Industrial Secretary & Ors v Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales & Ors

Introduction

1. In State Wage Case 2024 (No 3) [2024] NSWIRComm 19, this Full Bench proposed a new set of Award Making Principles. Proposed Principles were published in draft form as Annexure A to that decision.
2. The parties were directed to file any submissions that they wished to make as to the terms of the draft Principles. This was not an invitation to the parties to rerun arguments that had been determined by the Commission in the previous proceedings, but to assist the Commission to ensure that the proposed Principles did not give rise to any unintended consequences and were not expressed in infelicitous language. The Commission received submissions from the Industrial Relations Secretary (Secretary), Unions NSW and Local Government NSW (LGNSW).
3. With the benefit of those submissions we have made some minor amendments to the draft Principles. The 2024-25 Award Making Principles in their final form are published as Annexure A to this decision. We explain the nature of the changes from the previously published draft below.

Mandatory considerations (principle 2)

1. Clause 2.1(2)(a) lists the objects of the Act to which the Commission must have regard when determining an application to make or vary an award.
2. Both the Secretary and LGNSW submitted that it would be appropriate to include in cl 2.1(2)(a) text to the effect of the object in s 3(h) of the Industrial Relations Act 1996 (NSW) "to encourage and facilitate co-operative workplace reform and equitable, innovative and productive workplace relations". We have adopted this addition.

No extra claims commitments (principle 4)

1. We agree with the submission from LGNSW that it would be appropriate to amend subprinciple 4.2 to make clear that the Commission can make or vary an award by consent, notwithstanding the existence of a no extra claims commitment.
2. We agree with the submission from Unions NSW that it would be preferable to replace "different terms and conditions" in subprinciple 4.1 with "extra or reduced terms and conditions". Unions NSW noted that it is potentially unclear whether an undertaking not to pursue claims for "different" terms and conditions is an undertaking not to pursue claims for terms and conditions other than those set by the award itself or terms and conditions that existed at the time the award was made or varied (whether provided by the award or otherwise). Replacing "different terms and conditions" with "extra or reduced terms and conditions" in subprinciple 4.1 makes clear that a no extra claims commitment does not preclude a claim for an award term that reflects the agreed terms and conditions that existed at the time that the award was made, but which was not included in the award itself.
3. Further, we agree with Unions NSW that the removal of the words "entertain an application to" in subprinciple 4.2 will clarify that the Commission does not intend to depart from the position that a no extra claims undertaking prohibits extra claims from taking effect, but does not prevent the consideration of the application itself.

New principles addressing changes in the cost of living (principles 6, 9, 14, 17.2)

1. The proposed Principles included a new Value of Money Principle (principle 14), which permits a party to apply to the Commission to make or vary a public sector award to address changes in the real value of money. The Arbitrated Case Principle, now principle 9, was amended to provide that the Commission may grant an Arbitrated Case if an application meets the requirements of the Value of Money Principle.
2. After considering how applications to adjust public sector awards in line with inflation might be conducted efficiently, the Commission in its previous decision concluded that it is presently minded to set a "paid rates award adjustment" in future State Wage Cases, that would be available upon application for public sector awards. Since parties have not had the opportunity to consider or make submissions on a "paid rates adjustment", we determined not to introduce such an adjustment before the 2025 State Wage Case. Instead, we set out how the Commission would make such an adjustment in proposed subprinciples 6.3-6.6 to provide the parties with some guidance as to our proposed approach. In our decision we noted that we would consider whether to retain or amend the adjustment in the next State Wage Case. Subprinciple 17.2 also made it clear that these subprinciples would not take effect before that time.

Paid rates adjustment

1. The Secretary noted that the parties had not been asked to provide submissions on the paid rates award adjustment. He submitted that including references to the adjustment would confuse practitioners and should be omitted entirely from the proposed Principles. We disagree and have decided to retain the relevant provisions. It is appropriate for the Principles to contain proposed text that the parties can address in the next case, while making clear by way of a note and in Principle 17.2 that they do not currently have effect. Importantly, retaining this text will ensure that the consideration and implementation of a paid rates adjustment will not be delayed, potentially for another year, if the Commission confirms that the mechanism for such an adjustment should remain in the Principles.
2. The Secretary also submitted that while the proposed cl 6.4(5) specified that a paid rates adjustment would be determined with regard to the mandatory considerations in principle 2, it ought to explicitly include the state of the economy of New South Wales and the likely effect of the Commission's decisions on that economy. We are content to include words to this effect at 6.4(5).
3. Unions NSW submitted that the undertaking given by a union party "not to pursue any further claims in proceedings" in order to access the paid rates adjustment at cl 6.6(5) should be amended to an undertaking "not to pursue any further paid rates related claims". It noted that cl 6.6(5) in its current form could preclude a union from bringing further claims that are not related to paid rates, like "claims relating to non-financial matters or claims relating to reimbursement for allowances". However, the Full Bench intended the undertaking to afford a measure of industrial stability for the period of the paid rates adjustment by extending beyond salary related claims to include claims relating to award conditions. The Full Bench has decided to make a minor change to remove any doubt that the undertaking in cl 6.6(5) applies to further claims for any changes to the award, subject to the exceptions provided. Such an undertaking will not prevent a union from being able to represent their members in respect of any claim for the recovery of unpaid entitlements and the like.

