Re Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres (No 2) [2015] NSWIRComm 38

DECISION

1. In Matter IRC 828 of 2012 the Public Service Association and Professional Officers Association Amalgamated Union of New South Wales ("PSA" or "applicant") sought to vary the Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres ("the Island Award"). There are also two underlying industrial disputes before the Commission in Matter Nos IRC 156 and 1843 of 2011.
2. By an amended application filed 27 May 2014, following the Full Bench decision in Re Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres [2014] NSWIRComm 44 ("The Island Award Case"), the PSA sought a variation which had three elements as follows: 1. The insertion of a new cl 6.5 so as to provide for equitable rostering for Chief Correctional Officers and Principal Correctional Officers and that those officers shall not be required to work more than an average of 2 weekends per 19 day roster cycle; 2. A variation to cl 8.1 and Part B - Sch 1 so as to provide for Chief Correctional Officers and Principal Correctional Officers to be entitled to 12 rostered days off per year rather than the current 2 rostered days off in December and January each year; and 3. A variation Part B - Sch 1 so as to provide Chief Correctional Officers and Principal Correctional Officers with an entitlement to payment of an incidental allowance of $2,500 per annum.

Threshold questions

1. In the course of the proceedings what were described as two "threshold questions" were referred to a Full Bench of the Commission for determination. It is sufficient for an understanding of the questions to note that they related to costs savings flowing from a Memorandum of Understanding ("MOU") into which the applicant and the Commissioner for Corrective Services entered in August 2011. The applicant had sought to rely on those savings in this application.
2. In The Island Award Case, the Full Bench determined to defer the question posed by the applicant and to answer the question posed by Corrective Services NSW ("CSNSW" or "respondent"). The terms of that question were refined during argument and the Full Bench recorded (at [8]) its ultimate form as follows: "Whether savings effected at the three Correctional Centres governed by the Award as a result of the MOU fell outside the meaning of employee-related cost savings in cl 9(1) of the Regulation in consequence of the operation of paragraph (d) of the clause."
3. The Full Bench answered "no" to that question. In so determining the Full Bench stated at [62]-[66]: "[62] In our view, when so understood, the savings relied upon by the PSA as deriving from the MOU for the Centres are properly characterised, on the evidence before us, as being whole of Government savings within the meaning of the expression in cl 9(1). Our reasons for that conclusion (and by way of expanding the construction we have thus far provided) are as follows: (1) The statement in the MOU that the savings are employee-related savings is an axiom and nothing more. The deletion of custodial positions are, by their nature, employee-related cost savings. The statement merely permits, at most, any savings created by the deletion of up to 350 positions, to fall within the definition of cl 8 of the Regulation. (2) The categorisation of the savings in the MOU as employee-related costs savings (within the terms of cl 8 of the Regulation) does not prevent those savings being excluded for the purposes of cl 9(1)(d). (3) To the extent relevant, it is not open on the evidence to make a finding that there was an agreement that any offset above 2.5 per cent would be applied towards increases in remuneration or other conditions of employment. The stated purpose of creating savings was to make CSNSW more competitive and to avoid privatisation. To seek to apply that benefit back into employee costs is not consistent with that purpose. (4) Thus, whilst the Commission has repeatedly insisted upon the importance of parties being held to their industrial bargains (see Re Corrections Health Service Nurses' (State) Award (1999) 90 IR 235 at 245), in the present circumstances there is no such agreement. (5) In the absence of an agreement between the parties, the Commission is tasked, as we have noted, with categorising the savings. (6) In that respect, the terms of the MOU could not be determinative of the nature of the savings therein in any event (subject to an agreement between the parties pursuant to cl 6(1)(ii)). The terms cannot elevate the savings beyond that which they are by their nature. (7) Likewise, the attribution of the savings as 'Efficiency Dividend - Other' in the documents relied upon by CSNSW does not represent an irrevocable characterisation of the savings. At its highest, that evidence demonstrates that the savings were viewed by CSNSW and the NSW Government as part of a broader ongoing program overseen by the Fiscal Effectiveness Office. Hence, the submission of the PSA that the savings needed to be nominated and attributed at the time of the MOU does not require resolution. (8) In our view, as we have mentioned, for a 'measure' to be whole of Government, it does not need to be adopted by, or available to, every government agency in the same manner or to the same degree. In fact, no measure could ever be implemented identically across every department or agency in that manner. (9) A measure that is driven by the Government across agencies and from which any savings will be available for allocation across the whole of Government constitutes a whole of Government savings measure. (10) Upon the evidence, the savings relied upon by the PSA were the result of such a measure, which sought to return the State budget to surplus. The IR Workplace Initiative was a part of that wider program. (11) The 'measure' which gave rise to the savings was, thereby, not peculiar to CSNSW. (12) In the Budget Speech, the Treasurer referred to the reduction of 350 positions across CSNSW and later referred to the Government's preparedness to offer around 5,000 voluntary redundancies to "underpin" delivery of the discussed savings. This supports the proposition that the two initiatives were connected. (13) Any suggestion that, because the reduction of 350 positions was agreed to before the Budget Speech was delivered by the Treasurer, it could not form a part of the 5,000 voluntary redundancies announced in that speech was not supported by the evidence. It would be absurd to suggest that the 5,000 redundancies referred to in the Budget Speech were conjured up on the morning of 6 September 2011. Their political genesis must have occurred much earlier. (14) Further, whilst it is true that the inclusion of the savings in the 2011/2012 Budget Speech could not transform a CSNSW program into a whole of Government savings measure, it is equally true that the Treasurer's discussion of the savings occurring under the heading "Prison Reforms" in the Budget Speech cannot prevent a whole of Government savings measure from being characterised as such. (15) As earlier mentioned, the above interpretation is consistent with the purpose of the legislation. Section 146C was passed to achieve a government objective - a clear and stated "statutory purpose" of giving effect to Government policy. The policy underpinning s 146C and the Regulation was the philosophy to provide "a component of economic reform introduced by the New South Wales Government, central to which is the concept of fiscal restraint" (see HSU east and Director-General, Department of Finance and Services [2012] NSWIRComm 112 at [50]). (16) The intention of the legislature in amending the Act to include s146C and in promulgating the Regulation was undoubtedly to limit employment costs in the public sector. Increases in employee-related costs were to be limited to 2.5 per cent per annum. If employee-related cost savings cannot be achieved to fully offset any increase in employee-related costs in any one year beyond 2.5 per cent, on the face of the Regulation there can be no increase in remuneration for employees beyond that amount. (17) We do not accept the PSA's contention that, in consequence of the above construction of cl 9(1)(d), savings achieved in circumstances where an agency is over budget will necessarily be characterised as whole of Government savings measures (since the Government seeks to constrain all agencies to budget). [63] Thus, the savings cannot be called in aid to offset an increase in employee-related costs. [64] One final matter must be addressed in the disposition of the threshold question raised by CSNSW. The PSA made a submission that, in the event that the savings were determined by the Commission to be 'whole of Government savings', they could still be relied upon to offset costs because they were "additional" to whole of Government savings for the purposes of cl 9(1)(d). [65] The PSA submitted that savings will be "additional to whole of Government savings measures" if any efficiency dividend target or other measure was satisfied, notwithstanding the savings relied upon. If savings have been achieved over and above any savings target, the PSA submitted that any excess is available to be used as "employee-related costs savings". [66] CSNSW submitted that the PSA's suggestion that savings in excess of an efficiency dividend target are something other than whole of Government savings is a "non sequitur". We agree. Even if savings were achieved in excess of any required "efficiency dividend savings", it does not follow that savings which are properly characterised as whole of Government savings become something else. It is, in general terms, the measure which would need to be 'additional', rather than the amount of employee-related costs per se."

