Public Service Association and Professional Officers' Association... [2012] NSWIRComm 96 | Case summary

Public Service Association and Professional Officers' Association... [2012] NSWIRComm 96 | Case summary | Zoe

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Background 4The background, briefly stated, is that Mr Daly and Mr Dillon were employees of the National Art School, a unit of the Department of Education and Training ("the Department"). As such, Mr Daly and Mr Dillon were employed under public service conditions described by Staff J in his decision. In October 2009 the Department moved to establish a corporation known as the "National Art School Limited" ("the Company") independent, it was said, of the Department. The Company, being a constitutional corporation, fell within the jurisdiction of Fair Work Australia under the Fair Work Act 2009 (Cth). Employment with the Company was governed by an award of Fair Work Australia known as the Higher Education Industry, General Staff - Award 2010. There was no issue that the terms and conditions of that Award were, on the whole, inferior to what Mr Daly and Mr Dillon enjoyed as employees of the Department. 5Following the establishment of the Company, Mr Daly and Mr Dillon, amongst others, were required to make a choice between taking up employment with the Company or remaining in employment with the Department. The former involved accepting employment on terms inferior to what had applied in the public service and the latter involved being declared excess to requirements, thereby invoking the application of the "Managing Excess Employees in the New South Wales Public Sector November 2008 Policy and Procedures" ("the 2008 Policy"). 6In broad terms, the 2008 Policy provided that redeployment was the principal means for managing excess employees. However, where an alternative position was not found after a 12 months' retention period (during which the employee remained in employment), as a last and unavoidable resort, an agency could make redundant an excess employee. Where redeployment was not considered viable, a program of voluntary redundancies could be instituted by an agency. Benefits to an employee who took voluntary redundancy were greater than those available for forced redundancy. 7Before dealing with the choices made by Mr Daly and Mr Dillon I should mention a separate group of employees who were employed by the Department in the National Art School and that was the 27 academics. Unlike Mr Daly and Mr Dillon, who were permanent employees, the academics were employed on a temporary or casual basis under the Public Sector Employment and Management Act 2002. The academic staff ceased employment with the Department in January 2010 and were paid severance payments calculated in the manner set out in cl 4.5 of the 2008 Policy, that is, payments were made as if the employees had accepted voluntary redundancy. As Staff J notes, at least 23 of the 27 academic staff immediately commenced employment with the Company. 8Mr Daly and Mr Dillon, together with other administrative and technical staff, were initially assigned to work at the Company for a period of six months expiring on 30 June 2010. During this period, they remained employed in the public service. Both men were offered employment with the Company and were advised of the terms and conditions of employment. The first six months of their employment was to be on a probationary basis. Both men accepted the offers of employment. In August 2010, after they had accepted employment with the Company, Mr Daly and Mr Dillon were advised by the Department that if they wished to take up employment with the Company they needed to complete a Separation Form. Neither of them responded to this simple request and neither advised they had already accepted employment with the Company. 9In October 2010, both men were advised by the Department of the options of applying for six months' leave without pay before deciding to terminate their employment with the Department and for approval to engage in secondary employment. Both Mr Daly and Mr Dillon completed applications for secondary employment and leave without pay. The applications were approved. 10In November 2010, the Department advised Mr Daly and Mr Dillon of approval of an ex gratia payment of $1,500 to those who, at the end of their period of leave without pay, terminated their employment with the Department and took up a permanent offer with the Company. 11In March 2011, the Company advised both men of the availability of ongoing, full-time employment with the Company. 12Also in March 2011, the Department advised both men that the leave without pay period was ending on 17 April 2011 and of the need to advise the Department of their intentions. Each were advised that, if he elected not to terminate his service with the Department, he would return to the Department on 18 April 2011 and be declared excess officers and managed in accordance with the 2008 Policy. Both Mr Dillon and Mr Daly chose not to advise the Department of their intentions. 13In May 2011, the Department wrote to the Union representing Mr Dillon and Mr Daly (the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("the PSA")) extending the time for both men to either resign from or return to the Department to 20 May 2011. Both men were advised of the contents of the Department's letter. Neither the PSA nor Mr Dillon nor Mr Daly responded to the Department's letter. 14In June 2011 there were further letters from the Department to Mr Dillon and Mr Daly requiring advice by 24 June 2011 as to their intention to either resign from the Department or return to the Department and be managed in accordance with the 2008 Policy. Neither person responded to the letter. Both persons continued in employment with the Company and it may be presumed their employment with the Department ceased at the expiration of the extended period of leave without pay. 15Why Mr Dillon and Mr Daly refrained from responding to eminently reasonable requests by the Department as to their intentions was never coherently and adequately explained. It seems to me their conduct in this regard is a poor reflection on them and whoever was advising them. Having been confirmed in their employment by the Company in April 2011, and having obviously made the choice to remain in that employment, there was no prejudice involved in advising the Department of that choice and formally resigning from the public service.

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Informed choice? 16Be that as it may, the conduct of Mr Dillon and Mr Daly is not, of itself, a disentitling factor and a reason to refuse to grant the application. The Department did not contend otherwise. However, the Department did contend that the two individuals had a more than adequate opportunity to assess the pros and cons of relinquishing their employment with the Department and taking up employment with the Company. They were well aware that, had they decided to return to employment with the Department, they would, consistent with the operation of the 2008 Policy, have been provided with assistance to identify suitable redeployment opportunities and would have had the protection of a period of (at least) 12 months' salary maintenance. They were well aware that the conditions of employment at the Company were less beneficial than those formerly available to them when employed with the Department. 17Having had an extended opportunity to assess the pros and cons, the Department contended the two individuals made an informed choice. Knowing there was no transfer payment in the offing (other than the $1,500 ex gratia payment) and having experienced employment with the Company whilst on leave without pay from the Department, they decided to take up employment with the Company. In those circumstances, as I understood the Department's submissions, Mr Daly and Mr Dillon should not now be entitled to a transfer payment. This was particularly so given the PSA's application for the making of the Award occurred: (a) approximately 14 months after Mr Daly and Mr Dillon had accepted offers of employment from the Company; (b) approximately 13 ½ months after the PSA discontinued the proceedings in which it had initially sought the making of an award that included transfer package entitlements; and (c) approximately 4 months after Mr Daly and Mr Dillon had failed to respond to a final written request seeking advice as to their intentions in relation to either resigning from employment with the Department or returning to the Department from leave without pay. 18Staff J has dealt with the evidence regarding the discontinuation of the dispute proceedings. It is apparent that, although the PSA withdrew its claims in the Commission regarding transfer payments because of uncertainty about which of its members would ultimately take up employment with the Company and which employees would choose redeployment with the Department, it continued to privately press the claim with the Department. In other words, the claim for transfer payments was always a live issue between the parties. If that had not been the case, one would have to question the bona fides of the claimants. 19As to the Department's submissions about Mr Daly and Mr Dillon making informed choices, Staff J concluded that the chances of Mr Dillon and Mr Daly being redeployed with the Department were slight if not non-existent. His Honour found that if Mr Daly and Mr Dillon wished to continue to undertake the specialised work that they had been performing for a number of years, they believed they had no choice but to apply for, and accept, positions with the Company. 20I respectfully agree with his Honour's conclusions as to the evidence in this regard. The result is that Mr Dillon and Mr Daly had little choice but to accept employment with the Company if they wished to stay in long-term employment in their highly specialised field; either they stayed with the Department and most likely found themselves unemployed after 12 months, or they accepted employment with the Company and continued in long-term employment in their chosen vocation. Mr Daly and Mr Dillon made what were entirely reasonable choices in opting for employment with the Company.

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Transmission of business 24It was submitted that Pt 8 of the Industrial Relations Act and the provisions contained in Part 2-8 of the Fair Work Act evidenced an intention that employees whose employment transfers from one employer to another by reason of the transmission of the whole or any part of a business, undertaking or establishment should have their conditions of employment and continuity of employment maintained. 25The PSA submitted these reflect an abiding concern to protect the integrity of the award system: The protection of the integrity of the award system represents one of the most fundamental purposes of the NSW Act. The objects of the NSW Act include "to facilitate appropriate regulation of employment through awards, enterprise agreements and other industrial instruments": s 3(e). The intention of the NSW Act to discourage or prevent the avoidance of award obligations is evident is Part 9 of Chapter 2 (unfair contracts), Chapter 6 (public vehicles and carriers) and s 5(3) and Schedule 1 (deemed employees). It is also, of course, not possible to contract out of the benefits afforded by awards of the Commission: s 404. ... The Federal Commission has also recognised that in setting award conditions one consideration must be the necessity to protect the integrity of the award system established by the relevant legislation: see, for example, Federal Meat Industry Decision (1999) 91 IR 414 at [111]. The integrity of the award system requires the preservation of the conditions of employment prescribed by awards unless, by a process of conscious variation, sanctioned by the Act, they are altered: Australian Municipal, Administrative, Clerical and Services Union v Greater Dandenong City Council (2000) 101 IR 143 at [78]-[84]. 26Of course, the establishment of the Company to take over the role and functions of the National Art School was not a transmission of business under the Industrial Relations Act because the transfer of functions involved a movement from the NSW industrial relations system to the Federal system. Section 26 of the Fair Work Act excludes the operation of the Industrial Relations Act with respect to employees falling within the Federal system. Nevertheless, the PSA submitted the principles inherent in the transmission provisions should apply in this case. 27The PSA further submitted that, in any event, the transfer of the National Art School to a private entity did not involve a true privatisation. The sole shareholders of the Company are the Ministers for Arts and Education and the Ministers appoint the board of the Company. Thus, the Company remains, in substance, under the control of the Government. The PSA submitted it was inconsistent with fundamental principles of industrial fairness that employees suffer a reduction in their conditions of employment and interruption of continuity of service without compensation as a result of a change in the form of the relationship between the parties rather than a change of substance. 28There is no doubt that Mr Daly and Mr Dillon suffered disadvantage in the transfer of the National Art School to the private sector. The fairness and equity principles underpinning the case law relating to acceptable alternative employment and transmission of business legislation require that such disadvantage be ameliorated. This may be achieved in different ways, as the case law and legislation demonstrate. However, it would not be inconsistent with the approaches taken in relation to alternative employment and transmission of business to provide for transfer payments to Mr Daly and Mr Dillon.

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Whether precedents may be distinguished 31The Department submitted it was one thing for a transfer package regime to be negotiated and agreed upon or be the subject of a direction from the Commission before the changes in employment status were put into effect. Such a situation allowed the affected parties an opportunity to consider and tailor their position(s) moving forward. It was an entirely different matter, it was submitted, for such a regime to be sought to be imposed in arbitration after the event. 32As far as I understand it, the Department was never at any stage willing to negotiate a transfer payment for administrative/technical staff transferring their employment to the Company. In the light of that refusal the PSA made application for its claim to be arbitrated, an option that the Department was aware was always open to the PSA. The Department was also aware that it was open to the Commission to grant the application and to make an award that was "fair and reasonable" subject to the requirements of s 146(2) and s 146C of the Industrial Relations Act. 33For the reasons discussed earlier, this was not a case where the PSA withdrew its claim leaving the Department with the impression that a claim for transfer payments would not be pressed and the Department made its decisions on that basis. The evidence was that the PSA continued to press its claims outside the Commission. In the face of the Department's consistent rejection of a transfer payment it could not have been surprised the PSA might seek relief by way of an award. 34The position as I see it is that the Department transferred the National Art School to a corporate private sector entity over which it retains a large measure of control through its power to appoint the board. That transfer presumably had commercial and/or financial and/or restructuring advantages for the Department. There were no benefits for either Mr Daly or Mr Dillon. The transfer meant that they would lose the security of public sector employment, lose the benefit of continuity of employment and would suffer a reduction in their employment benefits; the transfer of the School to the private sector clearly disadvantaged them. 35The Government has recognised in other transactions involving privatisation or outsourcing of government agencies or enterprises that it is appropriate to ameliorate the adverse effect on employees of such changes having regard to the impact on job security, employment continuity and employment conditions. 36The Department has sought to make a distinction between those transactions and the National Art School by indicating that NSW Lotteries and Parklea Gaol, for example, yielded a financial gain to the Government. That would seem to indicate a view that if the Government makes money out of the transaction it would be in a position to make a transfer payment. However, there was no evidence that where a transaction did not produce a financial return the Government could not afford a transfer payment, especially where it involved only two former employees. 37The other distinction that was sought to be made was that in establishing a separate corporate entity the Government did not seek to force or place pressure on employees to transfer to that entity; it was a matter for the entity to select and recruit its own staff and, therefore, officers could elect to stay with the Department. 38Such an election, however, in the case of Messrs Daly and Dillon, was more illusory than real. An election to stay with the Department meant being declared an excess officer and, whilst redeployment was to be the principal means of dealing with these two employees, the reality was that after 12 months they could be made compulsorily redundant. If the two employees wanted ongoing, permanent employment, such as that offered to employees who were the subject of the privatisation/outsourcing transactions identified earlier, they had little choice but to accept employment with the Company. 39The precedent that the Government itself has established of compensating public sector employees who are adversely affected by privatisation/outsourcing transactions is a strong reason supporting the making of an award to provide for transfer payments to Messrs Daly and Dillon.