Arbitrated Case (principle 9)

1. Proposed subprinciples 9.2 and 9.3 state: 9. Arbitrated Case … 9.2 An Arbitrated Case may be granted if it meets one or more of the following criteria: (1) there has been a change in work value that meets the requirements of the Work Value Changes Principle; (2) there has been an increase in productivity or efficiency in respect of public sector awards that meets the requirements in the Productivity and Efficiency Principle; (3) the application addresses undervaluation on a gender basis in accordance with the Gender Based Undervaluation Principle; (4) a special case is established in accordance with the Special Case Principle; and (5) there has been a change in the value of money justifying a change in rates of pay and conditions for public sector employees that meets the requirements of the Value of Money Principle. 9.3 When determining an Arbitrated Case, the Commission will have regard to changes in the value of money since wage rates were last adjusted.
2. LGNSW submitted that proposed subprinciple 9.3 merely replicates the terms in cl 9.2(5) and thus should be deleted. We disagree. Clauses 9.2(1)-(5) list the various ways in which an Arbitrated Case may be granted under the following Principles, including, for example, on the basis of a change in the value of money. The purpose of subprinciple 9.3 is to make clear that the Commission will have regard to changes to the cost of living since rates were last set whenever it determines actual rates of pay as a result of a successful Arbitrated Case, regardless of whether the Arbitrated Case application was made on the basis of a change in the value of money. This is consistent with long-standing practice by the Commission to consider inflation when determining what wage increase should be awarded. [1] For instance, if the Commission determined, as a result of an application made under the Work Value Changes Principle, that an award should be varied to increase wages by 4%, in circumstances where the last wage increase was made a year earlier, the Commission would need to consider whether the actual rates set should increase by more than 4% due to changes in the value of money over the last 12 months.
3. The Secretary noted that both this Commission and the Fair Work Commission have stated that wages should keep pace with inflation "over time" [2] or "in the medium to long term". [3] It thus submitted that proposed subprinciple 9.3, which sets the reference point for the change in the value of money as "since wage rates were last adjusted", stifles the Commission's ability to set fair and reasonable conditions of work which maintain the real value of wages over a medium to long-term period. Instead, the Secretary suggested that the Commission should "have regard to changes in the value of money over the medium to long-term prior to the arbitration".
4. We do not agree that such a change ought to be made. The Secretary's proposed text gives rise to potentially quite different considerations and alters the proposed outcome in a manner that would not be contemplated without the benefit of response submissions from the other parties.
5. When considering changes to the value of money, the Commission has not yet determined whether and to what extent it is appropriate to look back in time before wage rates were last adjusted. We appreciate that the Secretary's concern is to ensure that when considering any particular 12-month period, the Commission should have regard to the fact that the year in question may be anomalous, such that instead of a full adjustment in that year the change might be addressed over time. In our view such submissions could be made without changing the text. On the other hand, unions may seek to convince the Commission to make wage adjustments that reflect past changes in the value of money over many years. Indeed, a submission of this kind was made in Industrial Secretary & Ors v Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales & Ors (No 2) [2024] NSWIRComm 21 at [57]. The change suggested by the Secretary might assist them to make good such a case.
6. In our view, the time period over which changes to the value of money should be determined is an issue which will be considered when a case comes before the Commission.
7. Overall, we do not accept that setting a reference point for the change in the value of money as "since wages were last adjusted" restricts the Commission's ability to set fair and reasonable conditions of work which maintain the real value of wages over a medium to long-term period. While subprinciple 9.3 makes clear that the Commission will have regard to changes in the value of money over the last 12 months, it does not preclude the Commission from considering matters that the Secretary correctly puts are also relevant matters.

