Definitive Report - Report No 377, March 2016

Case No 3118 (Australia) - Complaint date: 04-MAR-15 - Closed

Allegations: The complainants allege that the Government of the State of New South Wales has enacted legislation imposing restrictions on free collective bargaining on wages and other matters for state public sector workers, thus violating the principles of freedom of association and collective bargaining

1. 126. The complaint is set out in a communication dated 4 March 2015 from the Community and Public Sector Union (CPSU), the Public Service Association of New South Wales (PSANSW) and the Australian Council of Trade Unions (ACTU).
2. 127. The Government submitted its observations in a communication dated 2 September 2015, which contains the information transmitted by the New South Wales (NSW) Government.
3. 128. Australia has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98). It has neither ratified the Labour Relations (Public Service) Convention, 1978 (No. 151), nor the Collective Bargaining Convention, 1981 (No. 154).

A. The complainants’ allegation

1. 129. In their communication dated 4 March 2015, the CPSU, PSANSW and ACTU explain that:
   • – The CPSU is registered under the Federal Fair Work Act 2009 and is the largest union representing State and federal system public sector employees in Australia. It is composed of two groups: the State Public Services Federation (SPSF) Group which represents State public sector workers (approximately 90,000 employees of State governments in departments, agencies, statutory authorities, instrumentalities and State owned corporations, as well as general staff employees of universities) and the Public Sector Union (PSU) Group which represents Federal and Territory public sector workers.
   • – The PSANSW is a registered union under the Industrial Relations Act 1996 (NSW) and the Fair Work Act 2009 (federal). It represents members employed in the NSW public sector, including government departments, schools, prisons, statutory authorities, state-owned corporations, Technical and Further Education (TAFE) NSW and universities. The union represents approximately 40,000 members spread over 4,000 worksites.
   • – The ACTU is the peak body for Australian unions. Made up of 46 affiliated unions it represents almost 2 million working Australians and their families.
2. 130. By way of background, the complainants explain that: (1) the NSW public sector is the largest employer in Australia, employing approximately 11 per cent of the total NSW workforce (399,243 employees at the end of 2013); (2) in 2011–12, the NSW public sector made up 12.8 per cent of the NSW economy; (3) total NSW general government transaction expenses were AUD$64.5 billion in 2013–14, of which employee related costs accounted for 48 per cent; (4) over 60 per cent of public sector workers are engaged in the health (31.75 per cent) and education sectors (30.49 per cent); and (5) other major services include transport, police and justice, and community and social services. The complainants argue that the finances of the NSW State are extremely sound (operating surpluses in seven out of ten years since 2003), and that currently, the State has the strongest growth figures in the country and lower than national level unemployment rate.
3. 131. The complainants allege that while the State has the legislative capacity to make and amend employment law pertaining to employers and employees within the State, including the framework for collective bargaining, the trend over the last decade has been for states to relinquish their powers in relation to employment law (by either compulsion or consent), and for laws set by the Federal Government to prevail. In 2005 all employers (and their employees) trading as constitutional corporations where compulsorily transferred to the federal system of employment law under the Workplace Relations Act 1996 (federal). In 2010, the NSW Government transferred non-constitutional employers (and their employees) to the federal system to be covered by the Fair Work Act 2007 (which replaced the Workplace Relations Act 1996). According to the complainants, the outcome of this is that the State law applies only to employees of the State Government and federal law applies to private sector employers (including corporations owned by the state) and their employees. The two systems have different collective bargaining frameworks.
4. 132. The federal system is intended to facilitate collective bargaining at the enterprise level. The role of the federal arbitral body, the Fair Work Commission, is to provide a conciliation and arbitration function only when negotiations at the enterprise level have demonstrably failed, to regulate any conduct pertaining to industrial action, and to ratify contracts (known as agreements) once they have been completed and approved (by ballot of employees) at the enterprise level.
5. 133. The collective bargaining system in the NSW jurisdiction places greater emphasis on the role of the arbitral body, the NSW Industrial Relations Commission, in the striking of contracts (known as awards). Formally, the making of all awards in NSW is initiated by either an employer or union party making an application to the Commission to make or vary an award. In practice, extensive negotiations often occur between the parties prior to any application to the Commission being made. Where these negotiations result in a consensus position being reached, the function of the Commission is largely to ratify an agreed award. Where dissent between the parties exists, upon a formal award application to the Commission being made, the Commission takes an active role in conciliation and, where this fails, undertakes compulsory arbitration. Compared to federal laws, the NSW system presents a lower barrier to the use of compulsory arbitration to resolve collective bargaining disputes and subsequently, the State Commission more frequently performs a role as a third party to negotiations.
6. 134. According to the complainants, the industrial relations policy has been a principal tool in giving effect to the Government’s fiscal policy. They allege that the policy explicitly seeks to impose restrictions on the ability of unions to bargain collectively and the outcomes which they can achieve, through a series of interrelated legislation and subordinate regulation and policy. Pertinent to this complaint are:
   • – Industrial Relations Act 1996;
   • – Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011;
   • – Industrial Relations Amendment (Public Sector Conditions of Employment) Regulation 2011;
   • – Public Sector Employment and Management (PSEM) Amendment Bill 2012;
   • – State Revenue and Other Legislation Amendment (Budget Measures) Act 2014;
   • – The Government Sector Employment Act 2013;
   • – NSW Public Sector Wages Policy 2011; and
   • – Managing Excess Employees Policy.
7. 135. The complainants consider that the combined effect of these items is to legislatively prohibit unions from achieving pay increases above those set by the government policy, to prescribe the manner in which all awards are to be determined, and to limit the matters upon which awards can bestow enforceable entitlements upon employees.
8. 136. The complainants explain that the PSANSW challenged the constitutional validity of the legislative provisions contained in the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011. The High Court found the legislation to be constitutionally valid. The central provision of the proceedings was section 146C of the Act:
   • 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. (emphasis added)
     • (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.
