The 2,500 nurses who work for Nova Scotia's largest health authority have won an arbitration award against their employer that will add millions of dollars to the province's health budget.

The Nova Scotia Government and General Employees Union said Tuesday the nurses who work for the Capital District Health Authority have been awarded a 7.1 per cent wage increase over a three-year period, retroactive to Nov. 1, 2009.

The three-year agreement ends on Oct. 31, 2012. It provides wage increases of one per cent for the first two years, and gives a 3.5 per cent increase effective Nov. 1, 2011, and a 1.6 per cent increase effective May 1, 2012.

"We are pleased the award defends the principle of leading in Atlantic Canada," Joan Jessome, president of the Nova Scotia Government and General Employees Union that represents Local 97, said Tuesday in a release.

"Although we are not able to catch up to Newfoundland RNs at this time, the award puts us in a strong position to achieve our goal in future rounds."

She said the award means nurses will earn an extra $3,700 per year as of Tuesday, and the May increase will bring the increase up to $5,000 annually.

The Capital District Health Authority is the largest tertiary care centre east of Montreal.

Conciliation talks between the NSGEU and Nova Scotia's largest health authority broke off in May after the union recommended to its members that they vote against an offer that would have given them a one per cent pay increase in each of the last two years since their collective agreement expired on Oct. 31, 2009.

The union had been looking for four per cent increases in each of three years.

The issue was sent to binding arbitration in June.

Financial implications unknown: health minister

Health Minister Maureen MacDonald said she couldn't say whether her department or the health authority will be forced to shoulder a budgetary hit because of the increases.

"We need to assess now what that means in terms of health expenditures and that work is underway and I will work with the district health authority to look at how we move forward and implement the arbitrator's ruling," she told reporters on Tuesday.

"We're still doing an evaluation of the decision to establish what the financial implications are."

Liberal health critic Leo Glavine said the arbitration decision breaks the government's pattern of one per cent increases offered to other public sector workers.

"Many other workers across the province have bit the bullet to do cost-saving measures and to agree to a one per cent increase over the last two years," he said.

"We know that it's going to affect patients, especially dealing with already very strained wait-time lists. It just, as I said, got a lot more difficult with this contract."

The registered nurses work in a variety of areas including mental health, public health, critical care, transplants, corrections, occupational health, education and rehabilitation. They work at the Camp Hill Veterans' Memorial Building, the Queen Elizabeth II Health Sciences Centre sites, rehabilitation units and the Nova Scotia Hospital's forensic unit.

Premier Darrell Dexter said the government realized there were risks in going to arbitration. He said the alternatives were either to legislate a contract or allow the nurses to strike.

"I would suggest that the first one would be unacceptable to working people in the province and the second one would be unacceptable to everyone in the province," Dexter said.

The premier said the wage increases would undoubtedly add millions of dollars to an already stretched provincial budget.

With files from The Canadian Press