McGowan v Labour Court and the Unconstitutionality of Registered Employment Agreements

Yesterday’s Supreme Court judgment, which declared the Registered Employment Agreement system unconstitutional, comes as no surprise. McGowan v the Labour Court, available here, has been a protracted and complicated case but the central issue, which was heard in the Supreme Court, on the constitutionality of part III of the Industrial Relations Act 1946, was quite straight forward.

What is a Registered Employment Agreement?

Registered Employment Agreements (REAs) were introduced under the Industrial Relations Act 1946. Part III of the Act allows employment agreements to be registered with the Labour Court, provided that certain criteria are satisfied. Once registered, the agreement becomes legally binding, not only on the parties to the agreement but on every worker and employer in that sector. The agreements are normally negotiated between trade unions and employers, who are supposed to be substantially representative of their particular industry.

REAs are not unlike Employment Regulation Orders (EROs), which were permitted under part IV of the 1946 Act, until they were declared unconstitutional in 2011. EROs are agreements on remuneration and conditions of employment, which were set by Joint Labour Committees and they also applied to all employers and employees in the given sector. Both part III and part IV of the Act also provided that failure to comply with the agreed terms could give rise to a criminal offence punishable by a fine. In the John Grace Fried Chicken case (available here), Feeney J in the High Court decided that the provisions of part IV were repugnant to the Constitution. Thus, given the similarity of both regimes, yesterday’s decision was certainly not unexpected.

Background to the Case

As noted in the Supreme Court judgment, the proceedings were an amalgam of a series of cases all relating to the REA made on 24th September 1990 in relation to the electrical trade. A number of disputes have centred on this particular agreement but the motivation behind this particular case was a proposal made to the Labour Court to vary the REA in order to increase the minimum rate of pay in the sector, along with the fact that a District Court prosecution had been commenced against Camlin Ltd (one of the original parties) for breach of that REA.  Those proceedings were then adjourned while a consultative case stated was prepared for the High Court. An application had been made to the Labour Court in the meantime seeking a cancellation of the REA but when an adjournment was requested in order to await the outcome of the High Court case, the Labour Court refused. An injunction was then sought in judicial review proceedings to restrain any further hearing by the Labour Court but while granted initially, O’Keefe J later lifted the injunction. The Labour Court then proceeded with the hearing and refused the initial application to vary the REA but also refused to cancel the REA. Again, judicial review was sought to challenge this decision. When the issue reached the High Court, the respondents sought clarification on whether the “multitude of applicants named” (over 500) were actually electrical contractors and whether they had been a party to the 1990 REA. The result of this was that the number of named applicants was reduced dramatically.

The Proceedings

In the High Court, the applicants sought to challenge the REA on grounds of invalidity ab initio and for unconstitutionality. They also challenged the decision of the Labour Court in refusing to cancel the REA. Many other issues arose in the High Court, such as alleged errors of law, objective bias and the question of reasonableness in relation to the Labour Court’s decision. Hedigan J dismissed the applicants’ claims but on the question of the constitutionality of the REA, he decided that he could not consider this due to excessive delay and suggested that the case by brought instead by plenary proceedings. This was then appealed to the Supreme Court, which had to consider:

  1. Whether the appellants were entitled to raise the issue;
  2. Whether the Supreme Court was entitled to determine the issue even though it had not been expressly determined in the High Court; and
  3. Whether Part III of the 1946 Act was repugnant to Article 15.2.1 of the Constitution.

O’Donnell J, giving judgment for the Court, quickly decided the first two issues, specifically noting that the issue of constitutionality had been fully argued before the High Court and was not arising here for the first time so therefore the Supreme Court had jurisdiction to consider the point. It was also emphasised that:

 “To decline to hear and determine this issue would mean requiring the parties to incur substantial costs without the issues between the parties being resolved, and exposing the plaintiffs to the possibility of ongoing criminal prosecution and a choice between having to recommence proceedings or submitting themselves to a regime which they consider unconstitutional. Such an outcome would not be consistent with the administration of justice. Accordingly, albeit reluctantly, the court considers it necessary to address the central issue raised in this appeal.”