9. 137. Thus, according to the complainants, section 146C(1) removes all discretion held by the NSW Industrial Commission to consider any subject matter which is dealt with in a government policy that has been declared by the regulations, as it mandates the Commission to give effect to any policy on conditions of employment of public sector employees. The broad scope of the power to set policy on any aspect of the conditions of employment means that there is no capacity for the PSANSW to enter into any type of binding agreement or award with the Government in relation to matters determined by declared government policies. Thus, according to the complainants, the Government has conferred on itself the capacity to unilaterally determine which conditions can be dealt with through either bargaining or arbitration.
10. 138. According to the complainants, section 146C(2) provides the minister with wide-ranging authority to expand the scope of the current arrangements by two mechanisms: (1) allowing the constraints on the Commission to be set out in a regulation; and (2) enabling a limitation to a term and condition by reference to this regulation in a government policy. Section 146C(3) gives any regulation setting out a policy the power to override and render inoperative provisions of an award or order that is inconsistent with the terms of that regulation or policy. Section 146C(7) provides that “this section has effect despite section 10 or 146 or any other provision of this or any other Act”. Section 10 provides that “the Commission may make an award in accordance with this Act setting fair and reasonable conditions of employment for employees”. Section 146 sets out the general functions of the Commission:
    • 146 General functions of Commission
      • (1) The Commission has the following functions:
      • (a) setting remuneration and other conditions of employment,
      • (b) resolving industrial disputes,
      • (c) hearing and determining other industrial matters,
      • (d) inquiring into, and reporting on, any industrial or other matter referred to it by the Minister,
      • (e) functions conferred on it by this or any other Act or law.
      • (2) The Commission must take into account the public interest in the exercise of its functions and, for that purpose, must have regard to:
      • (a) the objects of this Act, and
      • (b) the state of the economy of New South Wales and the likely effect of its decisions on that economy.
      • This subsection does not apply to proceedings before the Commission in Court Session that are criminal proceedings or that it determines are not appropriate.
11. 139. Section 146(2) requires the Commission to take into account the “public interest” and the objects of the Act, which are set out in section 3:
    • 3 Objects
      • The objects of this Act are as follows:
      • (a) to provide a framework for the conduct of industrial relations that is fair and just,
      • (b) to promote efficiency and productivity in the economy of the State,
      • (c) to promote participation in industrial relations by employees and employers at an enterprise or workplace level,
      • (d) to encourage participation in industrial relations by representative bodies of employees and employers and to encourage the responsible management and democratic control of those bodies,
      • (e) to facilitate appropriate regulation of employment through awards, enterprise agreements and other industrial instruments,
      • (f) to prevent and eliminate discrimination in the workplace and in particular to ensure equal remuneration for men and women doing work of equal or comparable value,
      • (g) to provide for the resolution of industrial disputes by conciliation and, if necessary, by arbitration in a prompt and fair manner and with a minimum of legal technicality,
      • (h) to encourage and facilitate cooperative workplace reform and equitable, innovative and productive workplace relations.
12. 140. The complainants point out that the objectives that require the Commission to take into account the need to provide “a framework for the conduct of industrial relations that is fair and just” or to promote “efficiency and productivity in the economy of the State” or to “encourage and facilitate co-operative workplace reform and equitable, innovative and productive workplace relations” are all subordinate to the requirement to give effect to the government policy. Thus, the complainants consider that the intention of the legislative amendments is for government policy to prevail even when it is not fair or just or even when it is contrary to the public interest.
13. 141. The complainants indicate that the Government used the regulatory power conferred by the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 to issue the Industrial Relation (Public Sector Conditions of Employment) Regulation 2011 (the 2011 Regulation) on the same day the legislation became law. The key elements of the regulation are as follows:
    • 4 Declarations under section 146C
      • The matters set out in this Regulation are declared, for the purposes of section 146C of the Act, 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.
    • 5 Paramount policies
    • The following paramount policies are declared:
      • (a) Public sector employees are entitled to the guaranteed minimum conditions of employment (being the conditions set out in clause 7).
      • (b) Equal remuneration for men and women doing work of equal or comparable value.
        • Note. Clause 6(1)(c) provides that existing conditions of employment in excess of the guaranteed minimum conditions may only be reduced for the purposes of achieving employee related cost savings with the agreement of the relevant parties.
        • Clause 9(1)(e) provides that conditions of employment cannot be reduced below the guaranteed minimum conditions of employment for the purposes of achieving employee related cost savings.
        • 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 cent per annum.
      • (b) Increases in remuneration or other conditions of employment that increase employee-related costs by more than 2.5 per cent 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 organization of employees with one or more members whose interests are directly affected by the matter.
        • 7 The guaranteed minimum conditions of employment
      • (1) For the purposes of this Regulation, the guaranteed minimum conditions of employment are as follows:
      • (a) Unpaid parental leave that is the same as that provided by the National Employment Standards.
      • (b) Paid parental leave that applies to the relevant group of public sector employees on the commencement of this clause.
      • (c) Employer payments to employee superannuation schemes or funds (being the minimum amount prescribed under the relevant law of the Commonwealth).
      • (2) The guaranteed minimum conditions of employment also include the following:
      • (a) Long service or extended leave (being the minimum leave prescribed under Schedules 3 and 3A of the Public Sector Employment and Management Act 2002 or the Long Service Leave Act 1955, whichever Act is applicable to the employment concerned).
      • (b) Annual leave (being the minimum leave prescribed under the Annual Holidays Act 1944).
      • (c) Sick leave entitlements under section 26 of the Act.
      • (d) Public holiday entitlements under the Public Holidays Act 2010.
      • (e) Part-time work entitlements under Part 5 of Chapter 2 of the Act.
        • 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.
14. 142. The complainants consider that the above provisions place a legislative constraint on wage outcomes of collective bargaining for the following reasons:
    • – The key feature of the regulation is the limiting of increases in remuneration or other conditions of employment to 2.5 per cent per annum.
    • – Under these laws, the NSW Government can dictate the remuneration and conditions of employment without its employees having any means to either fairly bargain or to seek the intervention of an independent arbitrator.
    • – The current rate of 2.5 per cent is struck on the basis that it reflects the midpoint of the Reserve Bank of Australia’s (RBA) inflation target. Implicitly, the Government assumes that the RBA will use its monetary policy lever to retain prices within the target band, such that in the long-run, public sector pay levels will retain their real value.
