Industrial Relations Commission New South Wales Medium Neutral Citation: NSW Ambulance Death and Income Protection Benefits Interim (State) Award [2016] NSWIRComm 5 Hearing dates: 7 and 9 December 2015; 10 and 11 February; 18 April and 19 May 2016 Date of orders: 20 May 2016 Decision date: 20 May 2016 Jurisdiction: Industrial Court of NSW Before: Walton J, President; Stanton C; Murphy C Decision: The Commission makes an award entitled NSW Ambulance Death and Income Protection Benefits Interim (State) Award in terms of the draft award document filed by the Ministry with the Commission on 19 May 2016 and marked as Exhibit 22 in the proceedings. The award will operate on and from 20 August 2016 for a period of twelve months. Catchwords: AWARD – application for new award – Special Case – previous award provided for death and total or partial permanent disability – lump sum benefits – cost to Government about to exceed 3.6 per cent of salaries – immediate review of scheme – appropriate steps to maintain a maximum cost to Government of 3.6 per cent of salaries – parties unable to agree on new award – two stage process – income protection scheme in place of lump sum benefits – whether proposed award sets fair and reasonable conditions of employment for employees – affordability of new scheme – failure by unions to propose any alternative award which maintained maximum cost to Government of 3.6 per cent of salaries – whether requirements of Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 satisfied PRACTICE and PROCEDURE – whether appropriate to separate hearing into two stages – first stage – determination that income protection scheme would replace lump sum benefits for total or partial permanent disability – second stage – determination of detailed provisions of the income protection scheme Legislation Cited: Industrial Relations Act 1996 Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 Cases Cited: Health Employees Pharmacists (State) Award and other Awards [2003] NSWIRComm 453; (2003) 132 IR 244 NSW Ambulance Death and Income Protection Benefits (State) Award [2015] NSWIRComm 42Re Health and Community Employees Psychologists (State) Award [2001] NSWIRComm 302; (2001) 109 IR 458 Re Public Hospital Social Workers Award (unreported, Full Bench, 86/264, 20 December 1988) Category: Principal judgment Parties: NSW Ministry of Health (Applicant) Health Services Union NSW (First respondent) Australian Paramedics Association (NSW) (Second respondent) Secretary, NSW Industrial Relations (Intervener) Representation: Counsel: M Easton (Applicant) I Latham (Second respondent) A Perigo (Intervener) Solicitors: NSW Ministry of Health (Applicant) W G McNally Jones Staff (First respondent) Australian Paramedics Association (NSW) (Second respondent) Crown Solicitor's Office (Intervener) File Number(s): 2016/10318 (IRC 904 of 2015) decision 1. Before the Commission is an application by the NSW Ministry of Health ('the Ministry') for a new award entitled NSW Ambulance Death and Income Protection Benefits (State) Award ('the proposed award'). It is intended that the proposed award rescind and replace the Ambulance Service of NSW Death and Disability (State) Award ('the D and D Award'). 2. The D and D Award was initially made by the Commission, with the consent of the parties, in 2008 with effect from 29 February of that year. The main features of the D and D Award, which covers approximately 3,600 officers, are set out below: 1. Lump sum payments in the case of an on duty injury resulting in an officer's death or their suffering total and permanent disability ('TPD'). These lump sum benefits were paid through a superannuation scheme established by the NSW Ambulance Service ('the Service') with First State Super ('FSS') by way of an insurance policy taken out by FSS with an insurer, currently Zurich Financial Services Australia Limited ('Zurich'). The amount of a lump sum payment was determined by the officer's age and calculated as a multiple of salary ranging from 3.71 at age 60 up to 8.50 at less than 45 years of age (cls 7 and 10, Annexure A); 2. Lump sum payments in the case of an off duty injury resulting in an officer's death or their suffering TPD. These lump sum benefits were paid through a separate scheme established by the Service. The amount of a lump sum payment was again determined by the officer's age and, as at 11 July 2015, ranged from $73,572 between the ages of 64 to 65 up to $367,896 at less than 61 years of age (cls 8 and 10); 3. Lump sum payments in the case of an on or off duty injury resulting in an officer suffering partial and permanent disability ('PPD'). These lump sum benefits were paid through a scheme administered by the Service. The amount of a lump sum payment was determined by the officer's age and was, in the case of an on duty injury, calculated as a multiple of salary ranging from 0.00 at age 60 up to 8.33 at 20 years of age (cl 9, Annexure B). In the case of an off duty injury, the lump sum payment was equivalent to the unexpired portion of two years full salary or full salary to age 60, whichever was the lesser (cl 9); 4. The benefits conferred upon officers by the D and D Award were in addition to any superannuation benefits that may have been payable and any payments under workers compensation legislation (cl 6); 5. A Health and Wellness Program (cl 11); and 6. The costs of funding the various schemes established under the D and D Award were to be met by a contribution of 1.8 per cent of salary from the majority of officers covered by that award (cl 5) and a cost to Government of 3.6 per cent of salaries as defined by the award. There were to be actuarial and financial reviews conducted on the scheme each three years after the initial review (cl 14). 1. Importantly, cl 14.2 of the D and D Award contained the following provision: …If the results of the triennial actuarial and financial review referred to above or if in any 12 month period: 14.2.1 the insurance premium quoted for the next 12 months, and/or 14.2.2 the claims experience of the preceding 12 months are such that, in the opinion of the actuary and the Service, the long term cost to the Government is likely to exceed 3.6% of salaries, there will be an immediate review of the benefits and/or the officer contributions of the scheme. Appropriate steps will then be taken by the parties to implement a revised scheme that maintains a maximum cost to Government of 3.6% of salaries 1. The cost to Government of 3.6 per cent of salaries is currently approximately $11.2 million. 