Remaining questions for determination

1. The Full Bench remitted the matter to a single member of the Commission for the disposition of the remainder of the proceedings.
2. Evidence and submissions as to the merits of the application were heard over seven days in April 2014, March and June 2015.
3. The majority of the evidence was heard on 3 and 4 April 2014 before his Honour Justice Staff. That evidence dealt with both the merits of the claim and whether, and if so what, employee-related costs increases would be incurred by CSNSW in the event the PSA's claim were granted in whole or in part. I proceeded to hear the remaining evidence on 17 and 18 March 2015.
4. Submissions were not able to be taken at that time because the Minister for Industrial Relations sought to exercise the right to intervene provided by s 167(1) of the Industrial Relations Act 1996 (the "IR Act"). The Minister also sought to defer any submissions until after the termination of the "caretaker" period then in place pending the conduct of the State elections. Ultimately, the Minister decided not to intervene.
5. On 14 May 2015 the respondent filed a Notice of Motion seeking to dismiss or permanently stay the application. That Motion followed the delivery of two decisions by the Full Bench: Crown Employees Wages Staff (Rates of Pay) Award 2014 [2015] NSWIRComm 7 ("Wages Staff (Rates of Pay) Case") and Child Protection (Working with Children) Award 2014 [2015] NSWIRComm 8 ("Working with Children Case"). Those decisions dealt with aspects of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 ("the Regulation"). On the authority of those decisions the Motion posited that the making of an order varying the Island Award in June 2014 had extinguished or exhausted the jurisdiction of the Commission. It was accepted by the respondent that, even if the contention was correct, it would only have effect until the expiration of the order on 30 June 2015.
6. The Motion was referred to the President for consideration of whether it should be allocated to a Full Bench. His Honour decided not to do so.
7. The PSA submitted the following issues remained for determination: 1. Whether the Commission should vary the Island Award as sought by the PSA so as to provide for equitable weekend rostering, provision of 12 rostered days off and the payment of an incidental allowance for Chief Correctional Officers and Principal Correctional Officers? 2. If the Commission grants any or all of the claims made by the PSA, whether those changes to the conditions of employment result in increased "employee-related costs" for the purposes of the Regulation and, if so, what is the quantum of increased "employee-related costs"? 3. To the extent that there would be increased "employee-related costs" as a result of granting any, part or all of the claims, whether the increased "employee-related costs" exceed the "cap" imposed by cl 6(1)(a) of the Regulation so as to require demonstration of any "employee-related cost savings"?
8. The respondent submitted the issues to be determined, as expressed by the PSA, encapsulate a re-formulated approach of the PSA to its application, having regard to the Full Bench decision in The Island Award Case.

Evidence

1. The applicant relied on the following evidence in support of its application:

• Witness Statement of Jason Hodges filed 2 October 2012;
• Witness Statement of Darren King filed 25 January 2013;
• Witness Statement of Matthew Leslie Jones filed 28 June 2013;
• Witness Statements of Stuart Little filed 24 and 25 January 2013 and 8 August 2013; and
• Witness Statement of Steven Turner filed 4 March 2015; and

1. The respondent relied on the following evidence opposing the application:

• Witness Statement of Glen Bacic filed 9 July 2013;
• Witness Statements of Glen Scholes filed 29 November 2012, 21 June 2013 and 26 July 2013;
• Witness Statement of David Huskins filed 3 December 2012; and
• Witness Statement of Paul Irving filed 3 December 2012.

1. Each of the witnesses was cross-examined.

The PSA's case

1. The PSA submitted that the variations to the Island Award were intended to remove anomalies whereby persons employed as Chief Correctional Officers and Principal Correctional Officers at Kempsey, Dillwynia and Wellington Correctional Centres received inferior conditions to equivalent positions under other awards applying in other correctional centres. Particular attention was directed to the classifications of Assistant Superintendent and Senior Assistant Superintendent under the Crown Employees (Senior Assistant Superintendents and Assistant Superintendents, of Attorney General and Justice - Corrective Services NSW) Award 2009 ("the Assistant Superintendents Award").
2. The PSA contended that under the Island Award, Chief Correctional Officers and Principal Correctional Officers receive inferior conditions notwithstanding that Chief Correctional Officers receive an identical salary to Assistant Superintendents and Principal Correctional Officers receive an identical salary to Senior Assistant Superintendents.
3. The PSA indicated the inferior conditions under the Island Award in comparison to the Assistant Superintendent Award were as follows: 1. A lack of equitable weekend rostering; 2. No entitlement to Rostered Days Off ("RDOs"); and 3. No receipt of any incidental allowance.