    • – There is nothing to prevent the regulation from being amended to a rate below 2.5 per cent. Similarly, there is no compensation envisaged in the event the price level exceeds 2.5 per cent. There is the evident risk the cap will operate to reduce the real wages of public sector employees over time.
    • – The legislation allows increases above the 2.5 per cent cap but in very limited circumstances. Any such increase is contingent on the identification of employee related cost savings that fully offset the increase in employee costs. This effectively means wage rises above the cap can only be achieved by the cashing out of existing conditions.
    • – Clause 6(1)(b) constrains the timing of the awarding and payment of increases in excess of the 2.5 per cent cap. It also enables employees to be short-changed where the full value of savings achieved need not be passed on to employees as a remuneration increase.
    • – Clause 6(1)(d) requires all matters the subject of proceedings to be resolved and prevents further claims to be made during the term of the award.
    • – Clause 6(1)(e) constrains the capacity of the NSW Commission to order backdating of payment.
    • – The strictures imposed by the Act and Regulations led to the Public Service Association (PSA) accepting salary increases of 2.5 per cent on behalf of public sector workers in 2011 and 2012.
15. 143. The complainants further indicate that in March 2012, the federal Government passed legislation to increase the mandatory employer contribution rate to an employees’ superannuation fund (pension account). The Act sets out a series of incremental increases from the then rate of 9 per cent through to 12 per cent commencing 1 July 2013, completing 1 July 2019. This Act applies to all employers in Australia including State governments. On 1 May 2013, the NSW Government announced its intention to absorb the first incremental increase of 0.25 per cent and all increases thereafter, into the 2.5 per cent wages cap. The PSA opposed the enforceability of this position within the terms of the regulation as it was then constructed. On 17 June 2013 in Re Crown Employees Wages Staff (Rates of Pay) Award 2011 & Ors (No. 1) [2013] NSWIRComm 53, the Full Bench of the Commission ruled in favour of the PSA, deciding that increases of up to 2.5 per cent were available to employees as the remuneration cap pertained only to costs awarded by the Commission itself, and not to employee related costs compelled by Commonwealth government legislation. An interim increase of 2.27 per cent was awarded while the Government sought further legal mechanisms to circumvent the decision. The Government twice amended the regulations to specify the inclusion of increases to the superannuation guarantee within the wages cap. On both occasions these amendments were disallowed by a vote in the upper house of NSW Parliament, with such votes occurring on 21 August 2013 and 5 March 2014. On 6 May 2014 in Secretary of The Treasury v. Public Service Association & Professional Officers’ Association Amalgamated Union of NSW (2014) NSWCA 138, the Court of Appeal in the Supreme Court of NSW upheld the Government’s appeal of the Commission’s June decision and ordered the subsequent direction issued by the Commission on 17 December 2013, that the full 2.5 per cent be paid, to be quashed. On 17 June 2014, the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 was passed by both houses of Parliament under the pretext of a budget supply bill. Schedule 5, Part 5.2, clause 6 of this Act contains the regulatory amendments previously disallowed by the upper house pertaining to superannuation:
    • 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 cent 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 cent 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 cent 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.
      • (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.
      • (4) In subclause (1)(a), new or increased superannuation employment benefits means any new or increased payments by an employer to a superannuation scheme or fund of an employee as a consequence of amendments to the Superannuation Guarantee (Administration) Act 1992 of the Commonwealth or the State Authorities Non contributory Superannuation Act 1987.
16. 144. According to the complainants, on 22 June 2011, the Coalition Government announced a new policy in relation to management of excess employees, which contains a number of features that constitute a significant departure from the earlier policies regarding the management of displaced employees:
    • (1) The policy removes reference to redeployment being the principal means of managing excess employees.
    • (2) An employee is to be declared excess by their agency immediately they no longer have a substantive position and must, upon being declared excess, be given two weeks to choose between accepting an offer of voluntary redundancy or pursuing redeployment (clause 4.1).
    • (3) An excess employee must be made one (and one only) offer of voluntary redundancy with the voluntary redundancy package comprising four weeks (or five weeks) notice, severance payment of three weeks per year of service up to a maximum of 39 weeks and an additional payment of up to eight weeks’ pay (clause 5). No provision is made for job assist payments or job search leave.
    • (4) Excess employees who decline the voluntary redundancy offer are entitled to a three months’ retention period during which they may be placed in any suitable position without advertising and are to be provided with priority access to redeployment opportunities. Redeployment means permanent placement in a funded position (clause 6).
    • (5) An excess employee who accepts a temporary secondment or assignment during the retention period will continue to be employed for the remaining period of the secondment or assignment (clause 6.2.1). Access to priority assessment or direct placement without advertising will only apply during the retention period.
    • (6) If an excess employee is placed in a position at a lower grade, they are to be entitled to salary maintenance at their former grade for a period of three calendar months (clause 6.4).
    • (7) If an excess employee is not redeployed at the end of the three months’ retention period, they will be forcibly retrenched. The severance payment upon forcible retrenchment is the statutory minimum payment under the Employment Protection Regulation 2001, plus 4 weeks’ (or 5 weeks’) salary in lieu of notice (clause 7).
17. 145. The PSA challenged this policy in the Industrial Court seeking declaratory relief in relation to contracts of employment of public sector employees who had been declared excess, to determine:
    • – Whether government policies relating to the management of excess employees formed part of the contracts of public sector employees who had been declared excess; and
    • – Whether the services of any of the employees may only be lawfully dispensed with in accordance with section 56 of the PSEM Act.
18. The PSA sought orders declaring that the contract of employment, employment and collateral arrangements and/or related conditions between employers and employees in the public sector who had been declared excess, are harsh, unfair, unconscionable and contrary to the public interest. The Industrial Court found in favour of the Association’s application, finding the arrangement to be “unfair” under section 105 of the Industrial Relations Act 1996.