2. Ms Carolyn Synnott, Associate Director, Workplace Relations in the Ministry, gave unchallenged evidence in the proceedings to the following effect: 1. From 1 April 2011 to 31 March 2014, the insurance policy between FSS and Zurich had a guaranteed premium rate of 2.12 per cent of salaries; 2. In May 2014, Zurich advised FSS that the premium rate would increase to 7.63 per cent of salaries. Discussions between Zurich and FSS led to this increase in premium being effective from 17 July 2014 up to the expiry date of the renewed policy which was 31 March 2015; 3. FSS attempted to source and secure an alternative insurer willing to cover the existing award benefits at a cost which could be funded within the available funding pool. By the end of July 2014, it was clear that this would not be possible; 4. In June 2014, the Ministry engaged insurance brokers Jardine Lloyd Thompson ('JLT') to provide advice on the current state of the insurance market and alternative benefit options that might be affordable within the scheme's funding parameters; 5. The Ministry convened a working party in September 2014 including representatives of the Service, the Health Services Union NSW (' the HSU') and the Australian Paramedics Association (NSW) ('the APA') to undertake a review of the scheme pursuant to cl 14.2 of the D and D Award; 6. The parties agreed that an actuarial review of the long term costs of the scheme was required. PricewaterhouseCoopers ('PwC') was engaged to undertake the review; 7. On 19 September 2014, PwC advised the Ministry that the expected claims experience was such that the long term cost to Government for 2014/15 was likely to exceed 3.6 per cent of salaries and was estimated to be 7.09 per cent of salaries. PwC also advised that the long term cost to Government would continue to exceed 3.6 per cent of salaries while the group life policy requires a premium rate of 7.63 per cent of salaries. Further, the long term cost to Government was likely to exceed 3.6 per cent of salaries whenever the premium rate exceeded 3.8 per cent of salaries; 8. The insurance policy had to be renewed from 1 April 2015. In January 2015, Zurich advised FSS that the premium rate would increase to 9.34 per cent of salaries, guaranteed for one year; 9. The working party met on 20 occasions between September 2014 and September 2015 to examine alternatives to the current scheme; and 10. In September 2015, the Service conducted a ballot in which affected officers were invited to vote to either replace the existing scheme with a death benefit and income protection scheme or to wind up the existing scheme, cease employee contributions and return 85 per cent of achieved employee related cost savings to employees in the form of a new allowance. The HSU advised its members not to participate in the ballot. Of the 579 employees who chose to vote, 365 (63 per cent) voted for the first option, that is, to replace the existing scheme with a death benefit and income protection scheme. 1. Despite the protracted negotiations, the parties failed to reach agreement on an alternative scheme and, as a consequence, on 12 October 2015, the Ministry filed the application which is presently before the Commission. The proposed award makes provision for the following: 1. Lump sum payments in the case of on or off duty death (cl 7 and Annexure A) which are unchanged from the D and D Award and are to be paid through a superannuation scheme established with FSS (cl 6.1); 2. Income protection benefits (which were initially unspecified) for on and off duty injuries or illnesses (cl 8) to be provided via an insurance policy taken out by the Service (cl 6.2) or otherwise paid directly by the Service (cl 6.3); 3. Transitional provisions in relation to injuries or illnesses incurred prior to the commencement of the proposed award which provide that benefits under the D and D Award will be paid, provided certain criteria are met (cls 9 to 13 and Annexure C); 4. A commitment to a Health and Wellness Program for paramedics with 1.9 per cent of the scheme's funds to be used for health and wellness initiatives; 5. The Government's commitment under the D and D Award to contribute a maximum of 3.6 per cent of salaries is continued, as is the review trigger should the long term costs to Government be likely to exceed this amount (cl 19); and 6. No employee contribution towards the revised scheme is required. 1. When the application was first listed before the Commission on 23 October 2015, both the HSU and the APA accepted that the trigger mechanism in the D and D Award, which required a review of the award, had been activated. However, both unions were opposed to the application by the Ministry for the proposed award. On that occasion, the Commission raised the possibility of proceeding with the application by way of a BlueScope arbitration. When the matter came back before the Commission on 2 November 2015, the Ministry and the APA agreed to the proposal for a BlueScope arbitration but the HSU refused to be involved in such a process. 2. A conciliation conference was conducted before Walton J on 5 November 2015 but no agreement was achieved and the application was referred by his Honour to a Full Bench of the Commission. 3. On 10 November 2015, the HSU filed an application to vary the D and D Award, essentially, by removing references to "superannuation" and to "First State Super". No change was proposed to the existing levels of benefits in the case of death or TPD or PPD. The effect of the proposed variations, if granted, was said by the HSU to transfer the scheme from being an insurance scheme to one that was self-managed by the Government. There was no proposal to alter the existing level of employee and employer contributions, or to vary the existing review mechanism and the obligation on the parties, in the event that the long term cost to Government was likely to exceed 3.6 per cent of salaries, to implement a revised scheme that maintained a maximum cost to Government of 3.6 per cent of salaries. Apart from a bald statement in its outline of submissions filed on 27 November 2015 to the effect that the HSU application maintains a maximum cost to Government of 3.6 per cent of salaries, no attempt was made by the HSU to demonstrate how the proposed self-managed scheme, providing the same level of benefits, could be funded within that cap on the cost to Government. 4. On 11 November 2015, the APA filed an application to vary the D and D Award by deleting cl 14 - Award Review. The effect of the proposed variation, if granted, would have been to remove the existing cap of 3.6 per cent of salaries on the long term cost to Government of funding the scheme. In support of its proposed award variation the APA claimed that it "is fair and reasonable that the Ministry of Health provide fair and reasonable death and disability payments to Ambulance Officers regardless of the cost of the insurance premiums to the Ministry of Health." It appears that the APA's approach to the obligation on the parties under the D and D Award was, in the event that the long term cost to Government was likely to exceed 3.6 per cent of salaries, to implement a revised scheme that maintained a maximum cost to Government of 3.6 per cent of salaries, was to simply remove that obligation. 5. On 13 November 2015, the Crown Solicitor filed a notice of intervention on behalf of the Secretary, NSW Industrial Relations ('the intervener'). Intervention was granted by Walton J on 30 November 2015, but that intervention was constrained to putting on submissions concerning the application of s 146C of the Industrial Relations Act 1996 ('the Act') and the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 ('the Regulation') in the proceedings. 