Industrial Relations Commission New South Wales Medium Neutral Citation: Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 (Workers Compensation Top-Up) [2022] NSWIRComm 1080 Hearing dates: 8, 9, 11, 14, 15 and 16 March 2022, 8 April 2022 Date of orders: 23 September 2022 Decision date: 23 September 2022 Jurisdiction: Industrial Relations Commission Before: Commissioner Murphy, Commissioner Sloan and Commissioner Webster Decision: (1) Pursuant to s 19 of the Industrial Relations Act 1996 the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 is amended: (a) by adding after cl 82.7 and before cl 82.7.1 the following: Note: Following the decision in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary [2017] NSWSC 1473, this clause only applies to firefighters to whom cl 25 of Pt 16H of Sch 6 of the Workers Compensation Act 1987 applies, whilst they are engaged in firefighting duties; and (b) otherwise to give effect to the variations reflected in Exhibit 24 and Exhibit 25. (2) Matter 2021/121086 is dismissed. Catchwords: EMPLOYMENT AND INDUSTRIAL LAW – Awards and enterprise agreements – Variation – whether employees covered by the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 entitled to use accrued sick leave to top up workers compensation payments – whether Award should be varied to clarify, and if necessary confer, such an entitlement Legislation Cited: Government Sector Employment Regulation 2014 Industrial Relations Act 1996 ss 3, 17, 19, 146, 146C Industrial Relations (Public Service Conditions of Employment) Regulation 2014 cl 6 State Insurance and Care Governance Act 2015 Teaching Service Act 1980 Workers Compensation Act 1987 ss 36, 37, 50, Sch 6 Pt 16H cl 25 Workers Compensation Legislation Amendment Act 2012 Workers Compensation Legislation Amendment Bill 2012 Workers' Compensation Act 1926 s 7(2C) Workers' Compensation (Amendment) Act 1970 Workers' Compensation (Amendment) Bill 1970 Cases Cited: Applications for Variations to Crown Employees (Police Officers – 2017) Award and Paramedics and Control Centre Officers (State) Award [2021] NSWIRComm 1040 Health Employees' Conditions of Employment (State) Award 2018 (Infectious Cleaning Allowance) [2021] NSWIRComm 1049 Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary (2017) 271 IR 77; [2017] NSWSC 1473 Re Bush Fire Fighters Compensation Fund; Ex parte Varley [1971] WCR 231 Re Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres (No 2) [2015] NSWIRComm 38 State Wage Case 2021 [2022] NSWIRComm 1014 Texts Cited: Nil Category: Principal judgment Parties: Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales (Applicant) Industrial Relations Secretary (Respondent) Representation: Counsel: D Chin SC with M Foran (Applicant) T Dixon with H Pararajasingham (Respondent) Solicitors: McNally Jones Staff Lawyers (Applicant) Crown Solicitor (Respondent) File Number(s): 2019/00134157 and 2021/00121086 Publication restriction: On 22 September 2022 Commissioner Murphy made the following orders: 1. An order pursuant to section 164A(1)(a)(i) of the Industrial Relations Act 1996 prohibiting the disclosure in these proceedings of the name, address, picture or any material that identifies or may lead to the identification of [name redacted] and [name redacted]. 2. An order pursuant to section 164A(1)(b) of the Industrial Relations Act 1996 restricting the publication or broadcast in any report of these proceedings before the Commission, including any judgment or transcript, by: (1) substituting "Officer A" and "Officer B" for the names "[name redacted]" and "[name redacted]" respectively in any such report; and (2) deleting from any such report any material that may identify or lead to the identification of [name redacted] and [name redacted]. 3. An order pursuant to section 164A(1)(c) of the Industrial Relations Act 1996 prohibiting the publication of any evidence given before the Commission or of any documents lodged with the Commission in these proceedings, to the extent that such evidence or materials disclose the name, address, picture or any other material that identifies or may lead to the identification of [name redacted] and [name redacted]. decision 1. COMMISSIONER MURPHY: In this decision I propose to deal with the Further Amended Notice of Award Review and Application for Award Variation filed by the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("PSA") on 10 March 2022 ("PSA Application"). The respondent to the PSA Application is the Industrial Relations Secretary ("Secretary"). I will also deal with the issues raised in the Notice of Motion filed by the Secretary on 21 December 2021 which seeks an order that the PSA Application be dismissed ("Secretary's Motion"). 2. I have had the benefit of reading and considering in draft the joint decision of Commissioners Sloan and Webster in this matter ("Joint Decision"). For the reasons set out hereunder I have come to different conclusions than those contained in the Joint Decision. Background 1. The background to the matters before the Commission is largely set out Statement of Agreed Facts prepared by the parties ("Agreed Facts") which is reproduced in the Joint Decision at [74]. 2. Central to the issues to be determined by the Commission is the wording of cl 82.7 of the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 ("Conditions Award") which relevantly provides: 82.7 An employee who continues to receive compensation after the completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the employee's ordinary rate of pay. Sick leave utilised in this way shall be debited against the employee. 1. The entitlement to sick leave is set out in cl 79 of the Conditions Award 2. Sections 36 and 37 of the Workers Compensation Act 1987 ("WC Act") are the statutory source of an incapacitated worker's entitlement to workers compensation payments. Prior to 1 October 2012, ss 36 and 37 relevantly provided: 36 Weekly payment during total incapacity – first 26 weeks (1) The weekly payment of compensation to an injured worker in respect of any period of total incapacity for work during the first 26 weeks of incapacity shall be the amount of the worker's current weekly wage rate. (2) In this section: current weekly wage rate, in relation to a worker, means the worker's current weekly wage rate determined from time to time in accordance with section 42. 37 Weekly payment during total incapacity – after first 26 weeks (1) The weekly payment of compensation to an injured worker in respect of any period of total incapacity for work (not being a period during the first 26 weeks of incapacity) shall be: (a) 90 per cent of the worker's average weekly earnings, except that: (i) the payment shall not exceed $235.20 per week, (ii) in the case of a worker who is over 21 years of age at the time of payment – the payment shall not be less than $187.10 per week, and (iii) in the case of a worker whose average weekly earnings do not exceed $170 per week – the payment shall be 100 per cent of those earnings [or] $153, whichever is the lesser amount… ("the pre-2012 provisions") 1. It is not in dispute that, prior to 1 October 2012, employees employed under the terms of the Conditions Award, who were in receipt of workers compensation payments, were entitled, after the first 26 weeks of incapacity, to utilise their accrued untaken sick leave to "top up" the workers compensation payments set out in s 37 of the pre-2012 provisions up to their "current weekly wage rate" ("sick leave top up"). Sick leave top up was, and still is, a common entitlement for employees in both the private and public sectors. 2. Pursuant to the Workers Compensation Legislation Amendment Act 2012 ("2012 Amendment Act") ss 36 and 37 of the WC Act were repealed with effect from 1 October 2012 and replaced with the current ss 36, 37 and 38. The effect of these new provisions is set out at paragraph 10 of the Agreed Facts and is not repeated here (Joint Decision at [74]). The impact of these changes has created a situation where employees covered by the Conditions Award have been denied their previously accepted entitlement to use their accrued sick leave to top up their workers compensation payments and has ultimately led to the PSA initiating these proceedings. The impact of the 2012 Amendment Act elsewhere in the public sector has been quite different. 3. For example, many thousands of employees in the public health sector employed under the terms of the Health Employees' Conditions of Employment (State) Award 2021 ("Health Conditions Award") are entitled to the benefit of a top up provision expressed as follows: 18. Sick Leave … (iii) An employee shall not be entitled to sick leave on full pay for any period in respect of which such employee is entitled to accident pay, or workers compensation; provided, however, that where an employee is not in receipt of accident pay, an employer shall pay to an employee, who has sick leave entitlements under this clause, the difference between the amount received as workers' compensation, and full pay. The employees' sick leave entitlement under this clause shall for each week during which such difference is paid, be reduced by the proportion of hours which the difference bears to full pay. On the expiration of available sick leave, weekly compensation payments only shall be payable. 1. Putting aside the now redundant reference to "accident pay", the conditions relating to the grant of which were set out in the Hospitals Commission General Instruction to all hospitals, No. 1973/35 of 30th March 1973 (see 200 IG 2199), employees covered by the Health Conditions Award, and its predecessors going back many decades, have been, and continue to be, entitled to utilise their accrued sick leave to top up their workers compensation payments. All that changed as a consequence of the 2012 Amendment Act were the time periods at which sick leave top up kicks in ("step downs"). 2. Subclause (i)(b) of cl 37 - Sick Leave, of the Public Health System Nurses' and Midwives' (State) Award 2021 contains a similar provision to that set out at [9] above. 3. Subclause A - Sick Leave (x) of cl 22 - Leave Provisions of the Local Government (State) Award 2020 is in the following terms: (x) Section 50 of the Workers Compensation Act 1987 (NSW) dealing with the relationship between sick leave and workers compensation applies. 1. It is not in dispute that local government employees' entitlement to utilise accrued sick leave to top up workers compensation continued after the enactment of the 2012 Amendment Act and was not affected by it. 2. The problem for the PSA arose because cl 82.7 of the Conditions Award referred specifically to the "completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987" as the point at which accrued sick leave could be used to top up workers compensation payments in circumstances where, after 1 October 2012, reference to the "period of 26 weeks" had been removed from the legislation and replaced by a different "step down" arrangement in ss 36, 37 and 38 of the WC Act. 3. In the context of a situation where employees, due to the particular (and perhaps unnecessary) wording of a provision in the award which governs their employment, have been denied a longstanding entitlement to use their accrued sick leave to top up workers compensation payments at a time when they are unable to work due to a work related illness or injury, in circumstances where, according to the PSA's evidence which I accept, the vast majority of public and private sector workers have not been so denied, concepts of what is "fair and reasonable", as those concepts are to be construed in s 10 of the Industrial Relations Act 1996 ("IR Act"), require careful and serious consideration by this Commission. The Top Up Case 1. In Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary [2017] NSWSC 1473 ("Top Up Case") Walton J on 27 October 2017 dismissed an application by the PSA for declarations to the effect that employees covered by the Conditions Award and four other public sector awards continued to be entitled to use accrued sick leave to top up workers compensation payments after 1 October 2012 when the 2012 Amendment Act came into effect. 2. His Honour's determination turned on the specific reference to the "completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987" in the awards under consideration and the incompatibility of these provisions with the changes effected by the 2012 Amendment Act (at [171]-[173]). 3. Written submissions filed by the PSA on 25 March 2022 ("PSA Submissions") contained the following (footnotes omitted): 6. In Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary (2017) 271 IR 77 (the Top Up Case) Walton J declined to find that clause 82.7 continued (after 1 October 2012) to permit the majority of employees covered by the Conditions Award to use accrued sick leave after an initial period of incapacity of 26 weeks to top up their income: at [27] and [187]. His Honour declined to do so essentially because he found that cl 82.7 was intended to operate in conjunction with the repealed step-down provisions in the pre-2012 WC Act (the Pre-Amendment Act), and not with the new scheme: at [125], [171]-[173]. However, Walton J expressly deferred to this Commission's specialist knowledge to determine the industrial merit of varying clause 82.7 to operate within the current legislative scheme: at [184]. 7. The PSA's Application calls for the Commission to make such a determination. 1. It does not appear that his Honour considered, or was asked to consider, the effect of s 50 of the WC Act, which was unaffected by the 2012 Amendment Act, on the entitlement of employees covered by the Conditions Award to utilise accrued sick leave to top up workers compensation payments. The iCare Award 1. Insurance and Care NSW ("iCare") is a government agency established pursuant to the State Insurance and Care Governance Act 2015 which is responsible for providing workers compensation to approximately 3.6 million public and private sector employees in New South Wales. Lesley Watts, Performance Manager, Agency Claims in Insurance for NSW and HBCF Schemes, gave evidence in these proceedings in support of the Secretary's opposition to the PSA Application. 2. The Insurance and Care NSW Award 2017 ("iCare Award") was originally made pursuant to s 10 of the IR Act on 14 July 2017, before judgement was handed down in the Top Up Case. The award as originally made contained the following provision which was in virtually identical terms to cl 82.7 of the Conditions Award: 74.7 A staff member who continues to receive compensation after the completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the staff member's ordinary rate of pay. Sick leave utilised in this way shall be debited against the staff member. 1. It is unclear on the evidence whether, at the time the award was made, employees covered by the iCare Award were able to access sick leave top up when on workers compensation after 26 weeks but, given subsequent events, it is presumed that they were. 2. On 20 June 2018, after judgement was handed down in the Top Up Case, iCare filed an application to vary the iCare Award to increase salaries by 2.5% and in a number of other respects including "to make minor corrections to references to the Workers Compensation Act 1987 that as a result of amendments to that Act are now inconsistent with its provisions" (Schedule B – Grounds and Reasons to the application). The following was also stated in Schedule B to iCare's application: The proposed award is consistent with the provisions of clause 6(1)(a) of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014. 1. In Schedule C – Particulars to iCare's application the following was stated: Corrections 1. The Insurance and Care NSW Award 2017 (the "2017 Award") (382 IG 325) in sub-clause 74.7 refers to the period of 26 weeks in section 36 of the Workers Compensation Act 1987 This Act has been amended and the period during which the worker receives 95% of Average Weekly Earnings is now 13 weeks. The applicant seeks to delete the number "26" and replace with "13". Sub-clause 74.7 would then be as follows: 74.7 A staff member who continues to receive compensation after the completion of the period of 13 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the staff member's ordinary rate of pay. Sick leave utilised in this way shall be debited against the staff member. 1. I note that the amendment to the WC Act referred to above took effect from 1 October 2012, several years before the iCare Award was first made. The application by iCare to vary the award was granted by the Commission with the consent of the parties. 2. The provision as amended has remained in the award since 2018 but re-numbered cl 73.7 in the current iCare Award which was made by consent of the parties on 5 July 2019 and subsequently varied by consent on 21 October 2019, 17 February 2021 and 26 August 2021. Pursuant cl 73.7, employees of iCare, unlike employees covered by the Conditions Award, have continued to be able to access sick leave top up when on workers compensation. 3. In an affidavit sworn on 5 November 2021 in these proceedings by Anna Kulesz, Director, Public Sector Employee Relations ("PSER"), Employee Relations, in the Department of Premier and Cabinet, Ms Kulesz states that she is "authorised to make this affidavit on behalf of the Industrial Relations Secretary". Ms Kulesz further states, in relation to the variation to the iCare Award made on application by iCare in 2018: The variation application was undertaken by iCare itself. Bargaining parameter approval in accordance with the requirements of the NSW Public Sector Wages Policy was provided to iCare for the increases to salary rates but not for the variation to provide for sick leave top up payments after 13 weeks of workers compensation, this variation not being submitted for approval from iCare. Further research by my staff has failed to establish why this variation was made without prior approval of the Wages Policy Taskforce at that time. 1. Nevertheless, employees of iCare continued to be entitled to access sick leave top up even after Ms Kulesz had sworn her affidavit. 2. However, on 14 March 2022, the fourth day of the hearing of this matter and the day Ms Kulesz was due to give her evidence, Ms Kulesz sent correspondence to Amanda-Lea Smith, Group Executive People and Culture, iCare, which was marked exhibit 27 in the proceedings and which contained the following: It has come to the attention of the Department of Premier and Cabinet that icare is party to an award made by the NSW Industrial Relations Commission that contains a clause which purports to provide an entitlement to use accrued sick leave to top up workers compensation payments. … It is requested that you take immediate steps to determine the legal operation of clause 73.7 of the icare award in light of the decision in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary [2017] NSWSC 1473. Please thereafter take steps to stop payments that are inconsistent with the Government's directives in respect of the payment of sick leave top up, including steps to have the award clause removed at the earliest opportunity or otherwise in the course of the next bargaining round. 1. Ms Kulesz was cross-examined about this correspondence as follows: Q. You have a copy of exhibit 27 with you? A. No, I don't because I was told that I could only bring in my affidavit. Q. Can we provide you with a copy? It's a letter dated 14 March 2020 (sic 2022). It's copied to Ms Watts who gave evidence earlier this morning. Mr Peter Bell. It's addressed to Ms Amanda Lee Smith, Group Executive, People and Culture. This is a letter you sent this morning. A. Mm-hmm. Q. Did you write this letter? A. I did. Q. And you start it by saying, "It has come to the attention of the Department of Premier and Cabinet that iCare is party to an award which purports to provide a top up benefit", essentially. Do you see that? A. Yesh. Q. It actually came to your attention some time ago, didn't it? A. Yes. Q. It hasn't just come to your attention this morning. A. No, but it hasn't said that it has come this morning. Q. In the second paragraph, you then talk about the 2012 workers compensation amendments, and clause 82 of the conditions award. And you say that, "Sick leave top up payments are considered by government to be inconsistent with that regime." What regime were you referring to there? A. Where are you referring to? Q. In the middle of your second paragraph. A. Well, with the amendments. Q. I see. By that sentence, Ms Kulesz, you mean to say, don't you, sick leave top up payments that are tied to the old regime, are inconsistent with the 2012 regime. Don't you? A. Yes, because the sections have changed. Q. So, what you're referring to there, provisions, like, the current clause 82.7. A. Correct. Q. Which refer to the old regime, the step down? A. Correct. Q. That's what's inconsistent with the 2012 regime, of course? A. Yes. Q. Then you say in the next paragraph, you describe the nature of the variation of the iCare award. And you say in the following paragraph, that you understand that "Clause 74 of the iCare award was varied to remove the reference to 26 weeks and replace it with 13 weeks." A. Yes. Q. Then you say, you request two things. At the end of the first page, "That Ms Smith take immediate steps to determine the legal operation of clause 73.7 of the iCare award in light of Walton J's decision." Do you see that? A. Yes. Q. The result of that inquiry determination, I suppose, maybe either that the view is that it is inoperative, or that it is operative. It could go either way. A. Well, my thinking was that because in Walton J's decision in effect, Walton J said that. The clause 82,7 didn't have any work to do, that the same would apply here in effect, because the clause in iCare, earlier, was very similar. In fact, it was what we had in the conditions award. Subsequently, the clause is very similar, only the change that has been made is changing 26 weeks to 13 weeks. Q. That's a clear reference to the step down in the new regime. Isn't it? A. But there was no approval for that. Q. Leave aside whether there was an approval, you're asking Ms Smith to determine the legal operation of the current clause as varied and the current clause, as varied is clearly tied to the existing step down regime. Isn't it? A. Well, the 13 weeks does refer to what's in the current award. Q. It's likely to be determined, can I suggest, by Ms Smith, or anyone who cares to look, that it is operative. A. But it was put in there without going through the process of an approval and-- Q. Can you answer my question? A. --and your statement was again - can you say it again? Q. Don't