19. 146. The complainants allege that the Government responded to this judgment by introducing the PSEM Amendment Bill 2012, which effectively nullified the outcome of the judgment as it may have applied to similar cases in the future. Significantly, it amended section 56 to remove the requirement that excess officers could not be retrenched while there was “useful work” available in a department. This removed the common obligation on employers in a redundancy situation to take steps to mitigate the impact of the abolition of a position by genuinely exploring alternative employment. The complainants refer to the following amendment:
    • 56 Excess officers of Departments
      • (1) If the appropriate Department Head is satisfied that the number of officers employed in the Department or in any part of the Department exceeds the number that appears to be necessary for the effective, efficient and economical management of the functions and activities of the Department or part of the Department.
      • (a) the Department Head is to take all practicable steps to secure the transfer of the excess officers to on-going public sector positions, and
      • (b) the Department Head may, with the approval of the Commissioner, dispense with the services of any such excess officer who is not transferred to an on going public sector position.
      • (2) An officer does not cease to be an excess officer merely because the officer is engaged (on a temporary basis) to carry out other work in a public sector agency.
      • (3) In this section: on-going public sector position means a position in a Department, or in any other public sector service, that is not temporary.
20. 147. According to the complainants, to compound the injustice the Government also inserted in the PSEM Act a new section 103A which states:
    • Division 2 of Part 9 of Chapter 2 of the Industrial Relations Act 1996 (Unfair contracts) does not apply to contracts of employment of members of staff of any public sector agency that are alleged to be unfair for any reason relating to excess employees, including the following:
      • (a) when and how members of staff become excess employees,
      • (b) the entitlements of excess employees (including with respect to redeployment, employment retention, salary maintenance and voluntary or other redundancy payments),
      • (c) the termination of the employment of excess employees.
21. 148. Further, according to the complainants, the effects of these changes were worsened upon the commencement of the Government Sector Employment Act 2013 which replaced the PSEM Act as the underpinning legal structure for public sector employment in the state on 24 February 2014. The jurisdictional exclusion of excess employees from the unfair contract provisions of the Industrial Relations Act was maintained under section 74 of the 2013 Act:
    • 74 Excess employees-jurisdiction of Industrial Relations Commission
      • (1) In this section:
      • “excess employee” means an employee of a government sector agency who is determined by the head of the agency to be excess to the requirements of the relevant part of the agency in which the employee is employed, and includes an employee of a government sector agency who has been notified by the head of the agency:
      • (a) that his or her role, position or work in the agency has been abolished or terminated, and
      • (b) that he or she is an excess or displaced employee.
      • Any such person does not cease to be an excess employee merely because the person is engaged (on a temporary basis) to carry out other work in the same or any other government sector agency.
      • “termination” of the employment of a person includes dispensing with the services of the person.
      • (2) Division 2 of Part 9 of Chapter 2 of the Industrial Relations Act 1996 does not apply to contracts of employment of employees of any government sector agency that are alleged to be unfair for any reason relating to excess employees, including the following:
      • (a) when and how employees become excess employees.
      • (b) the entitlements of excess employees (including with respect to redeployment, employment retention, salary maintenance and voluntary or other redundancy payments),
      • (c) the termination of the employment of excess employees.
22. 149. The complainants explain that the requirement upon the head of a Public Service agency to take any measures prior to declaring an employee excess was entirely excluded from the 2013 Act. The authority to make such a decision is now described in Section 13 of the rules to the 2013 Act (which can be amendment by an appointed public service commissioner):
    • 13 Excess non-executive employees
      • (1) The head of a Public Service agency may determine a person who is employed in ongoing employment in the agency other than as a Public Service senior executive to be excess to the requirements of the relevant part of the agency in which the person is employed.
      • (2) In making any such determination and in dealing with any such excess employee, the agency head is to have regard to any relevant government policies that were in force immediately before 24 February 2014 and are notified by the Commissioner for the purposes of this rule. Any such policies are to be made publicly available on a website provided and maintained by the Commissioner.
23. 150. The complainants consider that the cumulative effect of these legislative and policy changes has been facilitating the undertaking of mass job cuts across the NSW public sector. Since the introduction of the policy in 2011, 6,789 employees have been made redundant under it.
24. 151. Furthermore, according to the complainants, clause 6(1)(f) of the Regulations prevents policies “regarding the management of excess public sector employees” from being “incorporated into industrial instruments”. The 2013 Act defines an industrial instrument to mean: an award, an enterprise agreement, a public sector industrial agreement, a former industrial agreement, a contract determination or a contract agreement. The complainants allege that the significance of this provision is that it prevents public sector employees from obtaining any legally enforceable rights in relation to redundancy. The legal standing of this clause was firstly upheld by the Commission in the SASS Redundancy Case, rejected and declared invalid upon appeal by the PSA in the Court of Appeal in the Supreme Court of NSW, only to be reinstated as a valid law by specific reference in the explanatory notes to Schedule 5 of the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014:

    Explanatory note

    • Schedule 5.1 amends the Industrial Relations Act 1996 to give effect to the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 as a regulation validly made under that Act.
    • Schedule 5.2 sets out the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014. The Regulation remakes, with some changes for clarification, the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011.The remaking of the Regulation confirms the validity of the Government policies that are required to be given effect to by the Industrial Relations Commission. In particular, it confirms the Government’s policies regarding the management of excess public sector employees and the 2.5 per cent cap on increases in remuneration or other conditions of employment (including superannuation).
    • Schedule 5.3 repeals the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011.
25. 152. The complainants argue that the clear intention of the Conventions pertinent to this complaint is to embed collective bargaining as the preferred and default mechanism for determining the wages and conditions of public sector workers. Actions that cause a departure from this norm should occur only as “exceptional measures”. It is the view of the complainants that the overall economy of NSW is stable and the fiscal circumstances confronted by the NSW Government are benign. Departure from a system of free collective bargaining in these circumstances represents a fundamental repudiation of the intention of the relevant conventions.
26. 153. While the complainants submit that the Committee should not find an economic stabilization policy justified, they argue that if the Committee is to opine that the fiscal circumstances faced by the NSW Government satisfied the need for an economic stabilization policy, the Committee should also take into account the manner in which these measures have been implemented. Specifically, that the measures were not preceded by any consultation with public sector workers or their representatives; are not temporary or time-limited in any way; and are not accompanied by safeguards to effectively protect the standard of living of the workers they affect.