Value of Money Principle (principle 14)

1. The proposed principle 14, with the internal numbering corrected, is as follows: 14. Value of Money Principle 14.1 The Commission can make a new award or vary an award to address changes in the real value of money having regard to: (1) the mandatory considerations in Principle 2 including the need to ensure that the award rates remain fair and reasonable; (2) the status of bargaining between the parties to the Award; (3) the likelihood of that bargaining concluding in a timely fashion; and (4) the terms of any no extra claims undertaking that relevant unions provide to the Commission in order to obtain the increase; in circumstances where: (5) the award applies to public sector employees; (6) the nominal term of the existing award has expired; (7) the employees covered by that award have not had an increase in rates for at least 12 months; (8) no paid rates adjustment has been set pursuant to Principle 6; and (9) each union party to the award gives a no extra claims undertaking in the following terms, or in such other terms as the parties agree or the Commission considers appropriate in the circumstances: [Name of union] undertakes not to pursue any further claims in proceedings before the Industrial Relations Commission in respect of employees covered by the award that would take effect during its nominal term. Provided that this undertaking does not prevent: (i) participation in collaborative discussions to amend the award by means of mutual gains bargaining or otherwise; (ii) making an application to vary the award by consent; (iii) participation in a consent arbitration; (iv) participation in a s 19 review or other proceedings initiated by the Commission or another party that affects the award; or (v) pursuing and giving effect to claims under the Gender Based Undervaluation Principle during the nominal term.
2. While the wording in cl 14.1(5) indicates that it only applies to awards covering public sector employees, we are content to adopt the suggestion from LGNSW that an additional subprinciple should be added to expressly exclude Local Government awards from principle 14's operation.
3. The Secretary submitted that a clause should be added to subprinciple 14.1 requiring the Commission to have regard to "any increases in an employee's actual wages due to band progression in the applicable Awards" when considering whether to increase wages under principle 14. The Secretary's proposed addition, which is directed to changes in "an employee's actual wages", is to a principle that applies to changes to award rates. Band progression results from a change in an employee's experience (progression by time served) and/or skills and training (progression by meeting higher criteria). It is not immediately apparent why the progression of specific employees is relevant to a consideration of changes to the value of rates of pay under an award generally. The Secretary's submissions did not identify any reasons to make such a change, and the change was not one identified in the Secretary's earlier written submissions. We take no final view as to whether such a consideration is a relevant matter generally or in specific cases. We are not satisfied, however, that it ought to be elevated to a mandatory consideration, although it is a matter we could reconsider in the next State Wage Case in light of any evidence or submissions. For now, we are content to alter subprinciple 14.1 to clarify that the "Commission can make a new award or vary an award to address changes in the real value of money having regard to all the circumstances including" the clauses in (1)-(4), to make it clear that such a consideration can be raised, if relevant.
4. The Secretary also submitted the addition of a subprinciple stating: "For the avoidance of doubt, in the immediate circumstances of a particular case it may not be possible to maintain the real value of wages." While we do not disagree that an application to increase rates to maintain their value in real terms might not succeed once all relevant matters are considered, we do not see the benefit of adding such a subprinciple.
5. Unions NSW contended the new principle would be easier to read if it were bifurcated into two subprinciples. We are not presently minded to do so, as we consider the current draft assists to make clear that the Commission will make a new award or vary an award to address changes in the real value of money if considers it appropriate to do so having had due regard to the matters numbered (1) to (4) and then only in the circumstances enumerated at (5) to (9).

Productivity and Efficiency Principle (principle 11)

1. In State Wage Case 2024 (No 3), the Full Bench accepted that this Principle had "little to no practical application to Local Government awards, as evidenced by its lack of use in that context", but that (in part for that reason) it was "not necessary to include an express exemption for Local Government awards in the revised subprinciple". [4] LGNSW repeated its submission from the previous proceeding that principle 11 should include a subprinciple that specifically excludes Local Government awards from its operation, for two reasons. First, LGNSW was concerned that it could be exposed to claims pursuant to subprinciples 11.1 and 11.4, without any consideration of the matters contained in subprinciples 11.2 and 11.3, which only apply to the public sector. Second, applications for wage and salary increases based on productivity or efficiency measures are incongruent with the character of the Local Government (State) Award, which is a skills-based award in which wage and salary increases are tied to the acquisition and use of skill. On reflection, the Commission accepts that it is preferable to clarify that this Principle does not apply to Local Government awards at all. We adopt the addition of LGNSW's proposed subprinciple.
2. The Secretary submitted that proposed subprinciple 11.4 should be amended to clarify that while not all applications will need to identify cost savings, in some cases it would be necessary for an application to do so. Unions NSW also submitted that proposed subprinciples 11.2 and 11.3 should be amended to make clear that the clauses in those subprinciples are non-exhaustive examples of what may and may not constitute productivity or efficiency improvements in public sector employment. While we do not disagree with what they put, in our view the wording is sufficiently clear so as to not require the amendments sought by the parties.