Equitable weekend rostering

1. Clause 6.3 of the Assistant Superintendents Award provides as follows: "Weekend work for 7 day and 5 of 7 day workers shall be equitably distributed over a 12 month period and displayed on the 28 day roster. Such 5 of 7 or 7 day workers shall not be rostered for work for more than an average of 2 weekends per 19 day roster period worked."
2. There is no equivalent provision under the Island Award with respect to Chief Correctional Officers and Principal Correctional Officers, which, the PSA submitted, are equivalent classifications to Assistant Superintendents and Senior Assistant Superintendents respectively.
3. Clause 6.2 of the Island Award provides for ordinary hours of work, being an average of 38 hours per week, in each roster cycle. Officers up to and including the rank of Senior Correctional Officer and Senior Overseer, when required to perform rostered duties on weekends or public holidays, receive additional payments pursuant to cll 7.4.1 - 7.4.4 of the Island Award. Chief Correctional Officers and Principal Correctional Officers are not covered by cll 7.4.1 - 7.4.4.
4. The PSA submitted that the absence of any requirement for equitable rostering for weekend work meant that Chief Correctional Officers and Principal Correctional Officers may (my emphasis) be rostered to work an unlimited number of weekend shifts without any additional remuneration.
5. It was submitted: "The Island Award makes no provision to ensure that the burden of weekend work is equitably shared between Chief Correctional Officers and Principal Correctional Officers or between Chief Correctional Officers and Principal Correctional Officers and other staff. In the absence of such provisions, the potential for a greater burden of weekend work falling on Chief Correctional Officers and Principal Correctional Officers is clear."
6. Mr Little gave evidence of the negotiations entered into by the parties in the lead up to making the Assistant Superintendents Award to provide for payment of annualised salaries for Assistant Superintendents and Senior Assistant Superintendents. He stated: "…In 2005 the Commissioned Officers Vocational Branch (COVB) negotiated a new award with the Department for the payment of annualised salaries for Assistant Superintendents and Senior Assistant Superintendents. The terms of that award require these officers to work a maximum of two weekends per 28 day roster period."
7. The PSA contended that it is fair and reasonable for provision to be made in the Island Award to ensure that Chief Correctional Officers and Principal Correctional Officers are fairly and equitably rostered to undertake weekend work, primarily on the basis that there are, it was submitted, sufficient Chief Correctional Officer and Principal Correctional Officer positions to enable equitable rostering without additional cost to CSNSW.

Additional RDOs

1. The PSA submitted that under cl 8.2 of the Island Award, officers up to the rank of Senior Correctional Officer or Senior Overseer are entitled to have their ordinary hours worked "on the basis of a rostered day off in each 20 working days of a 28 day roster cycle". Similarly, Assistant Superintendents and Senior Assistant Superintendents have an equivalent entitlement under cl 8.1 of the Assistant Superintendents Award. There is no equivalent entitlement for Chief Correctional Officers and Principal Correctional Officers under the Island Award.
2. The PSA argued that the consequence of being entitled to only two rostered days off (RDOs) per year is that Chief Correctional Officers and Principal Correctional Officers work 40 hours each and every week where the ordinary hours are to average 38 hours per week. There is nothing to suggest that it was intended that Chief Correctional Officers and Principal Correctional Officers be required to work 40 hours per week without either accruing an entitlement to a RDO or receiving additional remuneration above the annualised salary.
3. The PSA's evidence, particularly that of Mr Hodges, indicated that the staffing of correctional centres is determined according to what is referred to as the "209 formula", which is calculated on a basis that includes provision for 12 rostered days off per year for all staff, including Chief Correctional Officers and Principal Correctional Officers. It was contended that as staffing numbers, including those affected by the Island Award, are calculated on the basis of 12 RDOs for all staff, there should be sufficient staff to cover the provision of one RDO per roster cycle. The evidence also revealed that CSNSW agreed that the RDOs could be accommodated but only if it were cost neutral and that would require certain posts to be left vacant. The members of the PSA were not prepared to agree to that event.

Incidental allowance

1. The Island Award provides for an "incidental allowance" to officers up to the rank of Senior Correctional Officer or Senior Overseer (but not Chief Correctional Officers and Principal Correctional Officers). The incidental allowance is prescribed in cl 12.3 of the Island Award as follows: 12.3 Incidental This is to compensate for full participation in Area and Case Management, including maintenance of Case Management files, training junior staff and roster preparation (where appropriate), and for the progressive introduction of electronic security and inmate monitoring systems. Individual rates of this allowance are shown in Part B Schedule 1 - Salaries and Incidental Allowances - Table 2 for Custodial Officers and table 3.1 for Industrial Officers.
2. Similarly, it appears Assistant Superintendents and Senior Assistant Superintendents receive an incidental allowance for participation in case management of inmates, although this is not provided under the Assistant Superintendents Award. According to the evidence of Mr Little the incidental allowance is paid to Senior Assistant Superintendents and Assistant Superintendents pursuant to an agreement made in 2006 between the applicant (through its Commissioned Officer's Vocational Branch (the "COVB")) and CSNSW. Mr Little's evidence as to the reason for the payment (which was not challenged) was that it was paid for the officer's participation in case management of inmates. There was no other direct evidence as to the reasons for, or terms of, this agreement, although there was other evidence (relating to the work model under the Island Award) that touches upon the issue. I will come to it in due course.
3. The PSA submitted that Chief Correctional Officers and Principal Correctional Officers undertake the same duties for which the allowance is payable, area management and case management duties as well as training of junior staff and roster participation where necessary.
4. It was submitted that, in circumstances where Chief Correctional Officers and Principal Correctional Officers receive the same salary, but do not receive any additional allowance for undertaking the same duties, there is an obvious unfairness which should be corrected.

