Whether the Commission lacks jurisdiction to grant the 2.5 per cent increase at this time
7Resolution of the first issue essentially involves consideration of two matters. The first matter was raised by the PSA during the proceedings. The PSA directed the Commission's attention to its application for salary increases made in March 2011 (the 2011 application), together with cross-applications made by the Department and other respondents which resulted in an award of a 2.5 per cent salary increase operative from 1 July 2011. This increase was awarded following the Full Bench decision in Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) [2011] NSWIRComm 104 (the PSA case). At the time the Full Bench handed down its decision in the PSA case the 2011 application was not fully discharged by the award of a 2.5 per cent increase and remains on foot (the residual claim). In the proceedings before the Full Bench in the PSA case, the PSA sought, in addition to a 2.5 per cent increase further salary increases on grounds that may justify increases beyond 2.5 per cent. The Full Bench deferred hearing the application for salary increases beyond 2.5 per cent, until pending proceedings in which the PSA sought to challenge the validity of State legislation underpinning restrictions to salary increases in excess of 2.5 per cent, had been determined.
8It should be explained at this juncture that following the Full Bench decision in Public Service Association and Professional Officers' Amalgamated Union of NSW v Director of Public Employment [2011] NSWIRComm 143, in which applications to declare invalid the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 (the Amendment Act) and the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 (the 2011 Regulation) were refused, the PSA applied for special leave to appeal the decision to the High Court. On 11 May 2012, the High Court granted special leave. Hearing dates for the appeal have not been allocated.
9The second matter relevant to the jurisdictional issue was described by the Department as a contingent aspect of the counter proposal. It emerges only by reason of the provisions in the 2012 Award which foreshadow further increases in salaries and allowances following a determination in the Crown Employees (Public Service Conditions of Employment) Award (the Conditions Award). That Conditions Award is set down for directions on Thursday, 19 July 2012.
10Before setting out the respective submissions of the parties on these two matters, it is necessary to set out the relevant provisions of the Amendment Act and the 2011 Regulation which govern these proceedings.
11On 17 June 2011, the Amendment Act amended the Industrial Relations Act 1996 by inserting s 146C. That section provides:
(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.
(3) An award or order of the Commission does not have effect to the extent that it is inconsistent with the obligation of the Commission under this section.
(4) This section extends to appeals or references to the Full Bench of the Commission.
(5) This section does not apply to the Commission in Court Session.
(6) This section extends to proceedings that are pending in the Commission on the commencement of this section. A regulation made under this section extends to proceedings that are pending in the Commission on the commencement of the regulation, unless the regulation otherwise provides.
(7) This section has effect despite section 10 or 146 or any other provision of this or any other Act.
(8) In this section:
award or order includes:
(a) an award (as defined in the Dictionary) or an exemption from an award, and
(b) a decision to approve an enterprise agreement under Part 2 of Chapter 2, and
(c) the adoption under section 50 of the principles or provisions of a National decision or the making of a State decision under section 51, and
(d) anything done in arbitration proceedings or proceedings for a dispute order under Chapter 3.
conditions of employment-see Dictionary.
public sector employee means a person who is employed in any capacity in:
(a) the Government Service, the Teaching Service, the NSW Police Force, the NSW Health Service, the service of Parliament or any other service of the Crown, or
(b) the service of any body (other than a council or other local authority) that is constituted by an Act and that is prescribed by the regulations for the purposes of this section.
12The "regulations" referred to in s 146C is the 2011 Regulation. It declares, for the purposes of s 146C, aspects of government policy that are to be given effect by the Commission when making or varying awards or orders. The relevant clause of the 2011 Regulation, for present purposes, is clause 6, which provides:
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 that do not increase employee-related costs by more than 2.5% per annum.
(b) Increases in remuneration or other conditions of employment that increase employee-related costs by more than 2.5% per annum can be awarded, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs. 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.
(c) For the purposes of achieving employee-related cost savings, existing conditions of employment of the kind but in excess of the guaranteed minimum conditions of employment may only be reduced with the agreement of the relevant parties in the proceedings.
(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.
(e) Changes to remuneration or other conditions of employment may only operate on or after the date the relevant parties finally agreed to the change (if the award or order is made or varied by consent) or the date of the Commission's decision (if the award or order is made or varied in arbitration proceedings).
