The NSW rail union will no longer carry out their planned industrial action to turn Opal card readers off during peak hour from Thursday.

The Rail, Tram and Bus Union (RTBU) said it could not proceed with the move after the NSW government launched legal action against it for damages and lost fare revenue from what they allege is unprotected industrial action.

In an urgent hearing in the Federal Court this afternoon, the union sought to determine whether their action could proceed, but the matter was adjourned until Friday.

The lawyer for Sydney Trains flagged it would take two weeks to get evidence ready.

Hours later, union members voted to pause the Opal gate industrial action while the matter was before the court.

The RTBU move would have seen Opal machines switched off at all gated train stations from 3pm until 7pm on weekdays.

Secretary of the NSW branch Alex Claassens said it was disappointing the plan had to be scrapped at the last minute, and accused the government of the most "vicious" attack on workers ever seen in Australia.

"If the government continues to stop us from giving commuters free fares, the only actions available to us are things like strike action," he said.

"We don't want to go down that route, but it seems the government wants to force us there. Why the government would want to do that to commuters is beyond me."

The RTBU had claimed the action would give commuters "free travel indefinitely" but the government said it could result in passengers being charged hefty default fares if they tap on and couldn't tap off.

The union maintains the now-paused action is protected, as members voted in favour of it, and notice was given to the Fair Work Commission.

But the government argues it's illegal, as it hinges on union members pressing emergency buttons to keep Opal gates open, which is outside of employees' day-to-day duties. 

The legal stoush is the latest in a long-running dispute between the RTBU and the state government, which has significantly impacted rail commuters for most of the year.

The union says it has had no choice but to take action to secure better wages and conditions for staff, and to force the government to make safety changes to the New Intercity Fleet (NIF). 

The $2.8 billion fleet has been sitting in storage since 2020 as RTBU members refuse to operate the trains due to concerns about guards not being able to properly monitor passengers. 

Transport Minister David Elliott said the enterprise agreement the government had offered the union was one of the most generous the state had ever seen, and accused the RTBU of playing a "political game". 

He said the government was confident they would be successful in court, and the cost of pursuing legal action would be less than what would be lost in forfeited fares. 

Earlier this year the government agreed to make modifications worth hundreds of millions of dollars to the new trains. 

But Mr Elliott maintains that deed will be torn up if the union takes any further industrial action which impacts commuters.