27. 154. The complainants conclude that collectively, the measures outlined in this complaint remove altogether any significant role for collective bargaining in determining wages and conditions of public sector workers in NSW.

B. The Government’s reply

1. 155. By its communication dated 2 September 2015, the Government of Australia transmits a reply of the NSW Government on the allegation in this case.
2. 156. The NSW Government explains that the primary NSW statute regulating industrial relations is the Industrial Relations Act 1996. While its application has narrowed since its making, it still applies to local government workers and State public sector workers, and in particular, to the workers who are the subject of the complaint. The Act provides for the making of industrial instruments which document employee pay and conditions, relief from unfair dismissal, resolution of industrial disputes, regulation of employee and employer organizations and other matters. It establishes an independent tribunal, the NSW Industrial Relations Commission (IRC), whose key functions are the making of industrial instruments and the resolution of disputes. The Act also establishes an Industrial Court. Judges of the Court are also members of the Commission, but only judicial members of the Commission are members of the Court. The Act provides for the setting of pay and conditions primarily by means of awards. Awards are legally enforceable documents made by the IRC which detail pay and conditions for the employers and employees to whom they apply, who may be all of the employees and employers in an industry or occupation, or employers and employees at a particular enterprise. Awards are usually made following negotiation and agreement between the relevant employer and union parties. In the event that negotiations do not yield an agreed outcome, the IRC may conciliate between the parties, and in some cases, arbitrate. In making industrial instruments including awards, the Commission must have regard to matters such as public interest, and Government policy regarding the conditions of public sector employees. While other instruments – such as enterprise agreements – are available, awards are the primary instruments which set the pay and conditions of public sector employees.
3. 157. The NSW Government indicates that the established mechanisms for varying the pay of public sector employees are to either vary the pay rates in the relevant awards, or to make a new award. This will usually follow negotiation and agreement between the Government and the unions representing the relevant employees. For example, negotiations for a 2.5 per cent pay increase for 2015–16 were recently concluded between the NSW Government and relevant unions (including the PSANSW), and the increase was codified by the IRC making a new award, the Crown Employees (Public Sector – Salaries 2015) Award.
4. 158. The NSW Government indicates that some public sector conditions, such as conditions of engagement, transfers and secondments, and misconduct (but not pay) may be set by the Government Sector Employment Act 2013. The operation of this and Industrial Relations Act is intended to be complementary.
5. 159. Furthermore, one way in which consultation between NSW social partners regarding industrial matters is supported is under the Industrial Relations Advisory Council Act 2010. This Act provides for an Industrial Relations Advisory Council (IRAC), chaired by the Minister for Industrial Relations, and composed of representatives of unions, employers, local government, State government employer and policy agencies and legal practitioners. The IRAC was established in 2010 and is required to meet twice a year. Discussions at the IRAC may canvass any matter brought to the meeting by its members. The IRAC has met on eight occasions since its inception. There have been several meetings between the Minister for Industrial Relations and IRAC members since December 2010 where unions had the opportunity to raise concerns about the NSW Wages Policy. Unions NSW has attended each meeting of the IRAC, and the PSA attended the fourth meeting of IRAC on 23 March 2012, the fifth meeting on 5 October 2012 and the sixth meeting on 18 April 2013. Public sector wages were discussed at the fifth and sixth meetings but the Wages Policy was not raised as a particular item for discussion by any member attending. The then Minister has discussed the state of the economy at several IRAC meetings.
6. 160. Regarding the NSW Government Public Sector Wages Policy, the NSW Government indicates that it applies to the “government sector” as defined in the Government Sector Employment Act, which includes public service agencies, departments, executive agencies, state owned corporations including their subsidiaries, and independent statutory bodies. As at 30 June 2014 there were 328,311 public service employees in the whole government sector. Over the years, various NSW governments have developed policies regarding the appropriate level of public sector wages. NSW Government Public Sector Wages Policies have sought to deliver fair wage outcomes to employees, subject to ensuring that any increases are not to the detriment of the Government’s fiscal position. For example, the 2007 policy put in place by the then Labor Government began by stating that:
   • The NSW Public Sector Wages Policy 2007 (“the Policy”) is to maintain wages in real terms and encourage workplace reform in return for additional increases. To maintain real wages, the NSW Government will fund a 2.5 per cent annual increase in employee related expenses. Agencies must fund any increases above 2.5 per cent per annum to wages, or other employee related expenses such as allowances, superannuation etc, through employee related cost saving measures.
7. 161. An increase of 2.5 per cent is the midpoint of the RBA’s inflation target band of 2–3 per cent per annum. Choosing this figure as the target for wages growth is consistent with long term movements in the Consumer Price Index and is a valid forward-looking measure that is established by an independent body. An increase to wages of 2.5 per cent is still seen as appropriate in Australia’s current economic climate. In its Annual Wage Review 2014–15 decision, the Fair Work Commission’s Expert Panel referred to the RBA’s medium-term target band of 2–3 per cent in awarding a wage increase of 2.5 per cent to minimum weekly wages and modern award weekly wages. In practice however, public sector wage outcomes under the 2007 policy failed to meet this target, with real average wage increases in the NSW public sector between 1997 and 2011 totalling 21.9 per cent. NSW Treasury estimates that this approach over the four years from 2007 to 2011 cost the State $900 million in unfunded public sector wages.
8. 162. Following its election in March 2011, the current Liberal National Party Government sought to put in place a stronger and more effective public sector wages policy. By achieving fiscal discipline, the Government would be in a better position to achieve its commitments to improving the economy and public services of the state. While similar to its predecessor, the 2011 policy was reinforced by giving legislative force to its provisions to ensure compliance. This was done by amending the Industrial Relations Act to mandate the matters to which the Commission must have regard when making awards or orders. Specifically, a new Section 146C was inserted into the Act. This amendment passed NSW Parliament on 16 June 2011.
9. 163. As can be seen from the text of Section l46C(l), the Commission is required “to give effect to any policy on conditions of employment of public sector employees ... that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission”. Consequently, in order to give meaning and content to this requirement, a policy needed to be declared in the form of a regulation. This was done by making the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011. In broad terms, the key Public Sector Wages Policy provisions given effect by the Regulation are contained in its clause 6.
