Important Update for Employers Previously Governed by an ERO or REA

In July 2011 Peninsula ensured to keep all of our clients posted on the High Court’s decision to render the Joint Labour Committee (JLC) system of Employment Regulation Orders (ERO) unconstitutional. Since then Peninsula have vouched to keep all of our clients up to date on Government proposals to amend the JLC system in addition to the proposed changes to Registered Employment Agreements (REA) process. The Government is seeking to bring back the JLC system in a manner that is compliant with the Irish Constitution through the Industrial Relations (Amendment) Bill, 2011, and in doing so they are aiming to cure any perceived constitutional defects that may currently exist in the REA system. In this BLE update we will endeavour to provide a summary of the over-arching changes to the system in addition to updating you on the most recent amendments to the Amendment Bill.

General Amendments to EROs/REAs

1. Reduction in the Number of JLC Rates: The number of JLCs will be reduced from 13 to 6, through a process of abolition or amalgamation;
2. Streamlined Rates of Pay: JLCs will have the power to set only a basic adult rate and two higher increments to reflect longer periods of service.
   1. JLCs previously set over 300 different wage rates.
   2. Lower rates may still be paid to employees aged under 18 years of age, first time job entrants, and employees undergoing training. These rates will be a fixed percentages of the adult basic rate
   3. All other rates of pay (e.g. for experienced workers, particularly skillful workers) would be agreed at firm level, based on normal labour market rates and dynamics;
3. Sunday Premiums: JLCs will no longer set Sunday premium rates or other conditions of employment already provided for under existing legislation. However, the special position of Sunday working will still be recognised and a new Code of Practice on Sunday Working will be drafted by the Labour Relations Commission to allow for certainty amongst employers and employees as to the correct interpretation and calculation of Sunday Premiums;
4. Inability to Pay Clause: Companies will be able to derogate from EROs in cases of financial difficulty. This is known as an “inability to pay” clause and it already exists in the National Minimum Wage Act, 2000 (NMW);
5. Criteria to be Considered when Setting Rates: When setting rates or determining the validity of any variation, JLCs will have to take into account robust principles and policies outlined by the Oireachtas and this will take into account factors such as unemployment rates, competitiveness and wage trends in Ireland and in addition to those of our major trading partners.
6. JLC Decision-Making Process: The JLC decision-making process will need to be modified and strengthened such that decisions and amendments in respect of EROs must be taken in view of Labour Court recommendations and precedent.
7. Regular Review Process: Government proposals have outlined that there must be an ongoing review process in respect to the appropriateness of ERO terms and conditions. Such reviews must be comprehensive and will have to occur at regular intervals. This requirement will fall in line with the principles and policies requirements outlined above at point 5).
8. Reducing Red-Tape: Record-keeping requirements for employers will be reduced;

Recent Amendments Introduced to theIndustrial Relations (Amendment) Bill, 2011

As discussed, recent amendments to the Bill have just been published, the most notable of which is that employers or workers who were not involved in the drafting of the agreement, but still covered by the REA, to apply to the labour court to vary the REA’s terms. In order to be heard the applicant must satisfy the Labour Court that there has been "substantial change in the economic circumstances" of the sector to which the REA applies. There is, however, time restrictions on such hearings, and there can be no applications in the first 12 months of an REA, or within 12 months of any other such application being refused by the Labour Court. The Department of Jobs, Enterprise and Innovation have stated the main rationale behind this amendment is to avoid a scenario like we encountered last year with the JLCs and offer a defined route for people who were not a party to the REA to apply for a variation of the agreement.

A further exemption made to the Bill include an amendment in relation to the setting of the wage rates. Previously, the Bill highlighted that the Labour Court would take into account “the general level of wages in comparable sectors, including where the sector is in competition with enterprises outside the State, the general level of wages in such comparable sectors in other relevant jurisdictions”.

Now the changed wording reads that “where enterprises in the sector in question are in competition with enterprises in another Member State, the general level of wages in the enterprises in that other Member State taking into account the cost of living in the Member State concerned”. This narrowed definition has been considered at the behest of Trade Unions in order to not only take the actual wage rates into account but to also the cost of living in the other EU countries.

The amended Bill also included an amendment to tackle abuse of the “Inability to Pay” clause, which allowed the Labour Court to grant an exemption from the REA or ERO to an employer if the majority of their workers had agreed to it. The concern in this instance was that some employers could conspire with their employees to agree an exemption, thereby lowering wages, in order to undercut their competition in the market through having lower staffing costs. This would lead to a situation where one employer by virtue of this exemption could effectively monopolise a market due to a lower cost base, and as such jeopardise employment in the sector. The new amendment requires that the Labour Court must be satisfied that the employer’s business is experiencing “severe economic difficulties” in order to obtain an exemption, even if the majority of employees agree.

An additional amendment is one which has been suggested several months ago by the EU/ECB/IMP Troika, who in light of bailouts etc. have taken a special interest in this Bill. The Troika had suggested that any employer who was in receipt of an exemption from the REA/ERO could appeal to receive an extension to the exemption subject to a maximum of 24 months. Currently the Bill llows exemptions for between three and 24 months for employers, to the impact of this is that an employer cannot be in receipt of an exemption(s) for a total of more than 24 months. Under the Troika amendment, if an employer receives an exemption for less than 12 months they can get it renewed to a time not exceeding 24 months.

Conclusion

Agreement may be reached relatively soon on the Bill, and the amendments highlighted above will have a significant impact on Employment Law in Ireland. Some of the amendments are welcome changes that will benefit employers (exemptions and inability to pay), while others seem to be more employee focused (wage rates in other countries set against cost of living). As always, we will endeavour to keep you updated of any changes that may occur in the interim on this Bill. In the meantime, if you have any queries in respect of EROs or REAs then please phone the 24 Hour Advice Service on 01 8555050 and one of our experienced advisors will be happy to assist.