Respondent's case

1. CSNSW's position as to jurisdiction to vary the Island Award due to the constraints imposed by the Regulation had two aspects. The first, raised by the Motion, relies particularly on cl 6(1)(d). That clause provides: 6 Other policies (1) The following policies are also declared, but are subject to compliance with the declared paramount policies: … (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.
2. I have noted above that the respondent accepted that its argument had a time limitation. While that limit expired soon after submissions were received, it was submitted it would be, in a sense, renewed by another order anticipated to be made with effect from 1 July 2015. That submission was consistent with evidence given by Mr Turner who stated that an agreement had been reached for a 2.5 per cent increase in rates of pay with effect from 1 July 2015.
3. In fact an award, the Crown Employees (Public Sector - Salaries 2015) Award, was made on 8 April 2015, increasing salaries and salary related allowances, including the Incidental Allowance, under the Island Award by 2.5 per cent with effect from 1 July 2015. The applicant's response to this aspect was to submit that the Working with Children Case and the Wages Staff (Rates of Pay) Case were authorities confined to the subject matters dealt with in the primary order. That would mean that the subject matter of the Incidental Allowance may not be able to be dealt with but the other two claims were unaffected. I do not regard that submission as beyond question, but for reasons which will become apparent I do not need to express a concluded view on the matter.
4. The second aspect relies on the failure to identify other employee-related cost savings to offset the costs which would be incurred if the application were successful in whole or in part. The respondent noted that prior to the decision in The Island Award Case the applicant had contended that any increases in employee-related costs resulting from this application could be offset against savings under the MOU. The respondent then submitted: "In light of this determination of the Full Bench, the PSA has now attempted to re-formulate its case to effectively avoid the issue of employee-related cost savings. The re-formulated case attempts to side-step the operation of sub-clause 6(1)(b) and clause 9 of the Regulation by claiming, in effect, that whatever the quantum of employee-related costs which would flow from the changes sought, the effect will be that "employee-related costs in respect of those employees are not increased by more than 2.5% per annum as a result of the increases awarded together with any new or increased superannuation employment benefits provided (or to be provided) to or in respect of the employees since their remuneration or other conditions of employment were last determined." (Regulation sub-clause 6(1)(a))."
5. The applicant's response was to submit that if the Commission was not satisfied there was sufficient room within the 2.5 per cent cap, the Commission should determine the merits and the costs of any improvements and permit the parties then to attempt to identify appropriate cost savings. The effect of the 2.5 per cent increase from 1 July meant that any increase in employee-related costs flowing from improvements sought in this application would exceed the cap.
6. In relation to the merits, the respondent contended that cl 1.1 of Part B, Sch 1 of the Island Award provides that the salaries paid to Principal Correctional Officers and Chief Correctional Officers "are annualised and include compensation for overtime, penalty rates, incidental allowances, shift allowances and 10 Rostered Days Off per annum." That is, the Island Award makes provision for the relevant conditions the PSA submits are lacking.
7. CSNSW submitted: "Nowhere in the PSA Submissions is any attempt made to rebut the presumption that, by virtue of the operation of section 10 of the Industrial Relations Act 1996 (Act), the Island Award sets "fair and reasonable conditions of employment for employees" (Re Storeworkers - IGA Distribution Pty Limited New South Wales Distribution Centres Award 2002 ([2002] NSWIRComm 156 at [38]-[42])."

Consideration

1. The respondent pressed that the questions of jurisdiction should be considered first, contending in essence that the "merits" of the proposed variations do not arise for consideration by the Commission in circumstances where jurisdiction has not been established. Given that the jurisdictional limitations are, at their highest, limited to a particular time period I consider it appropriate first to give consideration to the merits of the claims. That seems to me consistent with the requirements of s 10 of the IR Act and Clause 6 of the Regulation.
2. Section 10 of the IR Act provides: 10 Commission may make awards The Commission may make an award in accordance with this Act setting fair and reasonable conditions of employment for employees.
3. Clause 6(1) 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, but only if employee-related costs in respect of those employees are not increased by more than 2.5% per annum as a result of the increases awarded together with any new or increased superannuation employment benefits provided (or to be provided) to or in respect of the employees since their remuneration or other conditions of employment were last determined. (b) Increases in remuneration or other conditions of employment can be awarded even if employee-related costs are increased by more than 2.5% per annum, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs beyond 2.5% per annum. For this purpose: (i) whether relevant savings have been achieved is to be determined by agreement of the relevant parties or, in the absence of agreement, by the Commission, and (ii) increases may be awarded before the relevant savings have been achieved, but are not payable until they are achieved, and (iii) the full savings are not required to be awarded as increases in remuneration or other conditions of employment. (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.
4. The approach is also consistent in my view with the interpretation of cl 6(1) of the Regulation as explained by the Court of Appeal in Secretary of The Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of NSW [2014] NSWCA 138. Meagher JA said at [66]-[68]: "[66] The text of cl 6(1) makes clear that its purpose is to impose a limit on the exercise of the power of the Commission to make or vary an award that increases the remuneration or other conditions of employment of "public sector employees". That limit adopts as its reference point the costs to the employer of employing those employees and those costs are defined as "employee-related costs". They are costs to the employer related to the salary or other remuneration payable to the employee or to benefits, including superannuation, which may be payable to or in respect of the employee. [67] Those costs include costs that are not imposed directly on the employer by an award. The superannuation guarantee shortfall payable to the Commonwealth under s 16 of the Superannuation Guarantee (Administration) Act 1992 (Cth) is an example. The obligation to pay that charge is imposed by statute and the amount payable is calculated by reference to the salary or wage paid to the employee. It follows, all other matters remaining constant, that an increase in that salary or wage will result in an increase in that cost to the employer. [68] Clause 6(1)(a) permits the Commission to award increases in remuneration or other conditions of employment "that do not increase employee-related costs by more than 2.5% per annum". Clause 6(1)(b) permits it to award increases "that increase employee-related costs by more than 2.5% per annum" but only if sufficient "employee-related costs savings" (also a defined term) have been achieved to "fully offset the increased employee-related costs". To decide whether that limit will be exceeded it is necessary to determine the employee-related costs for the annual period before the commencement of the proposed award and the increases in those costs for the following period."
5. This approach is also consistent with the process outlined by the Full Bench of the Commission in both Re Crown Employees (NSW Fire Brigade Retained Firefighting Staff) Award 2008 [2012] NSWIRComm 122 at [32]; and Operational Ambulance Officers (State) Award [2015] NSWIRComm 17 at [5]-[6].
6. In those matters the parties consented to the proceedings being split into "two stages". The first stage of the proceedings concerned the merits of the application, while the second stage concerned identification of potential employee-related costs savings where any proposed remuneration increases would cause employee-related costs to increase by more than 2.5 per cent per annum.
7. There is not necessarily only one order in which to determine issues raised by a case. This matter has some considerable history. It also intersects regularly with the annual review of public sector salaries and related allowances. At some point, if these claims have merit, it will be necessary to tailor orders to comply with the Working with Children Case and the Wages Staff (Rates of Pay) Case.
8. Accordingly, the approach I prefer in determining whether the Island Award should be varied in the terms sought by the PSA is to firstly, determine whether, on the evidence, the Commission is satisfied that variations of the kind sought should be made so as to provide fair and reasonable conditions of employment. If so, the Commission must then consider whether the variations sought can be made in accordance with the proper application of the Working with Children Case and the Wages Staff (Rates of Pay) Case. Finally it is necessary to consider whether the variations sought, if granted, would increase employee-related costs in respect of those employees by more than 2.5 per cent per annum pursuant to cl 6(1)(a) of the Regulation and if so, whether employee-related cost savings have been identified and implemented.