10. 164. In short, public sector pay increases are restricted to a maximum of 2.5 per cent, unless employee-related cost savings (as defined at clause 9 of the Regulation) can be demonstrated and have been achieved. If these conditions have been satisfied, the actual quantum paid beyond 2.5 per cent is a matter for negotiation between the parties, contingent upon the magnitude of the employee related cost savings. These provisions apply to the NSW Public Service, the NSW Teaching Service, the NSW Police Force, the NSW Health Service, the service of Parliament or any other service of the Crown.
11. 165. While the Wages Policy is required to be observed by state owned corporations such as electricity and water utilities, railways and the like, the statutory and regulatory provisions do not apply because these employers operate in the national workplace relations system under the Fair Work Act 2009. NSW laws and regulations cannot affect the operation of the national system. In practice however, these organizations do apply the policy reflected in these statutory provisions to wage negotiations with their employees.
12. 166. The 2011 Regulation was superseded in 2014 by the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 (the 2014 Regulation). The sole difference between the 2011 and 2014 Regulations is that the latter Regulation clarifies that the 2.5 per cent limit includes any increased superannuation charges. The basic policy approach remains unchanged.
13. 167. On the issue of consultations, the NSW Government explains that the Industrial Relations Amendment (Public Sector Conditions of Employment) Bill 2011 was introduced in the Legislative Council on 24 May 2011. It was subject to extensive and lengthy debate in the Legislative Council. All parties had full opportunity to put their views and propose amendments for the consideration of the Parliament before its adoption on 16 June 2011. The Bill was introduced as a means to strike a balance between maintaining the real value of wages for public servants and the ability of the State budget to fund wage increases. The then Minister for Industrial Relations explained the need for the legislation in his second reading speech to Parliament on 24 May 2011. After noting the Government’s commitment to “rebuild the economy, return quality services, renovate infrastructure, restore accountability, and protect the local environment and communities”, the then Minister said:
    • Employee-related costs are the largest component of government expenditure, accounting for almost half of government expenses. In 2010–2011 approximately half of government expenses will be employee-related and are projected to be $28 billion. Managing this expenditure is a major challenge, given that front-line services such as education, health care and policing are labour intensive. Each 1 per cent increase in wages permanently increases government expenses by around $277 million per annum.
    • Underpinning the need for fiscal restraint is the Government’s Wages Policy. The policy was first introduced by the previous Labor Government in 2007, but that Government failed to implement it. The New South Wales Coalition Government will continue the key provisions of the Wages Policy introduced by the former Labor Government. However, the Coalition Government has proposed changes to the way the Wages Policy operates to ensure that the key requirements of the Wages Policy are actually followed. Our policy and legislative response will ensure that wage increases of 2.5 per cent are available each year to our hardworking public sector employees. Increases in excess of 2.5 per cent are available but will be required to be funded through employee-related savings.
    • Key elements of the policy require that any increases to employee-related expenses exceeding 2.5 per cent per annum, including wages, allowances, superannuation and conditions of employment, must be funded through employee-related cost savings that have been achieved.
14. 168. The NSW Government further indicates that while regulations do not have to be introduced into Parliament and debated in the same way that legislation is, regulations made by the executive are subject to disallowance by the Parliament. This mechanism ensures that the Legislative Council also had the opportunity for a full debate on the details of the Wages Policy declared in the regulation. On 22 June 2011, the Labor Party moved to disallow the 2011 Regulation. The debate on the disallowance motion took place on 3 August 2011. A vote was taken and the disallowance motion did not succeed, therefore the Regulation remained in place. Furthermore, a Regulatory Impact Statement was prepared for the 2011 Regulation. The purpose of this Impact Statement was to provide interested parties and stakeholders with a detailed analysis of the options considered during the making of the 2011 Regulation and invite relevant submissions about its content. Subsequently, an invitation for public comment on the making of the Regulation was published on the NSW Industrial Relations website, with submissions due by 18 November 2011. Only one submission was received, from the Crown prosecutors.
15. 169. The NSW Government explains that Section 146C of the Industrial Relations Act and the Regulations made thereunder have been the subject of a number of legal challenges in courts and tribunals. The constitutional validity of the provisions was upheld by the High Court of Australia on 12 December 2012. This action was brought to the High Court by the PSA, which appealed against the finding of the Industrial Court of NSW on 31 October 2011 that the legislation and the regulation were valid. The PSA argued that Section 146C was invalid because it “impairs the institutional integrity of the Industrial Court in a manner inconsistent with Chapter III of the Constitution”. The PSA submitted that the institutional integrity of the Industrial Court is impermissibly affected because judicial members of the Commission, who sit as the Industrial Court, must comply with government policy when exercising the arbitral functions conferred on the Commission. The High Court delivered three separate but concurring judgments upholding the validity of Section l46C and the Regulation. These provisions were held to be no different from any other laws which the IRC must apply in exercising its functions. The Court ruled that it cannot undermine the integrity of the Industrial Court for its judicial members to apply the law as it stands from time to time (including as it stands at present, that is, in light of the requirement to give effect to the Wages Policy) when sitting as, and exercising the functions of, the Commission.
16. 170. On 6 May 2014, the NSW Court of Appeal upheld the Government’s position that increases to the superannuation guarantee charge (SGC) were to be considered by the IRC when awarding increases in remuneration up to 2.5 per cent. That is, the 0.25 per cent increase in the SGC meant that in order to comply with the Wages Policy cap on remuneration increases, rates of pay could increase by no more than 2.27 per cent. This position is reflected in the 2014 Regulation. On 3 June, the PSA and other unions filed an application in the High Court seeking special leave to appeal that decision. However, the unions withdrew this application on 25 July 2014. The Court of Appeal decision was the culmination of lengthy proceedings in the IRC in relation to the 2013 round of wage negotiations. The original application by the unions was for increases to commence on 1 July 2013; however, proceedings were protracted by controversy as to whether the increase to the SGC should be incorporated in the Wages Policy cap or in addition to the Wages Policy cap. The Government was concerned to ensure that employees were not disadvantaged by the time being taken to settle the legal question of whether or not the SGC formed part of the 2.5 remuneration increase, and made an offer to pay the 2.27 per cent increase from 1 July 2013. Unions accepted this offer and relevant variations were made to awards, ensuring that employees were paid an annual increase. The Court of Appeal’s unchallenged decision meant that no further variations of the wage increase were necessary.
