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Supreme Court Rules on Sectoral Employment Orders

Introduction

Sectoral Employment Orders (SEOs), are legally binding orders through which the Labour Court together with the Minister of Enterprise, Trade and Employment create minimum rates of pay and pension contributions across specific sectors of the economy. In June 2020 the High Court ruled that the legislation underpinning these SEOs, Part 3 of the Industrial Relations Acts 2015 (the “2015 Act”), was unconstitutional.

This legislation had at the time of the ruling had been in effect for just under 5 years. The state appealed the decision to the Supreme Court almost immediately and the High Court suspended its order rendering the 2015 unconstitutional, until this appeal concluded.

There had been significant uncertainty as to whether the SEO system would survive this challenge, particularly as the system which had existed prior to 2015 had also been struck down as unconstitutional.

Almost a year to the day of the High Court ruling the Supreme Court deemed the 2015 Act constitutional but at the same time struck down the SEO governing electricians pay and pensions as unlawful.

High Court Ruling

The High Court had found that the Oireachtas had delegated too much responsibility to the Minister for Enterprise, Trade and Employment and Labour Court in passing the 2015 Act.

Under the 2015 Act the Minister could create a legally enforceable right to minimum pay and other conditions solely on the back of a recommendation from the Labour Court. It was argued that this violated Article 15.2.1 of the Constitution which vests sole and exclusive legislative power in the Oireachtas.

Aside from this wider constitutional issue the High Court had also ruled that the SEO being challenged before the Court, which governed minimum pay and pension terms for electricians, was not created in compliance with the 2015 Act. The main reason for this was that the Labour Court had failed to properly outline the basis of their recommendations to the Minister and deal with the objections of the NECI which represented smaller electoral contractors.

There was a further issue that the SEO required that electricians be enrolled in a pension scheme, however the SEO failed to set out the terms of this pension scheme. Instead it stated that the terms must be not less favourable than the Construction Workers Pension Scheme. The High Court considered this a further unlawful delegation of power, from the Labour Court to the trustees of the Construction Workers Pension Scheme.

Supreme Court Ruling on the Constitutionality of the 2015 Act.

The Supreme Court in making its ruling restated the existing law on unconstitutional delegation of power but came to the view that the High Court had misinterpreted this.

The Supreme Court has long recognised that the Oireachtas cannot delegate its legislative power to other public bodies and government ministers. However, as part of the proper functioning of the State, the Oireachtas can delegate decisions regarding the detail of regulations and other secondary legislation to public bodies and ministers, particularly where these decisions require specific expertise.

This delegation by the Oireachtas can only occur where the Oireachtas also sets out a framework of policies, principles and parameters within which any such decisions must be made.

The Supreme Court held that the 2015 Act contained sufficient policies and principles which the Labour Court was required to be guided by when considering an application for an SEO. As such they found that the Labour Court and the Minister were not exercising legislative powers in making an SEO.

When making an SEO under the 2015 Act they are instead following legislation enacted by the Oireachtas and are required to remain within the framework provided by this legislation in any decision they come to. On this basis the Supreme Court held that the 2015 Act itself is constitutional.

Supreme Court Ruling on the Electrician’s SEO

Having held that the 2015 Act was constitutional the Supreme Court also had to decide whether the SEO governing the terms and conditions of electricians complied with the 2015 Act.

The organisation of small electrician firms, the NECI, challenged the SEO arguing that the Labour Court had failed to give appropriate reasons for its recommendation and had failed to take into account the NECI’s objections to the SEO.

The Supreme Court in its judgement outlined that a degree of deference should be given to the Labour Court on this front. McMenamin J, for the Court, referred to the pressure under which industrial relations negotiations and recommendations are carried out and the real world possibility of industrial action in a vital sector of the economy if these processes fail. However, the Supreme Court concluded that regardless of the pressures involved that the Labour Court’s recommendations must be based on adequate reasons outlined in its report to the Minister.

The NECI had raised issues regarding the definition of the sector the SEO was to cover, arguing that small electoral contractors operated in a different sector of the economy than the larger firms. It also argued the extent to which either the Union or Employer groups involved with the process had been substantially representative within the sector. The Supreme Court ultimately ruled that the 2015 Act required the Labour Court to respond to these issues when making its recommendation and that it had failed to do so.

The Supreme Court similarly followed the ruling of the High Court regarding pension scheme outlined in the electrician’s SEO. The Supreme Court ruled that if the Labour Court was recommending to the Minister that a compulsory pension scheme be established in the SEO then the Labour Court was required to set out a minimum daily rate of contribution to the scheme by workers and employers. The Labour Court had failed to do this also, instead they recommended that the terms of an already established Construction Workers pension scheme were to be followed going forward.

Conclusion

This judgement has been important in clarifying the requirements on the Labour Court in its recommendations to the Minister on an SEO in a sector of the economy.

The constitutional aspects of the judgement are timely and will no doubt influence the work of the recently established government review of collective bargaining in Ireland. This review will consider expanding the rights of unions to create legally enforceable conditions in individual companies as well as whole sectors of the economy. Up until now sectoral collective bargaining systems have generally affected only the trades and certain low pay sectors such as contract cleaning and security. These regimes could be expanded significantly to cover new sectors of the economy if further legislation is recommended by this review.   

Reference – Náisiúnta Leictreach Contraitheoir Eireann (NECI) -v- The Labour Court & ors

Authors – David Murphy and Anne O’Connell

1st July 2021

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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