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45In respect of the outsourcing of Parklea Correctional Centre and the sale of WSN Environmental Solutions, FreightCorp and the electricity generators the same payments applied as those above. 46Whilst these precedents might have provided a basis for the claim in this case it is not entirely apparent from the material tendered in relation to those precedents what the employer's rationale was for making the payments. The evidence of Mr Turner, the Assistant General Secretary of the PSA, who had been involved in the negotiations of some of the separation packages referred to above, was that the transfer payments were made to compensate employees "for the loss of employment conditions and job security." 47It seems to us that the rationale for transfer payments is necessarily linked to the concept of redundancy. It has been well established for over 30 years that where the employer no longer wishes the job the employee has been doing to be done by anyone through no fault of the employee the job has become redundant (R v Industrial Commission of South Australia: Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 at 8; Termination, Change and Redundancy Case (1984) 8 IR 34) ("TCR Case") and the employee may be entitled to a compensatory payment often referred to as redundancy pay or a severance payment. Usually, no obligation falls on an employer to pay redundancy pay where there is a transmission of business or where the employer has obtained acceptable alternative employment: TCR Case at 75. 48In respect of Mr Daly and Mr Dillon, the Department decided that it no longer wished the job the two men had been doing done by anyone. That constitutes the classic redundancy situation. The circumstance of the privatisation of a government agency does not change the fact that redundancies may result that requires employees to be compensated: Re Government Cleaning Services (Privatisation) Award (No 2). At 218, Schmidt J relevantly stated: When a business is sold, or a Governmental undertaking privatised, the original employment comes to an end. Employees do not always obtain work with the new employer. The fact that the old employer assists the employees to obtain work with the new employer, does not alter the consequence, that the termination of the original employment arose as a result of the employer's decision, that it no longer wished any of its employees to perform the jobs they were performing and not through any fault on the employee's part. It seems to me that employees in that situation have been made redundant, whether or not they are assisted in obtaining alternate employment. See also Re Clerks (State) Award (Redundancy Case) [1976] AR (NSW) 417 at 431. 49Thus, whilst it may be concluded that the jobs of Mr Daly and Mr Dillon were made redundant, they still had the protection of the Policy, which required their employer to endeavour to redeploy them before any question of a voluntary or forced redundancy payment arose. However, as I have already observed, the prospects of redeployment within the public sector were slim and this would seem to be the principal reason why the two men opted for employment with the Company. If Mr Daly and Mr Dillon had remained in public sector employment the inevitable outcome would appear to have been redundancy, either voluntary or forced. 50The question then arises as to whether Mr Daly and Mr Dillon were entitled to any compensation in the nature of a redundancy or severance payment in circumstances where they opted for employment with the Company. 51Neither Mr Daly nor Mr Dillon would be disentitled to compensation by reason of a transmission of business. The transfer of the National Arts School to the Company was not a transmission of business whereby Departmental employees suffered no interruption to the continuity of their employment and no loss of benefits. Moreover, whilst the Department clearly assisted Mr Daly and Mr Dillon in obtaining employment with the Company, I do not consider the Department could be regarded as having obtained acceptable alternative employment for Mr Daly and Mr Dillon. In United FM at [79]-[83] the Full Bench stated: [79] Thus, it seems to us that where an employer, through its efforts, has obtained alternative employment involving minimal dislocation for employees, no loss of accumulated employment benefits such as sick leave and long service leave, where there is continuity of service and the employees are not disadvantaged by the terms offered in the new employment (as would be the case in a succession, assignment or transmission of business), the employer would have a prima facie case for the exercise of discretion in its favour for the granting of an exemption, either in whole or in part, from the award obligation to make severance payments. We elaborate on this view in the following paragraphs. [80] For the reasons expressed by the Full Bench in Re Clothing Trades Award we do not consider that the word "obtains" should be given a narrow, literal interpretation. As the Full Bench determined in that case, where the employer is a "strong moving force" in causing the employment to become available, that will be an important consideration for a tribunal of fact in exercising its discretion as to whether an exemption from the requirement to make severance payments should be granted. However, there is the additional consideration that cannot be ignored or overlooked, of whether the employment was acceptable. There will be circumstances, as is the case here, where the incoming employer intends to employ the employees of the outgoing employer, regardless of any overtures or effort of the outgoing employer to secure that employment. In those circumstances it is necessary for the tribunal to consider what role the outgoing employer has played in causing the new employment to be available on acceptable terms. [81] In other words, the tribunal will have regard to the full extent of the role of the outgoing employer in the placement of its employees, not simply in alternative employment, but in acceptable alternative employment. That is to say, even though the outgoing employer did not "obtain" employment for the employees in the fullest sense of that word, when regard is had to the employer's overall role, including the part played in bringing about new terms of employment that were acceptable when viewed objectively, it may be concluded that in the absence of the employer's effort or request, acceptable alternative employment would not have become available to the employees. [82] To express the notion differently, if the outgoing employer is a strong moving force in causing acceptable alternative employment to become available to employees or, in circumstances where employment becomes available regardless of the outgoing employer's efforts or overtures, but the outgoing employer is a strong moving force in causing the employment to become available on acceptable terms, we consider the employer would have an arguable case for the exercise of the tribunal's discretion in favour of granting an appropriate exemption, whether in whole or in part. [83] We take the view that the primary objective should be maintaining employees in acceptable employment and thus, where an employer is a strong moving force, to use the words of the Full Bench in Re Clothing Trades Award, in causing to have made available acceptable alternative employment for employees, the employer should, prima facie, be entitled to the exercise of discretion in its favour granting an exemption from having to make severance payments, either in whole or in part. To take a different approach is likely to have the effect of removing the incentive for employers to make the necessary effort to maintain employees in acceptable employment. 52As Staff J found, both Mr Daly and Mr Dillon suffered a loss of continuity of employment, a loss of job security that at the time was associated with public sector employment and they incurred a significant reduction in their employment benefits. Further, Mr Dillon and Mr Daly were required to submit to a competitive recruitment process in order to obtain employment with the Company. In these circumstances, the test of obtaining acceptable alternative employment laid down in United FM has not been met in this case. 53One needs to consider then the Policy, which provided for compensation by way of a redundancy payment in two circumstances: first, where redeployment was considered impractical, the agency head could, with the approval of the relevant Minister, offer employees voluntary redundancy. Those who accepted were entitled to the voluntary redundancy package. Secondly, if an employee had been unable to find an alternative position after the 12-month retention period had expired, the agency head could consider making the excess employee redundant as a last and unavoidable resort. In such circumstances the employee was entitled to the compulsory redundancy package. 54Neither Mr Daly nor Mr Dillon was offered voluntary redundancy and they were not made compulsorily redundant. Therefore, no entitlement arose under the Policy. No entitlement arose under the default position prescribed under the Employment Protection Act 1982 because it does not apply to the Crown or a public authority within the meaning of the Industrial Relations Act. 55In these circumstances, I have given consideration to whether fairness requires that in making any award the Commission should use as the benchmark the compulsory redundancy package under the Policy. That package included four weeks' payment in lieu of notice (for employees aged 45 years and over with five or more years of completed service, an additional one week's notice or pay in lieu) plus three weeks for each year of service, up to a maximum of 39 weeks (3 x 13 years). 56However, I have concluded this approach would not be appropriate. The compulsory redundancy package included payment in lieu of notice. A period of notice or payment in lieu is to give an employee the opportunity to adjust to the change in circumstances that is to occur and to seek other employment: Westfield Holdings v Adams [2001] NSWIRComm 293; (2001) 114 IR 241 at [141] referring to Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 331 per von Doussa J. It would be inappropriate to pay Mr Daly and Mr Dillon any compensation by way of payment in lieu of notice because at no time were they unemployed and did not need to seek out other employment. Moreover, employees were granted a period of six months' leave without pay from the Department, with approval to engage in secondary employment during that period with the Company. As Staff J noted, the practical effect of this was that an employee could, during this period, terminate their employment with the Company and return to the Department to be declared excess and, therefore, trigger the Department's redeployment obligations under the Policy. 57A severance payment, on the other hand, is intended to provide a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee: TCR Case at 62; Westfield at [144]. Inconvenience and hardship includes the disruption to an employee's routine and social contacts and the competitive disability to long term employees arising from opportunities foregone in the continuous service of the employer: Fryar at 331 referring to Food Preservers Union of Australia v Wattie Pict Ltd (1975) 172 CAR 227; Westfield at [141]. 58The loss to Messrs Dillon and Daly of non-transferable credits was ameliorated in one important respect, namely, by the Department obtaining approval to have the Company listed as an employer under the various Superannuation Acts applicable to public sector employees. This enabled Mr Dillon and Mr Daly to continue to contribute to a defined benefits superannuation scheme as employees of the Company. 59Furthermore, permanent employees who accepted positions with the Company, and who had extended and recreational leave balances of less than 20 days, had their leave balances paid out. However, employees with leave balances in excess of 20 days, which included Mr Dillon, had the option of either cashing out the value of their entitlements on resignation, or have the current monetary value of their entitlements remitted to the Company based on the salary offered by the Company. There was also the capacity to transfer long service leave entitlements, but not sick leave. 60It follows from the foregoing analysis that whilst the jobs of Mr Dillon and Mr Daly were effectively made redundant, neither individual was put to the task of seeking out new employment and the Department sought to ameliorate the loss of non-transferable credits. This distinguishes their situation from a typical redundancy. Nevertheless, both individuals have foregone the job security historically associated with public sector employment, have suffered a reduction in employment benefits and have suffered the inconvenience and hardship referred to by von Doussa J in Fryar in so far as continuity of employment had to be foregone. 61Given these considerations I am of the view that some compensation is appropriate, particularly given the precedents already established by the Government in circumstances where agencies have been privatised or outsourced and where the voluntary redundancy package was applied to the academics despite them having no right to the package under the Policy. 62However, I am not inclined to simply adopt the standard in the Policy's compulsory redundancy package of three weeks' and multiply that by Mr Dillon's, or Mr Daly's, years of service. In Mr Dillon's case he was employed in the public service from 2001 to 2011 (10 years) and in Mr Daly's case from 1999 to 2011 (12 years). Nor am I inclined to grant the claim of 30 weeks' pay, which almost amounts to applying the compulsory redundancy scale to the two individuals. 63In my opinion, a payment of 13 weeks' pay is fair compensation as a "transfer payment" for Mr Dillon and Mr Daly, given the particular circumstances associated with their public sector jobs becoming redundant.

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Section 146C and Regulation 64The final matter to be addressed is s 146C of the Industrial Relations Act and the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011. 65Counsel for the Department submitted that in circumstances where the Award, if made, would lead to increases in Mr Daly's and Mr Dillon's employee related costs of more than 2.5 per cent, the Commission would need to be satisfied that there have been sufficient employee related costs savings to fully offset the employee-related costs of the Award. There was no evidence of such employee related costs savings having been achieved, it was submitted. 66In oral submissions, counsel further contended as follows: The simple proposition is this that let's assume continued employment by Mr Daly and Mr Dillon. At that point in time there is no employee related costs associated with the payment of a transfer payment. If this Commission makes such an award, there is an obligation not only to meet the ongoing employees' costs but there will be an additional employee related cost that is upon cessation you have to pay these employees a transfer payment... The employee related costs will exist at the point of time when the award is made. The fact that it crystallizes at one minute past 12 when the resignation is tendered, is really neither here nor there. It is the making of the award which imposes the obligation on my client to pay a transfer payment which is the employee related cost that is imposed upon my client and in circumstances where as this Commission would be familiar two and a half percent increases have been awarded in the past and most recently awarded by Backman J, any increases above that amount that increases employee related costs need to be offset and there simply isn't the offset. 67Section 146C of the Industrial Relations Act relevantly provides: 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. (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. ... 68The Industrial Relations (Public Sector Conditions of Employment) Regulation, which is a regulation made pursuant to s 146C, declares certain matters for the purposes of s 146C, to be aspects of government policy that are to be given effect to by the Industrial Relations Commission when making or varying awards or orders: see cl 4. 69Relevantly, cll 6, 8 and 9 of the Regulation 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. ... 8 Meaning of employee-related costs For the purposes of this Regulation, employee-related costs are the costs to the employer of the employment of public sector employees, being costs related to the salary, wages, allowances and other remuneration payable to the employees and the superannuation and other personal employment benefits payable to or in respect of the employees. 9 Meaning of employee-related cost savings (1) For the purposes of this Regulation, employee-related cost savings are savings: (a) that are identified in the award or order of the Commission that relies on those savings, and (b) that involve a significant contribution from public sector employees and generally involve direct changes to a relevant industrial instrument, work practices or other conditions of employment, and (c) that are not existing savings (as defined in subclause (2)), and (d) that are additional to whole of Government savings measures (such as efficiency dividends), and (e) that are not achieved by a reduction in guaranteed minimum conditions of employment below the minimum level. (2) Savings are existing savings if they are identified in a relevant industrial instrument made before the commencement of this Regulation (or in an agreement contemplated by such an industrial instrument) and are relied on by that industrial instrument, whether or not the savings have been achieved and whether or not they were or are achieved during the term of that industrial instrument. 70In order to determine the purpose of 146C and the Regulation made under that section, it is necessary to consider the policy referred to in those statutory provisions. That policy is the "NSW Public Sector Wages Policy 2011". 71The Wages Policy is essentially aimed at containing public sector labour costs by imposing a ceiling on employee related cost increases of 2.5 per cent per annum. Any increases agreed to or awarded by the Commission beyond 2.5 per cent must be offset through "employee related cost savings". 72The focus of the Wages Policy is at the agency level and is primarily concerned with collective outcomes rather than individual arrangements and the Policy operates in the context of ongoing employer/employee relationships. For example: (a) employee related cost savings are savings "that involve a significant contribution from public sector employees and generally involve direct changes to a relevant industrial instrument, work practices or other conditions of employment" (5.2.2); (b) "Remuneration and other conditions of employment must be negotiated concurrently and, where possible, contained in a single, comprehensive industrial instrument" (6.1.5); (c) all awards and agreements shall contain a no extra claims clause whereby: The parties agree that, during the term of this [award/agreement], there will be no extra wage claims, claims for improved conditions of employment or demands made with respect to the employees covered by the [award/agreement] and, further, that no proceedings, claims or demands concerning wages or conditions of employment with respect to those employees will be instituted before the Industrial Relations Commission or any other industrial tribunal (6.1.6); 73Paragraphs 7.1 and 7.2 of the Wages Policy sets out measures from which employee related cost savings may arise (7.1) and examples of employee related cost savings (7.2). All of the matters referred to are in the context of how employees may contribute to increased productivity and efficiency through changes essentially to working conditions and conditions of employment: 7.1. As a guide, measures from which employee related cost savings may arise include: 7.1.1. where they result in direct changes to the provisions of an industrial instrument or to working conditions including changes to staffing levels, human resource policies, rostering arrangements, workforce composition, work intensity or job redesign, provided they lead to savings 7.1.2. changes to conditions of employment which increase employee productivity and which will be realised as a cost saving 7.1.3. the expansion of the scope of work public sector employees perform in ways that enhance their productivity and realise savings 7.1.4. the agreed implementation or modification of workforce management policies which result in better utilisation of staff. 7.2. Examples of employee related cost savings include: 7.2.1. changes to rostering arrangements to better reflect customer service 7.2.2. increases to normal working hours that involve direct customer interaction 7.2.3. reduction in the days of absence allowable before a medical certificate is required 7.2.4. requiring a minimum period of leave every 12 months to reduce leave liabilities 7.2.5. limiting access to 'top up' sick leave 7.2.6. reduced accrual of leave during unpaid sick leave 7.2.7. limiting access to transferred employees compensation payments 7.2.8. call backs within 4 hour periods not to attract additional payment 7.2.9. higher duties allowances only paid after a minimum of 5 days acting 7.2.10. reduction in the accrual of maximum rostered days off 74An employee whose job becomes redundant is in no position to contribute to increased productivity and efficiency by giving up working conditions. It does not seem to me that the Wages Policy, or the statutory provisions reflecting that Policy, have as their purpose a requirement that the employee must offset the cost of payments made to the employee in the nature of redundancy or severance payments. 75A further consideration is that there is no indication that it is intended that the Wages Policy be applied to the Managing Excess Employees Policy. The two Policies serve quite different and distinct purposes. 76Finally, the Wages Policy provides that public sector employees are not to be awarded increases in employee related costs by more than 2.5 per cent per annum unless there are cost offsets. "Per annum" means "by the year" or "each year" or "annually". Noting that Mr Dillon and Mr Daly have not been employed by the Department since at least June 2011, and were absent on leave without pay from October 2010 until June 2011, how is it to be determined whether the cost of employing Mr Dillon and Mr Daly increased by 2.5 per cent from one 12 month period to the next 12 month period and what 12 month period is to be used for the purpose of the calculations? No assistance was provided to the Commission in this respect, but the absence of any reasonable answer to this question strengthens the view I have that s 146C and the Regulation do not apply in this case.