17. 171. The NSW Government indicates that it attempted on a number of occasions to address the ongoing uncertainty about how the increase to the SGC should be dealt with in the context of the Wages Policy. The Industrial Relations (Public Sector Conditions of Employment) Amendment Regulation 2013 was published on the NSW Legislation website on 28 June 2013. The regulation included words to clarify that the 2.5 per cent cap includes any new or increased superannuation benefits. A disallowance motion was moved in the Legislative Council on 21 August 2013 and the debate took place on that day, giving members of the Legislative Council the opportunity to express their views. The Legislative Council voted to disallow the Regulation. This had the effect of restoring or reviving the 2011 Regulation, as it was immediately before it was amended or repealed, as if the amending Regulation had not been made.
18. 172. Under the Subordinate Legislation Act 1989, if a regulation is disallowed, a statutory rule the same in substance as one disallowed cannot be published on the NSW Legislation website within four months after the date of disallowance. The Industrial Relations (Public Sector Conditions of Employment) Amendment Regulation 2013 was published on the NSW Legislation website on 23 December 2013. It was in the same terms as the July regulation. A further disallowance motion was moved, debated and passed by the Legislative Council on 5 March 2014. Once again, the previous (2011) Regulation was revived.
19. 173. The Government decided to put this issue beyond doubt by making the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014. This Regulation was made by virtue of Schedule 5 of the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014. The Bill was passed on 19 June 2014 and Schedule 5 commenced on assent on 24 June 2014. There was no parliamentary debate on that legislation. This legislative action created the 2014 Regulation.
20. 174. Increases of at least 2.5 per cent have been made available to all groups of employees since the inception of the Wages Policy. Since 1 July 2014 increases of 2.27 per cent (plus superannuation increases of 0.25 per cent) have been applied to 72 industrial instruments covering approximately 179,000 employees. In December 2013 the Department of Education and Communities and the NSW Teachers Federation reached agreement to the making of a new Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award for three years from 2014 to 2016. In addition to providing increases averaging 2.5 per cent per year over the duration of the award (inclusive of superannuation guarantee contribution increases) the parties also agreed to a number of reform initiatives over the term of the award, including the implementation of:
    • – standards-based remuneration for classroom teachers;
    • – new performance and development processes for principals, executives and teachers;
    • – a new principal classification structure; and
    • – amendments to the teacher efficiency process.
21. This consent agreement applies to approximately 63,000 full time employees.
22. 175. On 8 April 2015, the NSW Industrial Relations Commission granted increases of 2.5 per cent to salaries and salary related-allowances from the first full pay period to commence on or after 1 July 2015 and made a new Crown Employees (Public Sector – Salaries 2015) Award effective from 1 July 2015 for a period of one year. This application was made with the consent of the PSA, which represents the industrial interests of the employees covered by the award and applies to approximately 64,000 public service employees (FTE). Achieving a consent agreement was a significant step as it had been difficult to conclude matters in previous years. The parties were unable to reach agreement in 2013 on the quantum of the increase, and in 2014 on the requirement for a No Extra Claims clause, resulting in the requirement for a number of legal proceedings. The NSW Government further indicates that since 22 June 2011, 21 entities have successfully negotiated with unions to provide increases above 2.5 per cent to their employees and provides some examples in this regard.
23. 176. In addition to the information provided by the NSW Government, the Federal Government emphasizes that Australia has not ratified Conventions Nos 151 and 154 and that these Conventions are not under consideration for ratification. While the NSW Wages Policy sets certain parameters on employee-related cost increases, it does not purport to restrict or impede trade unions’ ability to organize their administration and activities and to formulate their programmes. The Government further states that in relation to Convention No. 98, its Article 6 and the subsequent findings of ILO supervisory bodies have resulted in the Convention being applied somewhat differently to public sector employees in comparison with private sector employees, with there being some latitude for governments to set limits on public sector wage negotiations. As such, the Australian Government does not consider that the NSW Wage Policy raises issues with regard to the intent of the Conventions which Australia has ratified. The Government points out that in recent years many governments have adopted various measures in relation to public sector employment to address fiscal pressures and ensure an effective and sustainable public sector. While Australia has weathered the global financial crisis relatively well, the global economy remains volatile. The NSW Government has recognized the importance of fiscal restraint and debt reduction while continuing to offer fair remuneration for its employees. The Australian Government also points out that the complaint was lodged during a NSW State election campaign despite the NSW Wages Policy having been in place largely unchanged since 2011. The NSW Liberal–National Coalition Government was returned in the 2015 election, suggesting that the voters of NSW are broadly comfortable with the quality and resourcing of public services in that state.

C. The Committee’s conclusions

1. 177. The Committee notes that this case deals with the collective bargaining rights of public sector workers in New South Wales and recalls at the outset that all public service workers other than those engaged in the administration of the State should enjoy collective bargaining rights, and priority should be given to collective bargaining as the means to settle disputes arising in connection with the determination of terms and conditions of employment in the public service [see Digest of decisions and principles of the Freedom of Association Committee, fifth (revised) edition, 2006, para. 886]. A distinction must be drawn between, on the one hand, public servants who by their functions are directly engaged in the administration of the State (that is civil servants employed in government ministries and other comparable bodies), as well as officials acting as supporting elements in these activities and, on the other hand, persons employed by the government, by public undertakings or by autonomous public institutions. Only the former category can be excluded from the scope of Convention No. 98 (ratified by Australia) [see Digest, op. cit., para. 887]. As the scope of the law appears to go well beyond the restricted notion of public servants engaged in the administration of the State and covers those engaged in health, transport, education, etc., the Committee will examine this case in respect of this broader category of public servants.