6. At the hearing of the competing applications before the Full Bench on 7 December 2015, an agreed statement of facts was tendered into evidence. Importantly, that document contained the following statement: 11 The review provisions at clause 14 of the current Award have been triggered, meaning that the scheme must be reviewed and appropriate steps taken by the parties to implement a revised scheme which maintains a maximum cost to Government of 3.6% of salaries. 1. Counsel for the Ministry, Mr M Easton, tendered a number of witness statements and other documents into evidence. A short summary of each witness' evidence appears below: 1. In addition to the matters outlined at [4] above, Ms Synnott referred to a Confidential Ministry Exhibit Bundle (which became Exhibit 5) at tab 2, which was a market testing report by JLT in February 2015. The report estimated the cost for a variety of income protection schemes, in particular the cost of a scheme providing an income protection benefit of 75 per cent of salary after a waiting period of 90 days with a maximum benefit period of two years. The premium cost of such a scheme was estimated to be 1.349 per cent of salaries or $3.78 million. 2. In his statement, Mr Neil Robinson, Benefit Solutions at JLT, gave evidence concerning the current losses in the life insurance industry being experienced by TPD insurers and the resulting increase in premiums, in particular by Zurich. On 7 May 2014, Zurich announced that it was withdrawing from the Australian group life insurance market. Mr Robinson also referred to the market testing which JLT had conducted for income protection cover; 3. Annexed to the statement of Ms Janice Jones, Director, Consulting at PwC, was an advice prepared by her and other officers of PwC in response to specific issues raised by the Ministry. That advice estimated the cost to the Service of the D and D Award if the death and TPD claims were insured (as per the current arrangement) or self-insured, before and after current member contributions were deducted. For 2015/16, the estimated net costs, expressed as a percentage of total salaries, were: * Death and TPD insured, PPD self-insured: 9.4per cent to 11.2 per cent; and * Death, TPD and PPD all self-insured: 4.1 per cent to 9.2 per cent. 1. The advice stated that the net cost to Government is over 3.6% of total salaries regardless of whether the death and TPD claims are insured or self-insured; 2. In the Confidential Ministry Exhibit Bundle was a document prepared by Ms Synnott which drew upon material supplied by Tal Life Limited and JLT. This estimated the cost to Government of a scheme which retained the current Death Benefit and Health and Wellness Program and provided income protection of 75 per cent of salary for a maximum of 2 years with a 90 day waiting period and made provision for expected transitional PPD costs, to be 3.58 per cent of salaries or $11.2 million per annum; 3. Ms Min Su, Acting Executive Director, Finance with the Service, gave evidence that, in 2014/15, following the increase in the Zurich premium, the current scheme recorded a loss of $25.3 million and was projected to make a loss of $26.8 million in 2015/16. It was expected that the scheme's cash reserves would run out at the end of January 2016; 4. Ms Michele Murphy, Manager, Insurance and Risk with the Ministry, gave evidence which dealt with initiatives being taken within the Service to reduce work related injuries and workers compensation claims; and 5. Mr Sean Kearns, Zone Manager, Sydney Zone with the Service, provided a statement of evidence which dealt with the support services currently available in the Service to paramedics in need of support. 1. None of those witnesses were required for cross-examination. 2. Counsel for the APA, Mr I Latham, tendered a statement of Harini Kasturiarachchi, Senior Industrial Officer of the APA. Ms Kasturiarachchi's evidence drew a comparison between the benefits available to disabled paramedics under the D and D Award and the benefits available under an income protection scheme providing 75 per cent of salary (plus 20 per cent loading) for a maximum period of three years. Ms Kasturiarachchi's evidence did not address the cost blow out of the current scheme which triggered the requirement for a review to bring the cost to Government back under 3.6 per cent of salaries. Nor did Ms Kasturiarachchi's evidence acknowledge that, under the award proposed by the Ministry, paramedics would no longer be required to contribute to the cost of the scheme and that income protection payments would be available to injured or sick paramedics who were not necessarily permanently disabled, as is the requirement under the current scheme. 3. Mr Nathan Keats, solicitor for the HSU, tendered into evidence the following documents: 1. A statement by Mr Steven Fraser, Intensive Care Paramedic with the Service. Mr Fraser's evidence dealt with some of the traumatic situations which confront paramedics on a regular basis. However, as was the case with Ms Kasturiarachchi, Mr Fraser did not address the cost blow out of the current scheme which triggered the requirement for a review to bring the cost to Government back under 3.6 per cent of salaries. Nor did Mr Fraser's evidence acknowledge that, under the award proposed by the Ministry, paramedics would no longer be required to contribute to the cost of the scheme and that income protection payments would be available to injured or sick paramedics who were not necessarily permanently disabled, as is the requirement under the current scheme; 2. A statement by Mr James Fox, Industrial Organiser for the HSU. Mr Fox did address the increasing cost of the current scheme and stated that the HSU application, which proposed a regime of self-insurance for TPD as well as PPD, together with an injury reduction and safe work scheme, would maintain the maximum cost to Government at 3.6 per cent of salaries. Mr Fox's evidence did not disclose how this would be achieved, nor did he address the evidence tendered by the Ministry to the effect that such a self-insurance scheme would increase the cost to Government beyond 3.6 per cent of salaries; and 3. A report from PwC entitled NSW Ambulance – 30 June 2015 valuation of NSW Ambulance Death and Disability (State) Award – July 2015. This report from PwC estimated the 30 June 2015 self-insured claims liabilities to be $17.4 million which was 64 per cent higher than the previous year. 1. Towards the end of proceedings (on 7 December 2015), in response to an observation by the President, all three parties advised the Full Bench that they were content for the adjudication of the matters before the Commission to be split into two stages. Stage one would deal with the issue as to whether or not the award to be made would retain lump sum benefits for TPD and PPD or, in lieu thereof, provide an income protection scheme of the kind contemplated by the application by the Ministry. The following day (on 8 December 2015), each of the parties filed written submissions addressing that issue. 