Breda O’Malley and Mary Kelleher: High Court strikes down wage setting in sectoral employment orders
Breda O’Malley and Mary Kelleher of Hayes solicitors discuss the implications of a recent High Court ruling on the setting of certain minimum pay and conditions for workers in a number economic sectors.
The High Court has struck down legislation providing for the setting of certain minimum pay and conditions for a number of workers in various economic sectors, which are traditionally covered by mandatory collective arrangements.
Members of the National Electrical Contractors of Ireland (NECI) brought a challenge to the High Court claiming a sectoral employment order (SEO), issued by the Government last year setting out pay rates, pension and sick pay entitlements in the electrical industry, breached their rights and was unconstitutional.
Implication of this Decision for the Economic Sector
This ruling of the High Court, declaring provisions of the Industrial Relations (Amendment) Act 2015 to be unconstitutional, thereby renders Sectoral Employment Orders invalid.
The defining characteristic of an SEO is that all employers within the economic sector concerned are required to apply the prescribed terms and conditions to their employees.
This could have very serious implications for thousands of workers in various employment sectors, particularly lower paid employees who will now only have a legal entitlement to the National Minimum Wage and other basic statutory protections. This decision will be welcome for many employers in the electrical contracting sector given the extent of the employment terms prescribed in the SEO. However, a note of caution for employers in terms of the non application of the SEO as a result of the decision, as this may be the subject of an appeal. As such, we recommend employers to keep a close eye on developments and to take advice as may be necessary.
The case arose when the claimant, NECI, brought a challenge over a 2019 Labour Court recommendation to the Minister for Business, Enterprise and Innovation to issue an SEO for the electrical contracting sector.
The SEO had been made pursuant to the Industrial Relations (Amendment) Act 2015. The 2015 Act had been introduced in the aftermath of the judgment of the Supreme Court in McGowan v. Labour Court  IESC 21;  3 I.R. 718. This judgment held that the provision made for “registered employment agreements” under the 1946 Act was unconstitutional. NECI claimed that said part of the 2015 Act replaced the old “registered employment agreements” with sectoral employment orders.
The SEO arose following an application from trade unions and associations representing electricians providing for (i) minimum rates of pay; (ii) the requirements for a pension scheme (including a minimum daily rate of contribution to the scheme by an employee and an employer respectively); and (iii) the requirements for a sick pay scheme.
The NECI claimed the SEO provided that an employer who employs an electrician at a rate of pay less than that prescribed, or who fails to make the prescribed contribution to a pension scheme, may ultimately find themselves subject to criminal prosecution.
The NECI sought a declaration that the Labour Court breached its duties, including in relation to transparency in its decisions, before making the recommendation to the Minister, by not providing clear reasons for its decisions.
The claims were denied by the Labour Court, the Minister, Ireland and the Attorney General.
High Court judgment
Mr Justice Garrett Simons of the High Court handed down his decision on Tuesday, 23 June 2020 in National Electrical Contractors Ireland (NECI) v The Labour Court, The Minister for Business Enterprise and Innovation & the Attorney General. The judgment can be viewed here.
In his judgment, Mr Justice Simons was critical of both the Labour Court, and the Minister for Business, Enterprise and Innovation and concluded that the Minister acted beyond her powers in purporting to make the SEO.
He found that a statutory report which the Labour Court was obliged to submit to the Minister prior to authorisation of an SEO was deficient in two significant respects.
Mr Justice Simons held that the report failed “to record even the conclusions of the Labour Court on crucial matters, still less does the report state a rationale for those conclusions.
Secondly, the report fails to set out a fair and accurate summary of the submissions made by those interested parties who opposed the making of a sectoral employment order, and does not engage with the issues raised in those submissions.”
He further stated that the Labour Court failed to have regard to the claimant’s detailed submissions on several important questions including:-
- whether the trade union and employers’ organisations complied with the “substantially representative” requirement;
- the definition of the “economic sector”;
- the implications for small to medium sized electrical contractors; and
- the potential anti-competitive effect of fixing a minimum wage for electricians.
It is a condition precedent to the Minister’s jurisdiction to make an SEO that he be satisfied that the Labour Court had complied with the requirements of the Industrial Relations (Amendment) Act 2015. Mr Justice Simons held the Minister erred in law in concluding, on the basis of the report and recommendation submitted to him, that the Labour Court had complied with these provisions.
He further stated that neither the procedures leading up to, nor the content of, the recommended SEO complied with the 2015 Act.
Mr Justice Simons stated that a decision to impose mandatory minimum terms and conditions of employment across an entire economic sector necessitates making difficult policy choices. The fixing of high rates of pay might well be welcomed by workers, but may limit competition, and thus adversely affect consumers.
It was held that the parent legislation, the Industrial Relations (Amendment) Act 2015, involves a standard-less delegation of law making to the Minister, and is, therefore, unconstitutional.