you consider it likely because this award, like the other ones that you say continue to operate, refer to the current step down regime that is likely to be operative? A. Well, yes. Based on that statement, it would be operative. (T14/03/22 P 204 L 43 – P 206 L 28) 1. As at the date of publication of this decision, no steps have been taken in this Commission by iCare to amend or delete cl 73.7 from the current Icare Award and employees of iCare continue to be entitled to access sick leave top up when on workers compensation. PSA's Application – s 19 of the IR Act 1. The Joint Decision at [84]-[85] deals with s 19 of the IR Act. I take no issue with what is there set out. This aspect of the matter requires consideration of s 50 of the WC Act. 2. Section 50 of the WC Act is in the following terms: 50 Weekly compensation and sick leave (cf former s 7 (2C)) (1) Compensation is payable to a worker in respect of a period of incapacity for work even though the worker has received or is entitled to receive in respect of that period any wages for sick leave under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment. (2) If a worker is paid compensation by the employer in respect of any period of incapacity for work in respect of which the employer is, or but for this section would be, liable under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment to pay to the worker any wages for sick leave— (a) that liability shall, to the extent of the compensation so paid, be deemed to have been satisfied by that payment notwithstanding the terms of that Act, award, agreement or contract, and (b) the amount of that compensation shall, for the purposes of subsections (4) and (5), be deemed to have been paid as compensation and not as wages. (3) If a worker, in respect of any period of incapacity for work in respect of which the employer is liable to pay compensation to the worker, is paid wages for sick leave by the employer and either an award is made afterwards for the payment of compensation to the worker in respect of that period or the employer agrees afterwards that compensation be paid to the worker in respect of that period— (a) the employer's liability to pay compensation in respect of that period shall, to the extent of the wages paid, be deemed to have been satisfied by that payment, and (b) the wages shall, to the extent of the compensation, be deemed for the purposes of subsections (4) and (5) to have been paid as compensation and not as wages. (4) If a worker is paid any compensation in respect of a period of incapacity for work, the worker shall, in respect of any entitlement to sick leave, or wages for sick leave, accruing after the expiration of that period— (a) if the worker has not also been paid wages for sick leave in respect of that period—be deemed not to have been entitled to or granted, or to have received, any sick leave or wages for sick leave in respect of that period, or (b) if the worker has also been paid wages for sick leave in respect of that period—be deemed not to have been entitled to or granted, or not to have received, sick leave or wages for sick leave in respect of the whole of that period, but only in respect of a lesser period calculated as provided by subsection (5). (5) The lesser period referred to in subsection (4) is a period which bears to the period of incapacity of the worker the same proportion as the wages paid to the worker in respect of the period of incapacity bear to the total amount of the wages and compensation paid to the worker in respect of the period of incapacity. (6) In this section— compensation means weekly payments of compensation under this Division. wages means wages, salary, allowance or other payment. 1. The PSA Submissions contained the following (footnotes omitted): 8. The merits of such a variation must be considered in light of the fact that the 2012 amendments preserved the operation of s. 50 of the WC Act, which makes award-based sick leave top up benefits entirely compatible with the WC Act. Moreover, section 50 itself provides for sick leave top up by ensuring that: (a) nothing can cut down the higher amount of ordinary sick leave payable under an award during a period in which they are also entitled to statutory compensation; and (b) only the portion of award-based sick leave payments that exceed the minimum statutory compensation shall be deducted from the worker's leave credit in adjusting their entitlement to accrued sick leave. That section - together with the primary award liability to grant sick leave under clause 79.3.1 of the Conditions Award - entitles employees to sick leave top up. It has done so at all material times, including since the 2012 amendments. 9. Accordingly, the variation sought by the PSA is consistent with the existing workers compensation scheme. It has the effect of regulating and refining a pre-existing entitlement to sick leave top up. It does not create an entirely new right. 10. This Commission has previously determined that there is no conflict between the 2012 workers compensation reforms and award-based sick leave top up benefits: Roads and Maritime Services and The Australian Workers' Union New South Wales (the RMS Case). In addition, in 2015 the Full Bench of the Fair Work Commission rejected a submission by the NSW Government that accident make-up pay provisions (like sick leave top up) in awards undermine the purpose of step down provisions in workers' compensation schemes in achieving better return to work outcomes (specifically in relation to the 2012 legislative amendments in NSW), and decided to maintain such benefits in areas where they have had wide application in the past as part of an appropriate award safety net: 4 yearly review of modern awards – transitional provisions. 11. However, the State of New South Wales generally (although not uniformly) has not permitted public sector employees covered by the Conditions Award (and those regulated by other award provisions similar to cl 82.7) to access sick leave top up since 2013. It has done so in error, and without due regard to the operation of s 50 of the WC Act and the objects of the 2012 amendments, properly understood. … 38. Subsection 50(1) expressly provides the opportunity for an injured worker both to receive workers compensation in respect of a period of incapacity for work and to accrue and take sick leave under, relevantly, an award made under a State Act, including the award the subject of this Application. That is, the statute recognises that the entitlement to compensation under the Post-Amendment Act and the entitlement to wages for sick leave under an award are not mutually exclusive or co-extensive. Furthermore, the workers compensation legislation has - at all material times since 1970 - explicitly accommodated the application of sick leave pay to top up the payment of statutory benefits for the compensable incapacity. 39. Prior to the enactment of the WC Act, the predecessor to s.50 was located at s.7(2C) of the Workers' Compensation Act 1926. The provision was first introduced by the Workers' Compensation (Amendment) Act 1953 (NSW) and later amended by the Workers' Compensation (Amendment) Act 1970 (NSW) (1970 Amendment Act). Section 7(2C) introduced by the 1970 Amendment Act was in substantially the same terms as s 50 of the Post-Amendment Act. 40. Section 7(2C)/50 ensures that a top up benefit is available because, by operation of this provision, "nothing can cut down the money [the worker] is entitled to receive in respect of any part of the period of incapacity below" the ordinary sick leave payable which is higher than the statutory compensation rate. 41. Section 50(3)(a) of the WC Act is engaged where sick leave is paid, and then compensation is later ('afterwards') awarded. Clause 82.6 of the Conditions Award reflects this entitlement. 42. The PSA withdraws the contention that clause 82.6 is more generous than ss. 50(3) and 50(4) of the WC Act. It is not necessary for the Commission to determine that the Award provides that the full amount of sick leave taken is restored to the employee in these circumstances. The PSA submits that the Commission may proceed on the basis that clause 82.6 effectively - and conformably with s.50(4)(b) - provides that only the amount of sick leave deemed to have been paid as compensation is restored to the credit of the employee (ie. only the 'top-up' amount paid as sick leave is debited from the employee's balance of accrued sick leave). 43. Section 50(2)(a) is more directly applicable to the top-up scenario contemplated in the Proposed Variation, ie. where a worker is paid statutory compensation and is also entitled to sick leave under an award. Where s.50(2)(a) is engaged, and the employer's liability to pay sick leave during a period of incapacity (for example, by operation of cl 79.3 of the Conditions Award) is deemed to be satisfied by the payment of compensation, s.50(2)(b) provides that the compensation will be deemed to have been paid as compensation and not as wages for the purposes of subsections (4) an (5), but only 'to the extent of the compensation'. The provision does not disturb that part of the employer's liability to pay sick leave during a period of incapacity that exceeds the extent of the compensation. The effect of ss.50(2)(b) and 50(4)(b) is that the employer remains liable for that part of its liability to pay sick leave during a period of incapacity that exceeds the extent of the compensation and if the employee received wages for sick pay that exceeded the employer's liability to pay compensation, then that amount in excess will retain the character of wages, and be debited against the employee's balance of accrued sick leave. 44. Thus, s 50 of the Post-Amendment Act explicitly provides for and permits the use of generic award-based sick leave entitlements to top up workers compensation payments made under the Act. … 46. In response to questions from the Full Bench of the Commission, counsel for the IRS conceded in his opening that an injured worker who is initially paid sick leave and is then subsequently awarded weekly benefits under the post-2012 WC Act is currently entitled to sick leave top up, ie. to retain the higher sick leave payment with only the top-up amount above the minimum weekly payment being debited from their accrued sick leave balance. He did so notwithstanding that this clearly confers an advantage to an injured worker with a contentious or problematic workers compensation claim, the acceptance of which is delayed (or was initially rejected), over one whose claim is swiftly accepted. Counsel for the IRS volunteered Mr Driver as an example of this so-called "an anomalous feature" of the current system. 47. Furthermore, the IRS's concession was made on the footing that s 50 of the WC Act was directed exclusively to avoiding the mischief of requiring an injured worker to return sick leave payments received for a period prior to the subsequent acceptance of a workers compensation claim covering that period. 48. This concession draws attention to a fatal weakness in the IRS's approach to the operation of s 50 of the WC Act. By focussing exclusively on the operation of subsection 50(3) - which addresses the payment of sick leave wages prior to the acceptance of a claim - the IRS misconstrues the overall purpose of s 50 and does so by ignoring entirely the operation of subsection 50(2). 49. The Second Reading Speech introducing the immediate and substantially identical predecessor to s 50 in 1970 made it clear that this provision was intended to preserve the employer's liability to provide ordinary paid sick leave under an award whether such liability arises or continues before or after the acceptance of a claim for weekly benefits. 50. As observed in the speech, the 1970 amendment bill also repealed subsection 7(2D) of the Workers' Compensation Act 1926. Subsection 7(2D) was predicated on the former requirement for a worker to elect to receive compensation in lieu of sick pay. It provided that, where a worker does not make such an election, the employer was nevertheless permitted to pay the difference between the compensation amount and the worker's ordinary remuneration to which they would have been entitled had they not been incapacitated. This amount was not to exceed the worker's ordinary sick leave entitlement. And the worker's accrued sick leave entitlement would be reduced to the extent of this top-up payment. 51. This immediately demonstrates long-standing harmony between sick leave top up and weekly payments under the workers compensation legislation in NSW. 52. Moreover, in 1970 s 7(2D) was repealed precisely because the predecessor to subsection 50(2) was introduced to reduce the employers sick leave liability under an award to the extent of any weekly compensation paid; but to provide that "the employer … still remains liable for payment of that part of the sick leave pay entitlement which is not deemed to be compensation payments", namely, the top up component comprising the difference between the weekly payment and the employees full entitlement to payment for sick leave. Accordingly, there was no longer any need for a provision such as s7(2D) to "permit an employer to make up compensation to the level of sick pay" (emphasis added). Section 50 and its predecessor operated to preserve the employer's award obligation to pay the full amount of sick leave for the period of incapacity. 53. Subsection 50(2) applies to "any period of incapacity for work in respect of which the employer is … liable under any … award … to pay to the worker any wages for sick leave" (emphasis added). Unlike subsection 50(3), it is not confined to periods of incapacity during which wages for sick leave have been paid prior to an award of compensation. 54. Thus, there is no justification for confining the operation of s 50 in the manner contended by the IRS. 1. I agree with and accept these parts of the PSA Submissions for the reasons set out therein. The entitlement to utilise accrued sick leave to top up workers compensation payments is found in s 50 of the WC Act as is recognised, for example, by the wording of cl 22A(x) of the Local Government (State) Award (at [12] above). 2. It follows that the entitlement to utilise accrued sick leave to top up workers compensation payments was never based exclusively on cl 82.7 of the Conditions Award. The utility of that provision was that it directed persons reading the award to the 26 week period in s 36 of the WC Act, being part of the pre-2012 provisions, at which point the step down occurred and the entitlement to top up kicked in. To this extent, the provision was not "otiose" (see discussion in Joint Decision at [99]). However, as was recognised by Walton J in the Top Up Case, that cl 82.7 became inoperative with the enactment of the 2012 Amendment Act which put in place a different step down arrangement. 3. However, as is discussed later in this decision, there is nothing in the copious amount of extrinsic material that was placed before the Commission concerning the 2012 Amendment Act which supports the proposition that it was the intention of the legislation to remove from some employees only their longstanding entitlement to utilise accrued sick leave to top up workers compensation payments, being those workers who are covered by the Conditions Award (or awards with provisions similar to cl 82.7), whilst preserving the entitlement for other workers such as those employed in the public health sector. 4. It follows that I disagree with the conclusions set out at [95]-[96] of the Joint Decision. I note that at [96] the Commissioners recognise potentially anomalous outcomes that their interpretation of s 50 of the WC Act may lead to. Accepting that s 50 is, in some respects, ambiguous, in my opinion, an interpretation which bestows the entitlement to sick leave top up on all workers who are incapacitated due to a compensable injury is to be preferred to an interpretation that results in an employee for whom acceptance of their workers compensation claim is delayed for whatever reason (including for reasons of their own making) being left "better off than one whose claim is swiftly accepted, as that employee will not have had the benefit of a longer period of sick leave on full pay". Conclusion 1. Given the determination I have made with respect to s 50 of the WC Act, I would vary cl 82.7 of the Conditions Award pursuant to s 19 of the IR Act in the following terms: 82.7 An employee who receives compensation pursuant to the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the employee's ordinary rate of pay. Firefighters to whom cl 25 of Pt 16H of Sch 6 of the Workers Compensation Act 1987 applies may use sick leave in this way after the completion of the first 26 weeks of incapacity. Sick leave utilised in this way shall be debited against the employee's balance of accrued sick leave. PSA's Application - 17 of the IR Act 1. The Joint Decision at [105]-[107] deals with s 17 of the IR Act. I take no issue with what is there set out. 2. Contrary to what is stated in the Joint Decision at [109], I do accept the contentions at paragraph 89 of the PSA Submissions (Joint Decision at [108]). Would the change sought by the PSA be consistent with the policy underpinning the 2012 amendments to the WC Act? 1. As stated at [37] above, I am unable to discern any intention in the 2012 Amendment Act to remove from some employees their longstanding entitlement to utilise accrued sick leave to top up workers compensation payments but not from others. There is nothing in the extracts from the Minister's Issues Paper reproduced in the Joint Decision at [113]-[115] that would support a finding that such an outcome was even considered, let alone intended. The same may be said of the extract from the JSC Report reproduced in the Joint Decision at [116] and of the extract from the second reading speech reproduced at [117]. In fact, in none of those extrinsic materials is there any mention of the entitlement to utilise accrued sick leave to top up workers compensation payments or of the pending removal of that entitlement for some workers but not others. If such a significant alteration to (some) workers' rights had been the legislative intention of the 2012 Amendment Act, it would have been expected that some mention of it would have been made somewhere in all of those materials. 2. It may be accepted that the "Post-Amendment WC Act scheme for workers compensation was underpinned by a policy that the provision of less than 100% of the worker's pre-injury weekly earnings (as defined in s 44C of the Post-Amendment WC Act) would encourage a return to work at the earliest available time" (Top Up Case at [178(1)] – Joint Decision at [122]). However, no case was made out to demonstrate that the removal of access to sick leave top up payments from some, but not all, workers would, in reality, encourage a return to work at the earliest available time. The evidence on this issue in the matters presently before the Commission, which is discussed later in this decision, is, at best, inconclusive. 3. It should be noted that under s 36 of the WC Act, an injured worker who has no current work capacity is entitled during the first 13 weeks to be paid compensation at the rate of 95% of the worker's pre-injury average weekly earnings ("PIAWE") which includes overtime and penalty rates. Given that the PSA Application is for payment of sick leave top up only up to the worker's ordinary rate of pay, for many employees covered by the Conditions Award who work regular overtime and/or shiftwork, such as Correctional Officers, their PIAWE will be more than 5% above their ordinary rate of pay and the issue of sick leave top up simply won't arise. However, because the rate is less than PIAWE, the encouragement to "return to work at the earliest available time" will, in theory at least, still be there. This will remain the case after the first 13 weeks of incapacity for workers whose PIAWE is more than 20% above their ordinary rate of pay. There is simply no analysis in the case presented by the Secretary of, for example, how many, if any, Correctional Officers would be disincentivised to return to work at the earliest available time if they were to receive sick leave top up in the event that their workers compensation payments fell below their ordinary rate of pay and for what period. 4. The extract from the cross-examination of Ms Kulesz reproduced in the Joint Decision at [126] highlights the inconsistency of the approach adopted by the Secretary in these proceedings. Ms Kulesz had conceded that "the secretary's position is that clauses which do not refer to 26 weeks in section 36 are consistent with the objects of the 2012 worker's comp amendments". Clause 18(iii) of the Health Conditions Award is just one example of such a clause (at [9]). It is the Secretary's evidence that such clauses in awards which cover employees who have continued post-2012 to receive sick leave top up payments are consistent with the objects of the 2012 Amendment Act. And yet the Secretary opposes the PSA's application to amend cl 82.7 of the Conditions Award in a manner which would effectively bring the provision into line with provisions which the Secretary concedes are consistent with the "objects of the 2012 worker's comp amendments" by removing reference to "the 26 weeks in section 36". The Secretary's opposition is "on the basis that the government has a policy in regards to top up clauses, and the current application by the applicant goes against the government's policy in regards to top up clauses, and incentivising employees to come back into the workplace". With the greatest of respect, none of that makes any sense. 5. Whilst I agree that "discerning the legislative intention underpinning the 2012 Amendments is a matter for the Full Bench" and that the opinions of Ms Kulesz may be of "limited assistance", Ms Kulesz, in her evidence, was not expressing her opinion about anything but, rather, giving evidence of the "secretary's position" and, in doing so, was required to attempt to defend the indefensible (Joint Decision at [127]). 6. Contrary to what is stated in the Joint Decision at [128], I am "persuaded that the changes to the Conditions Award sought in the PSA's Application" would not be inconsistent "with the legislative intention behind the 2012 Amendments". Would the change sought by the PSA result in better health and return to work outcomes for employees? 1. The evidence of the parties, including competing expert evidence, on "whether the step downs contemplated by ss 36 and 37 of the WC Act are effective in facilitating the timely return to work of injured workers, or might instead have a deleterious effect on their health and wellbeing" has been well canvassed in the Joint Decision at [129]-[145]. However, I disagree with the conclusion expressed at [145]. 