Supreme Court Rule REAs to be Unconstitutional

In breaking news it has been ruled today by the Supreme Court that the system of creating Registered Employment Agreements (REAs) in accordance with the 1946 Industrial Relations Acts is unconstitutional.

While details of the decision are sketchy at this stage as it has not yet been published, it is believed that the REAs have fallen foul of Article 15 of the Irish Constitution which vests the sole and exclusive power to create laws in the Oireachtas and therefore the REAs created by/through the Labour Court were unconstitutional. It had also been argued that the REAs were in contravention of the property rights of employers under Article 40.3 and Article 43 of the Constitution.

Ongoing Challenges to the Industrial Relations Acts

This decision is set against the backdrop of the decision of the High Court in July 2011 that Employment Regulation Orders (EROs) created through the Labour Court, which are somewhat similar to REAs, were also unconstitutional as:

1. Article 15 of the Constitution vests the sole and exclusive power to create laws in the Oireachtas and therefore the EROs created by the Labour Court were unconstitutional;
2. the requirement to provide premium rates of pay and conditions under the JLC was an unwarranted and disproportionate interference with the QFSA members’ property rights under Article 40.3 and Article 43 of the Constitution;
3. the requirement to pay differing rates of pay based on geographic location was also unconstitutional under Articles 40.3 & 43;
4. provisions of the Industrial Relations Acts which permit and regulate the JLC system were incompatible with the State’s obligation to protect property rights under Article 1 of Protocol No. 1 of the European Convention of Human Rights.

This decision had massive ramifications on a number of industries and it is extremely likely that the decision today on REAs from the Supreme Court followed a similar line of reasoning to the 2011 High Court ERO decision, as outlined above. Indeed, this reasoning has long been advocated by Peninsula and in a long submission to the Department of Enterpise in February 2011 Peninsula declared that "there is no democratic accountability in this system as Employment Regulation Orders and Registered Employment Agreements (EROs)/REAs are ratified by an unelected body (i.e. the Labour Court) functioning behind closed doors… It is submitted that this unfettered power of the Labour Court to fix minimum rates of remuneration and employment conditions is an unconstitutional usurpation by the Labour Court of the exclusive power of the Oireachtas to legislate."

Legal Challenge - McGowan & ors -v- The Labour Court, Ireland & The Attorney General

This case was taken to the Supreme Court by a number of persons involved in the electrical contracting industry who believed that the Electrical Contractors REA was unconstitutional as per the above but they also had a number of additional challenges in respect of this specific REA, namely:

1. that it was made by parties who were not representative of the electrical industry taken as a whole;
2. that they themselves were not parties to the REA and therefore should not be bound by it;
3. that it requires pay levels and conditions of work far above those that small contractors like themselves can afford to pay;
4. that it makes it impossible for them to tender for work because their costs are too high, especially in the current economic difficulties; and
5. that they were unaware of the existence of the REA until comparatively recently since it is only recently that it has been enforced against them.

This challenge had previously been rejected by the High Court, primarily because the REA had been in existence for 18 years prior to the challnege being taken.

Government Reaction

The Department of Jobs, Enterprise and Innvoation (DJEI) have been quick to release a statement acknowledging the Supreme Court decision. In their statement the DJEI have outlined that the ruling will only have an impact on new employees within the relevant industries. As a result, all existing employees will still be entitled to the same terms and conditions they currently enjoy and these may only be changed where such changes are agreed by both the employer and employee. The DJEI will study the decision in more detail, seek legal advice, and comment further once this review has been completed.

Effect of the Supreme Court Decision

While the claim was taken specifically against the Electrical Contractors REA, the decision of the Supreme Court decision will impact upon a number of different industries and hundreds of thousands of employees. It is important to note that this Supreme Court decision will impact upon all REAs created in accordance with the 1946 Industrial Relations Acts. This is important as it means that any REA created in accordance with the 2012 Industrial Relations Act will not be effected by this decision and all such REAs will continue to exist. However, we will have to await the published decision before any firm conclusions can be made on the impact on other REAs.

It is important to again reiterate that this will only impact upon new employees within the industries. This is very much consistent with what occurred with the EROs in 2011.

Peninsula will ensure to keep all subscribers updated as this matter develops and as more information becomes known on the details of the Supreme Court decision and the impact of same on both employers and employees alike.