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Background 84There was little contest in respect of the main facts. In 2007, the then Minister for Education and Training, the Hon Carmel Tebbutt, established a task force to identify options for the future of the NAS. In January 2009, the then Minister for Education and Training, the Hon Verity Firth, announced changes to the NAS whereby it would become an independent institution, registered as a public company, the shareholders of which would be the Minister for Arts and the Minister for Education. 85On 23 October 2009, a public company, known as the "National Arts School Ltd" ("the Company"), was registered with the Australian Securities and Investments Commission ("ASIC") and the NAS commenced being operated by the Company rather than the Department. The consequence of the transfer of the NAS to an independent company was as follows: (a) staff working at the NAS were no longer employed by the State of New South Wales in the Government Service; (b) the Department no longer determined the conditions of employment for employees working at the NAS; (c) work previously performed by public servants at the NAS would now be performed by employees of a constitutional corporation; (d) the employee of the Company working at NAS became subject to the operation of the Fair Work Act 2009 (Cth); and (e) employees of the Company fell within the coverage of the federal Higher Education Industry, General Staff - Award 2010. 86Prior to October 2009, academic staff working at the NAS were employed on a temporary or casual basis under the PSEM Act. Academic staff ceased employment with the Department on 29 January 2010 and were paid severance payments calculated in the manner set out in cl 4.5 of the Policy. At least 23 of the 27 academic staff immediately commenced employment with the Company. 87After the transfer of functions to the Company, administrative and technical staff were initially assigned to work at the NAS for a period of six months running to 30 June 2010. During this period, administrative and technical staff remained employed in the Government Service. Recruitment processes were undertaken by NAS in or about July and August 2010, resulting in offers of employment being made to Mr Daly and Mr Dillon. 88In August 2010, Mr Daly and Mr Dillon were informed that they were required to resign from the Department if they wished to accept positions at the NAS. Subsequently, Mr Daly and Mr Dillon were permitted to apply for leave without pay for a period of six months from October 2010, rather than terminate their employment immediately. 89In March 2010, Mr Daly and Mr Dillon were informed that no further leave without pay would be granted and that they were each required to terminate their services with the Department if they wished to continue employment with the NAS. In the event that Mr Daly or Mr Dillon terminated their services with the Department, the Department proposed to make no payment other than what was described as a "one ex gratia payment of $1500" (less applicable tax). 90The conditions of employment and salaries of Mr Daly and Mr Dillon while employed by the Department were determined by the Crown Employees (Public Sector Conditions of Employment) Award and the Crown Employees (Public Sector - Salaries 2008) Award. The employment of Mr Daly and Mr Dillon was also covered by the Personnel Handbook and a range of other Government policies applicable to public service employees in New South Wales. 91Upon ceasing employment in the public service, Mr Daly and Mr Dillon lost the security of employment associated with public sector employment. They were also immediately required to forego accrued entitlements, such as their accrued sick leave balances, and continuity of service was not recognised for the purposes of long service leave and redundancy. An analysis of the salaries and conditions of employment of Mr Daly and Mr Dillon while employed by the Department, and now as employed by the Company, discloses: (a) salary: in the case of Mr Daly, a reduction in salary from $65,626 to $60,250. Mr Dillon receives a higher salary at the NAS as a result of occupying a more senior position of Studio Technician; (b) sick leave/carers leave: loss of accrued sick leave balances and reduction in entitlement from 15 days per year fully cumulative (plus five days' FACS leave in the first 2 years and 1 day per year thereafter) to 10 days personal/carers leave per year as well as removal of the entitlement to workers compensation top-up payments; (c) long service leave: loss of continuity of service for the purposes of long service leave and a reduction in future accrual from 2 months in the first 10 years and 5 months for each 10 years thereafter, to 2 months in the first 10 years and 1 month for each 5 years thereafter; (d) other leave: loss of entitlement to other forms of leave applicable in the public service, including study leave, partner leave and examination leave and an entitlement to full pay for jury service; (e) hours of work: an increase in ordinary hours of work from 35 per week to at least 35 hours per week and "on occasions" more than 38 hours per week as directed by the Company; (f) overtime/penalty rates: the removal of an entitlement to overtime payments for additional hours and penalty rates for weekend or public holiday work and the provision that the basic salary "compensates for all hours worked, including outside normal business hours, on weekends and on public holidays"; (g) redundancy: the loss of continuity of employment for redundancy purposes and the removal of entitlements under the Policy to a retention and salary maintenance period of at least 12 months and redundancy payments of 4 or 5 weeks notice (subject to age), a severance payment of 3 weeks per year of service for each year of service up to a maximum of 39 weeks for 13 or more years of service and an additional payment of up to 8 weeks pay upon early acceptance of an offer of voluntary redundancy. Future redundancy payments would be in accordance with s 119 of the Fair Work Act; (h) the removal of various allowances payable in the public service, including private vehicle usage allowance, uniform/protective clothing allowance, language allowance, first aid allowance and higher duties allowances; (i) salary progression: the removal of an entitlement to the salary progression every 12 months upon satisfactory performance and replacement by a requirement that an employee has acquired or utilised additional skills to achieve salary progression. 92During 2010, transitional arrangements were put in place regarding the employment of Departmental administrative and technical staff at the NAS. This was to enable the NAS to operate while recruitment action was undertaken. Affected administrative and technical staff (including Mr Daly and Mr Dillon) were advised by letters dated 17 March 2010 and 5 March 2010 respectively that they had been assigned to work at the NAS for the period up to 30 June 2010 to use their expertise to assist in the implementation of the transition of the NAS from the Department to its new entity as an independent higher education institution. There was no change to the employees' salaries and conditions during this period. 93All the administrative and technical staff were provided with the opportunity to indicate whether they wished to accept or decline the assignment. Attached to the letter was a document that Mr Daly and Mr Dillon were requested to sign indicating whether they accepted or declined the assignment. 94Administrative and technical staff were advised that if they indicated they did not wish to continue in the assignment to NAS, the Department would take action to redeploy such employees "to a suitable administrative position elsewhere in the Department or the public sector consistent with the employees' skills and experience". 95Both Mr Daly and Mr Dillon were advised that: "the Department is not considering redeployment for the administrative staff currently employed at the NAS except for those permanent members of the administrative staff who indicate they do not wish to continue on the assignment to the NAS. The Department is not considering redundancies at this time". 96Neither Mr Daly nor Mr Dillon signed the acceptance/decline assignment document. 97Administrative and technical employees of the Department, including Mr Daly and Mr Dillon, had the opportunity to apply for positions with the NAS. If an employee chose not to apply for, or accept an offer of, employment with the NAS, such employee remained an employee of the Department and the Department's redeployment obligations arose. With the exception of two academics employed on a permanent basis, no academic staff formerly employed by the Department were employed on a permanent basis. Such academic employees were engaged on either a temporary or casual basis. Academics whose contracts of employment came to an end received a discretionary severance payment. 98The Department obtained approval to have NAS listed as an employer under the various Superannuation Acts applicable to public servants. This enabled administrative and technical staff, as employees of the NAS, to continue to contribute to the superannuation funds of which they were members while employed by the Department. 99Permanent staff who accepted positions with the NAS and who had extended and recreational leave balances of less than 20 days, had their leave balances paid. 100Permanent staff of the Department who had accepted positions with the NAS, and who had extended and recreational leave balances in excess of 20 days, had the opportunity to either: (a) cash out the value of their entitlements upon resignation; or (b) have the current monetary value of their entitlements remitted to the NAS (based on the salary offered by the NAS). 101By letter dated 28 July 2010, the Department provided advice to Mr Daly and Mr Dillon in respect of their superannuation, recreation, extended leave and sick leave, if they were considering terminating their employment with the Department to take up position with the NAS. 102Both Mr Daly and Mr Dillon applied for positions with the NAS. Their applications were successful and they commenced employment with the NAS. Neither Mr Daly nor Mr Dillon returned to the Department's employment following the conclusion of periods of leave without pay. 103The Department did not dispute that some of the conditions of employment of Mr Daly and Mr Dillon as employees of the NAS were less beneficial than those formerly provided to them as employees of the Department. However, counsel for the Department contended that Mr Daly and Mr Dillon were aware of the terms and conditions upon which employment with the NAS was being offered. Differences in the conditions available were factors that were required to be assessed by all employees in determining whether to accept the NAS' offer of employment or remain within the Government Service. 104On 31 March 2010, the Association notified an industrial dispute. During the course of proceedings before Kavanagh J on 6 May 2010, the Association sought leave to file what, in effect, was an application for an award to be known as the Crown Employees (National Arts School - Protection of Conditions) Award. After further conciliation before her Honour, the application was referred to Boland J President, as a special case. Ultimately, the proceedings were discontinued before the President in light of the Department forwarding a without prejudice letter to the Association dated 26 July 2010, which addressed employment conditions at the NAS; payment of a four per cent salary increase effective from July 2010; advice re the outcome of recruitment action taken by the NAS and advice in relation to extended and recreation leave balances on separation. 105By letter dated 29 March 2010 to both Mr Daly and Mr Dillon, the Department offered an ex gratia payment of $1500 to employees who elected to terminate their services with the Department and continue employment with the NAS. The Association's evidence was that it understood the amount of $1500 to have been increased to $15,000, which was a significant factor that influenced the Association to discontinue the proceedings before the President. The misunderstanding will be dealt with when I turn to consider the evidence of Mr Turner and Mr Holland. 106In the proceedings before the President on 29 July 2010, Mr N Keats, solicitor, who appeared for the Association, submitted: The position this morning is I'll be seeking leave to discontinue the proceedings. There has been a development late yesterday and I had communications with those appearing for the Department. It arises from some without prejudice correspondence that was provided to my client on 27 July they made a number of representations to us about the matter and, on the basis of those representations which have also been made to the individual employees, we seek to withdraw the matter. I apologise I wasn't able to get an indication to your Honour earlier, it is just that things didn't develop until late yesterday. 107Further documentation was exchanged between the Department and Mr Daly and Mr Dillon. By email dated 8 November 2010, Mr Daly and Mr Dillon were advised that approval had been given to their application for six months' leave without pay and for secondary employment. This included approval of Mr Dillon's application for leave without pay for the period 15 October 2010 to 14 April 2011 and approval of secondary employment. Similar approval was provided to Mr Daly. Such approval enabled both Mr Dillon and Mr Daly to continue working at NAS. 108The two individuals were further advised in this email that approval had been given for the payment of a one-off ex gratia payment of $1500 in the situation that, "at the end of your period of leave without pay you decide to terminate your employment with the Department and take up a permanent offer of employment at the new entity of the National Arts School". 109By letter dated 29 March 2011, the Department advised both Mr Daly and Mr Dillon that as no further applications for leave without pay would be considered by the Department, they were required to advise the Department by 17 April 2011 whether they proposed to continue their ongoing employment with NAS and terminate their employment with the Department, or return to the Department. The letters again advised that if they elected to terminate their services with the Department, they would receive an ex gratia payment of $1500, less applicable tax. A separation form was attached to each of the letters if either employee decided to terminate their services. The separation form made provision for how leave payments were to be administered. 110On 14 April 2011, the Association filed a notification of dispute. Relevantly, the Association contended: That in accordance with the provisions of the [Managing Excess Employees in the New South Wales Public Sector Policy] that all permanent employees of the Department that worked at the NAS should be entitled to a voluntary redundancy and that all temporary employees of the Department that worked at the NAS for more than 12 months should be entitled to a severance payment. 111The period of leave without pay granted to each of the employees expired on 15 April 2011. As a result of compulsory conferences and proceedings before Commissioner Tabbaa, the Department extended until 24 June 2011, the time for Mr Daly and Mr Dillon to advise whether they intended to resign from their permanent positions with the Department, or return from leave without pay as redeployed employees and be assigned meaningful duties in accordance with the Policy and Departmental Guidelines. 112Neither Mr Dillon nor Mr Daly have to date advised the Department of their intentions. They each continue to be employed by the NAS. On 12 May 2011, Commissioner Tabbaa issued a certificate of attempted conciliation pursuant to s 135 of the Act. The matter was programmed for arbitration on 28 September 2011. The matter was subsequently adjourned to 12 October 2011, at which time the Association provided to the Commissioner an application for a new award. The matter was referred to the President as a special case and his Honour determined the matter should be heard by a Full Bench. 113The Full Bench delegated the taking of evidence to Staff J. Reserved dates to hear evidence were set for 1 and 2 March 2012 with the parties to make oral submissions to the Full Bench on 16 March 2012. As the evidence did not conclude on the dates fixed, 16 March 2012 was utilised to conclude the evidence, with final submissions being programmed for 20 July 2012.