Negotiating Principle (principle 15)

1. LGNSW submitted that cl 15.2(2) should be amended to reflect LGNSW's historical approach to award negotiation, as follows: 15. Negotiation Principle … 15.2 In respect of the commencement of negotiations for a new award: … (2) the parties to the award must begin negotiations as soon as is practicable after the notification has been given but can also commence negotiations prior to such notification. In this regard, once a written claim has been made by one party on another party, negotiations must begin within 28 days unless it is agreed by the parties to commence negotiations at a later time or negotiations have commenced at an earlier time … (Emphasis added to indicate LGNSW's amendments. Text that was inserted is italicised.)
2. It is unnecessary to add that parties "can also commence negotiations prior to [a] notification". It is open to parties to commence negotiations at any time, including in advance of the notification of a major industrial case. Indeed, that ordinarily would be recommended, if not expected. Since nothing in the text of the Principles suggests otherwise, we do not adopt this addition. However, we are content to adopt the second addition, although in different terms to the ones suggested by LGNSW.
3. The Secretary submitted that cl 15.2(3) should be amended to clarify that any relevant information supplied by a party will be used for the purpose of evaluating options or developing claims during negotiations for a new award, rather than a collateral purpose. We agree with this submission and have amended cl 15.2(3) in the terms proposed by the Secretary.

Gender Based Undervaluation Principle (principle 12)

1. The Secretary submitted that proposed subprinciple 12.4 should be amended so that it provides that formulas which "have been found to be", rather than which "may be", the result or product of the history of gendered conceptions of the value of the work the subject of the application are inappropriate to the Gender Based Undervaluation Principle's implementation. The change is sought on the basis that it would provide "greater certainty".
2. The intent of subprinciple 12.4 is to ensure that any prior formula used to value the work that was inconsistent with proper consideration of the value of the work should not be applied. Little is likely to turn in practice on whether the inappropriate formula is one that merely "may be" or in fact "has been found to be" the result or product of gendered conceptions of the value of work. What is important is not the reason why it was wrongly developed, but that it is inconsistent with the proper consideration of the value of work. Given the important beneficial effect of the Principle, we prefer to retain the wider language, to reduce the potential for distracting technical arguments.

Special Case Principle (principle 13)

1. The Secretary submitted that subprinciple 13.1 should be amended to state that the Commission should also have regard to the mandatory considerations contained in principle 2 when determining whether an application to make or vary an award should be granted otherwise than under one of the Arbitrated Case principles. In circumstances where principle 2 states that the mandatory considerations need to be considered in every case, we think this is unnecessary.

Other amendments

1. In addition to the amendments mentioned above, we have made a small number of other minor drafting changes suggested by the parties.

Orders

1. The Full Bench makes the following orders: 1. Pursuant to s 51(1) of the Industrial Relations Act 1996 (NSW), the Commission orders that the Commission's Award Making Principles shall be as set out in Annexure A of this decision and shall operate on and from today. 2. The Award Making Principles in Annexure A of this decision supersede the Wage Fixing Principles in Annexure A of State Wage Case 2022 [2022] NSWIRComm 1081. 3. Employees within the jurisdiction of the Industrial Relations Act 1996 (NSW) whose employment is not subject to the terms of an industrial instrument shall be paid not less than the rate prescribed by the National Minimum Wage Order as made by the Fair Work Commission from time to time.

Preamble 1.1 These Principles guide the exercise of discretion when making or varying awards under Part 1 of Chapter 2 of the Industrial Relations Act 1996 (the Act).

Mandatory considerations 2.1 When determining an application to make a new award or to vary an existing award, whether by consent or otherwise, the Commission must have regard to: 1. whether the terms of the award as made or varied will set fair and reasonable conditions of employment for employees; and 2. the public interest, and in that respect must have regard to: 1. the objects of the Act, including the effect of the award as made or varied on: 1. the promotion of productivity and efficiency; 2. the promotion of participation in industrial relations by employees and employers at an enterprise or workplace level; 3. the prevention and elimination of discrimination in the workplace, in particular ensuring equal remuneration for all persons doing work of equal or comparable value; 4. the encouragement of co-operative workplace reform and equitable, innovative and productive workplace relations; and 5. strategies to attract and retain skilled staff where there are skill shortages so as to ensure effective and efficient delivery of services; 1. the state of the economy of New South Wales and the likely effect of the decision on that economy; and 2. in respect of an award that will apply to public sector employees, the fiscal position and outlook of the Government and the likely effect of the award as made or varied on the position and outlook.