(f) Policies regarding the management of excess public sector employees are not to be incorporated into industrial instruments.
(2) Subclause (1) (e) does not apply if the relevant parties otherwise agree or there are exceptional circumstances.
(3) The relevant parties in relation to a matter requiring agreement under this clause are the employer and any other party to the proceedings that is an industrial organisation of employees with one or more members whose interests are directly affected by the matter.
13Returning to the first of the two matters relevant to the jurisdictional question raised by the Department, the PSA submitted that the residual claim is not an issue which forms the subject of these proceedings under reg 6(1)(d). Rather, it is an application made before the Full Bench in the PSA case which was not fully discharged by the award made by the Full Bench of a 2.5 per cent increase. The fate of the residual claim is linked to the PSA's challenge to the validity of the Amendment Act and the 2011 Regulation to be determined by the High Court. It remains on foot on the basis that if the PSA succeeds in obtaining orders that the challenged 2011 Regulation is invalid, it will be in a position to proceed with the residual claim before the Full Bench, a different proceeding from the proceedings before the Commission.
14In response, the Department contended that the PSA is seeking to keep alive an earlier claim in these proceedings. Adopting a broad construction of the phrase, "all issues the subject of the proceedings" in reg 6(1)(d), the Department contended that "issues" arise between the parties in the proceedings and the Commission is not confined by the form of an order sought in granting relief. More detailed submissions on this matter are set out in the Department's written submissions extracted below:
The Commission must first determine what the subject matters of the proceedings are. Unlike the facts in Health Employees Conditions of Employment (State) Award and other Awards [2011] NSWIRComm 129 (see Director-General Department of Premier & Cabinet v HSU East [2012] NSWCA 111 at [9] and [13-15]) the Application foreshadows further increases based on employee related cost savings and the counter proposal also foreshadows further increases in salaries and allowances following a determination in the Crown Employees (Public Service Conditions of Employment) Award. The Commission in these proceedings unlike in the Health Employees Conditions of Employment (State) Award and other Awards has before it more than an application merely seeking an increase of 2.5 per cent in salaries and allowances.
The view that the Commission may subsequently vary the award following an increase in wages and salaries notwithstanding reg 6(1)(d) is possibly erroneous (see Director-General Department of Premier & Cabinet v HSU East at [12]).
The issues in the proceedings are the matters set out in both the application and the counter proposal as summarised at [2]-[3] and [6] above.
The notion of an interim award increase of 2.5 per cent (whether by new award or variation to an existing award by order) is clearly at odds with the requirements in cl 6(1)(d). An issue in these proceedings is quite clearly what further salary increases ought be paid to employees covered by Award either in light of proposed changes to the Crown Employees (Public Service Conditions of Employment) Award or on the Applicant's claim. In making an interim increase the Commission would not be resolving all issues the subject of the proceedings but leaving a conditions and salary claim for another day and therefore acting contrary to cl 6(1)(d).
15The Department's submissions refer to interim increases sought by the PSA said to be at odds with the requirements of reg 6(1)(d). The PSA at the beginning of the hearing, however, moved its application on the basis that it was confined to an increase in salaries and allowances of 2.5 per cent per annum in final disposition of the proceedings, that is, the increases sought were not sought on an interim basis, but on a final basis.
16The residual claim emerged before the Full Bench in the PSA case when an application for an interim increase of 2.5 per cent was granted operative from 1 July 2011. At the same time, the Full Bench noted that the proceeding before it was not fully discharged. It determined to deal with the residual aspect of the PSA's application at a later stage following the determination of proceedings in which the validity of the Amendment Act and the 2011 Regulation are under challenge. In this regard, the Full Bench said (at [42]-[44]):
This leaves the question of what to do with the PSA's application. If the PSA is successful in challenging the validity of s 146C or the validity of the Regulation, there would seem to be no bar to the Commission proceeding to deal with the application in accordance with the Wage Fixing Principles.