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117The package also included a three year employment guarantee for all award employees, the preservation of existing superannuation arrangements, the transfer or cashing in of annual leave and long service leave entitlements and recognition of continuous service for the calculation of future leave accruals, parental leave and future redundancy benefits. Employees were also able to choose not to transfer to the new owner, but seek redeployment within the NSW public sector. 118The next organisation to be privatised was WSN Environmental Solutions ("WSN"). Mr Turner was a Board member of this State owned corporation and stated that he was aware that its employees were offered the same entitlements as NSW Lotteries, or the choice of staying employed in the public sector. 119Mr Turner also annexed a direction made by Walton J Vice-President in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and Department of Corrective Services [2009] NSWIRComm 111 in which his Honour made a direction for the provision of a transfer package for public servants affected by the privatisation of Parklea Correctional Centre ("Parklea"). The direction included a transitional payment for employees who commenced with the new operator of Parklea. The payments were identical to the transfer payments offered to employees of NSW Lotteries and WSN. Employees were also entitled to request a voluntary redundancy package and accrued leave with the exception of sick leave paid out on resignation from the Department. The direction also included a recruitment support payment. This was a payment that an employee would receive representing the difference between the employee's ordinary time base salary as at the time immediately before the date that the successful tenderer took over the operation of Parklea and the ordinary pay, including compulsory superannuation contributions paid by the successful tenderer from time to time. The recruitment support payment was required to be paid for a period of three years after the date that the successful tenderer took over the operations of Parklea. 120Mr Turner's evidence was that he was aware of the events and circumstances leading up to the establishment of the NAS. He said that the Association was told that a transfer package would not be offered to ex-Department staff who chose to go to the NAS and no reason was given. The Association was successful in obtaining an agreement to preserve existing superannuation arrangements for employees that transferred to the NAS. Mr Turner contended that the position adopted by the Department appeared to him to be: [A]t odds with the statements made by the then Minister for Education, Verity Firth, in a letter to the PSA dated 10 August 2010. In this letter the Minister said that: Employees have been included in the Government's funding package, but decisions about staffing and pay again remain the responsibility of the schools Board. I am advised that discussions between the PSA and the Board on these issues are ongoing. 121Mr Turner's evidence was that employees of the NAS should have received a package similar to that offered to employees in NSW Lotteries or WSN if they chose to remain with the NAS. Alternatively, they should have been offered a voluntary redundancy in accordance with the Policy. 122In a statement in reply filed on 1 February 2012, Mr Turner stated that he was aware of other examples where Government operations had been privatised or had been proposed to be privatised in recent years. In such instances the NSW Government had negotiated with the relevant Union employment protection measures affected by the privatisation. In the type of employee protections that had been afforded, Mr Turner said they had typically featured the following elements: (i) guaranteed employment with the new private sector entity with a minimum period of job security (generally three years); (ii) the preservation of existing salaries and conditions of employment for a fixed period of time (generally three years); (iii) continuity of service and transfer of accrued leave entitlements and the preservation of existing superannuation entitlements; and (iv) the payment of "transfer payment" to employees who accept employment with the new private sector entity to compensate them for the loss of employment conditions and job security. 123Examples of privatisation of Government operations where such employment protections were afforded to employees included, according to Mr Turner: (a) The privatisation of the Freight Rail Corporation ("Freightcorp") in 2002 as set out in section 42 of the Freight Rail Corporation (Sale) Act 2001. (b) The privatisation of the Totalizator Agency Board ("TAB") in 1997 as set out in section 52 of the Totalizator Agency Board ("TAB") in 1997 as set out in section 52 of the Totalizator Agency Board Privatisation Act 1997. (c) The amalgamation of the Harness Racing Authority and Greyhound Racing Authority in 2004 as set out in clause 8 of Schedule 4 of the Greyhound and Harness Racing Administration Act 2004. (d) The privatisation of the Greyhound Racing Authority in 2009 as specific in section 5 of the Greyhound Racing Act 2009. ... (e) The privatisation of the NSW Lotteries in2010 as referred to in paragraph 3 of my previous statement. (f) The privatisation of WSN Environmental Solutions (as referred to in paragraph 6 of my previous statement). ... 124Mr Turner's evidence was that he was also involved in the initial discussions regarding the proposed privatisation of electricity generators and retailers in 2008. He said the Government proposed that employees of State owned corporations whose employment was to transfer to the private sector as a result of the proposed electricity privatisation would be entitled to the following benefits: A transfer payment of up to 30 weeks' pay; A guarantee of employment with private operator for five years; The maintenance of existing terms and conditions of employment during the five year period of guaranteed employment; The preservation of existing superannuation arrangements; The transfer of accrued sick leave; The option of either being paid out or transferring accrued annual leave and long service leave entitlements; and Continuity of employment for all purposes, including future redundancy by the private operator. 125Mr Turner annexed a Report of the NSW Auditor General titled "Oversight of Electricity Industry Restructuring" dated August 2008. The Report summarised the employee protection measures proposed for electricity employees affected by the proposed privatisation. It also summarised employee protection measures adopted in other recent privatisations and Government restructures. The entitlements were consistent with those referred to earlier in Mr Turner's evidence. Also annexed was Sch 5 of the Electricity Industry Restructuring Bill (No 2) 2008 which set out the employee protection measures proposed in relation to the privatisation of electricity. 126The Government subsequently privatised energy retailers in 2010. Mr Turner annexed an example of the employee information kit provided to employees. The entitlements, including a transfer payment, were consistent with those provided to employees where privatisation had previously occurred in NSW. 127Mr Turner gave oral evidence and was required for cross-examination. His evidence was that the NSW Government, which was proposing to franchise the operation of Sydney Ferries, had proposed a package of 30 weeks' separation payment plus three years' guarantee of employment conditions for employees of Sydney Ferries. 128During cross-examination, Mr Turner acknowledged that the transfer of employees at Sydney Ferries had not yet occurred and that to the extent that transfer arrangements had been agreed between the parties, that was a process that had been undertaken before any transfer of employees to a private sector entity had occurred. Although Mr Turner had not been the officer directly involved in conferences between the Association and the Department, he agreed that meetings commenced on 1 July 2009 with a further eight meetings taking place between August and December 2009. 129Mr Turner accepted that in respect of the privatisation of NSW Lotteries, WSN and Parklea, the transfer packages that were offered to employees were agreed before the privatisation occurred. He agreed that in respect of the additional organisations that he referred to in his statement in reply, transfer packages were agreed before the privatisation took effect. 130During re-examination, Mr Turner's evidence was that he recalled drafting a letter to the Minister for Education dated 4 June 2010 in which the Association sought the same packages for employees of NAS that had been provided to employees of other recently privatised organisations, such as NSW Lotteries, WSN and the electricity retailing companies. Mr Turner said that he had discussions regarding packages for employees of NAS with the Minister's Chief of Staff. His evidence was that the matters referred to in the Association's letter of 4 June 2010, were the matters that the Minister referred to in her letter to the Association dated 10 August 2010.

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Mr Daly 131Mr Daly commenced permanent employment with the Department in the NAS Printmaking Section in 1999. He was initially employed at the NAS in 1996 as a technical assistant in the Photography Department prior to gaining permanency in 1999. In 2004 he took leave from his position to act as the Audio Visual Computer Co-ordinator (Engineering 2). This position was ultimately advertised in 2008 and he was appointed to the position, although he remained on secondment. He filed statements dated 19 June 2011 and 27 September 2011, together with a statement in reply dated 1 February 2012. 132Mr Daly stated that he enjoyed the security of permanency and the conditions that his position as a public servant provided. These were two of the reasons that he initially sought employment in the public sector. He believed that when the NAS was registered as a company his position would be "rolled over" to the new organisation and all his conditions and benefits accrued through 10 years of service with the Department would be rolled over as well. He said that as a result of working with the NAS he would lose his permanency with the public service and his accrued sick leave, which amounted to more than 109 days. In addition, he would lose: recognition of service for all purposes, access to paid overtime, more favourable sick leave and carers entitlements, the guarantee of the standard Monday to Friday working week, and security around the way his employment could be terminated. 133Mr Daly's evidence was that at no stage did the Department provide him with any assistance in his attempt to gain employment with the NAS. Little information was received in advance regarding the planned transition or ongoing employment relationship from the Department, including options related to redundancy or redeployment. His evidence was that the only correspondence he had received from the Department clearly indicated that he no longer had a substantive position within the Department. He annexed to his statement letters from the Department dated 17 March 2010 and 28 July 2010 (referred to earlier in this judgment). 134Relevantly, the letter of 17 March 2010 to Mr Daly from the Corporate Employees Services Manager of the Department read: ... as previously advised, permanent administrative staff have been assigned to the National Arts School for the period up to 30 June 2010 to use their expertise to assist in the implementation of the transition of the School from the Department to its new entity as an independent higher education institution. During the assignment period there will be no changes to the administrative staff members' rate of pay, working conditions, industrial rights and entitlements or continuity of employment. There are no changes to the work location for the assigned staff which remains at the School site at Darlinghurst. The decision to assign staff has been made as a policy decision by the Department on the basis that administrative staff are satisfied to remain employed under their existing conditions of employment in the same location. I would like to provide permanent administrative staff with the opportunity to indicate whether they wish to accept or decline this assignment. Attached to this letter is a document that you should complete indicating your preference. Please complete and fax the completed document to the facsimile number shown at the top of the document. You should also retain a copy of the completed document for your own records. If you indicate that you wish to continue with this assignment to the School there will be no change to your working conditions for the period up to 30 June 2010. If you indicate that you do not wish to continue in this assignment to the School, the Department will take action to redeploy you to a suitable administrative position elsewhere in the Department or the public sector consistent with your skills and experience. The Department is not considering redeployment for the administrative staff currently employed at the School except for those permanent members of the administrative staff who indicate they do not wish to continue on the assignment to the School. The Department is not considering redundancies at this time. 135Mr Daly's evidence was that the Department also orally made reference to the Policy. He said this encouraged the belief that he and other staff were excess. Mr Daly stated that he had read the Policy and believed that he was entitled to voluntary redundancy in accordance with that Policy because his position with the Department had been deleted and it was very unlikely that he would be able to be placed in a vacancy elsewhere for the reason that there was nowhere within the public sector where the type of work that he was doing was being undertaken. He wrote to the Minister for Education on 8 November 2010 explaining his position. He received a response from the Minister dated 21 December 2010. The response from the Minister read: I am advised that an email was sent to you by the Department of Education and Training on 8 November 2010, advising you of a decision to provide an ex gratia payment of $1500 should you decide to cease your employment with the Department of Education and Training. There is not usually an entitlement to a redundancy payment where DET has not terminated the employment of a permanent staff member, so this payment was offered on an ex gratia basis, in recognition of the situation entailed by the creation of the National Art School as an independent non- government entity. I'm advised that you have been granted leave without pay and approval for secondary employment until April 2011 in order to make a decision about whether you wish to remain employed with the Department of Education and Training or take up a position of the new National Art School and accept this payment. While I understand that you remain dissatisfied with this offer, I must emphasise that it is a final offer, and comes after some negotiation to conclude the matter in a way that was as equitable as possible. I would like to thank you for your work with the National Art School and wish you the best for your future employment. 136Mr Daly stated that he was upset by the Minister's response because at the time he was aware that many teaching staff received separation payments in accordance with the Policy even though the Department had not terminated their employment and most of these teachers had been employed by the new independent NAS. A question and answer document provided by the NAS Director to staff explained the approach that the Department had adopted in respect of teaching staff. Relevantly, the question and answer document stated: All of the academic staff at the National Arts School were previously employed by the Department of Education and Training as temporary employees on short fixed term appointments under the Public Sector Employment Management (PSEM) Act. These appointments concluded on 31 December 2009. To ensure these staff are not disadvantaged, the Department extended their appointments until late January 2010 to enable the recruitment process to be completed. The industrial award under which the academic staff were employed applied to the Department, not the National Arts School. Therefore, it was appropriate to put in place the longer term contractual arrangements that had been long sought by staff with direct employment by the National Arts School a higher education provider and with contracts referenced to the new Higher Education Industry (Academic Staff) Award. 137To ensure the NAS had access to the best available staff, a merit based appointment process was undertaken, with the aim of implementing this recruitment and appointment process in time for the commencement of the 2010 academic year. 138Twenty-eight academic staff were appointed and all commenced work prior to the academic year. Of these appointees, 23 were previously employed at the NAS, many in similar or equivalent roles. Academic staff were not terminated by the Department. Their fixed term temporary appointments with the Department came to an end on 31 December 2009. 139Academic staff were then paid an additional month's salary through January and also received separation payments that reflected the total length of service of their temporary employments with Department. The academic staff members were informed that there would be no guarantee of any work beyond 29 January 2010. 140The separation advice was prepared in accordance with the provisions of the Policy and the separation payments provided in accordance with the Policy. 141Mr Daly stated that he believed the Department had made a decision that the teaching positions had ceased to exist with the Department. This was regardless of the fact that a large number of teaching staff who had received severance payments took up a new job with the NAS. He, therefore, believed that he and other employees had been treated unfairly. His evidence was that he and other support staff of the NAS should not be penalised for seeking to gain employment in one of the few places in New South Wales where the unique experience, skills and attributes would be highly valued and essential for their successful and ongoing employment. He acknowledged whilst redeployment may be desirable in most circumstances, it is not in this situation. This was because he believed that there was limited opportunity for him to be redeployed in the public sector in a suitable job. This was borne out by the fact that when given the opportunity to find a suitable job for him, the Department was unable to do so. 142Mr Daly provided a copy of his Curriculum Vitae to the Department to assist them in finding a position into which he could be redeployed. The Department advised that Mr Daly could be provided with meaningful work in a school supporting the DER programme and with other technical support. He was further advised the school would be in the Sydney region. After speaking with his Union regarding the Department's response, Mr Daly concluded that the position proposed would not be suitable for him. This was because the position referred to was temporary, not permanent, and was at a significantly lower salary and unrelated to his qualifications and experience. He believed it would result in him using only a very small amount of his skills and that he would be deskilled. 143As teaching staff received a redundancy benefit, Mr Daly believed for reasons related to consistency, equity and fairness, that he should be treated in a similar fashion. 144In his statement of 27 September 2011, Mr Daly stated that his gross salary at the time of accepting employment at the NAS was $60,250. His gross full time salary working at the NAS and employed by the Department immediately prior to this was $65,626. He annexed to his last pay slip from the Department together with a schedule comparing the conditions of employment enjoyed by him whilst working at the Department and those that now apply at the NAS. 145During oral evidence, Mr Daly confirmed that in 2010 he worked three days per week and took two days' leave without pay each week to care for two young children. 146During cross-examination, Mr Daly agreed that he was aware in January 2010 that an agreement had been reached between the NAS and the Department that had assigned public sector general staff to the NAS. He further agreed that the Director of the NAS, in a letter dated 15 January 2010, had advised employees of the NAS that it would be reviewing its support needs as an independent higher education provider and that consultation would commence in February/March 2010 with the aim of achieving the transition of employment to the new entity by the end of June 2010. 147Mr Daly was shown a copy of a letter dated 15 January 2010 from Ms Anita Taylor, the Director of NAS. Although he could not specifically recall receiving a copy of the letter he agreed that he was aware in or about January 2010 that an arrangement was being put in place whereby employees would be assigned to the NAS. 148Mr Daly was also taken to the letter from the Manager, Corporate Employee Services dated 17 March 2010. He agreed that this letter provided two choices to him: he could either stay on assignment or return to the Department. He agreed that as at 17 March 2010, the Department was not considering redundancies. Mr Daly stated he was obtaining advice from Mr Holland of the Association and that he did not respond to the Department's letter of 17 March 2010 as requested regarding which of the two options he wished to pursue. He said the Association advised him not to respond. 149Mr Daly explained that he did not want to be seen to be putting his signature on anything that might impinge on future employment possibilities. He also received advice from the Association to sign nothing. The approach was also discussed with other employees. 150Mr Daly acknowledged that he was offered employment with the NAS in a letter dated 1 July 2010, which set out his remuneration package and the terms and conditions of his employment. Mr Daly accepted the offer of employment by signing and returning a copy of the letter of offer. This was dated 4 August 2010. 151It was also agreed that Mr Daly received a letter of acknowledgment of his acceptance of employment with the NAS from the Director on 7 October 2010. This letter asked him to confirm by Monday 11 October 2010 that he would commence duty with NAS on 15 October 2010. Mr Daly was advised that the commencement date had been discussed with the Department and the date suited him. He received a letter from the NAS dated 28 March 2011 congratulating him on completing his probationary review and confirming his ongoing continuing employment, effective 5 April 2011, with the NAS. 152Mr Daly accepted that his base salary with the NAS was $60,250 and that the position he substantially held with the Department was technical assistant printmaker, which carried a salary of approximately $49,000. The position that he accepted was that of an AV computer facility co-ordinator. He agreed that he was acting in, and that that he could revert back to, his substantive position in salary, however, he did not expect this to happen. 153On 9 August 2010, Mr Daly was forwarded an email by the Department, which attached a separation form. Mr Daly did not complete the separation form as he had made a conscious decision not to complete it notwithstanding that he had accepted the offer of employment with the NAS. Mr Daly explained why he did not complete the separation form: The reason that I didn't fill out any paperwork was because (a) I did want to continue, take up the new offer with the National Art School, I felt by signing any paperwork with the DET the proceedings which had already been undertaken, because I didn't feel that the situation of my employment with the DET had been resolved, I felt that by signing anything saying I was leaving the DET would finalise that and make it impossible for me to continue on with the situation and resolve the situation that I didn't see as being fair. 154Mr Daly accepted that the position adopted by the Department was also that it did not wish to prejudice its position. 155Mr Daly acknowledged that by email dated 14 October 2010 the Department had advised him that he may wish to apply for leave without pay from the Department for a period of up to six months before deciding to terminate his employment from the Department. The email requested that he complete an application for leave without pay as soon as possible if he wished to avail himself of this option. He was advised in the email from the Department that it was highly unlikely that the Department would approve any further applications for leave without pay beyond the period of six months. Mr Daly applied for leave without pay. He had not advised the Department that he had accepted employment with the NAS. 156By email dated 8 November 2010, Mr Daly was advised that his application for leave without pay for a period of six months had been approved and approval had also been given for secondary employment for the same period. Mr Daly was also advised that approval had been given for the payment to him of a one-off ex gratia payment of $1500 at the end of his period of leave without pay if he decided to terminate his employment with the Department and take up the offer of employment with the NAS. 157Mr Daly agreed that the Department had therefore left open the option for his return to the Department if, at the conclusion of the leave without pay period, he was not satisfied working with the NAS. 158On 28 March 2011, Mr Daly was congratulated on completing his probationary period with the NAS and confirmed his full time employment effective from 15 April 2011. 159On 29 March 2011, the Department wrote to Mr Daly advising him that his period of leave without pay expired on 17 April 2011 and no further application for leave without pay would be considered. The Department restated its offer of an ex gratia payment of $1500 if Mr Daly terminated his services with the Department. It also confirmed previous advice that the Department would transfer the monetary amounts of his recreation and/or extended leave to the NAS if his leave balances were in excess of 20 days. The Department also confirmed that if he elected not to terminate his services with the Department, he would return to the Department on 18 April 2011 and be declared an excess officer and managed in accordance with the Policy. He was asked to confirm his intentions by 4 April 2011 via email. 160Mr Daly agreed he declined to advise the Department of his intentions by 4 April 2011. Mr Daly's evidence was that although he thought it a reasonable request by the Department, in speaking with his fellow workers a decision had been taken not to reply to the Department. 161As a result of the dispute proceedings before the Commission, the period for Mr Daly to advise of his intention in respect of returning to the Department was extended until 20 May 2011. Once again, Mr Daly did not indicate his intention to the Department, although he continued to be employed by the NAS. By letter dated 16 June 2011, the period of time to provide an answer to the Department was extended to 24 June 2011. No response was forthcoming from Mr Daly to the Department. 162During re-examination, Mr Daly's evidence in respect of why he had decided to accept the position with the NAS was: My past experience with the school had been a good one. It was work that I enjoyed and had fulfilment, as I have said. Also, my experience was that there was not a position available for the specific work and skills that I had built up over the years. Again, workmates and so on seemed to have unsuccessful experiences with being redeployed and I guess it was a risk that I didn't want to take.