2. 178. The Committee notes that the complainants in this case, the CPSU, the PSANSW and the ACTU, refer, in particular, to the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 and the accompanying Regulation, which require the NSW Industrial Relations Commission to give effect to the Government’s public sector policies when making or varying awards or orders relating to the remuneration or other conditions of employment of public sector employees. The complainants are particularly aggrieved by the following features of the 2011 Regulation (clause 6), which set out the NSW Government’s policy: (i) increases in remuneration or other conditions of employment are limited to 2.5 per cent per annum (increases above this cap are only permitted where “sufficient employee-related cost savings have been achieved to fully offset the increased employee-related cost”); and (ii) policies “regarding the management of excess public sector employees” are not permitted to be “incorporated into industrial agreements”.
3. 179. The Committee notes that the validity of the above legislation and the accompanying regulation was tested in the High Court. The Court found both the legislation and regulation to be valid, and in particular, that their application by the NSW Industrial Relations Commission and the NSW Industrial Court did not undermine the institutional integrity of these bodies.
4. 180. The Committee further notes that the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014, made by virtue of Schedule 5 of the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014, replaced the 2011 Regulation. The new Regulation confirms the Government’s policies regarding the management of excess public sector employees and increases in remuneration previously expressed in the 2011 Regulation. Clause 6 of the Regulation remained unchanged.
5. 181. The Committee notes that the NSW Government points out that the legislation and regulation merely provide for a framework within which outcomes must be negotiated. Regarding the public sector pay increases, as reflected in the Regulation, those are restricted to a maximum of 2.5 per cent unless employee-related cost savings have been achieved. The amount of increase above the set percentage is a matter for negotiation between the parties, contingent upon the magnitude of the employee-related cost savings. The Committee notes that the wording of the Regulation (subclause (1)(a)–(c) of clause 6) appears to allow the parties to negotiate increases in remuneration above the set cap if “sufficient employee-related cost savings have been achieved”. The Committee notes several examples provided by the Government of parties achieving, through negotiations, increases above 2.5 per cent.
6. 182. The Committee regrets that the NSW Government provides no information on the complainants’ allegation regarding the subclause (1)(f) of clause 6 of the Regulation, according to which, “policies regarding the management of excess public sector employees are not to be incorporated into industrial instruments”. The Committee considers that public servants not engaged in the administration of the State should enjoy the right to bargain collectively on all matters related to terms and conditions of their employment, including on the rights of employees on termination. It recalls that rationalization and staff reduction processes should involve consultations or attempts to reach agreement with the trade union organizations, instead of giving preference to proceeding by decree and ministerial decision [see Digest, op. cit., para. 1080]. Furthermore, where a staff reduction programme is undertaken, negotiations should take place between the relevant trade union and the employer. The Committee therefore requests the Government to provide to the Committee of Experts on the Application of Conventions and Recommendations, to which it refers this aspect of the case, information on the measures taken to review the restriction imposed by subclause 1(f) of clause 6 of the Regulation, in consultation with the social partners, so as to promote collective bargaining on all matters related to terms and conditions of employment for public servants not engaged in the administration of the State.
7. 183. The Committee further notes the complainants’ allegation that the above measures were not preceded by consultations with public sector workers and their representatives and that the state of the economy did not justify these measures. In this respect, the Committee notes that the Australian Government emphasizes the importance of fiscal restraint and debt reduction in the context of a volatile global economy, while continuing to offer fair remuneration for its employees. The NSW Government further points out that the Industrial Relations Advisory Council composed, among others, of unions and employers’ representative was established in 2010. The Council meets twice a year to discuss any matter brought before it by its members, including wages policies. The Government indicates that while public sector wages were discussed twice, no member has so far raised issues for discussion on the wage policy. Furthermore, with regard to the consultations prior to the adoption of the legislation, the NSW Government indicates that the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 was subject to extensive and lengthy debate in the Legislative Council, where it was introduced on 24 May 2011, and that all parties had full opportunity to put their views forward and propose amendments for the consideration of the Parliament where it was adopted on 16 June 2011. The NSW Government also indicates that the Legislative Council had also the opportunity for a full debate on the details of the Wages Policy declared in the Regulation and that prior to its adoption, the public was invited to provide comments thereon through submissions. The Committee further notes the Government’s indication that there was no parliamentary debate on State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 pursuant to Schedule 5 of which, the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 was made.
8. 184. The Committee considers that a fair and reasonable compromise should be sought between the need for financial sustainability, on the one hand, and the need to preserve as far as possible the autonomy of the bargaining parties, on the other. The Committee considers that as much as possible, governments should seek general consensus regarding labour, social and economic policies adopted in the context of economic restraint given that social partners should be able to share in the responsibility of securing the well-being and prosperity of the community as a whole. In the same vein, the Committee recalls that it is essential that the introduction of draft legislation affecting collective bargaining or conditions of employment should be preceded by full and detailed consultations with the appropriate organizations of workers and employers. It further recalls that tripartite consultation should take place before the Government submits a draft to the Legislative Assembly or establishes a labour, social or economic policy [see Digest, op. cit., paras 1070 and 1075]. The Committee is of the opinion that the process of consultation on legislation affecting conditions of employment helps to give laws and policies adopted and applied by governments a firmer justification and helps to ensure that they are well respected and successfully applied. The Committee requests the Government to ensure that in the future, any questions or proposed legislation affecting workers’ rights are brought, at an early stage of the process, to the attention of the Industrial Relations Advisory Council or any other appropriate forum so as to permit the attainment of mutually acceptable solutions.

The Committee’s recommendations

1. 185. In the light of its forgoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee requests the Government to provide to the Committee of Experts on the Application of Conventions and Recommendations, to which it refers this aspect of the case, information on the measures taken to review the restriction imposed by subclause 1(f) of clause 6 of the Regulation, in consultation with the social partners, so as to promote collective bargaining on all matters related to terms and conditions of employment for public servants not engaged in the administration of the State.
   • (b) The Committee requests the Government to ensure that in the future, any questions or proposed legislation affecting workers’ rights are brought, at an early stage of the process, to the attention of the Industrial Relations Advisory Council or any other appropriate forum so as to permit the attainment of mutually acceptable solutions.