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JOHN CURTIN explains the repercussions of the McGowan Judgement as regards registered employment agreements.

On May 9 last, the Supreme Court held that the mechanism utilised by the State to enforce registered agreements was unconstitutional.

Industrial relations and the law
The mechanism under discussion was the 1946 Industrial Relations Act – specifically part III. The Act provided for a scenario where, in the event that parties representing a sector (usually trade unions and employer bodies) made an agreement relating to conditions of employment, that agreement would be registered with the Labour Court and would be binding upon the whole of that sector. This agreement would become known as a registered employment agreement (REA). It was sufficient for the parties to be substantially representative of the sector, rather than the whole sector.

The Act facilitated any matter that can be regulated by a contract of employment, e.g., wages, pensions, working hours, holiday pay, travel time, etc., becoming law. The Act did not in any way guide the Labour Court as to how any agreement should be structured. The Court had no power to comment on any agreement, nor indeed could it refuse to register an agreement that met the very basic criteria set out in the Act. Article 15.2.1 of the Constitution provides: “The sole and exclusive power of making laws for the State is hereby vested in the Oireachtas: no other legislative authority has power to make laws for the State”.

It is quite common for Acts of the Oireachtas to grant individual ministers the power to introduce regulations. However, it is recognised that those powers must only extend to “a mere giving effect to principles and policies, which are contained in the statute itself” [Cityview Press v AnCo [1980] I.R. 381]. The question put before the Supreme Court in the recent case was: did the 1946 Act contravene the Constitution? In effect, did the Act cause The Labour Court to be elevated to the position of “law maker”? Ultimately, the Supreme Court held that it was clear that law was being made by persons other than the Oireachtas. A declaration of invalidity was then granted to the plaintiff.

Outcome of the case
As a result of the Supreme Court finding, the REA is no longer binding upon the construction industry as a whole. However, there are several matters that readers should be aware of:

  • the Supreme Court decision does not have retrospective effect; therefore, any existing contract of employment that relies upon the terms of the REA is not invalid;
  • further, employment law prevents employers from purporting to lay staff off and then rehire new staff on less favourable terms; and,
  • if any company has executed a contract and, as a condition of that contract has, in addition to a statutory obligation, entered into a contractual obligation to comply with the terms of the REA, they are bound by that contractual obligation.

Delivering stability
It is this writer’s opinion that the REA has delivered industrial relations stability, and further that this is recognised and welcomed by trade unions, the Construction Industry Federation (CIF) and, most importantly, sophisticated clients.

In the absence of any REA there is a real risk that any “race to the bottom” would have a destabilising effect upon the industry, and would cause an increase in trade union activity, leading to local bargaining, uncertainty and ultimately to strike action.

The largest engineering union in the country (the TEEU) has already laid down a marker when they issued their press release: “There are established rates of pay and conditions of employment in the construction and electrical contracting industry, and any employer who attempts to undermine these standards will be met with the wrath of the TEEU”.

If the Government wishes to attract foreign direct investment (FDI), they must present the construction industry as a reliable and stable industry. I believe that this is recognised by the Government and the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, as he has stated that he intends to bring forward legislation that will introduce “a revised framework to deal with these matters”.

So while it is apparent that the Government will support stability, at the time of writing no proposal exists in the public domain and it would now appear that any attempt to re-establish a framework for registered agreements will not be in place until the autumn at the earliest.

Implications for the industry
In the current vacuum, it is incumbent upon us as professionals to guide our clients with their interests in mind. Certainly the guidance documents that exist for public contracting authorities have not changed, and there is no instruction from the GCCC to depart from them. The CIF has not advised its members to depart from the REA. This writer is aware of several FDI clients who have redoubled their efforts to ensure that labour on site is employed in accordance with the REA.

The general consensus would appear to be that stability is in the best interests of the wider industry.

Any professional who advises their client to depart from the REA should consider the matter very carefully. It is questionable, in circumstances where main contractors are tendering at levels that are already below cost, that any reduction in labour costs will have any further downward pressure on tender levels. There will most likely be no benefit to clients, and having a contractor on site who does not comply with the terms of the REA may expose the client to delays, “the wrath of the TEEU” and, indeed, given the anticipated introduction of a revised framework, increased costs by reason of legislative enactment.

Members are also referred to the recent article regarding REAs in the August 6 issue of the Society’s Construction and Property News.

JohnCurtin(duo)

John Curtin
John is a Director of PJ Hegarty & Sons,
and a Past President of the Society
of Chartered Surveyors Ireland.