2. At best, the evidence on this issue is inconclusive and does not support a conclusion that the changes sought by the PSA will result in worse health and return to work outcomes for employees. 3. The competing experts whose evidence canvassed, on a broad level, the question of the impact of the level of financial benefit on the number and duration of workers compensation claims and the effect on return to work outcomes, virtually cancelled themselves out (Joint Decision [131]-[134], [138]-[141]). 4. What is missing from the case mounted by the Secretary on this issue is a careful analysis of the workers compensation claims experience, including number and duration of claims, and return to work outcomes of employees covered by the Conditions Award since 1 October 2012 compared to the experience of a comparable group of employees who continued to receive sick leave top up after 1 October 2012 over a comparable period of time. 5. It was also part of the Secretary's case that employees covered by the Conditions Award, as opposed to others such as health workers, should be prevented from accessing their accrued sick leave for top up payments when off work due to a compensable illness or injury so that it will still be available to them later in the event that the employee goes of work for a non-work related illness or injury. One example of the expression of this "we know what's best for you" approach was demonstrated in the following exchange during the cross-examination of one of the PSA's witnesses, Kylie Smith: Q. You understand that we're here to talk about the utilisation of your accrued sick leave to top up your workers comp payments? A. Yes. Q. In doing so, you understand that you would make a decision to run down your sick leave over time until in your case it might all run out? A. Yes. Q. Have you ever considered what would happen in that scenario if you had no sick leave left and you went back to work and actually became ill in a situation where you weren't able to access workers compensation? A. Well I've been in the Department for 16 years and I'd use my long service leave, which I have been using. Q. I'm asking you to look forward into the future here so to speculate in one sense. If you had no sick leave left because you used it for topping up your workers compensation, and in the future you became ill, generally ill, and you had no sick leave left, have you ever considered what the financial implications would be for you at that stage? A. No, because, yeah I don't want to get sick, and I'm unwell now, and it's - yeah. Q. Yes, but wouldn't it be the case that your financial situation would go from earning like you are now, at least 80% of what your pre-injury earnings were down to zero? Have you considered that? A. No. (T09/03/22 P 74 L 24-49) 1. Another example occurred during the re-examination of one of the Secretary's witnesses, Simon Kempson, Executive Director, People and Performance for the Department of Planning, Industry and Environment: Q. And I was asking you particularly about the use of sick leave for top up purposes as opposed to, as you said I think, that would end up sending it in the wrong direction. I was particularly asking you about what is your concern with respect of the use of sick leave for those purposes, as opposed to other purposes? A. Because I think we're using sick leave for the wrong purpose. Sick leave is designed for non‑work related injury or illness. And I believe that people need to preserve this sick leave balance for that situation. That was the intent of sick leave being put into the award, as I've otherwise understood it. Q. Are any examples that you can give to the full bench as to why you hold that view? A. I've certainly seen examples of individuals who have essentially run down their sick leave as a result of - in the firefighting scenario, using the sick leave to top up their workers comp. And then the moment they then need their sick leave, they don't have any. Q. What happens then? A. They then go on leave without pay or alternatively, they could take recreational leave or extended leave if they have it. But by and large, leave without pay is the end outcome and they end up with nothing. (T15/03/22 P 256 L13-33) 1. A detailed analysis of the evidence of the witnesses of both parties was set out in Appendix A to the PSA Submissions. I accept as accurate that analysis. 2. PSA witnesses Janelle Burns, Nichola King, Julie King, Dean Bramble, Kellie Jane Becquet, Murray Adamson and Stephen Wallace gave compelling evidence, which I accept, as to poor return to work outcomes and other hardship resulting from reduced income support and financial stress from the current step downs. Others, such as Mark Currie who worked for Transport for New South Wales and Kam Baker who worked for the Rural Fire Service were both able to utilise their accrued sick leave to top up their workers compensation payments and both experienced positive return to work outcomes. 3. Much of the evidence of the Secretary's witnesses was inconclusive as to the effectiveness of step downs as an incentive for employees on workers compensation to return to work. For example, Catherine Carvolth, Director, Workers Compensation Safety and Wellbeing, Department of Communities and Justice, gave the following evidence under cross-examination: Q. Are you aware of research that for some workers, an increase in financial benefits will have little or no impact, or the impact will be overshadowed by other factors in terms of their return to work behaviour? A. I'm not - I'm not aware of that - that research because I don't know which research we're talking about, but what I would say is that there is a bunch of - a whole range of things influence when someone is ready to come back to work. The financial change is one of those things, but there are other things as well. The nature of their injury, their treatment, the nature of their duties, other things that might be going on in their life. All of those things, the availability of suitable duties, all these things go into the melting pot of a return to work plan. 1. Further, the position adopted by the Secretary pays little, if any, regard to the fact that employees covered by the Conditions Award who are prevented from accessing their accrued sick leave for workers compensation top up, and who do not subsequently access some or all of it for non-work related illness or injury, on termination of employment forfeit their unused sick leave accrual. 2. My assessment of the totality of the evidence before the Commission is that granting the PSA Application will have no discernible impact on the number and duration of workers compensation claims made by employees covered by the Conditions Award or on return to work outcomes. Conclusion 1. The PSA has presented a compelling case on the merits in support of its application. Absent the unnecessary reference to "26 weeks" in cl 82.7 of the Conditions Award, the 2012 Amendment Act would not have had the effect of denying employees covered by the award their longstanding entitlement to sick leave top up. They now find themselves at a distinct disadvantage in comparison with other public sector employees with whom they enjoyed parity with respect to sick leave top up prior to the enactment of the 2012 Amendment Act. 2. Many employees covered by the Conditions Award who do not work overtime, shiftwork or the like, will find themselves financially better off in terms of receiving their full ordinary rate pay when on sick leave due to a non-work related illness or injury than when they are incapacitated due to a compensable illness or injury. 3. If it were the case that the PSA Application needed to be processed pursuant to s 17 of the IR Act, I would still vary cl 82.7 of the Conditions Award in the same terms as set out at [39] above. 4. If it were necessary, I would determine that the PSA Application has been made out as a Special Case for the purposes of cl 8.4 of the Commission's Wage Fixing Principles for the reasons set out at paragraphs 84-88 of the PSA Submissions set out below (footnotes omitted): 84. The PSA relies on the following factors showing that the Application has "special attributes" or is "out of the ordinary" so as to take it outside the restrictions which may otherwise apply under the wage fixing principles. 85. First, the Proposed Variation does not involve any increase in remuneration or conditions of employment, simply a modernisation of a clause regulating the use of existing entitlements. The change anticipated by the Proposed Variation involves the regulation of the use of an existing guaranteed minimum condition of employment, namely sick leave under s.26 of the IR Act. 86. It is no different to the application brought by the NSW Government agency iCare in 2018 to vary its award under s. 17 to make "minor corrections to references to the Workers Compensation Act 1987 that as a result of amendments to that Act are now inconsistent with its provisions" (emphasis added). This variation, made by consent, had the effect of updating the sick leave top up provision in the Insurance and Care Award 2017 (Icare Award) by reference to the initial 13 week compensation period under the Post-Amendment Act. This award has been subsequently varied four times in 2019 and 2021 with the sick leave top up clause - so corrected - intact to date. 87. Second, the Proposed Variation seeks to restore the full application of cl 82.7 in circumstances where it has largely ceased to apply as an unintended and inadvertent consequence of the 2012 amendments to the WC Act. As set out above at paragraph 73, there was no reference to sick leave top up in any of the extrinsic material concerning the 2012 amendments; and s 50 of the Post-Amendment Act was preserved. Indeed, the s.17 application brought by iCare referred to in the preceding paragraph proceeded on the footing there is no inconsistency between the 2012 amendments to the WC Act and an appropriately worded sick leave top up clause in an award. 88. Third, the position taken by the NSW Government not to honour sick leave top-up has been inconsistently applied across the NSW public sector. A notable example of this is the application by iCare to update the Icare Award to reflect the current language in the WC Act. Moreover, sick leave top up is still honoured for certain classes of employees (firefighters) and has been applied by the NSW Government on an ad hoc basis to employees who are not firefighters and who are covered by clause 82.7 or similar provisions in other awards. An extraordinary feature of this case is that the entitlement in dispute is widely conferred by the NSW Government on iCare employees who manage the workers compensation claims of employees covered by the Conditions Award – and other public sector employees on an ad hoc basis - but not generally for the injured workers who submit those claims. Section 146C of the IR Act and cl 6 of the Industrial Relations (Public Service Conditions of Employment) Regulation 2014 1. The Joint Decision at [81] refers to s 146C of the IR Act and cl 6 of the Industrial Relations (Public Service Conditions of Employment) Regulation 2014 ("Regulation") which underpinned the Secretary's Motion. However, there is no further reference made to the issues raised in the Secretary's Motion which is understandable, in light of the determination made in the Joint Decision at [178]. 2. Given the determination I have made with respect to s 50 of the WC Act it is not strictly necessary that I deal with the matters raised in the Secretary's Motion either. However, as the PSA has put an alternative case in answer to those matters I propose to set out my opinion with respect to those issues. I note that, on the first day of the hearing, counsel for the Secretary declined to press for the Secretary's Motion to be heard separately and indicated that he would deal with the matters regarding employee related costs in final submissions. 3. A document titled "Response" filed by the Secretary on 6 August 2021 in response to the Amended Notice of Award Review and Application for Award Variation filed by the PSA on 3 June 2021 contained the following (footnotes omitted): 10. The Proposed Variation is not permitted under s. 146C of the IR Act and cl. 6 of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014. 11. The Commission may not award increases in remuneration or other conditions of employment if the employee related costs for those employees are increased are increased by more than 2.5% per annum. 12. The Proposed Variation: (a) is an increase in conditions of employment; (b) is an employee-related cost; and (c) would increase employee related costs by more than 2.5% per annum. 13. The Application does not articulate any employee-related costs savings to offset the increase in employee-related costs arising from the Proposed Variation. 1. In support of the position put by the Secretary, written closing submissions filed on 28 March 2022 contained the following (footnotes omitted): 4. The award-making powers of the Commission, contained in s. 10 of the IR Act, are constrained by s. 146C and the policies declared in the Regulation. The PSA's variation attracts the proscription in the Regulation by reason of the projected increase in employee-related costs of above 2.5%. 5. The PSA has not sought to reply to the Secretary's evidence that its proposed variation will involve a significant cost to government, and it did not put to the Secretary's witnesses that there would be no employee-related costs. 6. The purpose of the PSA's variation is to introduce top-up payments from week 1 of a claim. The right to payments from week 1 has never been available to public servants covered by the Conditions Award. No top-up payments (other than under the firefighting exception) have been made to employees under cl.82.7 of Conditions Award since 2013. 7. To decide whether the 2.5% limit will be exceeded, it is necessary to determine the employee-related costs for the annual period before the commencement of the proposed award variation and the increases in those costs for the following period. The unchallenged evidence is that the 2.5% limit has been attained. 8. The process identified by the Full Bench in the Retained Firefighting Staff Award case was one where "the claim involves or is likely to involve an increase in remuneration or other conditions of employment of more than 2.5 per cent per annum in employee-related costs". Thus, it was held that "the onus must fall to the applicant to present evidence in support of its application so as to enable the Commission to determine whether that evidence is sufficient to satisfy the cost limitations imposed" by the Regulation. No such evidence has been presented in response the Secretary's evidence in this matter. 9. The process identified in the Retained Firefighting Staff Award contemplated an agreement on costs savings or, in the absence of any agreement, "the applicant will also need to satisfy the Commission the necessary cost savings have been or will be achieved to fully offset the increased employee-related costs". No savings have been suggested in this matter. 10. None of the matters in the Retained Firefighting Staff Award arise in the present proceedings as there (i) is no agreement between the parties, and (ii) has been no attempt made by the PSA to identify any costs savings. The case was not formally 'split' at the outset. The absence of any identified savings prevents the Commission from making an award on the merits Regulation 9 has the effect of requiring that any requisite employee-related costs to be identified in the terms of any award made. 11. In the Patient Transport Officers case, an award was sought providing for an increase in the form of an allowance to be paid to patient transport officers who were required to take their paid crib break away from the station. There was no evidence as to how often employees were "directed and might in future be directed to crib away from station", although Newall C was "prepared to accept that the practice is happening and will continue to happen" such that it could be said "that there will be an increase to employee related costs". Despite this, Newall C found it "impossible on the evidence to determine as a matter of certainty that there will be such an increase" and so made the award without further regard to stricture imposed by s. 146C. 12. On appeal, the Full Bench found the Commission had no power to make the award given "the potential increase in employee-related costs identified in the evidence" and "the absence of evidence upon which the Commissioner could make findings about the employee-related costs before and after the making of the proposed award". The Full Bench held that it was "incumbent upon the Commissioner to dismiss summarily the application for the award", and accordingly quashed the award. 13. In this case, there is ample evidence upon which the Commission can make findings that the 2.5% limit will be exceeded. For these reasons, the Full Bench should, in the absence of any attempt to respond in any way to the quantification evidence of the Secretary, dismiss the PSA's application. 1. The PSA Submissions contained the following responses to the position put by the Secretary (footnotes omitted): Wages Policy – section 146C 94. Contrary to the IRS's Response at [10]-[13] and his notice of motion to dismiss the Application filed on 21 December 2021 (IRS Motion), the Proposed Variation does not involve a relevant "increase" to any conditions of employment. Regulation 6 of the Industrial Relations (Public Sector Conditions of Employment) Regulations 2014 (the Regulations), therefore, is not engaged. 95. In the alternative, the PSA submits that even if Regulation 6 applies: (a) the evidence before the Commission does not demonstrate that the Proposed Variation increases employee related costs by more than 2.5%; and (b) the question of employee-related costs and employee-related cost savings are appropriately addressed in a subsequent stage of these proceedings when employee- related costs may be capable of being identified adopting the correct methodology. Procedure 96. The Commission has, in the normal course, adopted a two-stage process for dealing with claims in which s 146C has been put in issue. 97. Firstly, the Commission determines the merits of a claim including whether the claim relevantly involves an increase in remuneration or other conditions of employment of more than 2.5 per cent per annum in employee-related costs. The question of whether the proposed variation engages clause 6 of the Regulation at all is at issue; and this question is integral to the merits of the application because the PSA's case is that the variation merely clarifies the conditions under which the existing entitlement to sick leave top up may be utilised or accessed and does not constitute an increase in remuneration or other conditions of employment. If it is determined that the variation does not relevantly constitute an increase in conditions, then the Commission can determine the matter entirely on the merits at this stage. 98. Consistent with this approach, the Commission has resisted attempts to determine the operation of s 146C and Regulation 6 as a preliminary or jurisdictional issue. Accordingly, on 21 December 2021, with the consent of the parties the Commission ordered that the IRS Motion be heard together with the merits of the Application. The IRS effectively acceded to this position on the first day of hearing when counsel for the IRS declined to press for the IRS's motion to be heard and indicated that he would deal with matters regarding employee related costs in final submissions. 99. The proceedings are therefore effectively at the first stage. Having regard to its primary submission on s 146C, the PSA applies for the matter to be determined entirely on the merits in its favour at this stage. 100. Secondly, if the claim is successful in that the Commission is satisfied that the variation should be made, and if - contrary to the PSA's primary submission on s 146C - it is determined that the variation engages clause 6 of the Regulation by increasing employee related costs by more than 2.5% per annum, then the Commission can proceed to determine whether the necessary cost savings have been or will be achieved to fully offset the increased employee-related costs. The obligation on the Applicant to identify relevant cost savings arises only in the event that the Commission determines that the claim involves an increase in conditions of employment of more than 2.5% in employee- related costs; and that question presently remains at issue. Section 146C and Regulation 6 do not apply 101. Regulation 6(1)(a) only operates in connection with "awarded increases" in remuneration and other conditions of employment. The limitation on increases in employee-related costs to 2.5% per annum applies, relevantly to this case, to any increase in conditions of employment awarded by the Commission. 102. The Proposed Variation does not have the effect of increasing the employee's entitlements to accrued sick leave. Instead, the variation updates a clause that facilitates and regulates the use of the employees' existing entitlement to sick leave. It is not in the nature of "increased leave entitlements" referred to by the Minister as exemplifying "an additional condition of employment" (emphasis added) to which regulation 6(1)(a) is directed. On the contrary, the existing entitlement to accrued sick leave would be preserved. 103. Sick leave is an established and fundamental condition of employment. It is guaranteed as one of the minimum conditions of employment to which the Commission is to have regard as a paramount policy. The basic entitlement is contained in s 26 of the IR Act and provides that each employee is entitled to not less than one week of sick leave on full pay for each year of service with an employer, and sick leave accumulates from year to year for three years. 104. The effect of the Proposed Variation is to clarify the circumstances in which an employee may be eligible to draw upon their existing award-based sick leave entitlement, a matter which the Commission is expressly empowered to determine: s 26(2) of the IR Act. 105. The circumstances in which employees may draw upon their accrued sick leave is also relevantly and presently regulated by the interaction between s. 50 of the WC Act and clause 79.3 of the Conditions Award. Paragraphs 36 to 62 above demonstrate that the PSA is not seeking any relevant increase in the conditions of employment of employees covered by the Conditions Award. This is because the existing liability to grant sick leave under clause 79.3.1 of the Conditions Award which engages s. 50 of the Post-Amendment Act which effectively confers a right to sick leave top up to the extent of the employee's "ordinary rate of pay" (as reflected in the proposed variation to clause 82.7). 