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Mr Dillon 163Mr Dillon was initially employed in October 1999 as a casual technical assistant in Photography, through an agency known as SELECT. He was made permanent in that position on 4 June 2001 when he became employed directly by the Department. He currently holds the position of Studio Technician at the NAS. He stated that during the changeover process from the Department to the NAS, he was not aware of any possible changes or impact upon his position. This was until Heads of Department positions were advertised and subsequently the administrative and technical staff received proposed new job descriptions. Prior to this Mr Dillon was under the impression that the employees' positions were to be rolled over. 164Mr Dillon stated the new position involved 95 per cent digital outcomes, which was completely different to his role in the Department. His extensive postgraduate studies enabled him to meet the selection criteria for the new position. 165Mr Dillon gave similar evidence in terms of documentation received from the Department and meetings that he attended to that given by Mr Daly. There was some dispute as to what Mr Dillon contended Ms Charlton had said at a meeting that he attended on 19 August 2010. However, nothing turns upon the different recollections of these witnesses in light of the documentary material that flowed between the Department, the Association and the relevant employees involving the terms of the Policy. 166Mr Dillon's position is conveniently summarised by him in his written statement as follows: Due to our unique skill set we have chose (sic) to seek employment with the independent NAS rather than endure a likely unsuccessful redeployment process. We have applied for and have gained employment in the independent NAS following a competitive merit based selection process. DET has the discretion to offer VRs for employees in our situation. They have demonstrated a willingness to do so in regards to our academic colleagues. To not do so for us is unfair, biased and a shameful treatment of long term employees of DET and now the NAS. 167Mr Dillon stated that notwithstanding he had applied for and won a position at the NAS he would have a number of inferior working conditions to those he had whilst employed by the Department. These include: loss of job security; loss of flexi-days; loss of overtime for weekend or after regular hours work, with no time in lieu compensation either; reduced sick leave entitlements; if superannuation percentages are increased the employee contribution amount will be taken directly from his salary rather than topped up by the employer; and no paid parental leave. 168During cross-examination Mr Dillon acknowledged that his salary had increased from approximately $49,000 to $60,000 when he took up the new position at the NAS. He stated it was a very different position with far more responsibility. Mr Dillon commenced employment at the NAS in July 2010 and has continued to work there on a fulltime basis. Mr Dillon conceded that he did not tell the Department that he had accepted an offer of employment with the NAS. However, he assumed that the Department would have known through its interaction with the Association. Mr Dillon's appointment with the NAS was confirmed effective from 15 April 2011. He also availed himself of leave without pay similar to that taken by Mr Daly. 169Mr Dillon is aged 47 years. He was asked about the redeployment option and the prospects of a redundancy package and he gave the following evidence during cross-examination: ... [o]f course I didn't want to go through that part because its very difficult and I'm 47, not 37, the age I was when I started and its a very different sort of situation out there. As I said, our skills are very specific. By this stage I knew people in a similar position from NAS who tried to get work in the Department and weren't successful. Q. So you weighed up your options and made a decision as to what you thought was in your best interests? A. I was weighing up options and had not closed any doors as such so I was - in front of me I was seeing friends who weren't finding positions, so it seemed very difficult so I just continued on and I just wanted to see the outcome of this before acting, you know. Its been an ongoing thing for quite a while. Q. But you did look at more than just continuing on. You accepted the offer of employment from the National Art School? A. Yes. Q. You had an advantage of a six month period of leaving without pay to explore that option? A. That's true. ... Q. And if during that six month period you decided that: I'm not happy with these new employment conditions - the option was open for you to return to the Department, to be declared excess and put through a redeployment process, correct? A. Yes, but we were already excess at that stage so certainly I had reason but I take your point. Of course, I could have gone back if I was unhappy or it didn't work out or they didn't want me.

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Andrew Holland 170Andrew Holland is employed as a senior industrial officer with the Association. He has responsibility for the industrial interests of members employed in higher education and has carriage of this matter. 171Mr Gibian read a statement of Mr Holland dated 23 February 2012. He confirmed that following a number of meetings and exchanges of correspondence between the Association and the Department, the Association filed an industrial dispute on 31 March 2010. Mr Holland set out the chronology, which was consistent with the history of this matter as set out earlier in this decision. He confirmed that during negotiations with the Department, the Association was also making representations directly to the then Minister for Education and Training, the Hon Verity Firth and her Chief of Staff. 172Mr Holland also stated that after the Association advised the Commission on 29 July 2010 that it was discontinuing the dispute proceedings, it continued discussions with both the Minister and her office and the Department in an attempt to reach a resolution to the broad range of issues in dispute. He stated at that point in time it was still unclear which members would ultimately take up employment with the NAS, and which employees would choose redeployment with the Department. He stated there was no agreement or deal between the parties that resulted in the discontinuance of the dispute. Mr Holland said that the Association had continually maintained that Mr Dillon and Mr Daly, who had taken up employment with the NAS but had not resigned from the Department, were entitled to either a transfer payment or redundancy payment. 173On 1 July 2010, Mr Holland forwarded an email to Ms Charlton confirming the Association's concerns that there was a significant disparity between most of the terms and conditions currently enjoyed by their members and those that were to be offered to staff at the NAS. Mr Holland sought a commitment that the NAS would continue to apply the existing entitlements and practices. The Department responded to the matters raised in the email in its letter dated 26 July 2010 to which reference has already been made. 174Mr Mark Philip, Director of Industrial Relations at the Department, responded on 6 July 2010 to Mr Holland's email of 1 July 2010. Mr Philip's letter read: ... I understand that the National Art School is in the final stages of recruitment action for its new positions and that some existing permanent employees with the Department are considering offers of employment with the new entity. Should any existing permanent employees of the Department terminate their employment with the Department and accept a position in the new entity under the relevant terms and conditions offered by the National Art School the Department is prepared to: 1.Seek the approval of the NSW Treasurer to have the National Art School (NAS Pty Ltd) listed as an employer under the Superannuation Act, 1916, the State Authorities Non-contributory Superannuation Act 1987 and the State Authorities Superannuation Act 1987 for employees of the Department who accept a position with NAS Pty Ltd; 2.offer those employees with an extended leave balance in excess of 20 days, the option of: a) having their extended/long service leave entitlements either paid out at the time they terminate their service with the Department; or b) having the value of their existing extended/long service leave balance remitted to the National Art School; 3.make a one off gratuitous lump sum payment of $1,500 to those permanent employees. ... Any permanent employee of the Department who terminates their employment with the Department to accept a position with the new entity will not be eligible for a separation payment. 175On 10 August 2010, the Association received a letter from the Hon Verity Firth regarding staffing at the NAS. Relevantly, the Minister observed: Provisions for ongoing employee separation costs have been included in the government's funding package, but decisions about staffing and pay again remain the responsibility of the School's Board. I am advised that discussions between the PSA and the Board on these issues are ongoing. Any further issues regarding rates of pay and conditions of employment should be raised directly with the School's Board. 176By letter dated 24 August 2010, the Association replied to the Minister's letter and sought an urgent meeting with her to discuss a number of concerns that related to the employees of the Department that were on assignment to the NAS. The matters included, but were not limited to provisions for employee separation, transfer of leave entitlements and requests for leave without pay. 177A meeting occurred between the Minister and representatives of the Association on 28 September 2010. The agenda items for the meeting included the issues raised in the Association's letter to the Minister of 24 August 2010. 178Mr Holland agreed that in terms of seeking additional entitlements at the meeting with the Minister on 28 September 2010, the Association had been unsuccessful. He agreed that after the proceedings seeking the making of a Transfer Award were discontinued before the President in 2012, it was not until approximately 12 months later that an alternate claim was filed which again sought the making of a Transfer Award. That application was filed after discussions with the Minister had been unsuccessful. 179By email dated 8 November 2010, Ms Charlton advised Mr Holland that the Minister had given approval for an ex gratia payment of $1500 to the permanent administrative staff members of the Department who terminated their employment with the Department to accept a position with the NAS. 180Ms Charlton referred a discussion with an employee of the Association who she referred to as "Thane" who had expressed the view that the matter was for a different purpose and a higher amount. Ms Charlton confirmed that the amount was $1500. She observed that the four Department staff members eligible for the payment were currently on leave without pay for six months with approval for secondary employment and were currently employed by the new NAS entity. She confirmed that payment was for these employees when they terminated their employment with the Department assuming that they chose to do so at the end of their period of leave without pay. Ms Charlton further advised that if the employees wished to return to the Department after the period of leave without pay, appropriate arrangements would be made and no payment would be forthcoming. Arrangements in respect of the payment of any outstanding recreation and extended leave entitlements were also confirmed. 181Mr Holland gave evidence that in respect of the contents of the email of 8 November 2010, there was confusion between the parties regarding whether or not the figure proposed was $1500 (which the Department confirmed in the email was the correct figure) or $15,000 that he said had been referred to by a representative of the Minister's office. 182During cross-examination Mr Holland acknowledged that by letter dated 27 January 2010, the Department had confirmed what it had advised the Association in a meeting on 25 November 2009 that it had offered to assist the NAS in the period from registration date until the NAS completed its autonomous recruitment action to employ administrative staff in 2010 by assigning the current administrative staff to the NAS for the period from 23 October 2009 to 30 June 2010 upon their existing conditions of employment. 183The Department confirmed that NAS was now an independent institution and that the Department was unable to make a commitment sought by the Association regarding the employment of existing administrative staff at the NAS as such matters were for consideration and decision by the NAS. 184Mr Holland agreed that the Association was apprised of what was proposed regarding the assignment of staff. 185Mr Holland further acknowledged that by letter dated 23 February 2010, the Department had informed the Association that it proposed to write to permanent and administrative staff who had been assigned to the NAS advising them of their options at the conclusion of the assignment period. Mr Holland agreed that the Department had forwarded letters to this effect to Mr Dillon and Mr Daly dated 5 March 2010 and 17 March 2010 respectively. 186Mr Holland could not recall whether the Association provided any advice to their members in respect of the assignment period. His evidence was that the Association's focus was on the longer-term protection of employees' entitlements. He stated that he provided advice to the relevant employees not to resign from the Department. He could not recall whether he advised the employees not to respond to the Department's correspondence. He was not aware at the time Mr Daly and Mr Dillon received the correspondence from the Department that they had not responded, although he subsequently became aware of this fact. This was a reference to correspondence that sought their acceptance or rejection of employment with the NAS. 187It was put to Mr Holland that the notion that the earlier proceedings were discontinued on the basis of a misrepresentation being made to the Association as to salary was wrong. Mr Holland's evidence was: A. No. I'm not saying we discontinued on the basis of misrepresentation, I'm saying we discontinued based on us believing at the time those figures were correct. I don't think - and I may be wrong here - but I believe it is now accepted in the evidence that those figures were incorrect. We were all aware at the time that those figures were incorrect. I'm not sure whether our members were aware the figures were incorrect. We discussed between the members - and again it is not just Mr Daly and Mr Dillon at this point - the discussion continued to be around the package of issues, not just salary. I don't accept the assertion that it is wrong. I know very well what one of the key, if not the key factor in withdrawing the dispute, was and it was about the salary differential is quite significant. Q. Did you speak to the members before you gave instructions to Mr Keats? A. On these issues? Yes. Q. Yes. A. I can't recall specifically speaking about these issues before we gave instructions. ... Q. Notwithstanding you now say that it was a matter of fundamental importance to you? A. No, no. Maybe I haven't made myself clear. The whole package was of fundamental importance. The decision that led to us saying withdraw it was not - whether or not salary was or wasn't a matter - it was my understanding that as a matter of procedure - and if it was correct - that person A's salary is $20,000 more, irrespective of those conditions that we were arguing were far inferior, that the Full Bench would probably look at this application and say they have been more than compensated and the award application would not be successful. That wasn't the question, I believe, that we needed to make in consultation with the members at the time. It was a position, as we saw it, where we need to give some advice and direction to the members and we raised that after the event to the members. 188Mr Holland agreed that the Transfer Award, which was filed on 12 October 2011 was after both Mr Daly's and Mr Dillon's employment with the NAS had been confirmed effective from approximately 15 April 2011 and that they had been working at the NAS since July 2010. His evidence was that if either Mr Daly or Mr Dillon had resigned, it would have rendered these proceedings null and void.