When an award may be varied or another award made without the claim requiring consideration as an Arbitrated Case 3.1 Provided it otherwise complies with the requirements of the Act, an award may be made or varied without the application needing to be considered as an Arbitrated Case under Principle 9: 1. in accordance with an express provision in an award that provides for its variation; 2. to incorporate test case standards, in accordance with Principle 5; 3. to adjust wages consistent with a State Wage Case decision, in accordance with Principle 6; 4. to adjust allowances and service increments, in accordance with Principle 7; 5. to adjust wages to ensure that they are not below the National Minimum Wage Order as made by the Fair Work Commission, in accordance with Principle 8; or 6. where the application is consented to by the parties.

No extra claims commitments 4.1 A consent application to make or vary an award may involve parties giving a no extra claims commitment in agreed terms. Such a commitment may take the form of an undertaking to the Commission not to pursue claims for extra or reduced terms and conditions that would take effect during the nominal term of the award, with or without identified exceptions. 4.2 Absent extraordinary circumstances, the Commission will not vary or make an award that is inconsistent with a no extra claims commitment unless otherwise expressly permitted by the award or by consent of the parties. 4.3 The Commission will not include in an award a clause that prohibits a party making an application under the Act or participating in proceedings under the Act.

Test Case Standards 5.1 There is a presumption that test case standards established and/or revised by a Full Bench of the Commission will be incorporated into an award on application.

State Wage Case Adjustments 6.1 Following the completion of an Annual Wage Review by the Fair Work Commission, the Commission will issue a notice to show cause why that National decision should not be adopted wholly or partly and with or without modification for certain minimum rates awards and for paid rates awards that apply to the public sector, which will be determined at a State Wage Case hearing. 6.2 In the State Wage Case hearing the Commission will determine a minimum rates adjustment for the following awards: 1. Security Industry (State) Award ("Security Industry Award"); 2. Miscellaneous Workers - Kindergartens and Child Care Centres, &c. (State) Award; 3. Health, Fitness and Indoor Sports Centres (State) Award; 4. Transport Industry (State) Award; 5. Clerical and Administrative Employees (State) Award; 6. Local Government (Electricians) (State) Award; 7. Entertainment and Broadcasting Industry - Live Theatre and Concert (State) Award; 8. Local Government Aged Disability and Home Care (State) Award; and 9. Nurses' (Local Government) Residential Aged Care Consolidated (State) Award 2021. and vary them to give effect to that minimum rates adjustment, provided that each award contains the following clause: "The rates of pay in this award include the adjustments payable under the State Wage Case for the relevant year. These adjustments may be offset against: (i) any equivalent over award payments, and/or (ii) award wage increases other than State Wage Case adjustments." 6.3 In the State Wage Case hearing the Commission may determine a paid rates adjustment for paid rates awards that apply to the public sector. Note: As provided in Principle 17, Transitional Provisions, Paragraphs 6.3 to 6.6 have no application before the 2025 State Wage Case, which will consider whether to make a paid rates adjustment and will also determine whether there should be any alteration to those paragraphs. 6.4 A paid rates adjustment will be determined having due regard to all the circumstances including: 1. the National Decision; 2. its application to paid rates awards; 3. the terms of the no extra claims undertaking required; 4. changes in the value of money since the last State Wage Case; and 5. the mandatory considerations in Principle 2, including the need to ensure that awards remain fair and reasonable, the likely effect of the decisions on the New South Wales economy, and the fiscal position and outlook of government. 6.5 For the avoidance of doubt, the paid rates adjustment need not be the same as the minimum rates adjustment and need not equate to the rate of inflation over the previous 12 months. 6.6 Following the making of a paid rates adjustment, a public sector award may, on application, be varied to apply that adjustment and extend its nominal term for 12 months from the date the adjustment takes effect, having regard to: 1. the status of bargaining between the parties to the Award; and 2. the likelihood of that bargaining concluding in a timely fashion; but only where: 1. the nominal term of the award has expired; 2. the award has not had an increase in rates for at least 12 months; and 3. each union which is a party to the award gives to the Commission a no extra claims undertaking in the following terms or in such other terms as the parties agree: [Name of union] undertakes not to pursue any further claims to amend the award in proceedings before the Industrial Relations Commission in respect of employees covered by the award that would take effect during its nominal term. Provided that this undertaking does not prevent: (i) participation in collaborative discussions to amend the award by means of mutual gains bargaining or otherwise; (ii) making an application to vary the award by consent; (iii) participation in a consent arbitration; (iv) participation in a s 19 review or other proceedings initiated by the Commission or another party that affects the award; or (v) pursuing and giving effect to claims under the Gender Based Undervaluation Principle during the nominal term 6.7 Applications to apply a paid rates adjustment will be dealt with expeditiously.