If the PSA is unsuccessful, such that the legislation is held to be valid, the PSA will be provided with the opportunity of putting its case that the increase of 2.5 per cent does not represent the maximum amount that may be awarded by way of an increase in remuneration under the Regulation. Otherwise, by force of the Regulation it seems to us, the increase of 2.5 per cent that has been granted by way of variation in the awards that are the subject of the counter-applications is to be regarded as the amount of increase in employee-related costs under those awards for a period of 12 months from 1 July 2011. In those circumstances, given it has been conceded that the evidence filed in support of the PSA's application would not satisfy the requirements for employee-related cost savings as specified in the Regulation, no further increase in remuneration would be available prior to the expiry of the 12 months' period. The issue of whether a no extra claims clause should be inserted into the awards will be further considered by the Full Bench in the course of determining the disposition of the PSA's application.
The PSA submitted we should proceed immediately to hear the evidence relating to its application. We do not propose to take that course. As matters currently stand, the Regulation is valid. The evidence the PSA proposes to call has no relevance given the requirements of the Regulation. It would not be appropriate for the Commission to proceed to hear that evidence on the basis of a possibility that the Regulation might be found to be invalid. In this regard, we agree with the submissions of the DPE.
17What was contemplated by the Full Bench in the PSA case was that following the resolution of the issue of validity of the legislation, the PSA's residual claim would be disposed of in the proceeding before it. It follows that the PSA's contention that the residual claim is not an issue the subject of the present proceedings must be upheld.
18The second matter relied upon by the Department in relation to the jurisdictional question arises from proposed further increases in salaries and allowances contained in the 2012 Award, the subject of the Department's counter proposal. That aspect of the Department's "application" for further increases is contingent upon the making of the Conditions Award which, according to the respondent, will produce a degree of costs savings, a proportion of which will flow back to the employees by way of salary increases. The Department's primary submission in relation to the proposed increases set out in the 2012 Award was that in respect of the prospect of conditions changes occurring "in the not too distant future", and, the basis upon which salary increases might flow, the Commission would not make an order at this stage because the "salaries issue" is not capable of resolution at this stage.
19The PSA vigorously opposed the Department's contention that by reason of the "further issues" raised in the counter-proposal the proceedings cannot be resolved to finality at this stage. The Conditions Award, according to the PSA, is a discrete application yet to be heard by the Commission, and contains only vague references to further increases some time in the future constituting an insufficient basis for not dealing with the proceedings to finality.
20The Department contended in oral submissions that the "proceedings" are to be defined by the PSA's application for variation, the residual claim, and the counter-proposal, and, in accordance with the requirements of Regulation 6(1)(d), all of these matters constitute issues the subject of the proceedings which must be resolved to finality. Given that the Department's counter proposal seeks the further increases to be awarded at some future stage, in one sense the Department argued against its own position. It sought to resolve this apparent dilemma by proposing two solutions. The first was that the Commission effectively reject its "application" for further increases above 2.5 per cent by making the 2012 Award containing a "no extra claims" clause. The second was that the Commission decline to make any orders at this stage, and stand over the proceedings pending the outcome of the proceedings concerning the Conditions Award. The Department favoured the second alternative, acknowledging that if the Commission acceded to the first alternative, it may be difficult for it to prosecute any changes to the Conditions Award during the life of the Award.
21The Department advocated the same approach before the Full Bench in Health Employees Conditions of Employment (State) Award and other Awards [2011] NSWIRComm 129 (HSU East case). The Full Bench rejected the approach. It first set out the contentions of the Department (at [16]):
[16] Counsel for the DPE submitted that the effect of s 146C and the Regulation was that only one award or order could be made by the Commission and that award or order had to deal with all issues that were the subject of the proceedings. Further, the provisions did not allow for any matter to be reserved to be dealt with at a later time and also required a provision excluding the making and/or granting of extra claims during the term of the award or order. The effect of that submission, if accurately reflecting the operation of the Amendment Act and Regulation, would require each application before the Commission to be either granted a 2.5 per cent final increase in salaries or wages and allowances, together with a no extra claims clause or, in the alternative, if the applicants wished to proceed with a case for an increase beyond 2.5 per cent, to adjourn that case so that the issue of the initial 2.5 per cent and any increase above that could be dealt with at the same time. It was submitted that such proceedings, as required by the Amendment Act and the Regulation, would finalise all the issues between the parties and leave no outstanding question or issue to be later dealt with and would also require the final award or order to contain a no extra claims clause. It was asserted that, if the Commission proceeded to make interim awards in the present applications, the requirement to insert a no extra claims clause would prevent a further hearing for increases above 2.5 per cent.
