Landmark Ruling on Sectoral Employment Orders

by Lynda Nyhan, Associate on the Employment & Benefits Team, Mason Hayes & Curran

On 23 June 2020, the High Court struck down legislation providing for the setting of certain minimum pay, sick pay and pension contributions for workers in the Electrical Sector.

The High Court declared that the provisions of the Industrial Relations (Amendment) Act 2015 (the 2015 Act) governing the framework under which Sectoral Employment Orders (SEOs) are made, to be unconstitutional, and set aside the SEO for the Electrical Contracting Sector.

This decision is likely to have significant consequences for thousands of employees whose sectors are governed by SEOs, which currently include the Electrical, Construction and Mechanical Engineering Building Services Contracting sectors.

Sectoral Employment Orders
SEOs set the minimum rates of pay, sick pay and pension contributions in specified sectors. Employers found to be in breach of the terms of an SEO could face criminal prosecution.

In very general terms, the 2015 Act permits trade unions and employer representatives, in certain circumstances, to request the Labour Court to examine terms and conditions of employment for employees in certain economic sectors.

The Labour Court’s report setting out its recommendations are submitted to the Minister for Business, Enterprise and Innovation. The Minister can either accept or refuse the recommendation. When the Minister signs an SEO, the provisions of the Labour Court recommendation are placed on a statutory basis.

Sectoral Employment Order (Electrical Contracting Sector) 2019

Members of the National Electrical Contractors of Ireland (NECI) successfully challenged the validity of the Sectoral Employment Order (Electrical Contracting Sector) 2019 and argued, amongst other things, that requiring all employers in the electrical contracting sector to apply the SEO terms and conditions to their employees interfered with competition, and was unfair to smaller electrical contractors.

The Decision
The High Court held that the Minister acted beyond her powers in purporting to make the SEO. In setting aside the SEO, Mr Justice Simons stated that “neither the procedures leading up to, nor the content of, the sectoral employment order complied with the requirements of Chapter 3 of the Industrial Relations (Amendment) Act 2015”.

The Court further held that Chapter 3 of the 2015 Act was unconstitutional, as it delegated legislative authority on important matters of policy to the Minister, and indirectly to the Labour Court, without defined boundaries.

The Court outlined that the Labour Court report “must demonstrate that the Labour Court has addressed its mind to the mandatory statutory considerations” and “provide a fair and accurate summary of the submissions made by the interested parties, and some statement of the rationale for not accepting those submissions”.

In particular, the Court found that the Labour Court report was deficient in two respects:

  1. it failed to record the Labour Court’s conclusions on crucial matters or state a rationale for those conclusions; and
  1. it failed to set out a proper summary of submissions made by interested parties who opposed the making of an SEO and the report did not engage with such submissions.

It is a condition precedent to the Minister’s jurisdiction to make an SEO that the Minister be satisfied that the Labour Court had complied with the requirements of the  2015 Act. Mr Justice Simons held the Minister erred in law in concluding, on the basis of its report and recommendations that the Labour Court had complied with these provisions.

The Court went on to outline that under the 2015 Act, the Minister is constrained by the Labour Court’s recommendation. The Minister could not change the terms of the recommendation, but only accept the recommendation, or reject it. The Court noted that it did not seem that the Minister could carry out an examination of the economic sector or review the merits of the Labour Court recommendation, which meant that broad policy choices had been delegated to the Labour Court.

The judgment has far reaching consequences for tens of thousands of workers across many sectors in Ireland.

The Minister for Enterprise, Trade and Employment confirmed to the Dáil that the government was appealing the decision to the Supreme Court. In a judgment made on 31 July 2020, Justice Simons suspended the effect of the declaration of unconstitutionality for a period of six months, pending a Supreme Court appeal, which means that the relevant legislation will stay in place until the appeal has been heard by the Supreme Court. The recent judgment confirmed that the Sectoral Employment Order (Electrical Contracting Sector) 2019 is to be set aside with immediate effect.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

About the author

Lynda is an Associate on the Employment & Benefits Team and advises on both contentious and advisory aspects of the employment relationship. Lynda regularly reviews company policies and procedures and advises on disciplinary and grievance matters, redundancy, dismissals and discrimination matters. She also has particular experience advising on managing workplace absence and performance issues. Lynda regularly represents clients before the Workplace Relations Commission and the Civil Courts on a broad range of employment issues.