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Mr Bacic 189Mr Bacic is the Director, Industrial Relations, in the Public Sector Workforce ("PSW") within the Public Sector Management Reform Division in the NSW Department of Premier & Cabinet ("DPC"). 190Mr Ginters read an affidavit of Mr Bacic sworn 30 August 2011. Mr Bacic responded to various matters raised by Mr Turner in his evidence. Mr Bacic's evidence was that staff employed by NSW Lotteries were offered the option of transferring to the new owner of Lotteries, Tatts Employment Co (NSW) Pty Ltd, or seeking redeployment within the public sector under the Policy. These options were developed by the NSW Government prior to the sale of NSW Lotteries being concluded. 191On the completion of the sale on 31 March 2010, employees who wished to be employed by Tatts Employment were required to do nothing, as their employment with NSW Lotteries was taken to have ceased and their employment with Tatts Employment automatically commenced as per an offer of employment from Tatts Employment. Employees who declined were required to complete an "election to decline transfer of employment" and were transferred to Arts and Communities NSW with effect from the date of the completion of the sale. 192Employees in this circumstance, Mr Bacic stated, may then have been seconded to Tatts Employment for a transitional period of up to six months, but they were not eligible to receive a transfer payment, a redundancy payment, or any other payment in connection with the termination of their employment with NSW Lotteries (except for any annual or long service leave entitlements which they elected to cash out on the termination of employment with NSW Lotteries). 193In respect of the privatisation of WSN and Parklea, Mr Bacic stated that as was the case with NSW Lotteries the transfer arrangements were determined in advance of the processes being finalised. 194Mr Bacic further stated that in response to Mr Turner's evidence regarding employee protections the separation of NSW Lotteries, WSN and Parklea involved the sale of an operational business, which yielded financial gain for the NSW Government. His evidence was the circumstances surrounding the establishment of the NAS as an independent entity was different to that of NSW Lotteries, WSN and Parklea in that it was an educational provider and its separation was achieved using Government funds rather than the proceeds from sale. 195Furthermore, Mr Bacic's evidence was that the circumstances of the NSW Lotteries, WSN and Parklea sales differed from the establishment of the NAS as an independent entity separate from the Department in that it was the decision of the NSW Government to establish the new NAS with its own governance structure and the capacity to recruit its own academic and administrative and support staff. 196The NSW Government did not make a decision to transfer (or offer a transfer package to) either the academic or public service employees to a new school as part of this process. 197Mr Ginters read a further affidavit of Mr Bacic sworn 15 February 2012 in which he referred to Mr Turner's evidence in respect of the Greyhound and Harness Racing Regulatory Authority ("Harness Racing"). Mr Bacic stated that this Authority was dissolved in 2009 and the regulatory functions and responsibilities transferred to two industry bodies. The transfer arrangements for affected employees to these bodies were determined in advance to the processes being finalised. 198In cross-examination, Mr Bacic's evidence was that he had been involved the franchising of Sydney Ferries. As a result of negotiations between Sydney Ferries, a statutory corporation and relevant unions, deeds were executed which provided for a transfer package with respect to employees who would transfer their employment from Sydney Ferries to a private operator. The deed included the provision of a transfer payment of up to 30 weeks' pay for employees that transferred to employment with the private operator together with provision for the maintenance of conditions of employment. This was achieved by the mechanism of a federal enterprise agreement, which has a three-year nominal term. There was a guarantee of employment for a period of two years with the private operator. 199Mr Bacic accepted that in respect of Parklea the Government did not sell it, but contracted with a company to run the Centre. There were no proceeds obtained from any sale in respect of Parklea. The Government paid money to the private company to run Parklea with any separate costs being paid by the Government. A similar position prevailed in respect of Harness Racing, which did not involve the sale of that Authority.

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Ms Charlton 200Mr Ginters read an affidavit of Ms Charlton sworn 16 February 2012. Ms Charlton responded to evidence given, in particular, by Mr Dillon. Ms Charlton confirmed that on 28 July 2010, the Department wrote to the permanent members of the administrative and support staff at the NAS, including Mr Dillon and Mr Daly advising of the provisions that would apply if they chose to terminate their employment with the Department to accept a position at the new NAS. This advice was confirmed in an email dated 5 August 2010 to Mr Dillon and Mr Daly from the Department's Corporate Employee Services. 201Ms Charlton's evidence was that in response to a request from Ms Anita Taylor, Director of NAS, on 13 August 2010, she and Mr Paul Abraham, the Department's Manager, Corporate Employee Services, arranged to meet with some of the permanent administrative staff at the NAS. Ms Charlton and Mr Abraham had already met with Mr Rodney Smith and Mr Joseph Hawkins, two other permanent members of the administrative and support staff. 202The meeting was scheduled for 18 August 2010 and attended by Mr Dillon; Ms Rubella Irving, Human Resources Officer; Mr David Stockburn, Ceramic Technical Assistant; and Mr John Stanfield, Drawing Technical Assistant. 203Prior to the meeting commencing, Ms Irving asked Ms Taylor to leave the meeting because she and the other members of the administrative staff present wished to speak to Mr Abraham and herself without Ms Taylor being there. In the absence of Ms Taylor, Ms Irving informed Ms Charlton that she and the other members of staff at the meeting were currently negotiating with Ms Taylor on the conditions of their contracts for their employment with the new entity and they did not want Ms Taylor to hear the discussions in case it prejudiced their negotiations with Ms Taylor. 204During the course of the meeting Mr Abraham explained the procedures that applied to staff under the Policy. Both Mr Abrahams and Ms Charlton stated that the Department would undertake action in accordance with that Policy and that the processes of redeployment contained in the Policy were the principal means for managing excess employees. 205In response to Mr Dillon observing that most of the positions at NAS were unique and that it would be difficult to redeploy staff outside NAS, Ms Charlton stated that the Department understood that it may not be a straightforward process to identify suitable positions for staff in a technical classification as Mr Dillon held compared to staff in clerical classifications. However, she said as the Department included TAFE NSW, the Department would also be looking for suitable technical positions in a TAFE Campus. Ms Charlton denied that in response to a question asked by Mr Dillon regarding excess officers that she said "your positions at the National Arts School no longer exist but you are not excess employees, you are Crown Employees with no positions" and "the Department can only declare you excess if we try and redeploy you, and we are unsuccessful with that". 206Ms Charlton's evidence was that she stated that the administrative staff had not been declared excess at that time and that the Department was attempting, as part of the redeployment process, to identify other suitable work locations for them. She agreed that discussions took place in respect of the excess process in the context of the Policy and denied that she said "if you want I will put it in writing that you are excess staff". 207Ms Charlton stated that during the meeting of 18 August 2010, she provided an explanation of the circumstances of the severance payments made to members of the academic staff at the end of their temporary engagements in late January 2010. She denied saying to Mr Dillon that "there would have been uproar if the academic staff had not received payouts". She explained on several occasions that the circumstances of the temporary academic staff and the permanent administrative staff at the Department were different because of the temporary status of one group of employees and the permanent status of the others. 208Ms Charlton acknowledged that she said words to the effect that if a current employee of the Department at the NAS wanted to apply for another job at the new entity or with any other employer, they would have to resign from their employment with the Department and in those circumstances would not be eligible for a severance payment. At the conclusion of the meeting, Ms Charlton stated that the staff needed to advise the Department what action they intended to take in relation to the issues and asked that they advise their intentions in the following week. In respect of the circumstances surrounding Mr Rodney Smith, who was employed in a technical assistant position at the NAS, Ms Charlton stated that in a letter dated 16 June 2010, Mr Smith advised the Department that he would be declining the temporary assignment to the new NAS. Mr Smith subsequently submitted an application for recreation leave and proceeded on approved leave from 2 August 2010 to 29 October 2010. 209Ms Charlton's evidence was that she and Mr Abraham met with Mr Smith in early August 2010 to discuss what would happen when he returned from leave. During the course of this meeting, Mr Smith stated that he did not intend to apply for a position at the new NAS and that he understood that he would be treated in accordance with the provisions of the Policy. During the course of that meeting, the Policy provisions were discussed in more detail and Mr Smith was advised that the Department would attempt to identify suitable alternative work for him to undertake after his period of approved leave concluded. 210Mr Smith's period of leave concluded on 29 October 2010 and he returned to work on 30 October 2010 undertaking administrative work in the Department's Procurement Directorate pending identification of a further suitable position. Mr Smith was advised by the Department on 16 February 2011 that his former position at the NAS had been deleted and that he now had priority status for the purposes of matching in another position. In March 2011, Mr Smith was offered a voluntary redundancy which he accepted and exited the Department on 31 March 2011. 211Ms Charlton also referred to Mr Joseph Hawkins who was previously employed at the NAS as a permanent clerical officer Grade 5 - 6 in the position of Executive Assistant to the Director of the NAS. In a letter dated 7 June 2010, Mr Hawkins advised the Department that he would be declining the temporary assignment to the new NAS. Mr Hawkins submitted an application for sick leave from 15 June 2010 to 2 July 2010, which was approved. Mr Hawkins submitted further applications for sick leave, recreation leave and extended leave from 3 July 2010 to 11 April 2011, all of which were approved by the Department. Ms Charlton rejected Mr Dillon's contention that Mr Hawkins was unable to be redeployed. She stated that the Department identified a suitable position for redeployment for Mr Hawkins which was a position as a permanent clerical officer Grade 5 - 6 Executive Assistant to the Director, Legal Services. This position, which was in the Legal Services Directorate, was a direct match to the terms of grade and duties to be undertaken when compared to Mr Hawkins former position, which was that of a Clerical Officer Grade 5 - 6 to the Director of the NAS. 212In early August 2010, Mr Abraham and Ms Charlton met with Mr Hawkins to discuss his placement in the position in the Legal Services Directorate. During the course of this meeting, Mr Hawkins said that he did not want the position in the Legal Services Directorate and that he was declining the position. 213Mr Hawkins remained on approved leave for the remainder of 2010. On 28 February 2011, he was advised by the Department that his position at the former NAS had been deleted and he now had priority status for the purposes of being matched to another position. Mr Hawkins was subsequently offered and accepted a voluntary redundancy and exited the Department on 11 April 2011. 214Ms Charlton stated that on 5 March 2010 Mr Tim Kyle proceeded on accident leave and remained on accident leave from 5 March 2010 to 13 May 2010. He then proceeded on sick leave from 14 May 2010 to 16 July 2010, leave without pay from 17 July 2010 to 30 January 2011, recreation leave from 31 January 2011 to 25 January 2011, leave without pay from 26 January 2011 to 30 March 2011. 215On 28 February 2011 while he was on leave without pay Mr Kyle was advised by the Department that his position at the former NAS had been deleted and that he now had priority status for the purposes of matching. 216Mr Kyle did not return to work at all after April 2010. As he was on various forms of approved leave from that time he was not able to be redeployed. Mr Kyle was offered and accepted a voluntary redundancy and exited the Department on 11 April 2011. 217In cross-examination, Ms Charlton stated she had operational responsibilities as the Industrial Officer for the Department, but did not have principal responsibilities as that rested with the Deputy Director General, Mr Peter Riordan, and the Director of Industrial Relations. During the relevant period there were a number of relieving Directors of Industrial Relations including Mr Mark Philip and Mr Leo Piper. By operational responsibilities Ms Charlton's evidence was that this meant day-to-day hands on responsibility. 218As to questions about the payment of severance pay to the academic staff, Ms Charlton said that notwithstanding being aware that a large number of the academic staff had obtained positions with the new entity, they were paid a severance payment because their employment with the Department terminated on 29 January 2010. She said that their employment was extended from 31 December 2009 to 29 January 2010 at the request of the NAS. Such employees would have been entitled to holiday pay over the vacation period so there was no change in these employees' earnings from 31 December 2009 to 29 January 2010. 219Ms Charlton agreed that the Policy provided at cl 4.4 that whilst temporary or casual employees were not eligible for voluntary redundancy, such employees with more than 12 months' continuous service may be eligible for a severance separation payment. She agreed that there were approximately 12 or 13 temporary administrative and technical staff employed by the Department in its NAS at this time. She accepted that four of these employees were offered positions at the NAS. Some of the temporary administrative staff received a separation payment and some of them did not. 220Six of these employees received separation payments in accordance with the Policy and the four that chose to voluntarily terminate their services because they had obtained positions with the NAS did not. 221Ms Charlton's evidence was that any employees who terminated their employment with the Department to accept a position with NAS were not paid a separation payment. She confirmed that in respect of the matters set out in Mr Holland's email of 1 July 2010, she had informed Mr Holland that these were matters for the NAS and that she would refer them to the NAS. 222Ms Charlton agreed that no terms of settlement, memorandum of understanding or exchange of letters occurred between the Association and the Department. She also confirmed in her evidence that there was no confusion on the part of the Department in respect of whether the offer of a payment was $15,000 or $1500. She said it was $1500.

