wages case proceedings was not the same subject matter of the proceedings currently before the Commission. The 2020 wages decision was a generalised claim by the notifier (among others) for an increase in wages to apply to all people covered by the relevant awards. The notifier sought the variation on the basis of the matters contained at [45] above, none of which refer to the subject matter of these proceedings.
15. The central issue in these proceedings is whether Medical Officers with less than three years' post qualification experience should be paid as registrars when they are engaged in particular work. There was no attention given to the issue in the 2020 wage case, which also disposed of similar applications relating to a total of 41 awards. Nowhere in the 2020 wages decision was this dispute or its subject matter referred to, noting that this matter was commenced prior to the applications in the 2020 wages case proceedings being filed in the Industrial Registry. Both parties were aware of the current proceedings at the time the relevant variation applications were lodged by the notifier and until recently, proceeded in manner consistent with the matters being executed separately so to deal with the different subject matters. It is difficult to accept that the respondent was not on notice as to the type of relief the notifier would be seeking in the proceedings until they filed their outline of submissions on 10 February 2021. At all times, the notifier's complaint has been that Medical Officers with less than 3 years' post qualification experience should be paid as registrars when they acted in that role.
16. If the respondent's interpretation of reg 6(1)(d) were to be accepted, any relief claimed in dispute proceedings that provides for a change in remuneration in awards, irrespective of the basis for that claim, would be unable to proceed, except through the annual wage review process, even where the claim on specific grounds was before the Commission prior to the review of wages being sought. This would be the case, even where the nominal expiry date of the award has lapsed and there is no operative no extra claims clause (as is the case here). I am not persuaded that reg 6(1)(d) was intended to operate in this way in the circumstances of this specific case, which would deny the notifier an opportunity to be heard on the merits of the subject matter of the dispute.
17. This matter is listed for hearing of the merits in November 2021. Although the notifier has indicated in these proceedings that they would seek that any variation to the awards is backdated to the financial year 2020/2021, it would be open to them to seek an alternative remedy in the proceedings, or indeed, the Commission may decide that a different order should be made (depending on its findings on the merits of the case). Furthermore, there may be utility in the Commission determining the merits of the claim, irrespective of what, if any relief might be ordered.
18. The respondent also argues that the matter should be dismissed because the costs associated with the variation sought would be greater than 2.5% and sufficient employee-related cost savings have not been identified to offset these increases, as is required by reg 6(1)(a) and (b).
19. There is nothing in the language of s146C of the IR Act nor reg 6(1)(a) that supports an interpretation of the regulation that requires an assessment of the individual increase to each employee, or the cohort of employees affected by the variation, in determining whether a variation results in more than a 2.5% increase in employee-related costs. The second reading speech of the Industrial Relations Amendment (Public Sector Conditions of Employment) Bill 2011 introducing s 146C makes clear that that the objectives of the provision is to facilitate "fiscal restraint" by the Government with reference to the impact of the overall increases in employee-related costs. Those increases in costs are referred to in the macro sense. The respondent pointed to the following passage in the second reading speech to support their preferred interpretation: "It will be appreciated that while the focus of the wages policy is on ensuring appropriate restraints on the quantum of pay increases, as outline above, in order to do so the policy may also refer to the other relevant conditions of employment, such as increase leave entitlement or a new classification structure."
20. This passage does nothing more than confirm that employee-related costs referred to in the Regulations can include the impact of a new classification structure. It does not support the proposition that an assessment of whether an award variation will result in more than a 2.5 % increase in employee-related costs must be assessed on an individual employee basis, nor on the basis of the group of employees who will be the subject of the variation.
21. As stated by Meagher JA in Secretary of the Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of NSW at [78]: "The purpose of the policies declared by cl 6(1) is tolerably clear. It is, where possible, to keep annual increases in employee-related costs at or below 2.5% per annum. They do that by providing that awarded increases cannot produce increases in excess of the limit unless they are offset by cost savings - the premise being that all increases in employee-related costs will be taken into account in assessing whether the proposed award will result in increases in excess of the limit. The clause addresses the effect of the award increases at the "margin", which is the point at which increases in employee-related costs exceed the limit, and the offset provision ensures that award increases do not result in increases above the 2.5% limit unless there are equivalent cost savings."
22. The respondent relied upon the Full Bench decision in Secretary, Ministry of Health (NSW) v Health Service Union (NSW) [2018] NSWIRComm 1007 in support of its interpretation. In this decision, the Full Bench upheld an appeal from the respondent in respect of a decision by Commissioner Newall to amend the Health Employees Conditions of Employment (State) Award, accepting the appellant and intervenor's submission that the Commissioner had no power to make the award sought by the respondent (see [37]). Importantly, the Full Bench did not determine what the employee-related costs were, and nor was the question argued or considered. Rather the Full Bench's critique of the decision below was that the employee-related costs needed to be quantified by the Commission, with the assistance of both parties and the Commissioner should not have proceeded to make the variation without evidence with respect to the employee-related costs. The Full Bench then expressed concern that a variation had not been sought for a flow on of the 2.5% increase from a previous year, suggesting that the second 2.5% increase that may be applied be considered with the application for variation before the Commission, stating (at [50]): "We envisage the first stage of the proceedings should quantify all employee-related costs savings identified by the parties relevant to the application. The second stage would involve a further analysis to determine the cost of the allowance, the agreed or determined value of any offsetting employee-related cost savings and what combinations of pay increases and the determined of an allowance as sought by the respondent could be accommodated so as not to cause employee-related costs to increase by more than 2.5% per annum."