106. Furthermore, instead of increasing conditions of employment, the Proposed Variation would have the effect of regulating and further constraining the use of accrued sick leave in circumstances where a worker also receives workers compensation payments by: (a) making the grant of such leave conditional on the Department Head's satisfaction that the employee is complying with their statutory obligations, and (b) imposing mutual obligations to facilitate the employee's timely return to work. 107. Thus, the Proposed Variation involves no relevant increase in the conditions of employment of employees covered by the Conditions Award for the purposes of regulation 6(1)(a). Section 146C of the IR Act is no impediment to the Commission granting the relief sought by the PSA. Causation and quantification of employee related costs 108. [If], contrary to the PSA's primary submission, the Commission determines that the proposed amendments to clause 82.7 involve some increase in the conditions of employment and employee related cost, the Commission must determine the quantum of that cost, and also whether the cost increase results from, or is a consequence of, the Proposed Variation. 109. The onus is on both parties (applicant and respondent) to assist the Commission to establish the outer limits of employee-related costs: Secretary, NSW Ministry of Health v Health Services Union NSW. That would necessarily involve evidence demonstrating the maximum quantum of employee-related cost resulting from the Proposed Variation. 110. However, the IRS is in possession of the relevant information to allow the Commission to determine the issue of employee related costs. The Commission therefore has an expectation that the IRS would bring that information before the Commission to allow it to comply with its statutory mandates: Application for a New Award for Patient Transport Officers (No 2). 1. I agree with and accept the submissions of the PSA for the reasons set out therein. Granting the PSA Application will not result in public sector employees being "awarded increases in remuneration or other conditions of employment". The quantum of sick leave provided for in cl 79 of the Conditions Award will not increase. Clause 6 of the Regulation and s 146C of the Act are not engaged. 2. In the alternative, if cl 6 of the Regulation and s 146C of the Act are engaged and granting the PSA Application would result in some increase in employee related costs in excess of the recent 2.5% wage increase which was awarded to employees covered by the Conditions Award by consent with effect from 1 July 2022, then I would concur with the alternative position put by the PSA to the effect that the question of the quantum of employee related cost and potential employee related cost savings be considered at "stage 2" of the proceedings. 3. In this respect, the current state of the Secretary's evidence as to the quantum of employee related costs is entirely unsatisfactory. 4. By way of example, Ms Carvolth affirmed in her affidavit that the "total approximate annual cost of the PSA's proposed variation to DCJ is therefore $8,010,471". However, as was revealed in the following passage from Ms Carvolth, this estimate was based on a number of false assumptions and is likely to be wildly inaccurate: Q. In your affidavit you give an estimate of the costs you say of the PSA's claim in these proceedings, don't you? A. Yes. Q. Can I just ask you some questions about that. In paragraph 15 of your affidavit, you put a figure to that estimated cost which is $8,010,471. Do you see that? A. Yes, I do. Q. In paragraph 13 and 14, I think you explain the methodology you've used to reach that figure which is to use the 2020 2021 cost figures for your department and then bridge the cap or fill the gap of the 5% from 95% pre‑injury average weekly earnings, PIAWE, to 100% and then for the amounts paid at 80% PIAWE you add on the 20%, for the 20% gap. Is that correct? A. That's correct. Q. I think table 1 sets out your calculations. That's on page 970 of the court book. So in the total column, if you go down to the grand total row, that 42 million figure, that's the total actual cost in 2021 of payments made either at 95% or 80% PIAWE, correct? A. Yes, it is. Q. Then that figure is split up in the next table just below it. The first two rows split up the composition of that total figure between the payments made at 95% and the payments made at 80%, correct? A. That's correct. Q. And then for the next two rows, you add on that the 20% to make up the 80% PIAWE to 100%, and then - and that's the seven million figure, and then the 5% for the 95% PIAWE payments, which is the $669,000 figure, correct? A. That's correct. Q. And the total of those two sums comes to your figure, you state in your affidavit, the eight million figure, correct? A. Yes. Q. Okay. So, what you've measured is the cost of the top up from what was paid, from 95 or 80% PIAWE, to 100% PIAWE? A. That's correct. Q. And you've seen the PSA's application, have you not? A. Yes, I have. Q. Are you aware that the PSA's variation seeks to enable, or facilitate, people to top up, not to 100% PIAWE, but to 100% ordinary rate of pay? A. Yes, I am. Q. So, that would exclude penalty rates and overtime, is your understanding, wouldn't it? A. Yes, that's correct. Q. And PIAWE on the other hand, includes overtime and penalty rates? A. That's correct. Q. So, can I suggest to you - and before I do that, in your department, there are sections of employees who earn substantial overtime and penalty rates, are there not? A. In some parts of the agency, yes there are. Q. For instance, corrective services. A. That's correct. Q. For instance, youth justice services. A. Yes, that's correct. Q. So, the case is - the position is, your estimate doesn't measure the cost of payments, If the department started paying sick leave top up to maintain ordinary rate of pay, does it? A. That's correct. (T15/03/22 P 219 L 46 – P 221 L 14) 1. If it became necessary I would direct the parties to file and serve more reliable evidence than is currently before the Commission on the issues of the potential employee related costs of granting the PSA Application and related potential employee related cost savings. 2. COMMISSIONER SLOAN AND COMMISSIONER WEBSTER: The Full Bench has two applications before it. At the heart of the dispute between the parties are these questions: Are employees covered by the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 ("Conditions Award"), and who are in receipt of workers compensation payments pursuant to the Workers Compensation Act 1987 ("WC Act"), entitled to use their accrued and untaken sick leave to make up for the difference between the amount of compensation payable under the WC Act and their ordinary rate of pay? If not, should they be so entitled? Background 1. We have been assisted by a Statement of Agreed Facts prepared by the parties ("Agreed Facts"), which is in these terms: "Parties to the proceedings 1. The applicant, the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ('the PSA') is the industrial organisation representing employees in the New South Wales public sector. 2. The respondent, the Industrial Relations Secretary ('the Secretary'), is the employer of NSW Public Service employees pursuant to s 50 of the Government Sector Employment Act 2013 (NSW). Background 3. Prior to 1 October 2012, sections 36 and 37 of the Workers Compensation Act 1987 (NSW) ('the Act') relevantly provided: 36 Weekly payment during total incapacity – first 26 weeks (1) The weekly payment of compensation to an injured worker in respect of any period of total incapacity for work during the first 26 weeks of incapacity shall be the amount of the worker's current weekly wage rate. (2) In this section: current weekly wage rate, in relation to a worker, means the worker's current weekly wage rate determined from time to time in accordance with section 42. 37 Weekly payment during total incapacity – after first 26 weeks (1) The weekly payment of compensation to an injured worker in respect of any period of total incapacity for work (not being a period during the first 26 weeks of incapacity) shall be: (a) 90 per cent of the worker's average weekly earnings, except that: (i) the payment shall not exceed $235.20 per week, (ii) in the case of a worker who is over 21 years of age at the time of payment – the payment shall not be less than $187.10 per week, and (iii) in the case of a worker whose average weekly earnings do not exceed $170 per week – the payment shall be 100 per cent of those earnings [or] $153, whichever is the lesser amount… (together, the 'pre-2012 provisions') 4. The effect of the pre-2012 provisions was that: (a) The quantum of compensation was based on 'current weekly wage rate'. This means the rate of remuneration under the worker's relevant award but not including overtime or other penalty rates: s 42(1)(a) and 42(6). (b) After 26 weeks, a statutory cap applied. The statutory cap amount set out in s 37 was indexed in accordance with Part 3, Division 6 of the Act (now Part 3, Division 6A). As at 2012, the statutory cap was $432.50. As at March 2022, the statutory cap (for those persons who remain subject to the pre-2012 provisions) is $536.90. (c) If the worker continued to be entitled to weekly compensation under the Act, they could receive compensation payments up until 12 months after they had reached retiring age: s 52. 5. Prior to the making of the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 ('the Conditions Award'), public service regulations provided for NSW public servants to be paid the difference between the compensation payable under the Act and their ordinary rate of pay after a period of 26 weeks, with the amount to be debited against the employee's accrued sick leave: Public Service (General) Regulation 1984 (NSW) (cl 74(3)); Public Service (General) Regulation 1988 (NSW) (cl 64(3)); and Public Sector Employment and Management (General) Regulation 1996 (NSW) (cl 91(3)). The last such public sector regulation providing for sick leave top-up was repealed on 1 September 2009. 6. In 1997, the Conditions Award was made by consent and contained clause (vii)(g): 'A staff member who continues to receive compensation after the completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the staff member's ordinary rate of pay. Sick leave utilised in this way shall be debited against the staff member.' 7. In 2010, the provision referred to in the preceding paragraph was amended to include the terms of existing sub-clause 82.7.1. Since 2010, clause 82.7 has remained in the same terms in the Conditions Award. 8. The Commission has reviewed the Conditions Award in 2001, 2006, 2009, 2012 and 2016. Amendments to sections 36 and 37 of the Act 9. On 27 June 2012, the Workers Compensation Legislation Amendment Act 2012 ('the Amendment Act') received assent. The Amendment Act repealed ss 36 and 37 of the Act, with effect from 1 October 2012, and inserted in their place provisions altering the entitlements of employees to weekly compensation payments under the Act. 10. The effect of the Amendment Act was that, on and from 1 October 2012: (a) for the first 13 weeks, an injured worker with no current work capacity is paid 95% of their pre-injury average weekly earnings ('PIAWE') (which includes overtime and penalty rates); (b) after 13 weeks, if a worker resumes working at least 15 hours per week, the worker is paid 95% of their PIAWE for as long as they remain working at least 15 hours per week; (c) after 13 weeks, if a worker has no current work capacity, or if they return to work for less than 15 hours per week, the worker is paid 80% of their PIAWE; (d) after 130 weeks, if the worker has no current work capacity, or if they have work capacity but satisfy prescribed criteria, the worker is paid 80% of their PIAWE; or the entitlement to weekly payments otherwise ceases; and (e) after 260 weeks, if the worker's degree of permanent impairment resulting from the injury is more than 20%, the worker is paid 80% of their PIAWE; or the entitlement to weekly payments otherwise ceases. 11. The Amendment Act inserted transitional provisions into Pt 19H of Sch 6 to the Act. Clause 25 of the transitional provisions provided: '25 Police officers, paramedics and firefighters The amendments made by the 2012 amending Act do not apply to or in respect of injury received by a police officer, paramedic or firefighter (before or after the commencement of this clause), and the Workers Compensation Acts (and the regulations under those Acts) apply to and in respect of such an injury as if those amendments had not been enacted.' (the 'emergency services exceptions'). 12. Section 50 of the Act was not altered by the Amendment Act. 13. From on or about 13 May 2013, the NSW Government limited the access of top up payments under the Conditions Award for employees in the New South Wales public sector on the basis that clause 82.7 in the Conditions Award 'no longer has any effect for the majority of workers' because it referred to the repealed provisions of s 36 of the Act … Declaration Decision 14. On 24 October 2016, the applicant filed and served applications in the Industrial Commission of NSW for variations to the Conditions Award to provide for sick leave top up benefits. 15. On 8 November 2016, the applicant also filed and served applications in the Supreme Court relevantly seeking the following declaration: (1) That cl 82.7 of the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 permits, and at all times since 1 October 2012 has continued to permit, employees covered by that Award who continue to receive compensation under the WC Act by reason of having no current work capacity after the completion of a period of 26 weeks to use any accrued but untaken sick leave to make up the difference between the amount of compensation payable under that Act and the employee's ordinary rate of pay. Sick leave utilised in this way shall be debited against the staff member. (Public Service Association and Professional Officers' Association Amalgamated Union (NSW) v Industrial Relations Secretary [2017] NSWSC 1473; (2017) 271 IR 77 at [27] (Walton J) (the 'Top Up Case'). 16. ln the Top Up Case (at [187]), Walton J rejected the declaration referred to in the preceding paragraph. 17. Following the decision of Walton J, the applicant withdrew its variation application referred to in paragraph 14. 18. On 6 May 2019, the Industrial Registrar gave notice of a review of the Conditions Award (IRC No 2019/134157). 19. On 21 October 2019, the respondent filed a notice of review of the Conditions Award seeking, inter alia, the deletion of clause 82.7 (IRC No 2019/134157). 20. On 30 April 2021, the applicant filed a notice of award review and application for award variation, seeking to vary clause 82.7; and filed an amended application on 3 June 2021 which is the subject of these proceedings (IRC No 2021/121086). 21. On 6 August 2021, the respondent filed an amended notice of award review seeking a variation to clause 82.7 which is the subject of these proceedings (IRC No 2019/134157). 22. On 21 December 2021, the Respondent filed a notice of motion seeking the dismissal of the applicant's application referred to in paragraph 20, which is the subject of these proceedings." (Emphasis in original) 1. To place some of these facts into context, cl 82 of the Conditions Award is titled "Sick Leave – Workers Compensation". As it will be necessary to consider the provision in some detail, we set out below the clause in its current terms, as relevant to these proceedings: 82. Sick Leave - Workers Compensation 82.1 The Department Head shall advise each employee of the rights under the Workers Compensation Act 1987, as amended from time to time, and shall give such assistance and advice, as necessary, in the lodging of any claim. 82.2 An employee who is or becomes unable to attend for duty or to continue on duty in circumstances which may give the employee a right to claim compensation under the Workers Compensation Act 1987 shall be required to lodge a claim for any such compensation. … 82.5 Pending the determination of that claim and on production of an acceptable medical certificate, the Department Head shall grant sick leave on full pay for which the employee is eligible followed, if necessary, by sick leave without pay or, at the employee's election by accrued recreation leave or extended leave. 82.6 If liability for the workers compensation claim is accepted, then an equivalent period of any sick leave taken by the employee pending acceptance of the claim shall be restored to the credit of the employee. 82.7 An employee who continues to receive compensation after the completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the employee's ordinary rate of pay. Sick leave utilised in this way shall be debited against the employee. 82.7.1 Before approving the use of sick leave in this subclause, the Department Head must be satisfied that the employee is complying with the obligations imposed by the Workplace Injury Management and Workers Compensation Act 1998 which requires that the employee must: (a) participate and cooperate in the establishment of the required injury management plan for the employee; (b) comply with obligations imposed on the employee by or under the injury management plan established for the employee; (c) when requested to do so, nominate as their treating doctor for the purposes of the injury management plan a medical practitioner who is prepared to participate in the development of, and in the arrangements under, the plan; (d) authorise the nominated treating doctor to provide relevant information to the insurer or the Department Head for the purposes of the injury management plan; and (e) make all reasonable efforts to return to work as soon as possible, having regard to the nature of the injury. 82.8 If an employee notifies the appropriate Department Head that he or she does not intend to make a claim for any such compensation, the Department Head shall consider the reasons for the employee's decision and shall determine whether, in the circumstances, it is appropriate to grant sick leave in respect of any such absence. … 82.10 If the Department Head provides the employee with employment which meets the terms and conditions specified in the medical certificate issued under the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 and, without good reason, the employee fails, to resume or perform such duties, the employee shall be ineligible for all payments in accordance with this clause from the date of the refusal or failure. 82.11 No further sick leave shall be granted on full pay if there is a commutation of weekly payments of compensation by the payment of a lump sum pursuant to section 51 of the Workers Compensation Act 1987. … Matters before the Full Bench 1. As stated in the Agreed Facts, there are three matters before the Full Bench. The first (matter 2019/134157) was commenced on 6 May 2019 by the Industrial Registrar issuing a notice of the Commission's intention to review the Conditions Award pursuant to s 19 of the Industrial Relations Act 1996 ("IR Act") ("Review Application"). 2. Under the auspices of the Review Application, on 21 October 2019 the Industrial Relations Secretary ("Secretary") filed a "Notice of Award Review" proposing the changes that ought to be made to the Conditions Award as a consequence of the review under s 19 of the IR Act. On 6 August 2021 the Secretary filed an Amended Notice of Award Review, in which he seeks that cl 82.7 be amended to include at its end the following notation: "Note: Following the decision in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary [2017] NSWSC 1473, this clause only applies to firefighters to whom cl 25 of Pt 16H of Sch 6 [sic] of the Workers Compensation Act 1987 applies, whilst they are engaged in firefighting duties." ("Secretary's Application") 1. The second matter before the Full Bench (matter 2021/121086) was commenced on 30 April 2021 by the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("PSA") filing an application pursuant to s 17(3)(d) "and/or" s 19(6) of the IR Act to vary the Conditions Award ("PSA's Application"). The PSA's Application has been through several iterations. In its most recent form, the PSA's Application seek to have cl 82.7 amended to read: "82.7 An employee who receives compensation pursuant to the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the employee's ordinary rate of pay. Firefighters to whom cl 25 of Pt 16H of Sch 6 of the Workers Compensation Act 1987 applies may use sick leave in this way after the completion of the first 26 weeks of incapacity. Sick leave utilised in this way shall be debited against the employee's balance of accrued sick leave." 1. The PSA further seeks the inclusion of a new cl 82.7.2 requiring "the Department" to "make all reasonable efforts to enable the employee to return to work as soon as possible, having regard to the nature of the injury". The proposed clause details some of the steps that would be required of the employer in this regard. 2. On 9 July 2021 Commissioner Murphy ordered that the Review Application (incorporating the Secretary's Application) and the PSA's Application be heard and determined together "insofar as the Review Application concerns the manner in which cl 82.7 of the Award is to be reviewed". 3. On 21 December 2021 the Secretary filed a notice of motion seeking an order that the PSA's "substantive application" be dismissed ("Motion"). On its face, the Motion was filed in respect of both the Review Application and the PSA's Application, although it appears properly to relate more to the latter. The basis of the Motion is that the Commission is unable by virtue of s 146C of the IR Act and cl 6 of the Industrial Relations (Public Service Conditions of Employment) Regulation 2014 ("Regulation") to make the variation sought by the PSA. 4. On 22 December 2021 Commissioner Murphy directed that the Motion "be heard and determined together with" the Review Application and the PSA's Application. 