Adjustment of Allowances 7.1 Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect relevant changes in the level of such expenses. 7.2 If an order is made pursuant to Principle 6 for an adjustment to be made to the applicable award, that adjustment will also apply to existing allowances which relate to work or conditions which have not changed other than in line with whole of award salary adjustments, including shift allowances expressed as monetary amounts and service increments. 7.3 New allowances may be awarded to compensate for the reimbursement of expenses incurred where appropriate. 7.4 Otherwise, applications to increase existing allowances or create new allowances in the absence of consent will be determined in accordance with the Arbitrated Case Principle.

Minimum rate of pay 8.1 The Commission will vary an award on application or on its own motion to increase a rate of pay in an award which is below the minimum rate set by the National Minimum Wage Order as made by the Fair Work Commission from time to time.

Arbitrated Case 9.1 Other than as allowed elsewhere in these Principles, an application for increases in remuneration (including for new service increments or superannuation contributions higher than those mandated by Commonwealth legislation) or changes in conditions in awards, will be determined as an Arbitrated Case and, unless otherwise allocated by the President, will be heard by a Full Bench of the Commission. 9.2 An Arbitrated Case may be granted if it meets one or more of the following criteria: 1. there has been a change in work value that meets the requirements of the Work Value Changes Principle; 2. there has been an increase in productivity or efficiency in respect of public sector awards that meets the requirements in the Productivity and Efficiency Principle; 3. the application addresses undervaluation on a gender basis in accordance with the Gender Based Undervaluation Principle; 4. a special case is established in accordance with the Special Case Principle; and 5. there has been a change in the value of money justifying a change in rates of pay and conditions for public sector employees that meets the requirements of the Value of Money Principle. 9.3 When determining an Arbitrated Case, the Commission will have regard to changes in the value of money since wage rates were last adjusted. 9.4 Following determination of an Arbitrated Case the Commission will not include a no extra claims clause in the settled award, but may identify in the decision the extent to which it is open to parties to the award to make further claims that would take effect during the life of the resultant award. 9.5 Claims that are based substantially on comparative wage justice will not be countenanced other than to the extent contemplated by the Gender Based Undervaluation Principle. 9.6 There will be no double counting, provided however, that an Arbitrated Case may rely upon a cumulation of the factors referred to in these Principles. 9.7 In the following Principles the expression "the conditions under which the work is performed" relates to the environment in which the work is done.

Work Value Changes Principle 10.1 Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of the work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification. 10.2 In addition to meeting the test in 10.1, a party making a work value application will need to justify any change to wage relativities that might result not only within the relevant internal award structure but also against any external classification to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position. 10.3 The foregoing circumstances are the only ones in which rates may be altered on the ground of work value under this Principle and the altered rates may be applied only to employees whose work has changed. 10.4 In applying the Work Value Changes principle, the Commission will have regard to the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which work is performed. 10.5 Where new or changed work justifying a higher rate is performed only from time to time by persons covered by a particular classification, or where it is performed only by some of the persons covered by the classification, such new or changed work should be compensated by a special allowance which is payable only when the new or changed work is performed by a particular employee and not by increasing the rate for the classification as a whole. 10.6 The time from which work value changes in an award should be measured is the date of operation of any adjustment arising from the last work value inquiry or the date of a consent award where the parties agreed that the wage increases in the consent award reflect or include increases in work value, whichever is the later. 10.7 Care should be exercised to ensure that changes that were taken into account in any previous work value adjustments or in a structural efficiency exercise are not included in any work evaluation under this Principle. 10.8 Where the tests specified in 10.1 are met, an assessment will have to be made as to how that alteration should be measured in monetary terms. Such assessment will normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work or the date of a consent award in which the parties have agreed that the wage increases reflect increases in work value. 10.9 The Commission will guard against contrived classifications and over-classification of jobs.

