Four senior judges of the Industrial Relations Commission will retire early next year because there is no longer enough work for them to do.
The NSW opposition said the O'Farrell government had "strangled the life" out of the IRC.
Justice Roger Boland and his colleagues Justice Wayne Haylen, Justice Conrad Staff, and Justice Anna Backman have agreed to retire from February before they reach the mandatory retirement age of 72.
They will be entitled to an early retirement package and all four will be entitled to the full judicial pension in 2014.
Minister for Industrial Relations Mike Baird said their decision to retire early "reflects the drastically reduced workload of the commission".
He said the number of filings has fallen from more than 900 a year to less than 100 over the past nine years as a result of changes to the federal industrial relations system.
"The commission's president, Justice Roger Boland, acknowledged that by the end of 2013 the court is expected to generate enough work for only one judge," he said.
Attorney-General Greg Smith thanked Justice Boland for his leadership of the court and the commitment he and his colleagues have shown.
"The government acknowledges their dedicated service and their combined 38 years of service on the court," said Mr Smith.
Opposition spokesman for industrial relations Adam Searle said the O'Farrell government had capped wages for nurses, teachers and fire-fighters and then took away the ability of the NSW IRC as the independent umpire to give workers a fair hearing.
"This is a government that has shown flagrant disregard for the independent umpire for workers in this state from the moment they were elected," he said.
"The NSW opposition said last year that the government's decision to strip the industrial court of jurisdiction relating to occupational health and safety would compromise the long-term sustainability of the court – and that has been proven correct by the O'Farrell government's announcement.
"The O'Farrell government has successfully strangled the life out of the NSW IRC.
"The opposition has consistently argued that the IRC should have its jurisdiction broadened to ensure that the judicial resources are fully utilised. However, the O'Farrell government has instead decided to gut the independent umpire."
Mr Searle said NSW should have a properly resourced, independent umpire with jurisdiction to deal with workplace matters.
"Given there has been a significant backlog of more than 1000 cases in the IRC as a tribunal – which equates to more than 140 cases per tribunal member – today's decision will only reduce the courts ability carry out their important work," he said.
Greens MP and Industrial Relations spokesman David Shoebridge said the O'Farrell government had decided it did not want an independent umpire to consider industrial relations matters in NSW.
"The IRC has handed down a number of important decisions in the last few months alone, upholding the rights of working people in NSW to fair wages and conditions," Mr Shoebridge said.
"In particular its finding that the compulsory superannuation cap could not simple be appropriated by the government into wages will have a real impact on the hip pocket of thousands of workers.
"Over its term the O'Farrell government has introduced piece after piece of legislation seeking to exclude the jurisdiction of the IRC, meaning many workers are already unable to appeal unfair treatment by employers."
Mr Shoebridge said the commission was the only institution left to provide a check on the government's public sector "wage cutting agenda".