2. The hearing before the Full Bench resumed on 9 December 2015. The parties put further oral submissions in support of their competing proposals with respect to stage one of the proceedings. One of the main areas of challenge by the two unions to the proposed award was the lack of any detail around the proposal that there would be put in place an income protection scheme. At the end of proceedings on that day, the Full Bench reserved its decision with respect to stage one. 3. On 10 December 2015, the Ministry filed an amended application for a new award. At cl 8 – Income Protection – there was an obligation on the Service to take out and maintain an income protection insurance policy that provided insurance cover which would apply where, due to illness or injury incurred either on or off duty, an officer was unable to perform the duties of the position for which they were substantively employed and they are under the care of a medical practitioner. The proposed insurance policy included the following minimum terms: 1. A disability benefit which topped up any other income received by the officer so that the officer received 75 per cent of their pre-disability salary; 2. A waiting period of 90 days before any benefit was payable; and 3. A maximum benefit period of two years. 1. On 15 December 2015, the Full Bench published a statement setting out its determination with respect to stage one of the proceedings: NSW Ambulance Death and Income Protection Benefits (State) Award [2015] NSWIRComm 42. That statement is set out in full below. STATEMENT 1. The Ambulance Service of NSW Death and Disability (State) Award ('D and D Award') was first made by consent of the parties in 2008. The scheme established pursuant to that award provided for lump sum payments to paramedics in the case of death, total and permanent disability ('TPD') or partial and permanent disability ('PPD') suffered as a result of injury or disease incurred on or off duty ('the scheme'). 2. Death and TPD benefits are paid through an insurance arrangement established between First State Super and Zurich Financial Services Australia. PPD benefits are managed by the Ambulance Service of NSW ('the Service') and are paid directly from the scheme funds. 3. The scheme is funded by contributions from officers, generally of 1.8 per cent of salary (cl 5 of the D and D Award), and the Service. The Service's contribution is limited to 3.6 per cent of total paramedic salaries (cl 10.1 of the D and D Award). Clause 14 of the D and D Award, dealing with award review, provides that, in the event the long term cost to the Government of maintaining the scheme is likely to exceed 3.6 per cent of salaries, the following will occur: … there will be an immediate review of the benefits and/or the officer contributions of the scheme. Appropriate steps will then be taken by the parties to implement a revised scheme that maintains a maximum cost to Government of 3.6% of salaries. 4. It is common ground between the parties that the review provisions in cl 14 of the D and D Award have been triggered, meaning that the scheme must be reviewed and appropriate steps taken by the parties to implement a revised scheme which maintains a maximum cost to the Government of 3.6 per cent of salaries. Despite extensive negotiations over an extended period of time, the parties have been unable to agree on the terms of such a revised scheme. Competing Applications 5. The initial application filed by the Secretary, NSW Ministry of Health ('MOH') was for a new award to be titled NSW Ambulance Death and Income Protection Benefits (State) Award ('the proposed award'). The proposed award retains the entitlement to a lump sum benefit in the case of death. In the case of TPD or PPD, the proposed award would replace the lump sum benefit with payments in the form of income protection. The proposed award contained no detail as to matters such as the waiting period for the commencement of the income protection payments, the quantum of the income payable or the duration of such payments. As part of the proposed income protection scheme, officers would no longer be required to contribute any part of their salaries. 6. The Health Services Union NSW ('HSU') filed an application to vary the current D and D Award so as to retain the existing lump sum benefits, but with the Service effectively becoming a self-insurer for the whole of the scheme as it currently is for the PPD component of the scheme. 7. The application filed by the Australian Paramedics Association (NSW) ('APA') seeks to vary the current D and D Award by effectively removing the limitation of 3.6 per cent of salaries on the cost to the Government of maintaining the existing scheme. 8. All parties filed evidence and outlines of submissions in support of their respective positions. Two Stage Process 9. On Monday 7 December 2015, the first day of the hearing of the matter, the Full Bench raised with the parties the prospect of splitting the adjudication of the proceedings into two parts. The first part of the proceedings would concern the essential point of difference between the two unions and the MOH, namely, whether the current scheme of lump sum payments in the case of TPD and PPD should be retained or replaced by an income protection scheme. The second stage of the proceedings would then deal with the myriad considerations which would flow from the determination made at the first stage. 10. The parties filed further written submissions in response to the Full Bench's proposal and spoke to those submissions when the hearing resumed on Wednesday 9 December 2015. No party opposed the splitting of the proceedings into two stages. However, the HSU and the APA maintained their opposition to the award proposed by the MOH and emphasised the lack of any detail as to the quantum of the proposed income protection benefits and other issues impacting on the operation of the scheme. It was in that light that the MOH was granted leave to file and serve an amended application and for the HSU and the APA to file and serve supplementary submissions as to stage one of the proceedings. 11. On Thursday 10 December 2015, the MOH filed an amended application. In addition to the matters set out in the original proposed award, the amended application contained a requirement for the Service to take out an insurance policy including, at a minimum, the following terms: • A disability benefit which tops up any other income received by the officer so that the officer receives 75 per cent of pre-disability salary; • A waiting period of 90 days before any benefit is payable; and • A maximum benefit period of two years. 12. On Friday 11 December 2015, the HSU advised the Commission that it did not propose to file submissions in relation to the amended application of the MOH. The APA filed a short submission which acknowledged that the amended application resolved some, but not all, of the "vices" originally identified by the APA. The APA complained that the amended application did not explain the process of assessment of the insurance claims. The APA maintained its opposition to the making of an award in the terms proposed by the MOH in the amended application. 