Productivity and Efficiency Principle 11.1 Productivity or efficiency measures that have delivered substantial cost savings and/or productivity or efficiency improvements or which have made a substantial contribution towards the attainment of the objectives of the employer (including departments and agencies of the Crown) to achieve an improved quality of service, and/or become more competitive and/or efficient, to which employees have made a significant contribution, may constitute the basis for increases to wages and salaries or improvements in employment conditions, provided that the time from which such measures, savings or improvements are measured is the later of: 1. the date of the last adjustment awarded on account of productivity and efficiency; or 2. the date of a consent award in which parties have agreed that the wage increases incorporate an adjustment made under this Principle. 11.2 Productivity or efficiency improvements in the public sector could arise from: 1. delivering the same service (quality or quantity) with fewer inputs; 2. delivering a better service (quality or quantity) with the same inputs; 3. achieving a large reduction of inputs, with a relatively slight reduction in service quality/quantity; and/or 4. achieving a large improvement in service quality/quantity, with a relatively small increase of inputs. 11.3 The following are not productivity or efficiency improvements in the public sector: 1. gaining a small improvement in output with a proportionate or relatively large increase in inputs; 2. achieving a small reduction in inputs with a proportionate or relatively larger reduction in service quality/quantity; 3. gaining a small improvement in quality, with no extra inputs, but with a relatively large reduction in output; 4. slightly boosting output, with no extra inputs, but with a relatively large reduction in quality. 11.4 For the avoidance of doubt, it is not necessary to identify cost savings before an increase can be awarded under this Principle. 11.5 This Principle does not apply to Local Government awards.

Gender Based Undervaluation Principle 12.1 Claims may be made for an alteration in wage rates or other conditions of employment on the basis that the work, skill and responsibility required, or the conditions under which work is performed, have historically been, or are presently, undervalued on the basis of gender. 12.2 Where such a claim is established, the Commission will seek to ensure that wage rates and conditions of employment properly reflect the value of the work, skill and responsibility required and/or the conditions under which the work is performed. 12.3 Where the undervaluation is sought to be demonstrated by reference to any comparator awards or classifications, the assessment is not to have regard to factors incorporated in the rates of such other awards which do not reflect the value of work, such as labour market attraction or retention rates or productivity factors. 12.4 The application of any formula, which is inconsistent with proper consideration of the value of the work performed, including where such formulas may themselves have been the result or product of gendered conceptions of the value of the work the subject of the application, is inappropriate to the implementation of this Principle. 12.5 The assessment of wage rates and other conditions of employment under this Principle is to have regard to the history of the award concerned, including any historical gendered conceptions of the value of the work the subject of the application. 12.6 Where the requirements of this Principle have been satisfied, an assessment will be made as to how the undervaluation should be addressed in money terms or by other changes in conditions of employment, such as reclassification of the work, establishment of new career paths or changes in incremental scales. Such assessments will have regard to the wages and conditions of employment previously fixed for the work and the nature and extent of the undervaluation established. 12.7 In applying the previous paragraph, consideration is to be given to measures to address so far as possible, consistent with achieving the outcome in 12.2 above, a legitimate concern that changes in wage relativities, not only within the award in question but also against external classifications to which the award structure is related, will give to rise to claims that would cause wage leapfrogging. 12.8 Any changes made to the award as a result of this assessment may be phased in and consideration is to be given, where relevant, to whether any increase in award rates can be absorbed in individual employees' over-award payments. 12.9 The Commission will guard against contrived classifications and over-classification of jobs. 12.10 Equal remuneration will not be achieved by reducing any current wage rates or other conditions of employment.

Special Case Principle 13.1 A new award or a variation to an existing award can be granted otherwise than under one or more of the preceding Arbitrated Case principles where an applicant can demonstrate that the matter has special attributes or is out of the ordinary in a manner that warrants approval by the Commission despite the restrictive considerations imposed by these principles. 13.2 Care should be taken not to rely on factors already taken into account in establishing a predecessor award.

Value of Money Principle 14.1 The Commission can make a new award or vary an award to address changes in the real value of money having regard to all the circumstances, including: 1. the mandatory considerations in Principle 2 including the need to ensure that the award rates remain fair and reasonable, the state of the economy of New South Wales and the fiscal position and outlook of the Government; 2. the status of bargaining between the parties to the Award; 3. the likelihood of that bargaining concluding in a timely fashion; and 4. the terms of any no extra claims undertaking that relevant unions provide to the Commission in order to obtain the increase; in circumstances where: 1. the award applies to public sector employees; 2. the nominal term of the existing award has expired; 3. the employees covered by that award have not had an increase in rates for at least 12 months; 4. no paid rates adjustment has been set pursuant to Principle 6; and 5. each union party to the award gives a no extra claims undertaking in the following terms, or in such other terms as the parties agree or the Commission considers appropriate in the circumstances: [Name of union] undertakes not to pursue any further claims to amend the award in proceedings before the Industrial Relations Commission in respect of employees covered by the award that would take effect during its nominal term. Provided that this undertaking does not prevent: (i) participation in collaborative discussions to amend the award by means of mutual gains bargaining or otherwise; (ii) making an application to vary the award by consent; (iii) participation in a consent arbitration; (iv) participation in a s 19 review or other proceedings initiated by the Commission or another party that affects the award; or (v) pursuing and giving effect to claims under the Gender Based Undervaluation Principle during the nominal term. 14.2 This Principle does not apply to Local Government awards.