Merits of the application

1. The PSA submitted that the respondent had not put forward any evidence or submissions contesting the "merits" of the PSA's application to vary the Island Award. At most, the PSA said, the respondent contended that the presumption the Island Award provides fair and reasonable conditions of employment had not been rebutted.
2. The respondent submitted that there is a presumption, by virtue of s 10 of the IR Act that the award provides for fair and reasonable conditions of employment for the relevant employees.
3. Mr Murphy of counsel for the respondent, in support of this submission, referred to Re Storeworkers - IGA Distribution Pty Limited New South Wales Distribution Centres Award 2002 [2002] NSWIRComm 156. In that decision the Full Bench said at [42]: "Thus, in proceedings brought to establish a new award or vary an existing award, it shall be presumed, for the purposes of s 10 of the Act, that the existing award sets fair and reasonable conditions of employment for employees. However, that presumption is rebuttable by the applicant upon the establishment, by evidence, that the award does not provide fair and reasonable conditions of employment."
4. The PSA submitted that the evidence clearly establishes that the award does not provide fair and reasonable conditions of employment, primarily by way of comparison to entitlements provided to persons of "equivalent" positions under a separate award. It was said that anomalies existed within the award and between this award and other awards.
5. The primary assumption underpinning the PSA submission is that Chief Correctional Officers and Principal Correctional Officers under the Island Award are "equivalent classifications" to those of Senior Assistant Superintendents and Assistant Superintendents respectively under the Assistant Superintendents Award. There does not appear to be any evidence explicitly directed to establishing the correctness of that proposition. Mr Little did assert equivalence in one of his statements and Mr Gibian submitted that that assertion was not challenged. Mr Little was at the time, however, a Senior Industrial Officer of the applicant. He had in that role responsibility for the Prison Officers Vocational Branch (the "POVB") but he is not a prison officer. His evidence also needs to be read in context. He said in relation to the making of the Island Award: "In 2005 the Commissioner Ron Woodham informed PSA Delegates that the Department would be constructing three new prisons at Kempsey, Wellington and Windsor (Dillwynia). The Commissioner informed PSA Delegates that unless the union agreed to major industrial reforms these prisons would be privatised. The reform process was called "The Way Forward" by the Department. The three prisons were also referred to as "The Way Forward Gaols". A number of new work practices were introduced into the new prisons and a stand alone or island award was negotiated for the three sites in order to avoid the privatisation that had been threatened by Commissioner Woodham. The new award introduced a flat rate of overtime, different RDO arrangement and the introduction of Chief and Principal Correctional Officers. A number of the conditions worked by Chief and Principal Correctional Officers differed from their equivalent rank of Assistant Superintendant and Senior Assistant Superintendant working in all other public gaols in New South Wales."
6. At the same time as he uses the language of equivalence he observes that different work practices were introduced at the correctional centres covered by the Island Award. It was also said by other witnesses that those work practices were intended to be rolled out to other correctional centres but that did not happen. The result is that the Island Award regulates three correctional centres which have different work practices to other correctional centres and continue to be regulated by a separate award, it would seem, for that very reason.
7. The only other evidence to suggest the two pairs of classifications are equivalent is by reference to the annual salaries paid. They are are identical. The inference is, at first blush, available but the totality of the evidence and the award variation principles militate against drawing it.