13. On Monday 14 December 2015, the MOH filed a short reply submission in which it was stated that the Commission did not need to descend into the minutiae of the process of assessment in order to evaluate the fairness and the reasonableness of its proposed award. Determination of Stage One 14. The Full Bench determines that the proceedings will be split into two stages as outlined above. 15. In relation to stage one, the Full Bench considers, subject to stage two of the proceedings, that a new award should be made which will provide for income protection benefits in lieu of lump sum payments for TPD and PPD. Whilst we will provide more detailed reasons in our final decision, it is appropriate that we provide, in advance, the preliminary reasons upon which we have formed this opinion: (1) There is compelling evidence that the existing scheme, if allowed to continue as it is, will cause the long term cost to the Government of maintaining the scheme to exceed, by a substantial degree, 3.6 per cent of salaries from February 2016; (2) In such circumstances, the D and D Award requires the parties to take steps to implement a revised scheme that maintains a maximum cost to the Government at 3.6 per cent of salaries; (3) The proposal of the APA to simply remove this cap would, if allowed, constitute a repudiation of the commitment of the parties to the D and D Award and, overall, the objectives of that Award. The application would, in our view, offend the terms of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014; (4) We accept the evidence of the MOH that the proposal of the HSU for the Service to effectively become a self-insurer of the existing scheme will not prevent the long term cost to the Government of maintaining the existing scheme from exceeding 3.6 per cent of salaries. It is most likely the application would offend the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014; (5) Although the current D and D Award provides for it, we do not favour an outcome which would maintain the cap on the cost to the Government of the existing scheme by reviewing the level of officer contributions. The MOH does not propose such an outcome and it is strongly opposed by both unions. Employee opinion seems to be against such a course; and (6) A fair and reasonable income protection scheme will provide officers with a level of benefits that is sustainable within the 3.6 per cent cap on the cost to the Government and, in the circumstances, may offer some advantage in terms of injury management and rehabilitation. 16. We should not be taken as expressing any view one way or another on the amended application filed by the MOH, other than to say that any new award would, if made, contain specific detail as to income protection arrangements such as waiting time, quantum of benefits available and duration of the payment of those benefits as well as appropriate transitional arrangements. 17. The amended application filed by the MOH does contain specific detail on these issues, however, we express no view, at this stage, as to the fairness or reasonableness of those specific proposed provisions. We are yet to form any final view about the HSU's application for an injury management scheme. 18. There are additional matters relevant to stage two of the proceedings. 19. We apprehend that the parties would seek a further program for the hearing of stage two of the proceedings given that the amended application and the views expressed in this Statement may require, for the purposes of any further arbitration, the filing and service of further evidence and submissions. Any such program will necessarily have to comprehend the present grant of expedition in the proceedings. 20. Before taking steps to further program the proceedings, however, we propose to pause to give the parties an opportunity to evaluate whether there should be further conciliation in the proceedings in the light of this Statement. We do not require the parties to take that course. Rather, if the parties unanimously indicate a willingness to do so, and no issue of potential disqualification exists, we would make a member of the Full Bench available to conciliate the balance of the proceedings. Given the urgency of the matter, such a conciliation process would necessarily need to occur in early January 2016. 21. We direct that each party indicate whether conciliation is desired with respect to stage two of the proceedings, as discussed above, by email communication to the Principal Associate to the President transmitted no later than 12 noon Wednesday 16 December 2015. If the parties agree upon conciliation, Murphy C will communicate with them as to prospective dates. In that event, or if conciliation is opposed by any party, the Full Bench delegates its powers and functions to Murphy C to fix a program for the hearing of the matter. 1. In addition to the matters set out in that statement, the following may be added as reasons why the Full Bench favoured an income protection scheme to replace the existing lump sum benefits for TPD and PPD: 1. The D and D Award (at cl 14.2) contains a firm commitment by the parties, in the event of the likelihood of the cost to Government of maintaining the existing scheme exceeding 3.6 per cent of salaries, to review the scheme and to take "[a]ppropriate steps… to implement a revised scheme that maintains a maximum cost to Government of 3.6% of salaries."; 2. All parties agreed that the trigger for a review of the scheme and the taking of appropriate steps to maintain a maximum cost to Government of 3.6 per cent of salaries had been activated; 3. The evidence of Ms Synnott, Mr Robinson, Ms Jones and Ms Su, none of which was seriously challenged, demonstrated that the expected cost blow out of maintaining the existing scheme was significant. Appropriate steps were essential to bring the anticipated cost back under 3.6 per cent of salaries; 4. The award proposed by the APA ignored the obligation which the D and D Award imposed upon the parties to maintain the 3.6 per cent maximum cost to Government by simply excising it. To permit an industrial party to avoid such an obligation, in circumstances where its members have been the beneficiaries of the award, would be unconscionable; 5. Whilst the self-insurance proposal of the HSU purported to maintain the 3.6 per cent cap on costs, the union advanced no evidence as to how this might be achieved in the face of advice from Ms Jones of PwC that the estimated cost of such a scheme was between 4.1 per cent and 9.2 per cent; and 6. When comparing the quantum of monetary benefits available to permanently disabled officers (total or partial) with the quantum of payments available to officers under an income protection scheme, a number of other factors must also be weighed in the balance: 1. The income protection scheme requires no contribution from employees which means the vast majority of officers will receive a 1.8 per cent pay rise upon the commencement of the proposed new award; 2. The income protection scheme will provide benefits to sick and injured officers who receive nothing under the current scheme because their illness and/or injuries have not resulted in permanent total or partial disability; and 3. As transitional PPD claims 'wash out' of the scheme, more funds will become available to improve the income protection benefits available to officers. 