5. We have decided to address the merits of the PSA's Application and the Secretary's Application in advance of considering the Motion. Our reason for doing so is that the disagreement between the parties is of long standing. In order to bring finality to the dispute, we consider it necessary to articulate the Commission's decision in respect of the parties' substantive cases. This is consistent with the objects of the IR Act including "to provide for the resolution of industrial disputes" (s 3(g) of the IR Act, our emphasis) and the Commission's functions which include "resolving industrial disputes" (s 146(1)(b) of the IR Act, our emphasis). The PSA's Application – s 19 of the IR Act 1. Section 19 of the IR Act is in these terms: 19 Review of awards (1) The Commission is required to review each award before September 2001 and subsequently at least once in every 3 years. (2) The purpose of a review is to modernise awards, to consolidate awards relating to the same industry and to rescind obsolete awards. (3) The Commission must take account of the following matters in the review of awards— (a) any decision of the Commission under Part 3 or any other test case decision of the Commission, (b) rates of remuneration and other minimum conditions of employment, (c) part-time work, casual work and job-sharing arrangements, (d) dispute resolution procedures, (e) any issue of discrimination under the awards, including pay equity, (f) any obsolete provisions or unnecessary technicalities in the awards and the ease of understanding of the awards, (g) any other matter relating to the objects of the Act that the Commission determines. (4) The Commission must also take account of the effect of the awards on productivity and efficiency in the industry concerned. (5) During a review of awards, relevant industrial organisations and any other parties to the awards may make submissions on any of the matters being reviewed. (6) The Commission is to make such changes to awards as it considers necessary as a result of a review. 1. In Health Employees' Conditions of Employment (State) Award 2018 (Infectious Cleaning Allowance) [2021] NSWIRComm 1049 ("Infectious Cleaning Allowance") the Full Bench observed: "18. The approach to be taken by the Commission in reviews under s 19 has been considered in a number of decisions. The leading authority is Principles for Review of Awards – State Decision 1998 (1998) 85 IR 38; [1998] NSWIRComm 661 ('Principles for Review of Awards'), in which, relevantly for present purposes, the Full Bench (at 44-46) set out the following principles: (1) The word 'modernise' in s 19(2) is used with its ordinary meaning, and is to be understood in its statutory context as comprehending both bringing the award up to date and making it contemporary. (2) The concept of 'modernising' awards comprehends an obligation to ensure that the awards are made consistent with the current statutory framework. (3) The process of making or varying an award under ss 10 and 17 of the Act respectively must not be confused with the review process under s 19. (We note parenthetically that, relying on Principles for Review of Awards, the Full Bench in Re Hotel &c Employees (State) Award [2001] NSWIRComm 284 at [40] observed that s 19 is neither an alternative to, or a substitute for, applications under s 10 and s 17 of the Act.) (4) However, nothing precludes an application under s 10 or s 17 being heard in conjunction with s 19 proceedings, although the Commission may be cautious about requiring proceedings to be so conducted if a party is opposed to such a course. (5) A s 19 award review is not a mechanism for an appeal from earlier decisions made by the Commission in respect of an award, a means to overcome the consequences of earlier bargains made between the parties to an award or a device available to an award party to avoid the proper burdens involved in bringing a contested application to the Commission for the making or variation of an award in the normal way. (6) The Commission is not given a general discretion in s 19 to insert into an award being reviewed any other conditions which the Commission might consider a 'modern' award should contain. The review directed by s 19 concerns the provisions of existing awards. Unless properly arising from the matters specified in s 19 itself, during a review the Commission is not at liberty to insert into awards other conditions not already contained in them. 19. In Crown Employees (Public Service Conditions of Employment) Award 1997 [2001] NSWIRComm 22 at [19] Schmidt J observed that while s 19 'requires many things, it does not require a review that the Award has achieved fair and reasonable conditions of employment in practice, having regard to its operation since it was made'." 1. The PSA's "primary case", as set out in its written submissions dated 24 March 2022 ("PSA's Submissions"), is that the amendments sought to the Award through the PSA's Application "can and should be made under s 19 of the IR Act". [1] The PSA contended that the proposed variation "does not seek a fundamental change and does not introduce new conditions which are not presently included in the Conditions Award such as to take it outside the concept of modernisation" [2] , and would amount to a "minor correction to clause 82.7". [3] 2. These submissions are difficult to reconcile with the decision of Walton J in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary (2017) 271 IR 77; [2017] NSWSC 1473 ("Top Up Case"), referred to at pars 15-16 of the Agreed Facts. The effect of that decision was that cl 82.7 of the Conditions Award has no application to the majority of employees covered by it. We note parenthetically that it is common ground that it continues to confer a top up entitlement [4] on firefighters to whom cl 25 of Pt 19H of Sch 6 of the WC Act applies, whilst they are engaged in firefighting duties. 3. The PSA seeks to distinguish the Top Up Case, essentially on the basis that it was confined to the question as to whether cl 82.7 conferred a top up entitlement. The PSA contended that such an entitlement exists as a consequence of the interaction between the Conditions Award and s 50 of the WC Act, a matter which was not the subject of consideration in the Top Up Case. 4. Section 50 of the WC Act is in these terms: 50 Weekly compensation and sick leave (cf former s 7(2C)) (1) Compensation is payable to a worker in respect of a period of incapacity for work even though the worker has received or is entitled to receive in respect of that period any wages for sick leave under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment. (2) If a worker is paid compensation by the employer in respect of any period of incapacity for work in respect of which the employer is, or but for this section would be, liable under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment to pay to the worker any wages for sick leave— (a) that liability shall, to the extent of the compensation so paid, be deemed to have been satisfied by that payment notwithstanding the terms of that Act, award, agreement or contract, and (b) the amount of that compensation shall, for the purposes of subsections (4) and (5), be deemed to have been paid as compensation and not as wages. (3) If a worker, in respect of any period of incapacity for work in respect of which the employer is liable to pay compensation to the worker, is paid wages for sick leave by the employer and either an award is made afterwards for the payment of compensation to the worker in respect of that period or the employer agrees afterwards that compensation be paid to the worker in respect of that period— (a) the employer's liability to pay compensation in respect of that period shall, to the extent of the wages paid, be deemed to have been satisfied by that payment, and (b) the wages shall, to the extent of the compensation, be deemed for the purposes of subsections (4) and (5) to have been paid as compensation and not as wages. (4) If a worker is paid any compensation in respect of a period of incapacity for work, the worker shall, in respect of any entitlement to sick leave, or wages for sick leave, accruing after the expiration of that period— (a) if the worker has not also been paid wages for sick leave in respect of that period—be deemed not to have been entitled to or granted, or to have received, any sick leave or wages for sick leave in respect of that period, or (b) if the worker has also been paid wages for sick leave in respect of that period—be deemed not to have been entitled to or granted, or not to have received, sick leave or wages for sick leave in respect of the whole of that period, but only in respect of a lesser period calculated as provided by subsection (5). (5) The lesser period referred to in subsection (4) is a period which bears to the period of incapacity of the worker the same proportion as the wages paid to the worker in respect of the period of incapacity bear to the total amount of the wages and compensation paid to the worker in respect of the period of incapacity. (6) In this section— compensation means weekly payments of compensation under this Division. wages means wages, salary, allowance or other payment. 1. The PSA submitted that s 50: 1. "explicitly provides for and permits the use of generic award-based sick leave entitlements to top up workers compensation payments made under the [WC] Act"; [5] and 2. "explicitly countenances a sick leave top-up benefit. It specifically allows for the worker's accrued sick leave balance to be run down by the extent of the top-up payment." [6] 1. The PSA's Submissions proceeded to contend: "59. Under the Conditions Award, the Department Head's primary liability to grant sick leave on full pay is contained in cl 79.3.1. The only condition on the grant of sick leave is that the Department Head is satisfied 'that a staff member is unable to perform duty because of the staff member's illness or the illness of his/her family member'. Provided the Department Head is satisfied of the employee's inability to perform due to an illness; sick leave must be granted. This is the case whether or not the employee's incapacity is also compensable under the WC Act. 60. Clause 82 of the Conditions Award deals with a subset of the circumstances contemplated in clause 79 in which an employee may become 'unable to perform duty' because of illness or injury, namely, where they may also have 'a right to claim compensation under the Workers Compensation Act 1987': clause 82.2. Clause 82 recognises that the circumstances that may give the staff member a right to claim compensation under the WC Act are the same circumstances that would entitle them to sick leave on full pay under clause 79. And it operates by regulating an employee's access to the primary entitlement to sick leave under clause 79. 61. This is reinforced in the context of clause 82 as a whole: (a) The employer's obligation is to advise each employee about the scheme (82.1), assist employees to lodge a claim (82.1, 82.3) and to ensure that once received by the Department, a claim is lodged with the insurer in the appropriate statutory timeframe (82.4). The employee, on the other hand, is required to lodge a claim if they are unable to attend for duty or to continue on duty in circumstances which may give the employee a right to claim compensation under the WC Act (82.2). These obligations are mutually beneficial and reinforcing in the sense that: (i) the employer is given the opportunity to be reimbursed by the insurer for the employee's absence (for which it would otherwise be required to pay sick leave); and (ii) the employee's incapacity does not deplete their sick leave balance at the same rate as if their illness or injury was not compensable under the WC Act. (b) Clause 82.5 explicitly requires sick leave – for which the employee is otherwise eligible pursuant to their primary entitlement under clause 79 – to be granted pending the determination of an employee's application for workers compensation. (c) Clause 82.6 provides for the re-crediting of such sick leave where liability for a workers compensation claim has been accepted in the manner stipulated in s 50(4)(b) of the WC Act (as noted in paragraphs 41 and 42 above). (d) Furthermore, disregarding the application of clause 82.7 to the majority of employees covered by the Conditions Award, there is nothing in the Conditions Award that precludes the granting of sick leave under clause 79 where an employee has suffered a compensable injury and is also in receipt of a WC payment. In fact, when an employee has suffered a compensable injury, the only circumstance in which they can be denied the benefit of their primary (clause 79) sick leave entitlement is set out in clause 82.8, namely, where they have notified the Department Head that they do not intend to make a claim under the WC Act. Even in those circumstances, clause 82.8 provides the Department Head with a discretion to grant sick leave (accrued under clause 79) in respect of the worker's incapacity. 62. This analysis gives rise to two critical conclusions: (a) First, s. 50 contemplates the coexistence of ordinary award sick leave entitlements and statutory compensation payments. It is not limited to special classes of award-based sick leave top up benefits. Thus, subsection 50(2) is engaged when the employer is liable under cl 79.3 of the Conditions Award to pay sick leave for a period of incapacity during which the employee is also paid compensation under the WC Act. This liability is independent of – albeit regulated by – the operation of clause 82. The fact that clause 82.7 no longer corresponds to the Post-Amendment Act step down provisions (and therefore does not apply to the majority of employees covered by the Conditions Award) does not disturb the effect of s 50(2) as engaged by the entitlement to ordinary sick leave under clause 79.3. As a result, the entitlement to sick leave top up has remained in place for all employees covered by the Conditions Award, including since the 2012 amendments. The Proposed Variation does not seek to create an entirely new substantive entitlement. It merely seeks to modernise and bring up to date a clause that regulates the pre-existing right to sick leave top up. (b) Second, the Proposed Variation – like the existing clause 82.7 as it applied under the Pre-Amendment Act – would operate coherently within the Conditions Award (and clause 82 in particular) by regulating access to the primary entitlement to sick leave under clause 79.3. It would do so in the manner contemplated by s.50 of the WC Act." (Emphasis in original, footnotes omitted) 1. In oral submissions, Mr Chin SC, who appeared for the PSA, contended: [7] "As a result, the entitlement to sick leave top up has remained in place for all employees covered by the [Conditions Award] including since the 2012 amendments. That's the consequence of a proper understanding of the interaction between the Act, s 50, and the award. …In my submission, you'd need clear, unambiguous terms to subvert the intention and operation of s 50, which is that employees should be able to use their ordinary sick leave to top up." 1. On its terms, s 50 of the WC Act does not confer an entitlement on a worker to receive top up pay. It allows for a reconciliation of payments that a worker is entitled to receive under the WC Act with those that the worker has received, or is entitled to receive, by way of sick leave. It is possible that a worker will have received more by way of sick leave than they receive in workers compensation payments, and may enjoy the benefit of the surplus. However, as the Secretary submitted, care should be taken when referring to this surplus as a "top up". 2. Our attention was drawn to the history of s 50. The precursor to the provision was s 7(2C) of the Workers' Compensation Act 1926, which was introduced into the legislation by the Workers' Compensation (Amendment) Act 1970. In the second reading speech to the Workers' Compensation (Amendment) Bill 1970, the Hon F M Hewitt, the Minister for Child Welfare and Minister for Social Welfare stated: "Sick leave payments are dealt with in clause 4. Before section 7(2C) of the principal Act was enacted in 1953, the receipt of sick pay was a complete bar to the recovery of compensation for the same period. The worker had received his wages and therefore was not entitled to compensation for loss of wages. Section 7(2C) now provides that where a worker has received or is entitled to sick pay for a period of absence through an employment injury, he may elect to receive compensation instead. Such election must either be made before sick pay has been received or within reasonable time afterwards and, in the latter case, the sick pay must be refunded to the employer. The policy behind subsection (2C) is that the worker should be allowed to elect to receive compensation and preserve his sick leave for future use but must choose between one form of payment or the other. If he has received wages, he must make his choice and refund them within a reasonable time and should not be allowed to delay his choice indefinitely. The subsection, though of value to the worker, is presently open to the criticism which has been voiced by the Labor Council that the worker, unless he refunds the wages he has received, cannot obtain an adjudication of his right to compensation and he might not be able to afford such refund. The Government appreciates this problem and, to overcome it, seeks to amend the Act in the following manner. It is proposed that subsection (2C) be repealed and replaced by provisions to the effect that the receipt or entitlement to sick pay shall not be a bar to the recovery of compensation for the same period. In those instances where compensation has been awarded in respect of the period, or it is agreed that such compensation be paid, the wages paid for sick leave shall, to the extent of the amount awarded or agreed upon, be deemed to have been paid as compensation. Only that part of the period which is represented by the wages not deemed to have been paid as compensation shall be deducted from the worker's leave credit in adjusting his entitlement to sick leave. … The intention of the proposed subsection (2C) is that where compensation is paid, the employer's liability under any Act, award, industrial agreement or contract to pay any wages for sick leave is reduced to the extent of the compensation paid. The employer, however, still remains liable for payment of that part of the sick leave pay entitlement which is not deemed to be compensation payments." 1. This extract makes clear the intention behind what is now s 50 of the WC Act. It was to avoid the mischief of an employee who wished to receive workers compensation payments having to refund to their employer the amount of any sick leave received. There is nothing to suggest that a top up benefit was intended, much less conferred. 2. We are aware that the application of s 50 may lead to anomalous outcomes. An employee who experiences any delay in their workers compensation claim being accepted will be entitled to sick leave on full pay pending the claim being accepted, up to the extent of their accrued entitlements. They will not be required to refund any amount they receive in excess of the amount of workers compensation payments made to them. This will leave that employee better off than one whose claim is swiftly accepted, as that employee will not have had the benefit of a longer period of sick leave on full pay. While we acknowledge the anomaly, we accept the submissions advanced by the Secretary that such an outcome is consistent with the purpose for which the predecessor to s 50 was enacted, namely, to remove the obligation on employees to repay any "sick pay" they had received in a period for which workers compensation was claimed or became payable. 3. We recognise that in the extract at [94] above the Minister referred to an employer remaining "liable for payment of that part of the sick leave pay entitlement which is not deemed to be compensation payments". As observed by Ferrari J in Re Bush Fire Fighters Compensation Fund; Ex parte Varley [1971] WCR 231 at 232: "The overall effect of s 7(2C) would seem to be that a worker whose injury is both compensable and a ground for sick pay is not entitled to receive both payments in full. Nothing can cut down the money he is entitled to receive in respect of any part of the period of incapacity below the higher of the compensation rate and sick pay rate then applicable to that part of the period of incapacity. The result of it all is to be that the money he receives is not less than his full entitlement to weekly payments of compensation and that, to the extent that it is more, but only to that extent, his accumulated credit for this future sick leave entitlement is to be debited." 1. The question, then, is what an employee under the Conditions Award is "entitled to receive" by way of sick leave when they are unable to work due to an illness or injury which is compensable under the WC Act. In this regard, we do not agree with the PSA's contention that cl 79 confers an entitlement to sick leave in such circumstances which, firstly, operates independently of cl 82 of the Conditions Award and, secondly, entitles an employee to top up benefits. 2. On the PSA's case, cl 82.7 of the Conditions Award would be, and would always have been, otiose. In the Top Up Case at [49]-[81], Walton J examined the principles to apply to the construction of industrial instruments. We will not reproduce those passages. Suffice it to say, it would be inconsistent with his Honour's analysis and the cases to which he referred to adopt a construction of the Conditions Award that would render any provision otiose. 3. Further, the approach pressed by the PSA does not properly reflect the terms and operation of the Conditions Award. Read properly, cl 82 seeks to regulate the extent, if any, to which an employee is entitled to sick leave if they suffer an illness or injury which is compensable under the WC Act. The aim is that they pursue their rights under that legislation rather than claiming sick leave. This is clear in particular from the imperative language in cl 82.2; the discretion conferred on the Department Head by cl 82.8 to refuse sick leave if a workers compensation claim is not made; and, the cessation of sick leave entitlements in the event of a commutation of weekly payments, as per cl 82.11. The entitlement to sick leave under cl 79 is not independent of, but is in fact subject to, cl 82. 