23. As it was anticipated that there was to be a 2.5% increase for all employees covered by the award, employee-related costs saving had to be found to offset any further increase to any cohort of employees no matter how narrow the group was who would receive the additional monies. The matter was remitted to the Commissioner to be dealt with in accordance with law. The case does not assist the respondent's argument. The circumstances of this matter are different in that the parties do not yet agree on when any relief should become effective, with the notifier indicating its intention to argue that exceptional circumstances apply, justifying an amendment to apply retrospectively.
24. The respondent also referred the Commission to the Full Bench decision in Re NSW Health Service Allied Health Assistants (State) Award [2018] NSWIRComm 1023 (the AHA rates of pay case). In that decision, the Full Bench was concerned with the identification of any necessary savings to ensure compliance with s 146C(1) of the IR Act in the context of work value changes that were established in respect of Allied Health Assistants (AHA). Ultimately, The Full Bench found that there were sufficient employee-related cost savings within the meaning of the Regulations to permit the increases provided by the proposed award.
25. The circumstances in that case were the same as in Secretary, Ministry of Health (NSW) v Health Service Union (NSW) [2018] NSWIRComm 1007 in that all employees under the relevant award were to receive a 2.5% increase and therefore employee-related costs saving had to be found to accommodate the increases associated with the work value case, irrespective of whether the Full Bench was considering that cohort only or not. The Full Bench rejected an argument by the respondent in this case in that matter that the employee related costs saving must be found in respect of the particular group of employees who would benefit from the increase associated with the work value increase, stating at [71]: "In our view, that approach misconstrues the Regulation. Nothing in the words of the Regulation has the effect that the cost savings must be shown to be directly in relation to the particular group of employees in relation to which an increase is sought. Further, on the authority of Secretary of the Treasury set out above, we do not agree that a precise dollar sum, identifiable on an accounting basis, is what is required."
26. In my view, this approach is consistent with what is contended by the notifier in these proceedings with respect to the manner in which the Commission determines if the proposed variation would result in an increase in employee-related costs of more than 2.5 %. Further, the case also points to the need for the parties to be provided with an opportunity, should the claim advanced by the notifier be meritorious, to consider any employee-related costs savings that might offset the financial impact of any variation across all employees covered by the award. It is unclear how either party could meet this obligation in circumstances where the Commission has not yet determined the date upon which any variation, it successful, would apply.
27. For completeness, I note that the notifier contended that even on the analysis of the respondent, the group who would receive any increase in remuneration due to the proposed variation is drawn too wide even on the respondent's version of who that group should be. The notifier submitted at the preliminary hearing that it is only those officers classified as "Trainee" who would receive an increase in pay. The respondent complained that they had not understood this to be the notifier's case. The respondent's financial analysis is based on all Medical Officers classified as RMO1 and RMO2 in NSW Health being entitled to the benefit brought about by the proposed variation. In my view, the respondent's estimate of the resultant increase to employee-related costs is imprecise and contains a number of variables that could be eliminated with greater analysis; for example, it would be more accurate to consider the actual number of Medical Officers who are working as registrars with less than three years post qualification experience, rather than all Medical Officers without the requisite experience who might be so directed.
28. To my mind, the circumstances in this case are such that may call for the approach adopted in Secretary, Ministry of Health (NSW) v Health Service Union (NSW) [2018] NSWIRComm 1007: see [57] above. Namely, consideration should first be given the merits of the case, before the issue of the employee-related costs and any costs-related saving that may be required be determined through a separate phase of the proceedings (if the notifier is successful in the first phase).
29. It follows that in my view, the analysis of whether the variation would result in more than a 2.5% increase to employee-related costs is to be evaluated against the costs associated with all employees covered by the relevant award being varied. The evidence currently before the Commission is insufficient to undertake that analysis properly. Should the Commission reach the point where consideration is given to a variation to the Medical Officers Award based on the merits of the claim, it will be incumbent upon both parties to assist the Commission in understanding the costs associated with any proposed variation and any areas of employee-related cost savings that might be implemented to offset these if required. In short, it is premature to strike the matter out at this stage of the proceedings. The matter should proceed to determination on the merits of the underlying dispute, which has not been the subject of argument or consideration before this Commission.
30. For the reasons contained in this decision, I decline the respondent's application to dismiss the matter at this stage of the proceedings.

Orders

1. I dismiss the respondent's application that the matter be dismissed.

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