Introduction:
The on-going saga in respect of Employment Regulation Orders (EROs) and Registered Employment Agreements (REAs) appears to be finally coming to a close. Ever since the issue of EROs and REAs came to the forefront in February 2011 when the then Government commissioned a report on their effectiveness, Peninsula Business Services has endeavoured to keep our clients informed on the developments in this area. Since that report we have had the landmark moment of the High Court rendering Joint Labour Committees (JLCs) unconstitutional, which thereby rendered all JLC drafted EROs unconstitutional, with the Government ever since seeking to reintroduce the EROs (and REAs) in a more constitutionally compliant manner.
Background to the New Legislation
Following the High Court ruling, the Minister for Jobs, Enterprise and Innovation entered into an extensive consultation process in which Peninsula were heavily involved, lobbying on behalf of our clients, with the end result of new wage-setting legislation entering into force on 1st August. This may impact upon a significant number of readers as EROs and REAs affect more than 300,000 Irish workers. The important point to note from the outset is that this new legislation is simply the basis through which EROs and REAs will be set up, and has not actually set up any new EROs or REAs. Instead, the Industrial Relations (Amendment) (No. 3) Act, 2012, will set out the new ground rules for the establishment and updating of EROs and REAs.
The reasoning behind the need for new legislation on this matter is twofold:
1. The Landmark High Court case on 7th July 2011 which deemed all existing EROs as unconstitutional; and
2. The EU/ECB/IMF Troika stipulated in Ireland’s bailout programme that these sectoral wage mechanisms had to be reviewed.
The Industrial Relations (Amendment) (No. 3) Act, 2012
The legislation was first published in December 2011, and after debate in the Oireachtas was signed by President Higgins on July 24th. The Act has set out that Joint Labour Committees, can continue to set minimum rates of pay for employees who would fall under the EROs, however this is limited to no more than two hourly rates above the lowest rate of pay.
The Act has also specified that the JLCs cannot deal with Sunday premiums or redundancy payments. This was a contentious issue as previously employees could earn anywhere from time plus one third to time plus one half for working on a Sunday. Currently the Organisation of Working Time Act, 1997 set outs that persons working on a Sunday are entitled to a premium for Sunday hours worked however this exact rate is left at the employers own discretion
EROs had been criticised in the High Court’s ruling on the grounds that no Government designed ‘principles and policies’ existed to guide JLCs in formulating such agreements (indeed this was the primary reason that they were rendered unconstitutional). The new legislation will now require JLCs to take into account eight factors such as the legitimate commercial interests of employers, efficient work practices, levels of employment and wages in comparable sectors, in addition to the levels of employment and wages in our main trading partners.
Registered Employment Agreements
It should be highlighted that REAs were not struck out by the High Court ruling like the JLCs/EROs, and as such remain in force, although any variation will fall under the new legislation. These ‘Variation orders’, which change the minimum pay and conditions in an REA, can be made by the parties as before, but can now also be made by the Labour Court. The Court can also seek to cancel an REA, but only on the grounds that there is a substantial change in the business and/or the parties to the agreement are no longer representative of the sector.
Also, employers who are not party to the REA can also seek a variation of the REA. Employers would need to demonstrate “a substantial adverse change” in the sector and cannot apply for a variation if another such application has been made by any other employer in the last 12 months, or in the first 12 months of a new REA.
Exemptions may be sought by employers from EROs/REAs. These will be approved by the Labour Court, which must be satisfied that agreement has been reached with either a union or other employee representatives. Employers can only get one such exemption every five years and it can be for between three and 24 months, it can be extended once up to a limit of 24 months, only if the original period was less than 24 months. To ensure that workers do not collude with an employer to undercut competitors etc. to get contracts, the Court must be satisfied that the business is in “severe economic difficulty” and it must not distort competition in the sector, in order to qualify for any exemption.
Conclusion
It was always going to be the case of “when” rather than “if” the JLCs/EROs made their return. The Government have now put the framework in place for the formation of future JLCs and the introduction of consequential EROs. It is strongly advised that any employer that was formerly governed by an ERO, or indeed any employer that is still governed by an REA, closely monitor developments in this area as it may have far-reaching consequences for their business and the setting of employee terms and conditions.