Negotiation Principle 15.1 When considering an application for a new award or the variation of an award, including the timetabling of such an application, the Commission will have regard to whether the parties have complied with the following. 15.2 In respect of the commencement of negotiations for a new award: 1. a party contemplating a major industrial case pursuant to Practice Direction 8A must notify the Commission and the other relevant parties at least three months before the nominal expiry date of the award that it is their intention to enter into negotiations for a new award in respect of claims justified under one or more of the Arbitrated Case criteria or otherwise; 2. the parties to the award must begin negotiations as soon as is practicable after the notification has been given. In this regard, once a written claim has been made by one party on another party, then if negotiations have not already commenced they must begin within 28 days unless it is agreed by the parties to commence negotiations at a later time; 3. prior to or at the outset of negotiations, a party can make a reasonable request to another party for relevant information to be used for the purpose of evaluating options or developing claims and that request will not be unreasonably refused; 4. disputes about these procedures will be dealt with in accordance with the dispute resolution procedures in the relevant award applying to the parties to the dispute. 15.3 In respect of any claim to alter existing wages and conditions, including to modernise or consolidate awards, each party is to bargain in good faith prior to any arbitration commencing. In particular, parties are to: 1. consider whether to enter into mutual gains bargaining under Chapter 2A of the Act; 2. attend meetings they have agreed to attend and be represented at the negotiations by persons capable of giving genuine consideration and reasoned responses to the proposals of other parties; 3. comply with agreed or reasonable negotiating or meeting procedures; 4. disclose relevant information for the purposes of negotiation; 5. respond to each other's claims and/or counter claims in a reasonable and timely manner; and 6. to the extent that agreement is reached, apply by consent to the Commission to make a new award or vary an award to give effect to that agreement. 15.4 The good faith bargaining requirements do not require a party to: 1. make concessions during bargaining; or 2. reach agreement on the terms that are to be included in the agreement.

Economic Incapacity Principle 16.1 Any employer or group of employers bound by an award may apply, temporarily or otherwise, to reduce, postpone and/or phase in the application of any increase in labour costs determined under the Principles on the ground of very serious or extreme economic adversity. The merit of such an application will be determined on a case by case basis and any relevant material shall be rigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are important factors to be taken into account in assessing the merit of any application. 16.2 Such an application will be processed according to the Special Case Principle. 16.3 Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this Principle.

Transitional provisions 17.1 Other than as provided at 17.2, these Principles apply to: 1. any application to make or vary an award that is made on or after the date of commencement of these Principles; and 2. any such application filed prior to that time where the hearing of the matter has not commenced as at the date of the commencement of these Principles (directions hearings will not count for this purpose). 17.2 Paragraphs 6.3 to 6.6 have no application prior to the 2025 State Wage Case, which will consider whether to make a paid rates adjustment and whether there should be any alteration to those paragraphs.

Duration 18.1 These Principles will operate on and from 20 December 2024 until further order of the Commission.

The Commission makes the following order pursuant to s 51:

A. Minimum Wage for Award/Agreement Free Employees A.1 Employees within the jurisdiction of the Act whose employment is not subject to the terms of an industrial instrument shall be paid not less than the rate prescribed by the National Minimum Wage Order as made by the Fair Work Commission from time to time.

Endnotes

1. Re Crown Employees (Administrative and Clerical Officers) (State) Award (No 2) (1993) 52 IR 243 at 377; Re Crown Employees (Police Officers - 2009) Award (2012) 220 IR 1; [2012] NSWIRComm 23 at [547]-[567]; Re Crown Employees (Public Sector - Salaries 2020) Award and Other Matters (No 2) (2020) 301 IR 321; [2020] NSWIRComm 1066.
2. State Wage Case 2024 (No 3) [2024] NSWIRComm 19 at [93].
3. Re Annual Wage Review 2023-24 (2024) 331 IR 248; [2024] FWCFB 3500 at [154], quoting Re Annual Wage Review 2022-23 (2023) 323 IR 332; [2023] FWCFB 3500 at [179].
4. State Wage Case 2024 (No 3) [2024] NSWIRComm 19 at [154]. 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: 20 December 2024