Supreme Court declares Registered Employment Agreements Unconstitutional – How does this impact your business?

The Supreme Court recently declared that the Registered Employment Agreement(“REA”) system was unconstitutional in McGowan & Ors -v- Labour Court Ireland & Anor [2013] IESC  21 (9 May 2013) (“the Supreme Court Case”). This article will look at what an REA is, the Supreme Court decision and the consequences of the decision for employers.

What is an REA?

Part III of the 1946 Industrial Relations Act (“the 1946 Act”) provided for registration with the Labour Court of employment agreements entered into between trade unions and employers in sectors/groups relating to remuneration and terms of employment.  These agreements are known as Registered Employment Agreements (“REAs”).  Once an REA is registered it is legally binding not only on the parties to the REA but on others in the relevant industry/group whether or not they were party to the agreement or represented in relation to the REA.  A breach of an REA is enforceable under civil and criminal law.

REAs are similar to Employment Regulation Orders (“ERO”). EROs also set minimum terms and conditions of employment for workers engaged in certain industries and geographic locations but they are derived from a Joint Labour Committee (“JLC”).  EROs were also found be to unconstitutional two years ago in the case of John Grace Fried Chicken Ltd & Others -v- The Catering Joint Labour Committee & Others [2011] IEHC 27 .  In that case the High Court declared that an ERO in respect of the catering industry was unconstitutional.  Following that decision the Government enacted the Industrial Relations (Amendment) Act 2012 (“2012 Act”) in order to deal with the issues in the JLC/ERO system.  That Act also introduced changes to the REA system.  However the Supreme Court case was in train at the time of the enactment of that legislation and related to an REA which was in force under the 1946 Act.  Accordingly the Supreme Court case related to the 1946 Act and not the 2012 Act.

Background to the Supreme Court Case

This case was an appeal from a High Court decision concerning a specific REA that set pay and terms of employment for electricians in the construction industry.

The Supreme Court was asked to consider inter alia whether the part of the 1946 Act that provided for the creation of REAs contravened Article 15.2.1 of the Constitution, by delegating the making, variation and cancellation of REAs to the Labour Court and the parties to those agreements.  Article 15.2.1 of the Constitution provides that the Oireachtas has the sole and exclusive power to make laws in the State.

The Decision

On an analysis of s.27 of the 1946 Act, which deals with the procedure for registration of REAs by the Labour Court, the Court found that there were insufficient limitations placed on the power granted to parties creating REAs and submitting them for registration.

The Court noted that the relevant part of the legislation amounted to ‘a wholesale grant, indeed abdication, of lawmaking 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’.  Part III allows parties to make ‘any law they wish’ in relation to employment, provided that the Labour Court considers them to be substantially representative of the sector and they comply the formal requirements of the 1946 Act.  The Supreme Court found that once registered an REA “passes unmistakeably into the field of legislation which by Article 15 is the sole and exclusive preserve of the Oireachtas’. Accordingly Part III of the Industrial Relations Act of 1946 was declared unconstitutional.

Consequences of the Decision

There are approximately 70 REAs currently registered with the Labour Court.  They predominantly cover 6 industries namely, the Construction Industry, Contract Cleaning Industry, Drapery Footware and Allied Trades, Electricial Contracting Industry, Overhead Powerline Contractors and the Printing Industry.

Following the decision the Minister for Jobs, Enterprise and Innovation, Richard Bruton, issued a statement saying that the Government wishes to take legal advice on the decision before commenting on it.  However he went on to state:

“Existing contractual rights of workers in sectors covered by Registered Employment Agreement are unaffected by today’s ruling.  Contractual rights can be altered only by agreement between the parties involved.”

Typically employment contracts can only be varied with the consent of the employee concerned.  However the impact of this decision on existing contracts will depend on the wording of the employment contract and the manner in which the REA was incorporated into a contract of employment.  Accordingly it is possible that some existing contracts may be affected by the Supreme Court ruling, specific legal advice should be taken in this regard.  However employers in the industries affected by this decision will not be bound by the terms of the REAs in respect of new recruits . Although they will of course be bound by minimum terms of employment set out in other employment law legislation.  Furthermore given that the relevant aspects of the legislation were declared unconstitutional it is difficult to see how pending criminal convictions in respect of breaching REAs could be pursued.

See related article in respect of the constitutional challenge on the ERO system:-

High Court Declares Wage Setting Mechanism Unconstitutional

For further information on this article or any employment law queries please contact Laura Graham, Senior Associate, at lgraham@reddycharlton.ie