22After referring to some principles of general application to statutory construction, set out in a number of authorities, the Full Bench continued:
[49] The approach encapsulated in these decisions necessarily leads to a consideration of the policy and purpose of the amendment and how that may assist in the determination of the operation of cl 6(1)(d) of the Regulation. Reference to the Minister's second reading speech demonstrates a Government concern, in the prevailing economic conditions, for the level of its public sector wages bill and how a "highly skilled and effective public sector" can be built with wage increases made available each year to "hard-working public sector employees" while maintaining "fiscal restraint" via the Government's wages policy. At the heart of the provisions to give effect to that policy is the availability of 2.5 per cent per annum as a reflection of the median point of expected cost of living increases and the requirement that anything over 2.5 per cent requires costs off-sets equal to the increases sought before any increase can be granted by the Commission in salaries, wages, allowances and conditions involving employee-related costs.
[50] Adopting the approach of the DPE, "hard-working public sector employees" would be denied the assured first tranche increase of 2.5 per cent until the entire matter was completed when they wished to claim or arbitrate a higher level of increase. It is unlikely that this result was intended under the Regulation. The approach of the DPE also leads to the unusual circumstance that if an applicant wishes to arbitrate more than the first tranche of 2.5 per cent, but accepts an award of 2.5 per cent and persuades the Commission to grant the first tranche separately, then that event would prevent the proposed arbitration. This follows, firstly, because such an order or award would have to finally determine the whole proceeding and, on the argument of the DPE, would require the insertion of a no extra claims clause that would itself prevent the second tranche being dealt with by the Commission or render ineffective any further award or order made by the Commission in excess of the initial 2.5 per cent.
23This Commission remains bound by the HSU East decision of the Full Bench. The Department appealed the Full Bench decision in the HSU East case to the Court of Appeal which dismissed its application. Bathurst CJ, with whom Basten and Barrett JJA agreed, found (at [10]-[13]):
It follows from the procedural history to which I have referred above, that all the Commission had before it at the time it made the orders was the amended application seeking an increase of 2.5 percent in pay and allowances. That is what the Commission ordered. There is no issue that it had jurisdiction to make such an award.
However, in the course of its determination the Commission considered the question of whether it had the jurisdiction to make an interim award. It concluded that a two-stage process involving interim increases was permissible (Decision par [42]-[46]). Notwithstanding this, the orders of the Commission are not, in their terms, cast in the form of an interim award. They simply give effect to what the Commission was empowered to do, namely grant a 2.5 per cent increase in pay and allowances.
In these circumstances, the order made was an order within jurisdiction. The fact that the Commission, during the course of its reasoning process, expounded the possibly erroneous view that notwithstanding reg 6(1)(d) it had a general power to vary the award in the future does not affect the position. In this regard it is important to remember that the subject matter of the review is not the steps taken preliminary to the exercise of the power to make an award, but the legality of the award itself: c/f Attorney General for State of NSW v Quin [1990] HCA 21; (1989) 170 CLR 1 at 26.
In these circumstances, in my opinion, the order made was within jurisdiction. There is no application for prohibition and no suggestion that there is any application pending to vary the award. The question of whether the Commission has power to vary the award in the manner it suggested can be dealt with when the question arises. It follows that the application should be dismissed. The applicant should pay the costs of the first and second respondents.
24What follows from these two decisions is that the Commission has jurisdiction to make the orders sought in the PSA application for a 2.5 per cent single increase to take effect from 1 July 2012. Although some doubt was expressed by Bathurst CJ as to the jurisdiction of the Full Bench to vary the Award in the future notwithstanding reg 6(1)(d), this aspect was not determined. What is clear from the Court of Appeal decision is that "proceedings" was given a narrow construction, that is, it was confined to the application actually before the Commission. The only application before this Commission is the PSA application for a single increase. The counter-proposal is relied upon by the Department not as a formal counter-application but as a "response" to the PSA application.