4. We note that this conclusion is supported by an examination of the terms of cl 83 of the Conditions Award, which relevantly provides: 83. Sick Leave - Claims Other Than Workers Compensation 83.1 If the circumstances of any injury to or illness of an employee give rise to a claim for damages or to compensation, other than compensation under the Workers Compensation Act 1987, sick leave on full pay may, subject to and in accordance with this clause, be granted to the employee on completion of an acceptable undertaking that:- 83.1.1 Any such claim, if made, will include a claim for the value of any period of paid sick leave granted by the Department to the employee; and 83.1.2 In the event that the employee receives or recovers damages or compensation pursuant to that claim for loss of salary or wages during any such period of sick leave, the employee will repay to the Department the monetary value of any such period of sick leave. 83.2 Sick leave on full pay shall not be granted to an employee who refuses or fails to complete an undertaking, except in cases where the Department Head is satisfied that the refusal or failure is unavoidable. … 1. The use of the discretionary "may" in cl 83.1 is inconsistent with cl 79 conferring the unqualified entitlement to sick leave for which the PSA contends. 2. For these reasons, we do not accept the contentions advanced by the PSA set out at [86] above. We find that the effect of the PSA's Application is to create an entitlement not currently enjoyed by the majority of employees to whom the Conditions Award applies. 3. It follows that the amendment sought by the PSA is not available pursuant to s 19 of the IR Act in light of Infectious Cleaning Allowance and the authorities to which it referred (see [85] above). The PSA's Application – s 17 of the IR Act 1. In Infectious Cleaning Allowance the Full Bench observed: "21. In respect of the Variation Application, s 17 empowers the Commission to vary or rescind an award, provided that it may only do so after the nominal term of the award if it considers that it is not contrary to the public interest to do so: s 17(3)(d). The nominal term of the Award has expired. The power to vary awards must be read in conjunction with s 10, which empowers the Commission to make awards 'setting fair and reasonable conditions of employment for employees'." 1. There was no controversy as to the approach that the Commission should adopt in making or varying awards. The principles to apply were encapsulated by the Full Bench in Applications for Variations to Crown Employees (Police Officers – 2017) Award and Paramedics and Control Centre Officers (State) Award [2021] NSWIRComm 1040 ("Police and Paramedics") at [32]. 2. Consistent with Police and Paramedics (at [24]-[31]), the PSA accepted that in so far as the PSA's Application relied on s 17 of the IR Act, the matter must be progressed as an Arbitrated Case within the meaning of the Commission's Wage Fixing Principles, most recently articulated in State Wage Case 2021 [2022] NSWIRComm 1014. This requires the PSA to establish that its application is a "Special Case" within the meaning of cl 8.4 of the Wage Fixing Principles. 3. In the PSA's Submissions, the PSA contended: "Fair and reasonable condition of employment and the public interest 89. The Proposed Variation is in the public interest and concerns a fair and reasonable condition of employment for public sector employees, in that it would: (a) clarify and reinforce the employer's obligation to allow the majority of employees covered by the Conditions Award (and those covered by other awards which incorporate clause 82.7 of the Conditions Award) to utilise their accrued sick leave entitlements while receiving workers compensation payments; (b) removes any basis for the IRS's unilateral and erroneous position that the State has no obligation to provide sick leave top up to employees covered by the Conditions Award; (c) restore the rights of the majority of employees covered by the Conditions Award to utilise their accrued sick leave entitlements in circumstances which are more likely to enable them to return to work from injury as soon as possible without the hindrance of financial loss and hardship, including by the imposition of mutual obligations on the parties to make reasonable efforts to facilitate their timely return to work; (d) assist injured workers to recover from their injuries without compromising their treatment and recovery by a premature return to work; (e) ensures access to a commonly available condition of employment that is an entrenched feature of a wide spectrum of industrial awards and agreements regulating employment in both the public and private sectors in NSW, and federally; (f) ensure consistency with the legislative policy underpinning the 2012 amendments aimed at assisting seriously injured workers to focus on recovery by minimising financial hardship; (g) help ensure that the sick leave top up benefit is applied uniformly across the NSW public sector and not on the current ad hoc basis; and (h) ensure that public sector workers share a similar benefit accorded to employees at iCare who are responsible for managing their workers compensation claims." (Footnotes omitted) 1. Given our determination at [103] above, we do not accept the submissions advanced in pars 89(a) and (b) of the above extract. 2. The balance of the PSA's contentions give rise to three questions: 1. Would the change sought by the PSA be consistent with the policy underpinning the 2012 amendments to the WC Act? 2. Would the change sought by the PSA result in better health and return to work outcomes for employees? 3. Should the change sought by the PSA be made to ensure parity or uniformity in the terms and conditions of employment afforded to other public sector employees? Would the change sought by the PSA be consistent with the policy underpinning the 2012 amendments to the WC Act? 1. The changes introduced to the WC Act in 2012 are described in the Agreed Facts ("2012 Amendments"). We will not traverse the same ground. 2. Some reliance was placed by both parties on what they claimed to be the legislative intention evinced by the 2012 Amendments. This informed their contentions as to whether the Commission should, or should not, make the variations to the Conditions Award that each of them sought. It follows that some examination of that legislative intention is required. 3. On 23 April 2012 the Hon Greg Pearce MLC, Minister for Finance and Services, released an issues paper detailing a number of concerns with the New South Wales Workers Compensation Scheme and setting forth a number of ways in which those concerns might be addressed ("Issues Paper"). The Issues Paper observed: [8] "1.1 The need to reform the NSW Workers Compensation Scheme The NSW Workers Compensation Scheme is a broken system that does not produce good outcomes for injured workers, and without significant improvements it is not financially sustainable: 1. The premiums paid by New South Wales employers are estimated to be between 20 and 60 per cent higher than equivalent employers in our competitor states and if the Scheme continues to deteriorate the difference will increase starkly. The insurance arrangements offered to businesses are not optimal insurance arrangements reflecting risk; 2. The system is difficult to navigate for all participants with a lot of red tape; 3. Payments for seriously injured workers are inadequate, weekly payments in lieu of lost earnings for totally incapacitated workers that bear no relation to the income they have lost. ln fact, they are paid a rate barely above the poverty line; 4. Recovery and the health benefits of returning to work are not effectively promoted as there are perverse financial incentives for workers to remain off work and there is not effective work capacity testing; 5. Less seriously injured workers are not encouraged effectively through financial incentives and the system to recover and regain their financial independence; and 6. WorkCover has limited power to strongly discourage payments treatments and services that do not contribute to recovery and return to work. Because the NSW Scheme does not do these things well, it costs far more to get a claimant back to work in NSW than it does in Queensland or Victoria and costs are increasing at an unsustainable rate. The NSW Government is proposing a suite of reforms that will focus the NSW Workers Compensation Scheme on these critical principles. 1.2 Guiding Principles As a guiding principle the object of the workers compensation legislation is to provide income support, medical assistance and rehabilitation support for workers injured during the course of their employment. The best workers compensation systems are designed to: 1. enhance NSW workplace safety by preventing and reducing incidents and fatalities; 2. contribute to the economic and jobs growth, including for small businesses, by ensuring that premiums are comparable with other states and there are optimal insurance arrangements; 3. promote recovery and the health benefits of returning to work; 4. guarantee quality long term medical and financial support for seriously injured workers; 5. support less seriously injured workers to recover and regain their financial independence; 6. reduce high regulatory burden and make it simple for injured workers, employers and service providers to navigate the system; and 7. strongly discourage payments, treatments and services that do not contribute to recovery and return to work. Schemes that align to the above principles are fair, affordable, efficient and financially sustainable. International research has consistently found a correlation between early return to work and improved health outcomes. Long term absence and work-disability are harmful to physical and mental health and wellbeing. Recovery and return to work should be the key objects of any workers compensation system." 1. The Issues Paper compared the benefits available to injured workers under the New South Wales workers compensation scheme with those provided in other State jurisdictions. In this context the Issues Paper observed: [9] "ii) Weekly benefits for total incapacity Some jurisdictions have weekly benefit schemes which incorporate 'step downs', or reductions, after 13 weeks, to encourage workers to return to work. This approach is in line with research which indicates the longer a worker is away from work, the less likely they are to return. … iii) Weekly benefits – partial incapacity In NSW, a worker who has partial incapacity, who is working at less than their pre-injury capacity or who is looking for work, can receive a benefit up to the amount of the benefit the worker would have received if the worker was receiving benefits for total incapacity. The worker is eligible for this benefit as well as the actual earnings from their employment. This means that the worker's benefit, combined with their actual earnings, can add up to the worker's pre-injury average weekly earnings. These arrangements apply even if a worker is only working a few hours each week. These arrangements act as a disincentive for workers to return to their pre-injury employment. Most other jurisdictions provide for injured workers who have partial capacity to receive benefits which, combined with their actual earnings, are up to the amount received by a worker who has total incapacity. These arrangements ensure that workers who have partial incapacity have a financial incentive to return to their pre-injury employment. For example, in Victoria, workers who have partial incapacity during the first 13 weeks of a claim, receive 95% of their pre-injury average weekly earnings, less what they are actually earning. For the period from weeks 14-130, workers receive 80% of their pre-injury average weekly earnings, less 80% of what they are actually earning." 1. Under the heading "Options for Change" the Issues Paper set out 16 options by which to achieve the necessary reforms to the workers compensation system. These were said to be "intended to promote recovery and health benefits for injured workers of returning to work while guaranteeing long term income support and treatment for severely injured workers and ensuring the costs of the workers compensation system are sustainable". [10] In setting out those options, the Issues Paper identified that: 1. a "key plank of any reforms should be to improve the benefits for severely injured workers"; [11] and 2. consideration ought to be given to whether aligning weekly benefit payments more closely with other jurisdictions and to an earlier step down with capacity testing would align with clinical recovery patterns. This may create more appropriate and effective point for a financial return to work incentive to commence. 1. Soon after the release of the Issues Paper, on 2 May 2012 a Joint Select Committee on the NSW Workers Compensation Scheme was established. In a report published in June 2012 ("JSC Report"), the Joint Select Committee observed that its deliberations, and the submissions that it had received, were informed by the Issues Paper. The JSC Report relevantly contained the following comments and recommendations: [12] "3.42 The Committee believes it is appropriate, irrespective of the level of [Whole Person Impairment], to consider the effect of being severely injured on a person under the Scheme. Recommendation 1 That the NSW Government ensure that, under the Workers Compensation Scheme, a worker assessed as severely injured be subject to work capacity testing but with the Workers Compensation Commission able to suspend or to waive the requirement for the severely injured worker to undergo work capacity testing. Recommendation 2 That the NSW Government ensure that, under the Workers Compensation Scheme, any time cap on payment of weekly income benefits and medical expenses (apart from the Commonwealth retirement age) not apply to appropriately defined severely injured workers. … 3.127 The Committee agrees that step downs should occur at 13 weeks rather than 26 weeks. Among other things, this has the advantage of some harmonisation with the Victorian model. More importantly, this would more closely mirror clinical recovery outcomes (especially with work capacity testing) and incentivise return to work. Recommendation 6 That the NSW Government ensure that, under the Workers Compensation Scheme: • in cases of total incapacity, workers receive weekly income benefits on the Victorian model, namely (broadly speaking) 95 per cent of their pre-injury average weekly earnings for the first 13 weeks of total incapacity, and then 80 per cent from week 14 onwards. • in cases of partial incapacity, workers receive weekly income benefits on the Victorian model, namely (broadly speaking) 95 per cent of their pre-injury average weekly earnings for the first 13 weeks of total incapacity and then 80 per cent from week 14 onwards (in each case less certain amounts). … 4.64 Consequently, stakeholders called for an increased focus on intervention and return to work, and a number of specific proposals were put forward, including: • increased monitoring and oversight by WorkCover, including establishment of a return to work inspectorate • provide incentives for employers with regard to early intervention and return to work • strengthening employer obligations to provide suitable employment • greater emphasis on re-training injured workers • ban on employers requiring applicants to disclose workers compensation history. … 4.66 Given the financial and other impacts on workers of not returning to work, the Committee recommends that each of the ideas contained in paragraph 4.64 be fully explored by the proposed joint standing committee. Recommendation 25 That, given the financial and other impacts on workers of not returning to work, the NSW Government ensure that each of the ideas contained in paragraph 4.64 be fully explored by the joint standing committee proposed at Recommendation 16." (Footnotes omitted) 1. As observed in the Agreed Facts, the 2012 Amendments were introduced by the Workers Compensation Legislation Amendment Act 2012. In the second reading speech for the Workers Compensation Legislation Amendment Bill 2012, the Hon Mike Baird, then the Treasurer of New South Wales, stated: "…The Workers Compensation Legislation Amendment Bill responds to the recommendations of the report of the Joint Select Committee on the NSW Workers Compensation Scheme, and gives effect to the Government's commitment to introduce legislation during the 2012 budget session. The Workers Compensation Legislation Amendment Bill represents a fundamental shift towards properly meeting the needs of the most seriously injured workers in the scheme while strongly incentivising return to work for those workers who have the capacity to return to work. The Government is committed to ensuring that the income, support and treatment needs of seriously injured workers are met, and the bill will increase the weekly benefits paid to the most seriously injured workers while ensuring such workers have benefits until retirement, if they cannot return to work. The Government is taking steps also to ensure insurers direct more resources to support injured workers to improve their return-to-work outcomes and will focus on reducing the costs of insurers, which also are impacting on the scheme. … …The Government released an issues paper entitled 'NSW Workers Compensation Scheme' with its proposed reform based on seven principles. Firstly, enhance New South Wales workplace safety by preventing and reducing incidents and fatalities; secondly, contribute to economic and jobs growth, including for small businesses, by ensuring that premiums are comparable with other States and there are optimal insurance arrangements; thirdly, promote recovery and the health benefits of returning to work; fourthly, guarantee long-term medical and financial support for seriously injured workers; fifthly, support less seriously injured workers to recover and regain their financial independence; sixthly, reduce the high regulatory burden and make it simple for injured workers, employers and service providers to navigate the system; and seventhly, strongly discourage payments, treatments and services that do not contribute to recovery and return to work. The report of the joint select committee and these seven key principles have informed the Government's approach to reform [sic] the New South Wales workers compensation scheme. I refer now to the bill that seeks to amendment [sic] the provisions of the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 with amendments ordered in 12 schedules. Firstly, in the area of weekly payments of compensation, the bill makes important changes to the current weekly payments provisions of the Workers Compensation Act. These changes aim to provide support to workers in the initial period following an injury, and encourage them to return to work once they are recovered. The changes implement recommendation 6 of the joint select committee report and are consistent with the recommendation of the report. Based on the Victorian model, in the initial period, that is, the first 13 weeks of the claim, workers who have no work capacity will receive up to 95 per cent of their pre-injury average weekly earnings. From weeks 14 to 130 workers who have no work capacity will receive up to 80 per cent of their pre-injury average weekly earnings. The most seriously injured workers will be better off under the bill as they will receive 80 per cent of their pre-injury earnings up to week 130 rather than the current statutory rate of $432.50 which applies after the first 26 weeks. The bill implements a new scheme for the payment of weekly benefits to partially incapacitated workers. Workers who have a partial incapacity and are able to work during the 13 weeks after their claim is made will receive up to 95 per cent of their pre-injury average weekly earnings. This amount will comprise the actual wages they are earning and a top-up of the benefit. Workers who have returned to work for at least 15 hours per week will continue to receive up to 95 per cent of their pre-injury average weekly earnings in total up to week 130 after their claim. Workers who can work but who are working fewer than 15 hours per week from week 14 to 130 will receive up to 80 per cent of their pre-injury average weekly earnings. This amount will comprise the actual wages they are earning and a top-up benefit. If a worker who has work capacity is not working at least 15 hours per week by the end of the 30-week period, entitlement to weekly benefits will cease. However, workers who have no work capacity will continue to receive benefits of up to 80 per cent of their pre-injury average weekly earnings. This new benefit structure will support workers while they are recovering from workplace injury or illness and provide incentive to workers who have work capacity to return to work. The bill also adopts a similar model to Victoria of calculating pre-injury average weekly earnings by basing the calculation on average weekly earnings of the worker rather than the current method of the worker's current weekly wage rate at the time of injury and removing the distinction between award and non-award workers. This method of calculation is based on what a worker has actually been earning which is inclusive of specified allowances and will result in fairer and more generous payments to injured workers, particularly in the early weeks of an injury when it is important that workers are able to focus on recovery." 1. It will be clear from the extracts reproduced above that the Issues Paper informed the recommendations in the JSC Report, which in turn influenced the content of the Workers Compensation Legislation Amendment Bill. For present purposes, it suffices to observe that in our view the documents identify the following legislative intentions behind the 2012 Amendments: 1. providing greater generosity of benefits for seriously injured workers; and 2. providing an incentive to return to work, or a disincentive to remain off work, for those employees with the capacity to return to work. 1. The Secretary placed significant reliance on the second of these intentions. He contended that the step downs introduced in the 2012 Amendments were designed to act as an incentive for employees to return to work. 2. The PSA argued that the 2012 Amendments were directed more to scheme generosity. In that respect, offering injured workers the ability to earn 95% (as opposed to 80%) of their pre-injury average weekly earnings ("PIAWE") if they were able to work a minimum of 15 hours a week operated as the incentive. This was described by Mr Chin as "the carrot not the stick". [13] 3. It is clear to us that the step downs to 95% and 80% of a worker's PIAWE were intended to operate as an incentive to a worker with capacity to do so to return to work (or as a disincentive to remain off work). This was expressed in recommendation 6 in the JSC Report, to which the 2012 legislation was intended to give effect. The incentive remains, although obviously to a lesser degree, if an injured worker is able to maintain workers compensation payments at 95% of PIAWE by working at least 15 hours per week. 4. We further observe that in the Top Up Case, Walton J observed (at [178(1)]): "The Post-Amendment WC Act scheme for workers compensation was underpinned by a policy that the provision of less than 100% of the worker's pre-injury weekly earnings (as defined in s 44C of the Post-Amendment WC Act) would encourage a return to work at the earliest available time." 1. The PSA took issue with his Honour's finding as to the policy underpinning the 2012 Amendments. Even were we able to refute that finding, we would not do so. Having regard to [113]-[118] above, we respectfully agree with his Honour. 