Award variation principles

1. It is convenient at this point to set out the relevant Arbitrated Case Principles of the Wage Fixing Principles stated in State Wage Case 2010 (No 2) [2010] NSWIRComm 29; 206 IR 218. In particular, sub-principles 8.4 and 8.5 provide: 8.4 Special Case Considerations 8.4.1 A claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles, and which is not based on work value and/or productivity and efficiency pursuant to this Principle, will be processed as a special case in accordance with the principles laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to therein at [165]-[168]. 8.4.2 All special cases shall be tested against the public interest. 8.5 Exclusions 8.5.1 Claims that are based substantially on comparative wage justice, attraction and retention or community standards will not be countenanced except as provided in Re Public Hospital Nurses (State) Award (No 3) [2002] NSWIRComm 325; (2002) 121 IR 28 and Re Health Employees Pharmacists (State) Award [2003] NSWIRComm 453; (2003) 132 IR 244. 8.5.2 There shall be no double counting, provided, however, that an Arbitrated Case claim may rely upon a cumulation of the factors referred to in this Principle.
2. Re Health Employees Pharmacists (State) Award [2003] NSWIRComm 453; 132 IR 244 concerned an application by the HSU to establish new rates of pay for various classifications by linking or aligning rates of pay for those classifications with the rates of pay of allegedly comparative classifications in other awards.
3. The Full Bench said at [69]-[70]: "[69] On balance, we consider that the contentions by the HSU as to appropriate wage adjustments based on comparable classifications should be treated with great caution, and with a need to avoid any notion of 'comparative wage justice' found in past wage fixing regimes. [70] It appears to us that the appropriate course is to make any adjustments in classifications and wages by reference to the actual value of the work of the classification under review, or more particularly changes in the value of that work, and to have regard to external classifications only where there is some demonstrable historical or other appropriate basis for such an appraisal (say in the case of a clear anomaly which may be rectified by reference to such comparisons)."

