Download Registered Employment Agreements

Registered
Employment
Agreements –
Unconstitutional
Welcome
In 1946 the Industrial Relations Act was passed by the Oireachtas. Amongst
other things that Act laid down procedures for the registration of negotiated
collective agreements governing primarily minimum terms and conditions of
employment for individuals engaged in the relevant sector, and provisions
for the management of trade disputes which might arise. Part III of the Act
set up the Registered Employment Agreement procedure, whilst Part IV set
up a similar procedure for the registration of the recommendations of Joint
Labour Committees which if registered became Employment Regulation
Orders.
In the intervening 65 plus years these agreements have been modified and renegotiated and have been the subject of heated exchanges between the
representatives of industry on the one side, and employees on the other.
Registered Employment Agreements (‘REAs’) and Employment Regulation
Orders (‘EROs’) have determined matters such as rates of pay, hours of
work, and holiday and pension entitlements applicable in the relevant
industry, and have been afforded the full force of law. Failure to comply
with the terms of a these agreements or orders could lead to sanction,
including criminal sanction.
REAs have been a recognisable and readily identifiable aspect of the
construction industry for decades.
On 9th May last the Supreme Court, in the case of McGowan and Others v
The Labour Court [2013] IESC 21 delivered a judgement the effect of which
is to render all registered employment agreements unenforceable, by virtue
of the fact that the procedures under which they have been established are,
and always have been, unconstitutional.
In 2011, in the earlier case of John Grace Fried Chicken Limited and others
v the Catering JLC, the Labour Court and others [2011] 3 IR 211, Mr Justice
Feeney in the High Court declared Part IV of the Industrial Relations Act
1946 (governing the ERO procedure) invalid.
In both cases the Court relied on Article 15.2.1 of the Constitution.
Registered
Employment
Agreements –
Unconstitutional
Continued……
Article 15.2.1 of the Constitution prescribes that it is only the Oireachtas that
may make laws for the state, and it is not permitted under that article to
delegate a law making function to anyone other than itself. The Supreme
Court concluded having reviewed the provisions of Part III of the Industrial
Relations Act 1946 and the system set up under that Part that there had been
“a wholesale grant indeed abdication of law making power to private
persons unidentified and unidentifiable at the time of grant to make law in
respect of a broad and important area of human activity and subject only to
a limited power of veto by a subordinate body”.
Most activities in the construction industry are governed by REAs. These
agreements were negotiated and executed by individual companies and trade
unions which were, under the legislation, considered to be representative of
the different sides of the industries in question. The REAs, once registered,
bound all participants in the relevant industry, whether or not they were
signatories to the concluded and registered REAs, and were to be complied
with on pain of prosecution.
FINDINGS OF UNCONSTITUTIONALITY
The effect of the two judgements is that Parts III and IV of the 1946 Act have
been declared unconstitutional. It must also follow that all EROs in place on
the 7th July 2011 and all REAs in place on 9th May 2013 (the dates of the
decisions) ceased to have statutory effect from those dates.
The Oireachtas responded to the John Grace judgement by passing the
Industrial Relations (Amendment) Act 2012, which sought to cure some of
the issues highlighted in that case, and specifically the lack of Ministerial
oversight of agreements in respect of which registration is proposed. The
2012 Act introduces new criteria and standards to be applied in respect of
any REAs or EROs registered after its commencement. There is some
concern as to whether or not the 2012 Act cures the issues highlighted in
judgements in particular having regard to the fact that the 2012 Act amends
legislation which has now been condemned as unconstitutional. At present
however, and pending clarification on those concerns, it would appear that
REA’s/ERO’s registered after the commencement of the 2012 Act will
comply with the Constitution.
Registered
Employment
Agreements –
Unconstitutional
Continued……
On a practical level the REAs of relevance to the Construction industry all
pre-date the 2012 Act, and all are therefore impacted by the Supreme Court
decision. They are no longer effective.
IMPACT OF THE JUDGEMENTS
It is difficult at this juncture to assess the full effect and impact of these
judgements. A substantial amount of legislation will undoubtedly be
affected by this finding, not least of which is the full spectrum of the
Industrial Relations Acts, 1946 to 2012. Undoubtedly the government will
seek to address the vacuum which has now emerged – as they did urgently in
2012. In the meantime – what happens?
New contracts of employment
Compliance with REAs has been accepted as a fundamental requirement on
the part of both Employers and Employee representatives in the conduct of
negotiations with each other and with third parties for decades. The
provisions in the REAs have comprised the starting point for negotiation of
terms and conditions. That is no longer the case.
Employment negotiations between employers and prospective employees, or
groups of employees, can from now on be conducted in a much more flexible
environment, unconstrained by pre-agreed rates and terms and conditions.