1. In response to the direction to the parties at [21] of the Full Bench's statement set out above, each of the parties indicated willingness to engage in conciliation with respect to stage two of the proceedings. Conciliation took place before Murphy C on 13 January 2016. As a result of that conciliation there was a narrowing of the issues between the parties. 2. On 22 January 2016, the APA filed a Notice of Motion seeking an order that the matter be adjourned until a copy of the insurance policy for death and disability was provided to the Commission (ultimately, the APA did not press this aspect of its motion). In the alternative, the APA sought an order that an award be made which generally reflected the terms of the Ministry's amended application filed on 10 December 2015, but which provided for the following: 1. Income protection at the level of 75 per cent of salary; 2. A waiting period of 90 days in the case of a non-work related injury or six months in the case of a work related injury; 3. A maximum benefit period of seven years to commence after the completion of the waiting period; 4. A requirement that officers use their accrued sick leave during waiting periods; 5. Waiting periods to start from the date the claim for income protection was made or the date a claim for workers compensation was made; 6. An entitlement to benefits for each injury (whether it is a recurrence or exacerbation of an existing injury or a new injury); 7. Assessment by an officer's medical practitioner of whether that officer is "unable to perform the duties of the position for which they are substantively employed." (cl 8.2 of the award proposed by the APA); 8. An entitlement to an income protection benefit even if the officer's employment was terminated as a result of injury or illness during the life of the benefit period; and 9. Rehabilitation and retraining for officers who are permanently unfit to return to pre injury/illness duties. 1. On the same day, the HSU filed a cross claim seeking an award in substantially similar terms to those being sought by the APA but without the clause dealing with rehabilitation and retraining. The HSU maintained its previous claim for a provision dealing with injury reduction and a safe work scheme modelled on the scheme operating in the NSW Police Force. The HSU also filed an outline of submissions in relation to stage two of the proceedings. 2. On 3 February 2016, the Ministry filed an outline of submissions responding to the cross applications filed by the two unions. On 5 February 2016, the intervener did likewise with particular reference to s 146C of the Act and the Regulation. 3. A further conciliation conference occurred on 5 February 2016 before Murphy C which resulted in a further narrowing of the issues between the parties. 4. The hearing of the competing applications resumed before the Full Bench on 10 February 2016. On that occasion Mr Easton tendered further witness statements from Ms Synnott and from Mr Robinson of JLT on behalf of the Ministry. 5. Ms Synnott's further statement dealt with the relationship between the workers compensation system and the proposed income protection scheme. Mr Robinson's further statement dealt with similar issues, in particular, the proposal by the two unions that the waiting period in the case of work related injuries be six months. 6. Mr Keats tendered further witness statements from Mr Fraser and Mr Fox on behalf of the HSU. Mr Fraser sought to draw comparisons between the income protection scheme being proposed by the Ministry and privately held income protection policies held by a number of HSU members. Mr Fox provided a number of comparative figures showing the total dollar amounts available to permanently disabled officers of different ages under the existing scheme compared with the total amount those officers could receive under the competing income protection schemes. 7. Mr Easton also tendered a document showing the number of workers compensation claims by paramedics since 2012. 8. Much of the debate on this occasion centred on a document tendered by Mr Easton in the form of a draft of the proposed award which was colour coded to identify those terms which were: 1. "Agreed changes" – green; 2. "Not Agreed changes" – yellow; and 3. "To be inserted prior to commencement of the new Award, subject to affordability within the final insurance policy" – purple. 1. The significant agreed matters, which were shaded green in the draft proposed award, were: 1. An officer will not be forced to use their accrued sick leave during waiting periods (cl 8.2); 2. If an officer's employment is terminated as a result of illness or injury during the benefit period, the termination of the employment would not affect benefits to which the officer is otherwise entitled (cl 8.2); 3. The exclusion of an entitlement to benefits under the award in relation to an injury (or consequent disability) directly caused by the taking of reasonable disciplinary action that may lead to removal from the Service (cl 14); 4. The Service shall provide the two unions with a yearly breakdown of the expenditure of the 1.9 per cent of the Government's contribution on health and wellness initiatives (cl 15.4); 5. Provision to the two unions of the actuarial and financial reports created as part of the yearly reviews of the scheme within four weeks of their receipt by the Service (cl 18.1); and 6. In the event that the long term cost to the Government is likely to be less than the 3.4 per cent of salaries, there will be an immediate review of the scheme. Appropriate steps will then be taken by the parties to increase the benefits available to officers under a scheme that maintains a maximum cost to Government of 3.6per cent of salaries (cl 18.3). 1. The matters still in dispute, which were shaded yellow in the draft proposed award, were: 1. A maximum benefit period of two years (the Ministry) versus seven years (the unions) (cl 8.2); and 2. The injury reduction and safe work scheme clause proposed by the HSU (cl 15A). (This aspect of the HSU's application was eventually abandoned by that union.) 1. The matters to be inserted subject to affordability, which were shaded purple in the draft proposed award, were: 1. A six month waiting period in the case of a work related injury (cl 8.2); and 2. If an officer suffers a recurrence of disability due to the same or a related injury or illness, the subsequent period of disability will be eligible for a new claim if the officer returned to work for more than six months between periods of disability (cl 8.2). 