Historical context

1. It is appropriate then to note, in a little more detail, the circumstances which led to the making of the Island Award and the development of the alleged anomalies.
2. The PSA submitted that the initial Island Award made by consent in 2004, was made in particular circumstances such that it was not intended to give rise to "long-standing anomalies in conditions". The PSA argued that the developments subsequent to the making of the initial Island Award, being the introduction of the Assistant Superintendent Award in 2005, created anomalies and inequities whereby the Assistant Superintendents and Senior Assistant Superintendents received "identical levels of annualised salaries" in line with those under the Island Award, but also receive extra conditions of which the Principal Correctional Officers and Chief Correctional Officers do not have the benefit.
3. Mr Irving gave evidence as to sequence of negotiations which led to the making of the Island Award. Attached to his Statement were minutes of the meetings (about 10) in which negotiations took place between the parties. Those minutes reveal a series of meetings which addressed a range of issues over a reasonably lengthy period commencing on 20 October 2003 and concluding with an Enterprise Agreement on 12 February 2004. The Minutes of the first meeting suggest that negotiations, even at that point, had been ongoing for some time as they contain references to "previous offers" and there being only "two sticking points" (at that time). Mr Irving expressed the following observation: "In my view extensive consultation and considerable compromises were made by both parties. The POVB agreed with the terms and conditions of the Award. The Award was made by consent of the PSA and the Department of Corrective NSW."
4. I note that some of the meetings were with the COVB and others with the POVB. That is not necessarily surprising as both were branches of the applicant who represented the commissioned officers (or management ranks) and non-commissioned officers respectively. Ultimately it appears agreement was reached with the PSA through its POVB.
5. The PSA submitted the negotiations were hurried, but that is not what the minutes suggest. It may be that the negotiations became more urgent and therefore seemingly "hurried" at the end of the period, but I do not accept that supports the conclusion the PSA invites the Commission to draw. One cannot ignore the complete history of the negotiations. Nor can one ignore the undoubtedly considered submissions of the PSA to the Commission in support of the making of the award. Mr Scullion, appearing for the PSA said: "The new prisons which have been completed at Kempsey and Dillwynia, or the one entitled Dillwynia, are purpose built centres which are meant to be on modern lines and which require departure from the normal operation of traditional prisons. We have developed a completely new working profile for the operation of the two centres and for that reason the union is confident that the arrangement we have negotiated should apply to the centres and not to any others. There are distinct differences in the operation and in the geographical layout of the centres."
6. There was evidence from Mr Bindley, State Chairperson of the POVB, in which he portrayed the position at the delegates meeting held to approve the agreement for the making of a new award, as one in which there was no real choice but to accept the award or see the centres operated by private industry. I can accept that the prospect of privatisation had an impact on the negotiations, but it does not lead to a conclusion that the negotiations miscarried.
7. Also attached to Mr Irving's statement was a letter written to all staff, dated 27 May 2004, by the then Commissioner for Corrective Services. The Commissioner referred to the new award and the new ranks developed. He described the Principal Correctional Officer and Chief Correctional Officer ranks as replacing the Senior Assistant Superintendent and the Assistant Superintendent ranks. Consistent with this approach Mr Irving said in cross-examination: "Q. In any event, just going back to the parts of the document I was taking you to, the chief annualised salary was to be set by reference to the assistant superintendent's salary; correct? A. Yes. Q. And really it was intended to replace this superintendent rank at those correctional centres? A. Yes. Q. And the additional payment of 8,500 on annualised salary basis was to compensate for over time, penalties and the like? A. Yes. Q. And the same with respect to the principal correctional officer, it was to be set by the salary for that position was to be set starting at the salary for a senior assistant superintendent and adding in a component to compensate for over time, penalties and the like? A. No, over time, shift work, allowances and other things. Q. Various other entitlements? A. Yes. Q. And at that time under the commissioned officers award assistant superintendent and senior assistant superintendents were paid a salary and over time and penalties other entitlements separately? A. Correct. Q. All right. And this was an attempt to reach a figure to evaluate the additional amount so that there would be a fixed annualised salary? A. Yes."
8. The next event of significance was the making of the Assistant Superintendents Award in 2005 with annualised salaries for the ranks of Senior Assistant Superintendent and Assistant Superintendent. There is little or no evidence presently before the Commission which sets out the background to the making of the Assistant Superintendent Award in 2005 or the circumstances which led to the provision of annualised salaries to Senior Assistant Superintendents and Assistant Superintendents.
9. The PSA indicated in the course of oral submissions: "HIS HONOUR: Before you move on, I think you dealt with this, in at least part of the submission, the comparison between Assistant Superintendents and Superintendents receiving those benefits. Were those benefits introduced for those classifications after the making of this final award? GIBIAN: Yes. What happened is an annualised salary was introduced for these three centres for these ranks when this award was originally made in 2004. Your Honour will recall the evidence of Mr Irving in relation to the late decision to create these new ranks in place of the existing Superintendent and Senior Assistant Superintendent ranks because of the inability to reach an agreement with the COVB. At that time Assistant Superintendents and Senior Assistant Superintendents did not receive an annualised salary, that is, they were paid wages and overtime and all other benefits applicable to Correctional Officers, generally speaking. Later an annualised salary was introduced. It was set, as I say, at precisely the same quantum as for Principal Correctional Officers and Chief Correctional Officers at these three centres. But, in addition to receiving that annualised salary, they were not excluded from all of the conditions applicable from which Principal and Chief Correctional Officers were excluded. They did have, in addition to the same annualised salary, access to a roster arrangement which ensured that they had a rostered day off each month not over two months a year, provision to ensure that weekend work was equitably rostered and agreement was reached for an incidental allowance, somewhat lower than other ranks but an incidental allowance to be paid for case management work, et cetera. That was not a feature of the system. As I say, those ranks did receive an incidental allowance at that time because of the wages and overtime system, but the comparative arrangement of introducing an annualised salary of the same amount was a matter which post-dated the making of the initial "Island Award" as it's been referred to."
10. Mr Irving was cross-examined to a limited extent on the topic of annualised salaries in the Assistant Superintendents Award. His evidence was: "Q. This award introduced for the first time annualised salaries for those ranks, that is assistant superintendent and senior assistant superintendents? A. Yes. Q. Previously having been paid separately, salary and over time and other entitlements; correct? A. Yes. Q. And the rate of that annualised salary for those ranks were set by reference to the chief correctional officer and principal correctional officer positions at Kempsey, Dillwynia and Wellington? A. That's not my recollection. Q. So well they are identical? A. I can't recall that there was any discussion about the rates at Wellington, Kempsey and Dillwynia when these negotiations were occurring. Q. At any event, the rates are what they are in the awards? You accept that? A. Yes. Q. And if they are the same as the rates for chief correctional officers and principal correctional officers, that is identical, we are not to understand that was a coincidence; are we? A. I don't know whether it was a coincidence. I don't recall it being a deliberate design of the consent award. Q. You are not suggesting that they were dollar for dollar identical without there being some reference being made to the those rates? A. I can recall there were very detailed and in depth negotiations about the rates and a lot of work went into it and a lot of models were done before agreement was reached. Q. In any event, in addition to the annualised salary without figures it was, those ranks, that is senior assistant superintendents and assistant superintendents, were also to be rostered in a way that they had 12 rostered days off? A. Yes. Q. And were to be rostered in such a way that they worked no more than two weekends per roster period? A. Yes."
11. According to the evidence of Mr Little at some point in 2006 agreement was reached between the COVB and CSNSW for payment of the incidental allowance to Senior Assistant and Assistant Superintendents. It appears no application has been made to vary the relevant award.
12. The Island Award was reviewed in 2007 and 2012. This application was made in 2012 but there is no explanation for why concerns were not raised in 2007. Evidence led on behalf of the applicant suggested the sense of grievance about different conditions came later. Mr Little said in cross-examination: "Q. What you refer to as an "anomaly", you are saying it should be addressed by way of utilisation of the savings achieved by the deletion-- A. I say that the anomaly arose because the Department had always informed the union that on new facilities and the future of the Department was based on the models at Kempsey, Wellington, Dillwynnia through the islands, but what the Department then proceeded to do was to open up the Nowra facility, South Coast Correctional Centre, and once they did that, which I think was about 2008 or 2009, it must have been some time around there, it created a great sense of iniquity (sic) amongst these officers because they believed this was what they termed "the way forward gaols" and that they were operating on the view that was the system for how all gaols would be operating in the future, and it seemed to them the Department had done a great backflip and that these issues were never going to be addressed."
13. To similar effect Mr Hodges stated: "I recall that in or around 2006 the then Commissioner of the Department, Ron Woodham, came to our gaol and told us that all the gaols from now on would be "the Way Forward gaols". He told us that any new gaols would come under the 2007 Award but this did not happen. When the Nowra gaol opened earlier this year they come (sic) under the Crown Employees Employees (Senior Assistant Superintendents and Assistant Superintendents, Department of Corrective Services Award) 2009 and the Crown Employees (Correctional Officers, Department of Corrective Services) Award There is a feeling of resentment amongst the staff at Kempsey due to the different working conditions found in the Department. The staff at Kempsey feel like they are second class citizens and inferior officers because they do not have the same conditions as found elsewhere in the Department. The feeling around the gaol among the Principal and Chief Correctional Officers is that our working conditions are not fair and reasonable when compared with other officers at other correctional centres."
14. So a further key event seems to have been the opening of the South Coast Correctional Centre. That event however casts no light on the question of equivalence of the two pairs of classification here in question.

Are the Classifications Equivalent?

1. Applying, as I am bound to do, the principle that concluding adjustments in conditions are appropriate based on alleged comparator awards (and, in the case of the incidental allowance, an unregistered agreement) is to be approached with caution, I am not satisfied on the evidence before the Commission that these classifications are equivalent. The evidence suggests the Island Award was established to suit the context of the three correctional centres to which it applies and no others because they operate under different frameworks. The terms of the Island Award, particularly cl 1 of Pt B of Schedule 1, suggest that the subject matters of the present claim were specifically considered and dealt with in a particular way. The terms of that clause relevantly state: 1. Annualised Salary Package … 1.1 The above salaries are annualised and include compensation for overtime, penalty rates, incidental allowances, shift allowances and 10 Rostered Days Off per annum 1.2 Officers on an annualised salary package shall be entitled to take the equivalent of a rostered day off in each of the consecutive roster cycles in December and January each year. 1.3 Officers working under this arrangement shall work 20 days in each 28-day cycles for 10 roster cycles; and 19 days in two 28-day roster cycles for two roster cycles only. For the 13th roster cycle, the provisions of subclause 8.6 of this Award apply.
2. In these circumstances I am not satisfied that the positions are equivalent. I then need to consider whether otherwise the conditions are fair and reasonable.