Employers are still, of course, required to comply with the full range of
legislation designed to protect all employees, but the additional constraints
under the REA’s have been removed. At least for the present, and subject to
the broader employment legislation obligations, the market will determine
the going rate for wages, terms and conditions.
Existing contracts of employment
The consensus amongst commentators is that the Judgements do not impact
on existing arrangements as between individual employers and individual
employees. If the terms and conditions set out in the relevant REA or ERO
have been incorporated into a contract of employment either directly or by
reference then the said terms remain part of that contract. They can of course
Registered
Employment
Agreements –
Unconstitutional
Continued……
be amended but only by agreement between the parties to that contract. This
view has not of course been tested, and there is no judicial decision on the
point – as yet.
Historical failure to comply with an REA
Under the legislation, failure to comply with the terms of an REA could have
led to criminal prosecution. It is difficult to see how an individual might be
successfully prosecuted now in connection with an historic failure to comply
with REA terms, when those terms have been declared unenforceable by
virtue of unconstitutionality. There has also been some comment about the
impact of the judgements on pre-existing criminal convictions under these
provisions and same will undoubtedly be the subject of further litigation and
clarification by the Courts in due course.
Contracts with third parties
Most of the standard forms of contract in common use within the
construction industry make reference to terms and conditions of employment
for contractor’s personnel. This is particularly so in the case of the
government forms of contract. These standard conditions usually require
assurance that contractor’s personnel will be afforded, at a minimum, the
terms and conditions as specified in the relevant REAs. Whilst it would be
dangerous to assume that these requirements no longer apply, the declared
invalidity of the relevant comparison document must introduce an element of
doubt on the enforceability of these provisions.
CONCLUSION
a) Parts III and IV of the 1946 Act are unconstitutional.
b) Any REA’s registered under Part III of the 1946 Act should be
considered to be invalid.
c) Any ERO’s registered under Part IV of the 1946 Act should be
considered to be invalid.
d) Any REA’s or ERO’s registered under the 2012 Act should be
considered to be valid (none affecting the construction industry to
date)
Registered
Employment
Agreements –
Unconstitutional
Continued……
e) Existing Contracts of employment should be considered to have
incorporated the terms of the relevant REA’s.
f) New Contracts of employment not subject to REA/ERO constraints.
g) From the date of the judgement, failure to abide by REA terms may
constitute breach of an existing contract of employment, but will not
result in criminal prosecution.
h) The enforceability of a contract obligation to a third party to provide
terms ‘no less favourable’ than REA terms is in some doubt –
because the comparator document is no longer valid.
It is very difficult to assess the full impact and implications of the Supreme
Court decision. As set out above, the government reacted very swiftly to the
previous High Court judgement, and similar urgent action is to be
anticipated. They may seek to introduce further legislation, or may perhaps
seek some way to re-register existing agreements so that they comply with
the 2012 Act procedures. There is little doubt but that the putting in place
and negotiation of completely fresh collective agreements, to replace each of
the REAs now deemed to be ineffective, would be a very substantial and, in
the present climate, very difficult task.
In the meantime, pending further action on the part of the legislature, we
must acknowledge the present position. As of 9th May 2013 all REAs
registered under the 1946 Act (Part III) are ineffective. They are binding on
neither the employers nor the employees engaged in the relevant sector, and
the parties to an employment agreement are free to negotiate the terms of that
agreement without reference to the constraints previously negotiated and
agreed on their behalf by industry representatives and set out in the relevant
REA.
Within the construction industry some will undoubtedly welcome the
freedom to negotiate rates of pay and terms and conditions without the
constraints imposed by the collective agreements. There is however, a price
to be paid.
The quid pro quo for agreeing industry wide rates and terms was the putting
in place of industry wide procedures for dealing with trade disputes and
issues (also dealt with in the REAs). If the former certainty has been
removed, has the latter also disappeared?
Registered
Employment
Agreements –
Unconstitutional
Continued……
The freedom of a contractor to negotiate without constraint with his
workforce means that his competitors are similarly liberated. In the past
when bidding for contracts, most contractors would assume that their
competitors would price on the basis of compliance with the terms of the
REAs. In the absence of a known baseline, tendering strategy will have to be
reviewed.
The judgements referenced in this note might, without further action from the
government, potentially alter the entire industrial relations landscape which
has prevailed in Ireland since the 1940’s. It remains to be seen how this
freedom to negotiate will evolve, and how the affected sectors will react to
that freedom.
SIOBHAN KENNY
July 2013
The information contained in this article is provided for information purposes only, and cannot
be considered to be legal advice.