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Mr Abraham 223Mr Ginters read an affidavit of Paul Frank Abraham sworn 17 August 2011. Mr Abraham is responsible for managing the delivery of human resource services to corporate and non-corporate based staff in the Department. His affidavit responded to evidence given by Mr Dillon. Mr Abraham recalled attending a meeting with Mr Dillon and other members of the NAS on 19 August 2010. 224In response to Mr Dillon's evidence that Mr Abraham said during this meeting that "it is highly unlikely" that any employee from the NAS will be able to be redeployed in a suitable position by the Department Mr Abraham's recollection of what he said was "it may be difficult" to redeploy some technical/specialist staff into a suitable position in the Department. His evidence was that the reason he made this comment was due to the nature of the NAS as an organisation and the specialist type of work some employees had performed there for quite some time. 225Mr Abraham also did not recall Ms Charlton making the statement alleged by Mr Dillon that "your positions at the National Arts School no longer exist but you are not excess employees, you are Crown Employees with no positions". 226He stated that it was made clear to the NAS staff that they were not considered to be declared excess employees under the Policy at that time. In addition, Mr Abraham's evidence was that the Department had an obligation to seek redeployment opportunities for staff affected by the organisational change. The Department was also operating under its own guidelines, which emphasised the primacy of redeployment over redundancy. 227Mr Abraham agreed that the meeting became heated and that the NAS staff were pressing their case for access to redundancy payments. However, he said that he had no recollection of Ms Charlton saying "if you want I will put it in writing that you are excess staff". He did not believe that Ms Charlton made that comment or would have said those words given both his and her awareness of the circumstances of the NAS and its staff. 228Mr Abraham recalled Ms Charlton saying that "the Department was not compelled or obliged to pay a severance to the academic staff but exercised its discretion to do so", but he had no recollection of Ms Charlton saying "there would have been uproar if academic staff had not received payouts". He agreed that Ms Charlton had said, "you are naive to think about a separation payment" and that he had said "you cannot expect a pay out one and a job the next day". His evidence was that both he and Ms Charlton were trying to emphasise the Department's position in circumstances where the NAS staff wanted voluntary redundancy payments to be made before applying for any of the new NAS jobs. They were trying to get concessions from he and Ms Charlton and they were unable to agree to such concessions. He stated that they had both attended the meeting to provide the NAS staff with information on their status and their options. 229Mr Abraham's understanding of the Department's position at the meeting was that no leave without pay would be offered to employees of the NAS. However, the Department later reconsidered this position and offered employees the option of applying for, and being granted, a period of leave without pay. He recalled that at the end of the meeting, Ms Charlton had advised the NAS staff that they had until the following Friday to either sign the resignations from the Department or go back to the Department and seek redeployment. He also confirmed that Ms Charlton said that if the NAS employees chose not to resign from the Department, then the NAS would withdraw the offers of employment and readvertise the positions. 230Mr Abraham acknowledged that some employees had received voluntary redundancies. However, this was only after the Department had attempted to redeploy the permanent NAS staff in the Department and after having them perform meaningful work during this interim period, that the conclusion was reached that certain staff from the NAS were unable to be redeployed and they were subsequently offered voluntary redundancies. 231Mr Ginters read a further affidavit of Mr Abraham sworn 16 February 2012. Mr Abraham confirmed that during 2012 Mr Daly had held the substantive position of technical assistant at the NAS. This position attracted a salary as at 1 July 2010 of $48,980. Mr Abraham confirmed that during 2010, Mr Daly continued a secondment to a higher graded position of AV and Computer Facility Co-ordinator. This position was classified as a Technical Officer Grade 2 and attracted an annual salary of $65,626 on and from 1 July 2010. He confirmed that during 2010, Mr Daly worked in a part time capacity to 30 June 2010. Mr Daly worked three days per week (0.6 FTE) as the AV and Computer Facility Co-ordinator. Any entitlements arising from his employment would, therefore, be required to be calculated on a pro-rata basis based on his actual service. 232Mr Abraham confirmed that during 2010, Mr Dillon held the substantive position of Technical Assistant at the then NAS. An annual salary of $48,980 was payable in respect of this position at 1 July 2010. He confirmed that until 1 July 2010 Mr Dillon worked on a part time basis, two days per week (0.4 FTE) in the higher graded position of AV and Computer Facility Co-ordinator. This position was classified as a Technical Officer Grade 2 and an attracted an annual salary of $65,626 on and from 1 July 2010. For the remaining three days per week (0.6 FTE), Mr Dillon performed work in his substantive position. His gross salary for the financial year 2009/2010 was $54,800. 233On 1 July 2010, Mr Dillon returned to his substantive position as a technical assistant on a full time basis which from the first pay period after that date, attracted an annual salary of $48,980. 234During cross-examination, Mr Abraham acknowledged that there would have been few positions exactly the same within the Department that the administrative and technical employees could have been redeployed. However, the Department had an obligation to try and find redeployment for them and find meaningful work for them as well. His evidence was that it is often difficult to redeploy employees, however, the Department tried to explore all employment options before considering redundancy. He accepted that at the meeting on 19 August 2010, the employees regarded themselves as excess to requirements of the Department, however, they had not been formally declared excess. 235Mr Abraham accepted that at the time of the meeting they did not have a substantive position and that the Policy provided that employees be declared excess if they no longer had a substantive position. However, his evidence was he believed the timing of the decision to declare an employee excess was at the discretion of the Department, although this was not referred to in the Policy. 236Mr Abraham accepted that the Policy allowed for voluntary redundancy to be offered at the outset if the view was formed that redeployment was not viable. However, the Department's practice was to seek redeployment opportunities for employees, because redeployment was given primacy over redundancy in the Department's Policy and the Government's Policy.

[26]

Mr Philip 237Mr Ginters read affidavits of Mark Andrew Philip sworn 16 August 2011 and 26 September 2011. Mr Philip has been employed in the Department since 1985 in various industrial and employment related roles and is currently the Director, Industrial Relations of the Department. 238Mr Philip's evidence dealt with the changes to the entity and structure of the NAS; the conclusion of temporary employment contracts of all academic staff at the NAS; the transitional arrangements and management of administrative and support staff of the NAS under the 2008 Policy; industrial dispute in Matter No IRC 237 of 2010 filed 31 March 2010; the application for a transfer award; the discontinuance of the dispute proceedings; action taken by the Department from August 2010 onwards; the notification of a further industrial dispute by the Association on 14 April 2011 in Matter No IRC 375 of 2011; the Association's submissions; the statement of Mr Daly; the statement of Mr Dillon, and the statement of Mr Turner. 239Mr Philip annexed a substantial number of documents to his affidavit. Much of the material duplicated material attached to the Association's witness statements and material tendered by it, which has already been referred to in this decision. 240Relevantly, in addition, Mr Philip annexed the documentation headed "New Task Force to Plan Future for National Arts School" dated 24 January 2007 and a document titled "Future of National Arts School Secured" dated 27 January 2009. Various documents that passed between the Director of the NAS and the Department were also provided together with the Managing Excess Employees in New South Wales Public Sector November 2008 and Managing Organisation Change and Affected Employee Guidelines dated 4 May 2009. 241In summary, Mr Philip's evidence was that he had reviewed the files held by the Industrial Relations Executive in respect of this matter and had been provided with advice from employees of the Executive. He did not assert that he was directly involved in this matter. In addition, he said his affidavit was created from information he had obtained from discussions with Ms Charlton. It is, therefore, unnecessary to further deal with Mr Philip's evidence as reference has already been made to the relevant documentation and the history of the matter when dealing with the evidence.

[28]

Salient facts 243On 27 January 2009, the Minister for Education and Training announced changes to the NAS such that it would become an independent institution registered as a public company. Registration occurred on 23 October 2009. Prior to this occurring, employees of the NAS were employed by the Department. 244During 2010, transitional arrangements were put in place regarding the employment of the Department's administrative and technical staff at the NAS. This was to enable the NAS to operate whilst recruitment action was undertaken. Affected administrative/technical staff, including Mr Daly and Mr Dillon, were given the option of being assigned to work at the NAS during this period, or redeployment within the Department or the wider public sector. 245The Department made it clear that it was not considering redundancies for the staff. 246The process for administrative/technical staff applying for positions with the NAS was facilitated by the Department. This included the Department obtaining approval to have the NAS listed as an employer under the various Superannuation Acts applicable to public sector employees. This enabled employees to continue to contribute to a defined benefits superannuation scheme as employees of the NAS. Permanent employees who accepted positions with the NAS, and who had extended and recreational leave balances of less than 20 days, had their leave balances paid out. Employees with leave balances in excess of 20 days had the option of either cashing out the value of their entitlements on resignation, or have the current monetary value of their entitlements remitted to the NAS based on the salary offered by the NAS. 247The Department allowed employees to apply for a position with the NAS and accept an offer of employment. Employees also had an additional safeguard period of six months' leave without pay from the Department, with approval to engage in secondary employment during that period (employment with the NAS). The practical effect of this was that an employee could, during this period, terminate their employment with the NAS and return to the Department, to be declared excess and, therefore, trigger the Department's redeployment obligations under the Policy. 248Both Mr Daly and Mr Dillon applied for leave without pay. The Department granted these applications for a period of six months from 14 October 2010, which were extended to 24 June 2011. Mr Daly and Mr Dillon applied for positions with the NAS. Their applications were successful and they commenced employment with the NAS. Neither Mr Daly nor Mr Dillon returned to the Department's employment following the conclusion of periods of leave without pay. 249If either Mr Daly or Mr Dillon had returned to employment with the Department by 24 June 2011, they would, consistent with the operation of the Policy, have been provided with assistance to identify suitable redeployment opportunities and would have had the protection of a period of a minimum of 12 months' salary maintenance in accordance with the Policy. 250The Department did not contest that the terms and conditions of employment applying to Mr Daly and Mr Dillon in their employment with the NAS were less beneficial than those formerly available to them when employed with the Department. 251Prior to October 2009, academic staff working at the NAS were employed on a temporary or casual basis under the PSEM Act, with the exception of two academic staff. The contracts of employment of the academic staff were extended to 29 January 2010, when they concluded by the effluxion of time. The extension of their contracts resulted in these employees not suffering any interruption to their employment if they commenced with the NAS. Pursuant to the Policy, temporary and casual employees were not entitled to the redeployment obligations set out in the Policy. However, these employees received a discretionary severance payment.

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Acceptable alternative employment 252Mr Daly and Mr Dillon both gave detailed evidence in relation to the specialised nature of the work performed at the NAS, to which I have earlier referred. Mr Daly was responsible for the operation, maintenance and supervision of the main digital laboratory at the NAS, including computer software and hardware AV equipment. In addition to undertaking the AV role, Mr Dillon was responsible for the maintenance and operation of photographic facilities, including black and white and colour chemistry formulas and all lights and suitable materials. 253Mr Daly and Mr Dillon both formed the opinion that due to the unique work and skills set, there was little prospect of redeployment to another suitable position within the public service. Mr Dillon's evidence, which I have set out earlier, was that he was aware of other positions performing similar work and knew of only two positions which could possibly be appropriate for him. Both of these positions were filled by long-term employees. 254In response to evidence given by Mr Dillon that Mr Abraham said during a meeting on 19 August 2010 that "it is highly unlikely" that any employee from NAS will be able to be redeployed in a suitable position by the Department, Mr Abraham's recollection of what he said was "it may be difficult" to redeploy some technical specialist staff into a suitable position in the Department. Mr Abraham explained that the reason he made this comment was because the nature of the NAS as an organisation and the specialist type of work some employees had performed there for many years. 255Ms Charlton's evidence was also to the effect that it would not be a straightforward process to identify suitable positions for staff in a technical classification as held by Mr Dillon compared to staff in clerical classifications. She said, as the Department included TAFE NSW, that it would be looking for suitable technical positions in a TAFE Campus. 256The evidence discloses that the concerns regarding the prospects for redeployment were well founded. Of the administrative and technical staff working at the NAS at the time of the transfer, only one was successfully redeployed. That employee was a librarian rather than a technical employee. All the other employees were offered and accepted voluntary redundancy in either December 2010 or March 2011. These dates fell well within the 12 months' retention period required by the Policy and supports the inference that the Department recognised that redeployment would not occur and made the offer of voluntary redundancy. 257In my view, upon a proper analysis of the evidence, it is open to find that the prospect of Mr Dillon and Mr Daly being redeployed was slight if not non-existent. It was the respective view of Mr Daly and Mr Dillon that suitable redeployment positions were not available, which led them to accept the offer of employment with the NAS. 258In reaching this conclusion, I reject the submission of Mr Ginters that such a finding is merely speculative. It was accepted by the Department, as I have already observed, that Mr Daly and Mr Dillon performed highly specialised work. True it is, as Mr Ginters submitted, Mr Daly and Mr Dillon did not "stick around" to await the outcome of the redeployment exercise. Their decisions were based on wishing to remain in employment and the knowledge that there were no available suitable alternative positions. Had they explored redeployment, as I have already observed, it was highly likely, as with all of the other technical staff, they would have been offered voluntary redundancy. 259In this regard, I accept that Mr Daly and Mr Dillon weighed up the benefit of employment with NAS against the perceived benefit of continued employment with the Department, which carried with it the prospect of a redundancy if redeployment ultimately proved not to be viable. If Mr Daly and Mr Dillon wished to continue to undertake the specialised work that they had been performing for a number of years, they believed they had no choice but to apply for, and accept, positions with the NAS. 260Their prospects of being redeployed, as I have already found, were slight. In such circumstances, I am not persuaded that Mr Daly and Mr Dillon were given a "reasonable choice". Mr Daly and Mr Dillon had no realistic option if they wished to continue to undertake the specialised work they had been performing, but to apply for and accept positions with the NAS.