Article 15.2.1, which states that the Oireachtas is the only body that can make laws in the State, was first considered and it was noted that recent academic work has shown that this Article was originally more concerned with freedom from Westminster rather than with the separation of powers. However, the provision is also “an assertion of a core democratic principle” and is considered a further aspect of the separation of powers principle enshrined in Article 6. The cases of Pigs Marketing Board v Donnelly [1939] IR 413 and Cityview Press v AnCo [1980] I.R. 381 were then considered and the general principles determined in those cases were enunciated. The central point to be taken from those cases is well explained by Casey in his Constitutional Law in Ireland book: “The Oireachtas, it seems, may delegate a power to put flesh on the bones of an Act; but anything going beyond this will be constitutionally suspect.”

The power afforded under the 1946 Act was contrasted with s 21 of the Industrial Training Act 1967, which was under consideration in Cityview. In that case, the power involved was simply the power to fix the amount of a levy. Here, it was noted that the REA could make provision, not merely for remuneration, but for any matter which can be regulated by a contract of employment, ie wages, pensions, working hours, grievance procedures etc. It was pointed out that the Labour Court had no power of consultation or even a power to comment on a proposed Agreement. Furthermore, there was no guidance given to the Labour Court on the concept of representativity, there was no obligation on the Labour Court to consider the interests of those who would be bound by the agreement but who were not parties to it and while the agreement was binding on everyone in the sector, it could only be varied on the application of the original parties. Thus, it could not be said that the REA was simply putting flesh on the bones of the original statute. This was more than a mere “giving effect to principles and policies contained in the statute itself” – this effectively amounted to law making.

It was concluded that: “There can be little doubt therefore that Part III of the 1946 Act raises serious issues of compatibility with Article 15.2.1.” It was clear that law was being made by persons other than the Oireachtas:

“Instead there is a wholesale grant, indeed abdication, of lawmaking power to private persons unidentified and unidentifiable at the time of grant to make law in respect of a broad and important area of human activity and subject only to a limited power of veto by a subordinate body. In effect, Part III allows the parties to an employment agreement to make any law they wish in relation to employment so long as the Labour Court considers them to be substantially representative of workers and employees in the sector, and does not consider the agreement itself to be unduly restrictive of employment or make provision for unduly costly or inefficient methods of work or machinery, and otherwise complies with the formal requirements of s.27. No guidance or instruction is given to the Labour Court as to how the matters of representativity or restriction on employment or inefficiency or costly methods of work, are to be gauged. The process permitted by Part III cannot be said to be merely the filling in of gaps in a scheme already established by the Oireachtas: in truth the Oireachtas which enacted the 1946 Act could have no idea of even those areas which may be subject to regulation in an employment agreement sought to be registered under the Act, and no conception still less control of the possible range of regulation that might be made in respect of each such matter. Nor did the Oireachtas retain any capacity for review either by the Oireachtas or by a member of the Executive responsible to it, of the agreements actually made. Whatever may be thought of a scheme which permits parties to an agreement to clothe that agreement with certain legal consequences including the possibility of enforcement by criminal proceedings, once such an agreement purports to become binding on non-parties pursuant to s.30 of the Act, it passes unmistakably into the field of legislation which by Article 15 is the sole and exclusive preserve of the Oireachtas. The limited and essentially negative limitations imposed by s.27(3)(d) are plainly inadequate to bring the exercise of such power within constitutional limits.”

A declaration of invalidity was then granted.

The Fallout

The Minister for Jobs, Enterprise and Innovation, Richard Bruton released a statement yesterday stating that the Government had just received the judgment and intended to study it and take legal advice before commenting in detail. The statement also clarified that existing contractual rights of workers in sectors covered by REA are unaffected by the ruling. While the Technical, Electrical and Engineering Union has commented that the ruling erodes existing protection for workers, the NECI (National Electrical Contractors Ireland) has welcomed the decision, expressing an expectation that many jobs will now be secured because long term, viable pay and conditions can now be agreed. Others have agreed with this sentiment and have commented that the result will be good for competition. (See here). The long term effects of the decision remain to be seen but much of this complexity could have been avoided if the opportunity had been taken to radically overhaul the REA system in the Industrial Relations (Amendment) Act 2012, which was passed recently in order to reform the ERO system, which had been struck down in the John Grace Fried Chicken case.

 Dr Laura Cahillane

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