2. We accept the PSA's contention that one of the legislative intentions behind the 2012 Amendments was to "leave seriously injured workers 'better off'" [14] . There seems no controversy that the payments available to injured workers are more generous as a result of the 2012 Amendments than they were previously. To that extent, injured workers are "better off". 3. We further observe that the amendments to the Conditions Award sought in the PSA's Application are not limited to or apparently directed towards "seriously injured workers". Top up would be available to all injured workers from the first day of their absence due to a compensable illness or injury, regardless of the duration of that absence. 4. It is necessary to address a matter which arose during the hearing on which the PSA placed some reliance. The Secretary relied on a statement of Anna Kulesz, the Director, Public Sector Employee Relations, Employee Relations in the Department of Premier and Cabinet. Under cross-examination Ms Kulesz gave the following evidence: [15] "Q. Now, you've given evidence that the [S]ecretary's position is that clauses which do not refer to 26 weeks in section 36 are consistent with the objects of the 2012 worker's comp amendments. Haven't you? A. Yes. Q. And what I'm suggesting to you is this is one of those clauses. A. But if a clause is consistent with the objects of the Act, that doesn't stop the government having a position that top up clauses inherently disincentivise employees from returning to work earlier. Q. I see. So, the [S]ecretary's position is this. That it opposes the PSA's variations application even though it is otherwise consistent with the objects of the 2012 amendments to the Workers Compensation Act. A. Yes, on the basis that the government has a policy in regards to top up clauses, and the current application by the applicant goes against the government's policy in regards to top up clauses, and incentivising employees to come back into the workplace." 1. The PSA relied on this evidence to contend that the Secretary's opposition to its application was founded on a "government policy" as distinct from the "actual policy" underlying the 2012 Amendments. We have taken these submissions into account but do not consider that they significantly advance the PSA's case. The legislative intention underpinning the 2012 Amendments was squarely raised as an issue which had been joined before us. Discerning that intention is a matter for the Full Bench. In this regard, the opinions of Ms Kulesz are, with respect, of limited assistance. 2. For the reasons set out above, we are not persuaded that the changes to the Conditions Award sought in the PSA's Application would be consistent with the legislative intention behind the 2012 Amendments. Rather, we find to the contrary. Would the change sought by the PSA result in better health and return to work outcomes for employees? 1. There was a significant controversy as to whether the step downs contemplated by ss 36 and 37 of the WC Act are effective in facilitating the timely return to work of injured workers, or might instead have a deleterious effect on their health and wellbeing. The PSA's case 1. At the heart of the PSA's case is the contention that step downs subject injured employees to financial loss, which may create hardship. This may force them to return to work prematurely, compromising their treatment and recovery and potentially exposing them to a risk of further harm. 2. The PSA relied on an expert report by Professor Louise Thornthwaite, a Professor of Management and Employment Relations, Department of Management at Macquarie University. In the introduction to her report, Professor Thornthwaite stated: [16] "…The literature review identifies two distinct eras of empirical research on WC claims since the late-1970s; the first era between 1970 and 1999, and the second, between 2000-2022. … This early US research largely concluded that a rise in the level of income replacement for injured workers would increase the number of workers' claims and the duration of their time off work. Scholars adopted the concept of moral hazard, previously used in insurance and risk research, to explain their findings. Their argument was that raising the levels of WC benefits to which workers are entitled poses a range of moral hazards in the form of incentives or disincentives, including, for example, reducing the incentive for injured workers to prevent or minimise risks and injury. With its suggestion that reducing income replacement levels would incentivise a reduction in the volume and duration of WC claims, the research of economists and econometricians informed policy formation on WC, including the justification of step-downs in Australian WC jurisdictions. However, in the last two decades, the validity of this early research has been challenged by the findings of contemporary studies by economists, econometricians and social scientists, and more holistic analyses of the factors underlying WC claims and RTW outcomes. After examining the main contributions of these two research eras, this analysis concludes that it is very unlikely that raising the level of income replacement for injured workers would increase the number or duration of WC claims or adversely affect return to work (RTW) outcomes. Most contemporary evidence instead indicates that raising income replacement levels will have a zero direct impact on claims frequency and duration. Moreover, it suggests that higher income replacement levels facilitate more rapid and sustainable worker recovery from injury and, hence also, associated RTW outcomes. However, the affidavit materials presented by the Industrial Relations Secretary in this case heavily reflect the conclusions of the first era research, despite its limitations, and to the neglect of the large body of more recent research on WC claims incidence and duration and scholarly analysis of the factors influencing claims patterns. …" (Emphasis in original, footnotes omitted) 1. Having set out a review and analysis of relevant literature and research, Professor Thornthwaite's conclusions included the following: [17] "In sum, contemporary research on the relationship between income benefit levels and WC claims and RTW outcomes suggests three conclusions. First, it is very unlikely that raising the level of income replacement for injured workers would increase the number or duration of WC claims or adversely affect RTW outcomes. Second, most contemporary evidence instead indicates that raising income replacement levels will have a zero direct impact on the incidence and duration of WC claims, in the sense that patterns in WC claims do not change in response to increases in income replacement levels as such. Third, higher income replacement levels would have an indirect impact on the incidence and duration of WC claims in that it is highly likely to facilitate a more rapid and sustainable worker recovery from injury and hence also, associated RTW outcomes. … Drawing on the literature review above, there is no empirical evidence that WC benefits below the level of a worker's ordinary wage rate impact directly on the incidence or duration of WC claims either positively or negatively. … However, empirical evidence on the factors which influence the incidence of WC claims and RTW duration/outcomes does suggest that the level of income replacement indirectly has substantial adverse impacts on the outcomes for injured workers. This is because income benefit levels below a workers' usual wage are likely to cause financial and psychosocial stresses that reduce the wellbeing of injured workers. The combined financial burden that WC claimants experience from having both a lower income and increased costs, reduces psychosocial wellbeing, and, in the process, contributes also to the well evidenced incidence of secondary psychological injuries which exacerbate ill health and jeopardise RTW goals. Evidence also indicates that the financial strains associated with injury-based absence, along with other pressures in the WC system detailed above, lead to the premature RTW of injured workers. Two likely consequences of premature RTW are first, additional absences from work after the initial RTW and second, an ultimate failure to RTW. Thus, the rehabilitation and rate/timeliness of RTW of injured workers are adversely affected through the compounding impact of injury on financial and psychosocial health. … Assuming that a sick-leave top-up is not currently paid to WC recipients covered by the Conditions Award, the likely impact of the payment of a sick leave top-up benefit is twofold. First, the top-up benefit is highly unlikely to increase the incidence of WC claims or the duration of injured workers' absences from work, and it is highly unlikely to negatively impact RTW outcomes. Second, the top-up benefit is highly likely to have the indirect effect of decreasing the costs of WC claims through reducing the financial strain and associated psychosocial harms, and the consequential secondary psychological conditions experienced by injured workers, thus facilitating more effective rehabilitation and the earlier RTW of injured workers. A reduction in cases of premature RTW, which evidence suggests result in further absences and sometimes an unsustainable RTW, would also contribute to a reduction in WC costs in the longer term." (Emphasis in original, footnotes omitted) 1. Professor Thornthwaite further stated: [18] "As the literature review highlights, an increase in benefits would also reduce WC costs through its effect on reducing the financial strain and other adverse social consequences that injured workers suffer when on WC leave, decreasing both psychological stress and the incidence of secondary psychological injuries. By better enabling workers to take the time they need for a full recovery, higher income benefits would also reduce the adverse consequences of a premature RTW, including repeated absences following the initial return, and ultimately the likely unsustainable RTW that, according to scholars, a significant proportion of workers experience." 1. We observe that in her oral testimony, Professor Thornthwaite qualified her use of the term "full recovery" in the passage above to be "a recovery to the extent of someone being able to undertake suitable duties, or at least…the duties that were suitable to the work capacity for which they were assessed". [19] 2. The PSA relied on statements from a number of its members who deposed as to the financial, psychological and social pressures they faced when they suffered a reduction in their income as a result of a step down. A number expressed the view that these pressures negatively impacted their recovery. In the main, the witnesses had some level of accrued sick leave. The witnesses stated that their financial and other stress would have been alleviated, at least in part, had they been able to use those entitlements to top up their income whilst they were in receipt of workers compensation payments. 3. Several of the PSA's witnesses stated that the financial pressure that they experienced led them to returning to work before they had properly recovered. For example: 1. Janelle Burns, a School Learning Support Officer ("SLSO") employed in the Department of Education, stated: [20] "At the time I was not 100% better but it was too difficult for me to remain on such a reduced income. I decided to return to work in May 2017 solely because of my financial circumstances – I was going backwards financially and I could no longer afford to continue on the reduced income." 1. Julie King, a Senior Correctional Officer employed with Corrective Services NSW, described how she had "begged" the governor of the correctional centre at which she works to let her return to work at least 15 hours per week to enable her to earn 95% of her PIAWE. [21] 2. Nichola King, also a SLSO with the Department of Education, referred to "feeling pressure to return to work before I am fully recovered" due to her reduced financial circumstances whilst on workers compensation. [22] The Secretary's case 1. The Secretary contended that: 1. increasing benefit generosity in the form of allowing for top up is likely to lead to an increase in the number and duration of workers compensation claims; and 2. increasing the duration of workers compensation claims will most likely lead to adverse health outcomes for workers. 1. The Secretary relied on two expert reports prepared by Professor Alex Collie, the Director of the Healthy Working Lives Research Group and Co-Director of the Division of Health Services Systems and Policy in the School of Public Health and Preventative Medicine at Monash University. 2. In his first report, Professor Collie outlined his experience in leading and participating in research studies of Australian and international personal injury compensation and work disability benefit schemes. Having explored the findings in some of these studies and in other literature, Professor Collie drew the following conclusions: [23] "CONCLUSIONS Having regard to the briefing material provided and my knowledge and experience concerning rehabilitation and return to work of injured workers, I draw the following conclusions regarding the questions you asked me to address: 1. Would an increase in benefit generosity in a workers' compensation scheme [affect] claims behaviour? If so, how (or if not, why not)? There is very limited recent Australian peer-reviewed evidence to draw upon. The evidence that does exist shows that an increase in benefit generosity leads to an increase in the number of claims overall, and an increase in the duration of income support in some workers. These effects were not observed consistently across all workers. They were statistically significant in some groups of workers but not in others. Care should be taken in generalising these findings to the current NSW workers' compensation scheme as the study was undertaken in a different jurisdiction, at a different time, within a different societal context. … The available international evidence suggests that overall more generous benefits can lead to workers making more claims and taking more time off work. However, these effects are small, do not affect all workers equally, and the reported effects are somewhat inconsistent. … There are multiple potential explanations as to how changing benefit generosity affects claims behaviour. These include that where more generous benefits are provided: (a) workers are more likely to take fewer safety precautions leading to more injuries and claims; (b) workers are more likely to make a claim if the financial penalty (i.e., the amount of lost income) is lower; and (c) workers are more likely to make a second or subsequent claim once they have experienced a more generous scheme. The most likely explanation is that any changes in claims behaviour are driven by more than one of these factors. It is important to understand that these behavioural effects of changing benefit generosity are less powerful than the effects of other psychosocial factors, such as those described above as occurring in the workers [sic] personal and social life, the workplace, and in the healthcare and insurance systems. 2. Would the addition of benefits in the form of top-up payments in a scheme which features step-downs designed to incentivise an early return to work generally tend to have an effect on the: (a) Rate of claims; and/or (b) Compensated time off work? If so, how ([or] if not, why not)? To my knowledge, there is no published peer-reviewed evidence either in Australia or internationally that has directly tested the effect of a top-up payment on claims behaviour in a workers' compensation scheme. Thus, it is not possible to answer this question definitively. There is one recent Australian peer-reviewed study of the effect of step-downs on duration of compensated time off work. This study shows that workers exit compensation schemes (i.e., stop receiving income support payments) at a faster rate before step-downs take effect than after. While this effect is statistically significant it is very small, and was not observed in all of the workers' compensation schemes studied. At face value, this evidence could be interpreted as suggesting that eliminating or reducing the step­ down, for instance by allowing top-up payments, would slow scheme exit and thus increase the total compensated time off work. Care should be taken in extrapolating the findings in this way, for the reasons outlined earlier in this letter. There is not, to my knowledge, any recent, published peer-reviewed evidence of the impact of step­ downs on rate of claims. … At an individual level, introducing top-up payments may provide a financial incentive for some workers meaning that they are more likely to make a claim, or to stay off work for longer following a successful claim application. However, we should acknowledge that even in these circumstances, other factors in that workers life are likely to be more powerful incentives or disincentives for claiming and returning to work." 1. In his second report Professor Collie responded to Professor Thornthwaite's report. We note the following matters in particular: 1. Professor Collie disagreed with Professor Thornthwaite's opinion that it was very unlikely that raising the level of income replacement for injured workers would increase the number or duration of workers compensation claims or adversely affect return to work outcomes. He maintained the view set out in his first report, namely that the available Australian evidence is that an increase in benefit generosity leads to an increase in the number of claims overall, and an increase in the duration of income support in some workers. He reiterated, however, the same caveats that he had made in his first report. 2. He agreed with Professor Thornthwaite that many factors affect the number and duration of workers compensation claims. However, in his view, the available evidence indicates that changes in benefit generosity may have some direct behavioural effects. 3. He shared the view of Professor Thornthwaite that some workers experience significant levels of financial stress while receiving workers compensation benefits, and that this can negatively impact their recovery. For some individual workers more generous benefits are likely to have a positive impact on their recovery and return to work. However, this finding cannot be extrapolated to all workers across an entire scheme. He disagreed with Professor Thornthwaite's conclusion that higher income replacement levels would be highly likely to facilitate a more rapid and sustainable worker recovery from injury and hence also associated return to work outcomes. 4. He would accept that for some workers a return to work too early could introduce risks that would lead to further absences and potentially a failure to return to work sustainably. However, at a population level the evidence suggests that early return to work can facilitate recovery. He did not agree with Professor Thornthwaite's opinion as to the benefits of enabling workers to take the time they need for a full recovery. In Professor Collie's view, there are many factors across multiple domains that contribute to return to work, not just benefit generosity. He also stated that it is necessary to consider the strong evidence that, on average, engagement in work can be an important part of recovery and rehabilitation. He acknowledged that for some workers, returning to work prior to a full recovery may contribute to unsustainable work outcomes. 5. In his view, any claims about the compensation scheme-wide financial impacts of changing benefit generosity are speculative because the available evidence is indirect. 1. The Secretary also relied on expert evidence from Dr Mary Wyatt, an Occupational Physician. Dr Wyatt's evidence was directed towards the benefits to an injured worker of being able to rehabilitate and recover at work. Dr Wyatt offered the following opinions: 1. The core benefit of early return to work is the prevention of long term work disability. 2. There are many consequences of being out of work long term. The weight of evidence over the last 20 years shows that workers who remain out of work in the medium to long term are at greater risk of negative health outcomes. These include poorer general health and well-being; poorer mental health; increased risk of substance abuse; and increased likelihood of suicide attempts. Other consequences include the psychological and social impacts of a worker losing a sense of identity and of being a contributor in the workplace. Work absences also place a strain on family, workplace and community relationships, and may impose financial burdens on the worker. 3. Research has identified "concrete health benefits associated with return to employment". [24] 4. Delays with return to work increase the likelihood that an individual will remain off work in the longer term. 5. In summary, the benefits of early return to work are improved health for the individual and their family and reduced financial impacts for workers who experience a work injury. 1. The Secretary tendered into evidence a number of journal articles and reports that were said to demonstrate three things. First, that doubt could be cast on the reliability of Professor Thornthwaite's report, including on the basis that her literature review had not been comprehensive and that her conclusions were partisan. Second, they supported Professor Collie's conclusions. In some cases, they had been co-authored by Professor Collie and were referred to in his reports in these proceedings. Third, they evidenced the benefits of an early return to work on a worker's rehabilitation and recovery. It is not necessary to attempt to summarise all of that evidence. 