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Earlier dispute proceedings 263Mr Ginters submitted that it would be contrary to the public interest for this Commission to make the transfer award in circumstances where the applicant had discontinued proceedings in which it sought the making of an award that included transfer entitlements after the Department had "made a number of representations... to the Association about the matter, and on the basis of those representations which had also been made to the individual employees". Approximately 13 months after the proceedings were discontinued the transfer award application was filed. I have earlier set out the history to the dispute proceedings. 264In summary, the Association filed an industrial dispute on 21 March 2010 in which the issue of a transfer payment was raised and a proposed application was drafted and provided to the Commission during the conciliation phase. Those proceedings were discontinued by the Association on 29 July 2010. There was no evidence that the discontinuation of the proceedings was the consequence of any agreement between the parties to settle the dispute. 265Mr Holland's evidence was that the dispute proceedings were discontinued because it was still unclear which members would ultimately take up employment with NAS and which would seek redeployment. He gave evidence that the discontinuation of the proceedings was not as a result of any agreement between the parties and the Association continued to press the position that employees who transferred their employment to the NAS should be entitled to a transfer or redundancy payment. Ms Charlton agreed that the discontinuation of the dispute proceedings was not the result of any agreement between the parties. 266After the discontinuance, the Association continued to press the Department and the Minister for an appropriate resolution of the dispute, including seeking agreement that any employee who took up employment with the NAS should receive a transfer or redundancy payment. 267In my view, a substantial and potentially unwarranted waste of time and resources of the Commission and the parties may have occurred had the Association pursued proceedings in circumstances in which it was far from clear which employees (if any) would take up employment with the NAS. 268The Association commenced further dispute proceedings in April 2011 when it became clear that Mr Daly and Mr Dillon did not intend to return to the Department at the expiry of their leave without pay periods. 269In these circumstances, there is no basis for refusing the relief sought by the Association due to it discontinuing the initial dispute and then subsequently notifying a fresh dispute when it became clear that employees proposed to take up employment with the NAS.

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Treatment of academic staff 270I have already observed that the evidence disclosed that temporary or casually employed academic staff were paid a discretionary severance (or separation) payment pursuant to cl 4.4 of the Policy. The Association contended that it was, therefore, unreasonable and inequitable for Mr Daly and Mr Dillon not to receive comparable compensation for the cessation of their employment in the NAS compared and contrasted to that received by academic staff. 271The Policy provides at cl 1.2.1 as follows: 1.2.1 Excess employee Employees are declared excess by an agency when they no longer have a substantive position. Excess employees include those: who were previously declared "displaced" or "excess" under previous policy; whose substantive position is deleted; who become excess due to their work or position being relocated to a significantly different geographic area (and they choose not to relocate); or who are: a.on an employee initiated secondment; or b.on more than 12 months leave without pay (this does not include full time unpaid parental leave or military leave); or c.at the conclusion of a period of approved study leave And for a, b & c above the home agency has permanently backfilled their position after giving the employee notice and the employee has chosen not to return. The definition of 'excess employee' is limited to permanent employees and does not include temporary or casual employees or those employed for a specified period or project. Temporary employees with more than 12 months' continuous service and who have not been engaged for a specific period or project and who no longer have a position may be: considered for internal temporary opportunities. Refer to section 3.2 entitled to a severance payment. Refer to section 4.4. This policy does not apply to the Senior Executive Service. Guidelines on the management of the Senior Executive Service can be found on the Department of Premier and Cabinet's website... 272The definition of "excess employee" makes clear that it is limited to permanent employees. 273Clause 3.1 of the Policy provides that redeployment is a principal means for managing excess employees. Clause 3.2 Eligibility relevantly provides: 3.2 Eligibility All excess employees may seek redeployment except for the following: employees engaged on a temporary or casual basis or for a specific period or project. However, temporary employees with more than 12 months' continuous service who have not been engaged for a specific period or project may be considered for internal temporary positions, provided the interests of permanent employees are given priority. apprentices at or near the conclusions of their apprenticeship employees on workers' compensation whose claim is based on compensation for termination (unless the agreement of their workers' compensation insurer is obtained to any separation payment being made) or others awaiting determination of claims against the employer for termination of services employees about whom action is underway to terminate their services. 274Clause 4 of the Policy deals with voluntary redundancy and cl 4.4 relevant provides: temporary and casual employees. While temporary employees are not eligible for a voluntary redundancy, those employees with more than 12 months' continuous service and who have not been employed for a specific term or project may be eligible for a severance (or separation) payment only. 275Clearly, the principal obligation on the Department in respect of permanent employees who did not accept employment with the NAS was to seek to redeploy them. The Department had a discretion to attempt to redeploy temporary academic staff who were not eligible to seek redeployment. However, the ability to do so was limited by the provisions of cl 3.2. 276The Department chose to exercise its discretion pursuant to cl 4.4 of the Policy and pay the temporary or casually employed academic staff a severance payment. 277Mr Gibian submitted that the Department exercised its discretion in respect of academic staff in circumstances where it must have known that virtually all of the academic staff would immediately commence employment with the NAS. Ms Charlton accepted this proposition in her evidence. 278The Policy itself distinguishes between permanent and casual or temporary employees. Redeployment is the principal means for managing excess employees with the exception of employees engaged on a temporary or casual basis. The Department had a limited discretion as to how it would deal with its temporary and casual employees. A distinguishing factor is that the contracts of employment for academic staff had come to an end by the effluxion of time. The employment contracts of the permanent staff, in my view, are different in respect of their terms and conditions to casual and temporary employees. It was open to the Department to deal with the employees of different status in the way that it did. 279The ultimate question for determination is whether it was unreasonable and inequitable for Mr Daly and Mr Dillon not to receive compensation for the cessation of their employment with the Department.

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Redundancy payment versus transfer payments 280Mr Gibian described the transfer payment as being "in much the same context" as a redundancy. Counsel submitted the transfer payment is a; ... severance perhaps adapted to the particular circumstance of the transfer of functions outside the public sector. As we would put, in recognition of the fact that an employee in that circumstance continues to have a job, much the same job, and perhaps a full severance payment as set out in the Managing Excess Employee Policy, may be warranted in that circumstance. But the somewhat reduced scale has arisen in other exercises of this nature is appropriate in this context to compensate .....It is not a distinct concept. It is the same concept adapted to the particular circumstances. 281Asked by Walton J, Vice-President during the hearing what the transfer payment was paid for, Mr Gibian submitted; As we would put it, and I think we would express this as partial compensation for the fact that these employees have lost their continuity of service, they have lost the benefit of accrued entitlements. They are continuing in employment in positions in which they are, in a number of respects that we have set out, subject to inferior terms and conditions of employment and outside public sector employment and outside the protections and security that entails as a consequence of a decision of government to transfer a function that was performed directly by government employees to a corporate entity, albeit one established in which two ministers were shareholders. These consequences have been suffered by that decision of government and it is appropriate to compensate the employees for that decision. 282The issue that therefore arises is what principles should be applied in order to attract an entitlement to a transfer payment. In other words, how should a transfer payment be formalised. The evidence in respect of the examples relied upon where privatisation has occurred did not set out the elements or factors taken into account in respect of the payments made by governments in respect of, for example, the privatisation of Lotteries, Waste Services, Parklea and Sydney Ferries. Mr Gibian accepted payments made in the earlier privatisation examples may have included an incentive component for employees to take up employment in another entity. 283A well known statement of what is a redundancy was that of Bray CJ in R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 at 8; [1977] 44 SAIR 1202 at 1205, as follows: ... the concept of redundancy in the context we are discussing seems to be simply this, that a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be a dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone. 284A redundancy payment is intended to provide a payment upon dismissal for redundancy as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee: Termination, Change and Redundancy Case (1984) 8 IR 34 at 62, 73. The inconvenience and hardship includes the disruption to an employee's routine and social contacts and the competitive disability to long term employees arising from opportunities foregone in the continuous service of the employer: Food Preservers Union of Australia v Wattie Pict Ltd (1975) 172 CAR 227. 285The dominant purpose for a redundancy payment is therefore to compensate an employee for the loss of non-transferable benefits and for the inconvenience and hardship imposed by the termination. 286As Mr Gibian conceded, a different purpose is relied upon for a transfer payment. To my mind, in effect what is being sought, is the equivalent of a partial or transitional redundancy payment. I accept that in view of the alternative employment, the employees should not receive full redundancy payments. Although there are elements of a redundancy entitlement arising in this matter, in order to properly access this claim, it is necessary to extract those elements that are applicable to a claim for a transfer payment. 287In determining the appropriate factors that should be taken into account in determining whether a transfer payment should be made in this instance, it is appropriate, in my view, to consider the detriment that the employees have suffered. Such detriment would include such factors as loss of continuity of service, loss of the benefit of accrued entitlements, loss of job security (the statutory protections), loss of flex days, loss of overtime for weekend or after regular hours of work with no time in lieu compensation, reduced sick leave entitlements, no paid parental leave and less favourable long service leave (Extended Leave) entitlements. These factors demonstrate that there is a qualitative distinction between Government employment and private sector employment. 288A further element, although not relevant here, would be loss of more favourable superannuation entitlements. 289Accepting that these are the broad factors that should be applied in determining this application, needless to say, each case must be determined on its own facts and circumstances. 290To my mind, when viewed objectively and in the light of these factors and what I might describe as the unique elements (this claim deals with two employees who accepted alternative employment) and within a practical industrial relations context, there is no doubt that the two employees have suffered a detriment and should be compensated. 291The decision that the Department reached was that it did not require Mr Daly or Mr Dillon to continue to carry out the work that they had been doing with the Department, or for that work to be done by anyone else. Their positions were therefore made redundant and the Department was obliged to apply the Policy. However, the employees were invited to make an election in respect of whether they wished to take up employment with the NAS, or seek the benefits of the Policy which required the Department to explore whether it was possible to redeploy each of them. If redeployment was unsuccessful, they were entitled to redundancy. 292Absent the payment of a redundancy benefit, I find that in light of the detriment suffered by these employees, they should receive compensation in the form of a transfer payment. This matter, as I have made clear, relates to two employees only. I therefore propose to adopt a global approach to determining a transfer payment in light of the fact that the differences between the two employees is not great. However, this should not be taken to be the approach that would apply in other cases where a more detailed analysis may be required. 293In balancing the various issues that I have addressed in the consideration of this matter, I am mindful that the effect of awarding the transfer payment claimed for Mr Daly and Mr Dillon could have the potential to place them in a position of unjustified relative advantage as compared to the circumstances which prevail for those administrative and technical employees who did not accept an offer of employment with the NAS and who accepted a voluntary redundancy payment. This was in circumstances where their positions were abolished in the Department, they were declared excess in accordance with the Policy and were unable to be redeployed. 294Such employees received four weeks' payment in lieu of notice (with employees aged 45 years and over with five or more years of completed service, an additional one week's notice, or payment in lieu was available), plus three weeks for each year of service, up to a maximum of 39 weeks (3 x 13 years). In addition, voluntary redundancy entitlements applied which entitled the employees to the following additional payments: Less than 1 year's service:2 weeks' pay 1 year and less than 2 years' service:4 weeks' pay 2 years and less than 3 years' service:6 weeks' pay 3 years service and over:8 weeks' pay 295Mr Daly and Mr Dillon continued to enjoy ongoing employment with the NAS. It is relevant to take into account that they were assisted by the Department in obtaining this employment. However, I am also mindful that it is inconsistent with the fundamental principles of industrial fairness that employees suffer reductions in conditions of employment and interruption of continuity of service without compensation as a result of a change in the form of the relationship between the parties.. 296In my view, the transfer of the functions of the NAS did not involve a true privatisation. The sole shareholders of the NAS are the Minister for Arts and the Minister for Education and the Board of the Company appointed by the Ministers. It follows that NAS remains in substance under the control of the Government. However, as I have already determined, each of the employees suffered a detriment in their employment status. Taking into account the factors that I have earlier set out in respect of the detriment suffered by Mr Daly and Mr Dillon, together with the provisions of s 10 of the Industrial Relations Act and the overall circumstances of this matter, I propose to award a transfer payment of thirteen weeks to Mr Daly and Mr Dillon. The amounts to be paid should be calculated in respect of Mr Daly on the performance of his fulltime duties. The evidence disclosed that Mr Daly worked three days per week at the relevant time of the transfer of the NAS. In respect of Mr Dillon, the payment should be calculated by reference to the salary of his substantive position as at 1 July 2010, being $48,980. 297The order I propose to make in these circumstances shall include payments calculated on this basis.

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Section 146C of the Industrial Relations Act 1996 298Mr Ginters submitted that the provisions of s 146C of the Industrial Relations Act 1996 and, in particular, cl 6(1)(a) of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 arise for consideration in this matter. Section 146C provides: 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. (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. 299Clause 6(1)(a) of the Regulation provides that public sector employees may be awarded increases in remuneration and other conditions of employment that do not increase employee-related costs by more than 2.5 per cent per annum. 300Mr Ginters submitted that the making of the award sought "would lead to increases in Mr Daly's and Mr Dillon's employee-related costs of more than 2.5 per cent" and the Commission would need to be satisfied that sufficient employee related costs savings offset the cost of the award. 301Clause 8 of the Regulation deals with employer related costs. It provides: 8 Meaning of employee-related costs For the purposes of this Regulation, employee-related costs are the costs to the employer of the employment of public sector employees, being costs related to the salary, wages, allowances and other remuneration payable to the employees and the superannuation and other personal employment benefits payable to or in respect of the employees. 302Accordingly, "employee-related costs" are the costs of the employment of public sector employees. In my view, the making of a transfer payment is not a cost of employing Mr Daly or Mr Dillon. They are no longer performing work for the Department and have not done so since the middle of 2010. 303In my view, the making of an award providing for an entitlement to the payment of a transfer payment following their employment with the NAS in 2010-2011 will not increase costs of employment of public sector employees at all and cl 6(1)(a) of the Regulation therefore, has no work to do. 304Furthermore, the restriction in cl 6(1)(a) applies to an increase in "employee-related costs per annum". This must involve a comparison between costs in a 12 month period with the previous 12 month period. In such circumstances, the costs of employment Mr Daly and Mr Dillon has not increased at all as they ceased to be paid by the Department in around October 2010. 305Since preparing my judgment, I have had the benefit of reading the reasons of Boland J in respect to the operation of s 146C of the Act. I agree with his Honour's additional reasons. 306I would make an award providing for a transfer payment to Mr Daly and Mr Dillon of thirteen weeks pay each. The parties are to confer on the terms of the Crown Employees (National Arts School Transfer Payment) Award. The parties are also directed to file short minutes of order. The application for an award to be known as the Crown Employees (National Arts School Transfer Payment) Award can be re-listed before Staff J when a draft award has been prepared.

Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v NSW Department of Education and Communities

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Judgment (36 paragraphs)

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Cases Cited (14)

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