1. The most significant area of dispute was the maximum benefit period. The two year period proposed by the Ministry was clearly a conservative proposal but, unlike the seven year period proposed by the unions, the Ministry's proposal was supported by some evidence, albeit of a somewhat speculative nature. 2. The two most significant components of the cost of funding the proposed income protection scheme were: 1. The cost of the insurance premium; and 2. The cost of the transitional PPD claims. 1. The Ministry's estimate of the premium cost for benefit periods of varying numbers of years was based on market testing conducted by JLT. JLT's estimate for a two year benefit period, providing 75 per cent of salary with a 90 day waiting period, was 1.349 per cent of salaries or $3.78 million. Initially Ms Synnott, in her calculations, added GST to this amount but, during the course of the proceedings, Mr Easton, on behalf of the Ministry, conceded that GST should not have been added to the premium cost. Neither union made any attempt to dispute this estimate of the cost of the premium. 2. The other significant component of the cost of the proposed income protection scheme was the cost of transitional PPD claims which were to be paid out of the scheme's funds. Ms Synnott estimated the number of transitional PPD claims to be 65 with a potential cost, based on an average payment of $340,000, of $22 million, or $4.7 million (1.5 per cent of salaries) in the first year of operation of the new scheme. 3. Whilst Ms Synnott's estimate was somewhat speculative, it was supported to an extent by an earlier estimate by PwC, in September 2014, of the cost of PPD claims for 2014/15. PwC estimated the costs at that time to be $4.59 million or 1.56 per cent of salaries. 4. At no stage did either of the two unions seriously challenge these estimates or produce any evidence to call them into question. 5. Ms Synnott's estimate of the total cost of operation of the Ministry's proposed scheme in its first year, but disallowing the GST on the insurance premium, was $10.8 million or 3.45 per cent of salaries, which leaves very little room to move under the cost cap of 3.6 per cent of salaries. This raised the very real concern that any award made by the Commission which went beyond the provisions proposed by the Ministry, and added to the Ministry's estimate of costs, may be contrary to s 146C of the Act and the Regulation. 6. Unlike the Ministry's proposal, the seven year scheme proposed by the unions was entirely unsupported by any evidence. Using the JLT estimated premium cost for a five year scheme, and extrapolating out to seven years, it is readily apparent that the premium cost alone for a seven year scheme would exceed the cost cap of 3.6 per cent of salaries without taking into account the other cost components of the scheme, such as the transitional PPD claims. For this reason alone, an award containing such a scheme would be prohibited by s 146C of the Act and the Regulation. 7. The failure of the two unions to advance any evidence in support of the claim for a maximum benefit period of seven years, or to engage in any meaningful way with the evidence relied upon by the Ministry in support of its two year proposal, meant that the Ministry's position assumed greater weight than would otherwise have been the case. As a result of the unions' failure to mount a case in support of their own claims, or in opposition to the Ministry's proposal, by way of advancing, and supporting with evidence, a feasible alternative to the two year period, the Commission was left in an analogous position to that which confronted the Full Bench in Re Health and Community Employees Psychologists (State) Award [2001] NSWIRComm 302; (2001) 109 IR 458. In that matter, the Full Bench, after citing a passage from the judgement in Re Public Hospital Social Workers Award (unreported, Full Bench, 86/264, 20 December 1988), stated (at [61]): We consider similar comments are apposite in the present case. The respondent's position was to oppose any change in the classification structure or any increase in salaries; it proposed no alternative to the applicant's claims. As unfortunate as that approach may be in not providing the Commission with an arguable alternative, we have to say it has compelled us to accept more forcefully than we might otherwise have done the evidence led in these respects by the applicant. 1. In Health Employees Pharmacists (State) Award and other Awards [2003] NSWIRComm 453; (2003) 132 IR 244 the Full Bench cited the above extracted passage from Re Health and Community Employees Psychologists (State) Award and went on to state (at [5]): Whilst the HAC ultimately adjourned its cross claim for the inclusion of certain conditions of employment provisions and did offer in a very limited way alternative definitions for some employment classifications caught by the application, it essentially engaged in a blanket repudiation of the application by resisting outright any substantial reclassification, redefinition of classifications or adjustment to rates of pay. We consider that that approach (of essentially outright opposition) to be quite unsatisfactory in this matter for three reasons: … 2. There were aspects of the application which on a reasonable assessment of the competing positions of the parties required a different approach by the HAC. There was revealed in the evidence some deficiencies in the existing classification structures and gaps in the operation of the awards under consideration in this matter (which, in fact, had been partially resolved by administrative action taken by the HAC) which should have resulted in the HAC putting an alternative position with respect to various aspects of the application. For example, the HAC opposed outright the application for a new Perfusionist classification and offered no proposal as to an appropriate rate of pay for any existing or new classification in that respect, notwithstanding that it had been demonstrated during the proceedings that the existing classifications for that occupation were entirely redundant. Further, the HAC did not propose any alternate classification structure for Pharmacy Technicians, notwithstanding that the evidence demonstrated that the existing classifications and definitions were so grossly inadequate as to be inoperative in any legal or practical sense. 3. In the result, the Commission was left without any real assistance by the opponent to the primary application as to the appropriate resolution of the issues raised by it, in circumstances where it was reasonably clear that at least some alternative to the form of existing awards would be required. One consequence of this approach, as was observed by the Full Bench in the Psychologists case, is that, where there is a clear indication in the proceedings that some wage or classification adjustments are appropriate (in accordance with the wage fixing principles) the Full Bench is left without any 'arguable alternatives' from the HAC as to the form of the award, that is, the actual adjustments to the award which may be appropriate. Thus, we have been compelled, where classification and wage adjustments have been found to be warranted under the wage fixing principles in relation to a particular aspect of the application, as in the Psychologists case, to "accept more forcefully than we might otherwise have done," the position advanced (on the evidence) by the HSU. 1. In the matter presently before the Commission, the obstinate refusal of the two unions to engage in any meaningful way in the arbitral process has, in effect, greatly assisted the Ministry in achieving the outcome for which it has contended. 