Fair and reasonable conditions of employment

1. In City of Sydney Wages/Salary Award 2014 [2014] NSWIRComm 49, the Full Bench outlined at [19]-[22] the requirements of s 10 of the IR Act in considering what constitutes "fair and reasonable" for the purposes of the Act: "[19] The terms 'fair' and 'reasonable' in s 10 of the Act import a requirement that the conditions of employment set represent a proper and proportionate balance between the entitlements afforded employees and the interests of those employing them. [20] Consideration of what is fair and reasonable for an employee will necessarily involve a consideration of what is fair and reasonable having regard to the nature and circumstances of the employment afforded to the employee by an employer. That inquiry cannot be made in a vacuum. It must also extend to the broader context in which the employment occurs and ultimately, by effect of s 146 of the Act, the state of the economy in New South Wales. [21] The assessment required by s 10 will often involve consideration of collective relations between unions and employers or employer associations and, in appropriate cases, consideration of the history of terms and conditions that the parties chose to apply, formally and informally, to employees who will now be covered by the proposed award. [22] In particular cases, the Commission may be required to take into account not only differences between employers or industries in which employment is undertaken, but relevant differences between employees or classes of employees in a workplace, enterprise, project or industry. What may represent a fair and reasonable condition for one set of employees may not be for another, even where the employees are engaged by the same employer. That particular assessment may depend on the history as well as consideration of the present circumstances of the work to be performed."
2. The starting point is the presumption that the existing award sets fair and reasonable conditions. The question is whether there is now evidence before the Commission to support a conclusion, on a basis other than equivalence, that in respect of the three subject matters the Island Award does not do so. I will consider each of the claims separately.

Equitable Rostering

1. Mr Hodges gave evidence of his experience of weekend work. He said that he usually worked three weekends per roster period; he worked every weekend; almost every weekend; and most weekends. He also gave evidence of the detrimental social impact on his family and himself of being required frequently to work weekends. The disruption he described was credible and understandable. Unfortunately the same cannot be said for his estimate, as variously described, of the frequency of his weekend rostering.
2. In cross-examination he said that he "worked a lot of weekends". He also agreed that he sought the position at Kempsey in full knowledge of the terms of the Island Award. CSNSW cross-examined him on the basis of the records of his most recent 12 months of employment. He did not dispute those records which showed that on average he worked two weekends per roster period. He also accepted that he had the option to apply in advance for particular weekends to be rostered off, that he had availed himself of that option and his requests had been met.
3. The evidence elicited in Mr Hodges' cross-examination was consistent with that given by Mr Huskins, called by CSNSW, who had been at the time of making his statement the Director Custodial Operations Support. In that role he had overall responsibility for rostering. At the commencement of his cross-examination Mr Huskins accepted that he had misunderstood the PSA's application as to this subject. He thought the application had sought rostering individuals on alternate weekends and thus no more than twice in a roster period. Mr Gibian clarified for him the claim as follows: "Q. The third aspect of claim is this weekend rostering issue. Now that I have clarified for your benefit what the claim actually is, you understand that it is that principal and chief correctional officers would be rostered on on an average of two weekends per roster period? A. Yes"
4. The cross-examination then continued in the context of calculating the costs of the PSA's claim: "Q. The current situation is at an operational, practical level your understanding is that these centres at Kempsey, Dillwynia and Wellington that chiefs and principals would work an average of 26 weekends in the 12 month period, a total of 26 weekends in a 12 month period? A. An average. Q. Sorry? A. An average. Q. An average of 26 weekends in a 12 month period? A. That's right. … Q. But the point that you were making in your earlier answer is that it might be three in one month, one in the next month? A. That's right, yes. Q. And the capacity to balance that would be the period of 12 months? A. 12 months, that's right. Q. That's the current situation. That is your understanding from being in charge of the rostering for these centres and other centres in your previous role? A. That's right. …. Q. If that aspect of it were addressed, that is if you understood the PSA's claim would permit that type of flexibility, that is an averaging over a period of time, averaging of two per roster period over a 12 month period, if that were the case there would be no cost for the granting of the PSA's claim, is that right, in this respect, leaving? A. In the weekend respect it would be the same as it is now, that's right, no additional cost."
5. The effect of Mr Huskins cross-examination was to establish that Principal and Chief Correctional Officers work on average two weekends per roster period and that the PSA's claim, if successful, would have a nil cost. It seems to me it would not lead to any change in conditions either.
6. In the light of this evidence I cannot conclude that the existing conditions are not fair and reasonable.

Additional Rostered Days Off

1. There was no evidence, other than that based on equivalence, directed to showing that the existing award did not set fair and reasonable conditions in this respect. I am therefore not satisfied that a case has been made out for a variation of the kind sought.

Incidental Allowance

1. The same may be said of this claim. There was evidence that Principal and Chief Correctional Officers did case management work and there was by Mr Hodges (a fairly summary) description of the work involved, but nothing to indicate the context, nature, frequency or complexity of that work such as to permit any form of work value assessment. It is clear that at the time of making the Island Award an Incidental Allowance was included for other ranks. The amount has been adjusted relative to rates so there does not appear to have been any perceived change in the value of the work for which the allowance was originally set. And, of course it was specifically expressed to be included in the annualised salary.
2. I am not satisfied that a case has been made out for the granting of this allowance.

Special circumstances

1. I am not satisfied that the applicant has proved the existence of special circumstances. The terms of the Island Award, particularly Sch 1 Pt B cl 1 suggest that to grant these claims would involve double counting within the meaning of sub-principle 8.5.2 of the Commission's Wage Fixing Principles.
2. In view of the decision I have reached on the merits it is unnecessary for me to express a view on the question of jurisdiction and the related question of employee-related costs.

Order

1. The Commission makes the following orders: 1. The PSA's application for variation is refused.

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DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 December 2015