Good News for Employers in the JLC System

In a landmark case (John Grace Fried Chicken Limited, John Grace and Quick Service Food Alliance Limited -v-The Catering Joint Labour Committee, the Labour Court, Ireland and the Attorney General - High Court 2008 No. 10663P), Mr. Justice Feeney of the High Court has ruled that the Joint Labour Committees (“JLCs”) system of setting minimum rates of pay and conditions of employment is unconstitutional.

On foot of the ruling, the Minister announced yesterday a major overhaul of the JLC and registered employment agreement wage settling mechanisms.

Whilst the ruling and the announced overhaul is welcomed by employers within the JLC system, potentially hundreds of thousands of employees are affected and the issues require careful consideration by employers. We consider some of the potential effects of the ruling and the Minister’s announcement for employers below.

Background to the JLC System

JLCs were established pursuant to the Industrial Relations Act 1946 to determine minimum rates of pay and conditions of employment for employees in particular sectors by way of employment regulation orders (“EROs”). The JLC system was intended to protect vulnerable employees from exploitation in an era when there was scant legislative protection for employees. However, a wide range of employment legislation was subsequently enacted entitling employees to statutory minimum rates of pay and terms and conditions of employment.

EROs impose legally binding obligations on an employer to pay the wages and provide the conditions of employment specified in the relevant ERO. Breach of such obligations is a criminal offence. EROs typically impose higher minimum rates of pay than those set out in the National Minimum Wage Act 2000. Furthermore, EROs often impose more favourable terms and conditions of employment than the national statutory minimum conferred by relevant employment legislation.

Challenge to the Catering ERO

Members of the Quick Service Food Alliance (the "Plaintiffs") challenged the constitutionality of certain provisions of the Industrial Relations Act 1946 and Industrial Relations Act 1990 (the “Industrial Relations Legislation“) and the validity of Employment Regulation Order (S.I.142 of 2008) (the “Catering ERO”). The Catering ERO provided for minimum rates of pay and regulated the statutory conditions of employment for persons employed within the catering industry in a specific geographical area.

The Plaintiffs successfully challenged the rights of the Labour Court and the Catering JLC to set minimum rates of pay conditions of employment for the catering industry.

The Plaintiffs argued that the relevant provisions of the industrial relations legislation did not contain sufficient principles and policies to guide the Catering JLC and the Labour Court in deciding the rate of pay or conditions to be included in a binding ERO. Accordingly, the legally binding rates of pay and conditions of employment in the Catering ERO were found to have been determined in an arbitrary and illegal manner. Mr. Justice Feeney ruled that the JLC system is unconstitutional and declared that the Catering ERO is unlawful.

Questions Likely to Arise

Due to the uncertainty surrounding EROs and potentially registered employment agreements (“REAs”) pending the announced overhaul of the system we set out below the answers to some questions which employers may have.

What are the effects of the High Court ruling?

The full implications of the ruling are as yet unclear. However, it has fast tracked the Minister’s plans to overhaul the entire system.

What will the overhaul of the system involve?

The measures announced yesterday include the following:

• A reduction in the number of JLCs from 13 to 6;
• JLCs will have the power to set only a basic adult rate of pay and two higher increments based on longer service (currently JLCs set over 300 different rates of pay);
• JLCs will not set Sunday premium rates as such rates will be dealt with under the Organisation of Working Time Act, 1997 (as amended);
• Employers will be permitted to derogate from EROs and JLCs in cases of financial difficulty;

What is the legal status of the Catering ERO?

The Catering ERO is now invalid and ceases to have effect since 7 July 2011.

What is the position for existing employees covered by the Catering JLC?

It will be difficult to change any existing rates of pay and conditions of employment. An employer considering making changes to the rates of pay or conditions of employment or conditions of employment should seek appropriate legal advice before taking any action.

What is the position for newly hired employees in a sector or geographical area previously covered by the Catering JLC?

Employers affected by the Catering JLC seeking to hire new employees will need to ensure that they do not inadvertently breach relevant employment legislation which establishes minimum conditions of employment – e.g. national minimum wage rates and payment of a premium for Sunday working.

What is the position regarding all other EROs?

The position regarding all other EROs is unclear at present pending the introduction of legislation to implement the overhaul announced yesterday. Whilst EROs may cease to have statutory effect, employers operating within the JLC system ought to seek legal advice in the interim to ensure that they do not inadvertently breach relevant employment legislation in respect of both current employees and newly hired employees.

Will NERA continue to carry out inspections to check for compliance with EROs?

NERA has indicated that it will not enforce the minimum pay and conditions of employment prescribed in EROs in force at the time of the High Court ruling. However, NERA inspections will continue to be carried out in sectors covered by EROs to check for compliance with applicable employment legislation.

Whilst the High Court ruling and the system overhaul announcement will be welcomed by employers seeking lower rates of pay and national standardised conditions of employment, a number of potentially complex issues arise. Pending reform of the JLC system, employers should seek legal advice before implementing changes to rates of pay or conditions of employment for existing employees or hiring new employees so that relevant legal issues can be managed.