2. As a consequence of the lack of evidentiary support for the claim pressed by the two unions, the prospects of that claim or, indeed, any outcome which improved upon the Ministry's proposal, being awarded in arbitral proceedings were virtually nil. It was with this dilemma in mind that the Commission offered the parties one last opportunity to achieve a compromise of their competing positions through conciliation. 3. That conciliation occurred at the conclusion of the hearing before the Full Bench on 11 February 2016. The conciliation was conducted by Murphy C and presented the unions with an opportunity to attempt to secure an agreed outcome which provided their members with a more beneficial income protection scheme than the conservative scheme being proposed by the Ministry in the context of the arbitral proceedings. 4. Unfortunately, conciliation again failed. A final attempt by the Commission to assist the parties by renewing the offer to resolve the competing applications by way of a BlueScope arbitration was again rebuffed by the HSU. 5. In the end, based on the evidence and submissions before the Commission, the Full Bench was left with no alternative but to announce its decision to make an interim award with a maximum benefit period of two years and other provisions as proposed by the Ministry, but with a duration of twelve months. This announcement was made at the conclusion of proceedings on 11 February 2016. 6. The Full Bench adopted this course for the following reasons: 1. The relative novelty of the proceedings; 2. The circumstances of this determination lying proximate in time to the cessation of arrangements under the D and D award and the provisions therein which we intend to rescind; 3. The attendant uncertainty, in terms of evidence and otherwise, upon the determination of the issues concerning the maximum benefit period. Particularly, in that respect, the relevant costs associated with those arrangements arising under the proposed part C of the proposed award which contains transitional provisions for officers who become disabled before the proposed award commences operation; and 4. The principle, at least in relation to the granting of interim relief, of not passing on the final relief which may be awarded. In other words, not embarrassing the final result in the proceedings. 1. With respect to those provisions in the purple category earlier mentioned, we consider that those provisions would be desirable subject to costs considerations arising in relation to them. 2. The nature of the determination which we have made, so that it is clear, leaves outstanding what should be the final form of an award providing death and income protection benefits for ambulance officers, which determination will be made 12 months hence the date of operation of the award. 3. The Ministry was directed to prepare a draft award which reflected the earlier statement of the Full Bench and the announcement of 11 February 2016. 4. The matter was listed on 19 May 2016 to hear the parties with respect to the draft award and the resolution of any issues concerning the purple category described above. 5. At the resumption of the hearing on 19 May 2016, Mr Easton tendered a further draft of the proposed award. That document included provisions dealing with the two remaining issues in the purple category of the previous draft, namely: 1. The waiting period for a work related injury; and 2. The treatment of a recurrence of disability due to the same, or a related, injury or illness which had previously attracted an income protection payment. That document, which had been filed on 16 May 2016, was marked as Exhibit 20 in the proceedings. 1. In relation to the issue of the waiting period for a work related injury, the proposed award, at cl 8.2, provided for a 26 week waiting period "in the case of an illness or injury incurred on duty". The 26 week waiting period was in line with the position for which the two unions had contended on the basis that a paramedic who suffered a work related injury would be entitled to the maximum weekly workers compensation payment for the first 26 weeks of absence from work due to that injury. 2. With respect to the issue of recurrence of disability, the position put by the Ministry was that such a recurrence would not be treated as a new claim and the wording which had been proposed by the unions to deal with this issue was deleted from the latest draft of the award as proposed by the Ministry. Mr Easton submitted that the cost of including such a provision, as had been proposed by the two unions, would have taken the cost to Government of the scheme above 3.6 per cent of salaries, which is the limit imposed by the current award (at cl 14) and the proposed award (at cl 18). Neither union put any submission to the Full Bench in opposition to what was put by the Ministry on this issue. 3. During the proceedings, Mr Easton advised the Full Bench of a number of minor errors in some of the dollar amounts in Annexures B and C to the proposed award. 4. Further, the Full Bench raised with Mr Easton a possible unintended consequence of the proposed wording in cl 8.2 dealing with the 26 week waiting period for an illness or injury incurred on duty, in particular, the possibility that an illness incurred on duty might not attract workers compensation payments. 5. Shortly after the Full Bench reserved its decision and the hearing concluded, the Ministry filed a further draft of the proposed award in which the errors in Annexures B and C were corrected. In addition, the wording in cl 8.2 dealing with waiting periods was amended to read: A waiting period of 90 days before any benefit is payable in the case of an Off Duty Injury, or 26 weeks in the case of an On Duty Injury. 1. The latest draft of the proposed award was marked as Exhibit 22 in the proceedings. 2. Having further heard the parties, the Commission makes an award entitled NSW Ambulance Death and Income Protection Benefits Interim (State) Award in terms of the draft award document filed by the Ministry with the Commission on 19 May 2016 and marked as Exhibit 22 in the proceedings. The award will operate on and from 20 August 2016 for a period of twelve months. ********** Amendments 23 May 2016 - The title of the decision has been amended to include the word 'interim' to correspond with the orders in the final paragraph. 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: 23 May 2016