The Court of Appeal has invalidated a government regulation which excluded the Industrial Relations Commission from making redundancy provisions in industrial awards.

NSW Industrial Relations Minister, Mike Baird, said the decision appeared to contradict years of accepted practice.

‘‘The government will carefully consider the judgement and the options available to it,’’ he said.

“The NSW Court of Appeal has ... handed down a decision that appears to permit the Industrial Relations Commission to include matters relating to the management of excess employees in an industrial award.

‘‘The government considers that this is a policy position that it should be able to manage without any restrictive approaches being embedded in an award.’’

The court’s decision follows the O’Farrell government’s failure on two occasions to introduce a regulation in parliament to claw back superannuation entitlements, as part of its 2.5 per cent cap on salary increases.

Opposition spokesman for Industrial Relations, Adam Searle, said the Court of Appeal had on Thursday found the government had exceeded its statutory powers by introducing a regulation that prohibited the IRC from awarding redundancy entitlements for displaced employees.

"One of Barry O’Farrell’s first acts in government was to strip the Industrial Relations Commission of its power to set fair wages and conditions for our hard-working teachers, nurses, police, emergency service workers and all the hundreds of thousands of employees who work for State agencies,” Mr Searle said.

“Now, the highest Court in our State has found the O’Farrell Government acted unlawfully in trying to undermine the Industrial Relations Commission and its role as an independent umpire.’’

NSW Greens MP David Shoebridge said the Court of Appeal decision was a ‘‘victory for fair work entitlements in NSW’’.

“With the coming State budget raising the prospect of the O’Farrell government cutting more and more public sector jobs, fair redundancy entitlements should be a basic minimum in NSW,’’ he said.

‘‘This decision will allow the PSA and other public sector unions to bring applications for fair redundancy provisions for hundreds of thousands of public sector workers.’’

The Public Service Association’s general secretary, Anne Gardiner, said the Court of Appeal decision ‘‘is another blow to the government’s wages policy and I think it is also a boost because it hands back to the IRC a bit of its old jurisdiction in relation to redundancy’’.

‘‘We call on the government to accept the ruling of the Court of Appeal and sit down with the public sector unions and negotiate their redundancy arrangements,’’ she said.