2. A number of the lay witnesses called by the Secretary to give evidence offered their opinions as to the possible impacts of allowing sick leave top up. For example: 1. Catherine Carvolth, the Director, Workers Compensation Safety and Wellbeing, Department of Communities and Justice, stated that in her view "if employees were able to use sick leave to top up their workers compensation payments in accordance with the Proposed Variation, [it would] be a disincentive to undertaking recovery at work…undermining the policies in place designed to achieve early return to work". [25] 2. Simon Kempson, the Executive Director, People and Performance for the Department of Planning, Industry and Environment, expressed the opinion that the PSA's proposed variation would undermine what he considered to be the intention of the 2012 Amendments, namely a shift in focus from "return to work" to "recovery at work". The variation would remove the capacity for the Department "to apply the full extent [of] the recovery at work methodology as workers would have no financial incentive to remain in the workplace while they recover". [26] In some cases, the use of sick leave as a top up "would mean that the injured worker would have a financial incentive to remain off work as normal commuting costs are not incurred". [27] 3. Saakshi Sharma, Senior Advisor, Recover at Work Team at the Department of Customer Service, stated that the consequences of employees being able to use sick leave to top up their workers compensation payments would include an "increase in the average duration and cost of workers compensation claims due to the absence of a financial incentive for injured workers to return to work". [28] 1. The Secretary's evidence also included data which suggests that following the introduction of the 2012 Amendments there was a reduction in both the number of workers compensation claims and the duration of claims across different government departments. The data also suggests an increase in return to work rates at 13 weeks, when the step down to 80% of PIAWE would take effect. Conclusions 1. We are persuaded, on balance, that allowing employees to use their sick leave entitlements to top up their workers compensation payments is more likely to result in adverse health and wellbeing outcomes for workers, and poorer return to work outcomes, than maintaining the status quo. 2. We do not discount the PSA's evidence as to the pressures felt by workers who experienced step downs in accordance with the WC Act. These pressures were recognised by the Secretary's expert witnesses, in particular Dr Wyatt. However, it is in large part those pressures which underpin what we have found to be the legislative intention of the WC Act – namely, to influence a worker towards returning to work. 3. We accept that this carries the risk of some workers being under pressure to return to work before they have sufficiently recovered, increasing the likelihood of both prolonging their recovery and suffering further injury. While some of the PSA's witnesses gave evidence of having returned to work earlier than they would have liked as a result of financial pressures, the evidence falls short of demonstrating that they had returned to work too soon. Moreover, there is no evidence of any individual suffering adverse health consequences as a result. 4. The evidence suggests three things. First, extended absences from the workplace may have a detrimental impact on a worker's health and wellbeing, impeding their recovery and reducing their prospects of a sustainable return to work. Conversely, an early return to work – when the worker has capacity to do so – is more likely to result in positive outcomes for the worker. Second, step downs will have some effect, albeit limited, in reducing the number and duration of workers compensation claims. Consistently, the evidence revealed that the introduction of step downs in the 2012 Amendments did result in a reduction in both the number and duration of workers compensation claims in the years immediately following those amendments. Third, it is more likely than not that allowing employees to access sick leave to top up their workers compensation payments would lead to an increase overall in the duration of absences. 5. On an empirical level, the variation sought in the PSA's Application is less likely to be in employees' interests than the status quo. 6. In his Closing Submissions the Secretary contended: "45. Proposition 4: Changing matters of policy can lead to serious and unexpected consequences. 46. The step downs and other measures introduced in the 2012 Amendments saw a reduction in the duration of workers compensation claims in the years immediately following. However, the evidence is that, from around 2018, the continuance rates in NSW have worsened. 47. Professor Collie's evidence was that return to work outcomes are a function of many variables (domains), and that the determinants react within a complex system in 'dynamic and at times unpredictable ways'. His research of the policy influences across the various schemes in Australia found that 'jurisdictional-level factors are significantly associated with duration' and that 'the design and management' of schemes have a substantial effect on duration. 48. To change a system by increasing benefit generosity against a background of legislated step-downs will most likely have consequences, many of which may be unforeseen and unintended. The best evidence before the Commission is that most likely consequence will be an increase in duration and a concomitant decrease in return to work outcomes which is not in the best interests of workers." (Emphasis in original, footnotes omitted) 1. For the reasons set out above, we accept these submissions. 2. We also observe that the evidence from the PSA's witnesses suggests in a number of instances that had they received sick leave top up they would have remained on workers compensation longer. Other than offering their personal observations and opinions, there is no compelling evidence that this would have aided them in their recovery. As stated, there is no evidence of an employee suffering an adverse health outcome as a result of returning to work too early. 3. It follows that our answer to the question we have posed above, namely whether the change sought by the PSA would result in better health and return to work outcomes for employees, is no. Should the change sought by the PSA be made to ensure parity or uniformity in the terms and conditions of employment afforded to other public sector employees? 1. The PSA identified several issues which it submitted demonstrated that the terms of the Conditions Award, in not providing for top up for the employees to whom it applies, was anomalous and resulted in it not providing fair and reasonable conditions of employment. We will deal with each in turn. Other instruments allow for top up or similar benefits 1. The PSA relied on the existence of industrial instruments made by the Commission and by the Fair Work Commission, which were said to confer a top up benefit or something akin to it. Shay Deguara, the Manager of the PSA's Industrial Support Team, gave evidence that he had identified 172 State and federal awards "that currently contain provisions from some sort of accident pay [sic]". [29] Of the awards made by this Commission, Mr Deguara identified 71 that adopt cl 82.7 of the Conditions Award, 27 which contain a separate top up provision and 31 which provide for top up by referencing awards other than the Conditions Award. These awards were listed in a table compiled by Mr Deguara ("Mr Deguara's Table"). [30] 2. Our particular attention was drawn to the Insurance and Care NSW Award 2017 ("iCare Award"). Mr Deguara deposed that when first made, the iCare Award contained a term similar to cl 82.7 of the Conditions Award. On 28 June 2018 the iCare Award was varied on the application of iCare to replace the reference in the clause from 26 weeks to 13 weeks. The clause as amended has remained in the award since then, and currently reads: "73.7 A staff member who continues to receive compensation after the completion of the period of 13 weeks referred to in section 36 of the Workers Compensation Act 1987 may use any accrued and untaken sick leave to make up the difference between the amount of compensation payable under that Act and the staff member's ordinary rate of pay. Sick leave utilised in this way shall be debited against the staff member." 1. The PSA submitted: [31] "An extraordinary feature of this case is that the entitlement in dispute is widely conferred by the NSW Government on iCare employees who manage the workers compensation claims of employees covered by the Conditions Award – and other public sector employees on an ad hoc basis – but not generally for the injured workers who submit those claims." (Footnotes omitted) 1. At the outset, we do not accept as a starting proposition that the Commission should strive to achieve commonality in the terms and conditions applied to award-covered employees across the public sector. Differences in the terms contained in the Commission's awards may be due to historical, industry, operational, regional or other factors. It is not sufficient for the PSA to identify anomalies, as stark as some of those might be. It must demonstrate that in failing to allow for workers compensation top up the Conditions Award does not set fair and reasonable terms and conditions. 2. We note in this regard that cl 8.5.1 of the Wage Fixing Principles provides: "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." 1. We place little weight on evidence regarding awards made by, or enterprise agreements approved by, the Fair Work Commission. They are made and approved as the case may be under an entirely different legislative regime. They apply in large part to the private sector. We have no insight into how those instruments came to be made and why they contain the terms they do. 2. There are several observations to make regarding Mr Deguara's evidence. First, Mr Deguara's Table includes awards which provide for benefits such as accident pay or income protection insurance. These are quite separate and distinct benefits to sick leave top up, and we do not regard them as being comparable. This excludes from consideration the awards listed in Categories 1 and 3 of Mr Deguara's Table. 3. Second, to the extent that an award sets conditions by reference to the Conditions Award, it cannot be said to confer an entitlement to sick leave top up. This is the consequence of the Top Up Case and of our finding at [103] above. This excludes from consideration the awards listed in Category 2B of Mr Deguara's Table. 4. Third, of the 58 awards listed in Category 2A of Mr Deguara's Table (those said to "provide for sick leave top up (or adopt sick leave top up provisions from a different award)"): 1. one is the Conditions Award itself; 2. nine contain terms, or apply by reference conditions of awards containing terms, similar to cl 87.2 of the Conditions Award, in referring to "the completion of the period of 26 weeks referred to in section 36 of the Workers Compensation Act 1987"; and 3. 39 apply to employees in the health industry. 1. It follows that the raw numbers provided by Mr Deguara need to be approached with some caution. Outside of the health sector, Mr Deguara's evidence identifies only a small number of awards [32] providing a top up benefit, almost all of which are confined in their operations to particular agencies or workplaces. This falls short of evidence of a widespread entitlement to workers compensation top up across the broader public sector. 2. We are not persuaded that the PSA has made out the premise of par 89(e) of the PSA's Submissions (see [108] above), that workers compensation top up is "a commonly available condition of employment that is an entrenched feature of a wide spectrum of industrial awards and agreements regulating employment in both the public and private sectors in NSW". Ad hoc sick leave top up and equivalent benefits 1. The PSA relied on evidence of employees being provided with sick leave top up on an ad hoc basis, even in the absence of an award entitlement to it. For example, Stuart Driver was a Senior Customer Service Officer with the NSW Trustee and Guardian. His employment was covered by the Conditions Award. He gave evidence that he was told in mid-2019 that he could access his accrued sick leave to top up his workers compensation payments. He did so and received top ups until his employment came to an end in August 2021. 2. The PSA also drew our attention to instances of employees being permitted to top up their income through accrued annual leave or extended leave, or through other bespoke arrangements. Mr Chin submitted: [33] "It encapsulates the unfairness and unreasonableness of making annual leave available to top up in these circumstances; leave that's intended for rest and recreation and recuperation; but not the very kind of leave intended for illness or injury." 1. We observe that a number of the instances of employees being provided with bespoke top up arrangements involved employees who were injured in extraordinary and harrowing, if not horrendous, circumstances. It is not altogether surprising that particular arrangements were made in their case to ensure that they suffered no reduction in income as a result of their injuries. They do not serve as examples which could be extrapolated across the public sector more generally. 2. We accept that there may have been an inconsistent application of sick leave top up in particular instances. It is difficult on the evidence to discern whether this is the result of design or confusion. However, we are not persuaded that these anomalies demonstrate a widespread entitlement enjoyed by some employees that is not enjoyed by others. 3. We observe that accrued but untaken annual leave or extended leave is payable to an employee on the termination of their employment. There is no such entitlement in respect of sick leave. It might be said to be different to permit an employee to access their annual leave or extended leave balances to top up their income than permitting them to do so through accrued but untaken sick leave. 4. However, nothing in cl 77 of the Conditions Award appears to permit accrued annual leave being used to top up an employee's income. It is similarly not provided for in Sch 1 of the Government Sector Employment Regulation 2014, which sets out extended leave entitlements for Public Service employees. Further, permitting employees to access their annual leave or extended leave to effect workers compensation top up is inconsistent with the Secretary's rationale for resisting the PSA's Application. 5. Despite these observations, we are not convinced that the fact that some employees have been permitted to top up their income through their accrued annual leave or extended leave rises to the point of warranting the variation sought by the PSA. Any inconsistency in the approach taken by the Secretary to date does not obviate our findings at [128] and [145] above Determination 1. The Conditions Award is presumed to set fair and reasonable conditions of employment: Police and Paramedics at [32(2)]. The question is whether there is evidence before the Commission to support a conclusion that in respect of workers compensation top up the Conditions Award does not do so: Re Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres (No 2) [2015] NSWIRComm 38 at [76]. 2. Given the findings we have made at [128] and [145] above, and the other matters canvassed above, we are not persuaded that the PSA has discharged its onus. 3. Further, in the context of s 146(2) of the Act, our findings at [128] and [145] above lead us to conclude that it would not be in the public interest to make the variation sought by the PSA. 4. We note further that the PSA relied on three factors to demonstrate that the PSA's Application met the criteria for being a "special case" within the meaning of cl 8.4 of the Wage Fixing Principles: 1. the proposed variation does not involve any increase in remuneration or conditions of employment, being a modernisation of a clause regulating the use of existing entitlements; 2. the PSA's Application seeks to restore the full application of cl 82.7 in circumstances where it has largely ceased to apply as an unintended and inadvertent consequence of the 2012 Amendments; and 3. the position taken by the Secretary not to honour sick leave top-up has been inconsistently applied across the NSW public sector. 1. Given our findings at [103], the first and second contentions cannot be sustained. In light of our discussion at [154]-[172] above, we are not persuaded that the third contention gives rise to a "special attribute" as submitted by the PSA. The PSA has failed to meet its onus to demonstrate that its proposed variation attracts the special case sub-principle. 2. For these reasons, we have determined to dismiss the PSA's Application. The Motion 1. Having made that determination, it is not necessary to address the Motion. The Secretary's Application 1. The Secretary submitted: [34] "1. Under a s 19 review, the Commission is only to make such changes it considers 'necessary'. The term 'modernise' in s 19(2) necessarily means 'an obligation to ensure that the awards are made consistent with the current statutory framework'. 2. Clause 82.7 has no legal current operation following the 2012 Amendment Act beyond the contingent of employees performing firefighting duties. This was confirmed in the Top Up Case, which held that the terms of the Award are inconsistent with the post 2012 legislation. That decision represents the law in NSW. 3. The 'Note' proposed in the Secretary's application is necessary to vary the terms of the Award to make it consistent with its current legal operation." (Emphasis in original, footnotes omitted) 1. As we have already observed, there is no controversy that cl 82.7 continues to confer a top up benefit on firefighters to whom cl 25 of Pt 16H of Sch 6 of the WC Act applies, whilst they are engaged in firefighting duties. In light of our finding at [103] above, this is the only contingent of employees on whom the clause confers such a benefit. 2. The evidence reveals a history of disputation between the parties over the application of cl 82.7 for a number of years, up to and including these proceedings. As we have already observed, there is evidence of some inconsistency in the Secretary's approach to permitting top up through the use of sick leave balances or through other leave accruals. 3. For these reasons, we accept the Secretary's submissions as reproduced at [180] above. Having regard to the principles outlined in Infectious Cleaning Allowance (at [85] above), it is appropriate that cl 82.7 be varied pursuant to s 19 of the IR Act to clarify and confirm the employees on whom it confers a top up benefit. 4. It follows that we have determined to grant the Secretary's Application. Further variations to the Conditions Award 1. During the progress of the Review Application, the parties agreed on a number of variations to be made to the Conditions Award pursuant to s 19 of the IR Act. On 30 March 2021 Chief Commissioner Constant made the following direction: "The parties are to file an agreed amended Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009…with proposed amendments in tracked changes and a table setting out the proposed changes to the Award, save with respect to cl 82.7 (which remains in dispute) on or before 9 April 2021." 1. Pursuant to that direction, a document titled "Schedule of Proposed Changes" – Final – 9 April 2021" and a copy of the Conditions Award with tracked changes reflecting those variations were filed with the Industrial Registry. Those documents were entered into evidence in these proceedings as Exhibit 24 and Exhibit 25 respectively. Orders and directions 1. We make the following orders: 1. Pursuant to s 19 of the Industrial Relations Act 1996 the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2009 is amended: 1. by adding after cl 82.7 and before cl 82.7.1 the following: Note: Following the decision in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary [2017] NSWSC 1473, this clause only applies to firefighters to whom cl 25 of Pt 16H of Sch 6 of the Workers Compensation Act 1987 applies, whilst they are engaged in firefighting duties. 1. otherwise to give effect to the variations reflected in Exhibit 24 and Exhibit 25. 1. Matter 2021/121086 is dismissed. 1. We direct that: 1. the parties confer with a view to reaching consensus on short minutes to give effect to the orders set out above; 2. the Secretary is to file proposed short minutes of order by 4.00pm on 7 October 2022; and 3. the parties have liberty to apply on reasonable notice. ********** Endnotes 1. PSA's Submissions, at par 74 2. ibid., at par 76 3. ibid., at par 79 4. For the avoidance of any doubt, and unless otherwise stated, a reference in this decision to "top up" is to an employee being able to access their accrued but untaken sick leave to make up the difference between the payments they are entitled to receive under the WC Act and their pre-injury average weekly earnings. 5. PSA's Submissions, at par 44 6. ibid., par 45 7. Tcpt, 8 April 2022, p 10(30-38) 8. Affidavit, Shay Deguara, 17 September 2021, Exhibit SD-1, Tab 6, at pp 127-128 9. ibid., pp 137-139 10. ibid., at pp 143-144 11. ibid., at p 144 12. Affidavit, Shay Deguara, 17 September 2021, Exhibit SD-1, Tab 7 13. Tcpt, 8 March 2022, p 36(49) 14. PSA's Submissions, par 28 15. Tcpt, 14 March 2022, p 193(9-25) 16. Statement, Professor Louise Thornthwaite, Annexure LT-1, at pp 5-6 17. ibid., at pp 28-30 18. ibid., at p 33 19. Tcpt, 11 March 2022, p 92(45-47) 20. Statement, Janelle Burns, 2 September 2021, at par 10 21. Statement, Julie King, 9 September 2021, at par 30 22. Statement, Nichola King, 2 September 2021, at par 35 23. Affidavit, Alex Collie, 18 February 2022, Exhibit AC-1, Tab 3, at pp 23-24 24. Affidavit, Mary Wyatt, 18 February 2022, Annexure B, at p 4 25. Affidavit, Catherine Carvolth, 5 November 2021, at par 21 26. Affidavit, Simon Kempson, 5 November 2021, at par 18a 27. ibid., at par 19 28. Affidavit, Saakshi Sharma, 3 November 2021, at par 27b 29. Statement, Shay Deguara, 10 December 2021, at par 6 30. ibid., Exhibit SD-2 at Tab 1 31. PSA's Submissions, at par 88 32. We observe that one of the instruments in Category 2A of Mr Deguara's Table is a Determination made under the Teaching Service Act 1980. 33. Tcpt, 8 April 2022, p 11(25-28) 34. Respondent's Closing Submissions, 24 March 2022 Amendments 19 October 2022 - Amendments made to the coversheet and paragraph [143 (2)] and footnote 26 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: 19 October 2022