Sectoral Employment Orders Ruled Legally InvalidPosted in : Labour & Superior Court Case Law Review Panel on 1 July 2020
Decision Number:  IEHC 303
Legal Body: High Court of Ireland (IEHC)
Type of Claim/Jurisdiction: Contracts of Employment, Collective and Trade Union Issues, Pay and Conditions of Employment, Tribunal Practice, Procedures and Jurisdictional Issues
The Applicant was a company, limited by guarantee, which represented a number of small to medium sized employers which provide electrical contracting services.
This judicial review was taken to determine:
- Whether a sectoral employment order (SEO) made pursuant to the Industrial Relations (Amendment) Act 2015 was legally valid.
- Whether the underpinning legislation, Chapter 3 of the Industrial Relations (Amendment) Act 2015, was constitutional.
The High Court, finding for the Applicant, held that the purported SEO was not legally valid and that the underpinning legislation, Chapter 3 of the Industrial Relations (Amendment) Act 2015 was unconstitutional as it did not meet the requirements of 15.2.1° of the Constitution.
By way of background, in McGowan V Labour Court  IESC 21;  3 I.R.718, the Supreme Court had previously held that the provision made for “registered employment agreements” under Part III of the Industrial Relations Act 1946 was invalid having regard to the provisions of Article 15.2.1° of the Constitution, thus striking down the legislation as unconstitutional. The Industrial Relations (Amendment) Act 2015 was introduced in the aftermath of that judgment, as replacement legislation. The High Court, in this case, examined at length whether the new legislation avoided the pitfalls which the Supreme Court had identified in the previous legislation in McGowan V. Labour Court.
SEOs are a form of secondary legislation which are legally binding on all employers, within a relevant economic sector. The terms and conditions of the SEO over-ride less favourable terms in existing contracts of employment, and therefore, represent a significant encroachment on employers’ freedom to contract.
In this case, the SEO purported to regulate:
- The minimum rates of remuneration.
- The requirements for a pension scheme, including a minimum daily rate of contribution by the employer and employee respectively.
- The requirements for a sick pay scheme.
Failure to comply, by an employer, with any of the terms and conditions prescribed under the sectoral employment order may ultimately result in a criminal prosecution of the employer.
The High Court’s Findings
The Court examined non-constitutional and constitutional grounds.
The procedure under Chapter 3 is as follows:
- Stage 1 is the submission of an application to the Labour Court requesting it examine the terms and conditions of employment “in the economic sector in respect of which the request is expressed to apply.” [Whether or not the Labour Court itself could determine the scope of “an economic sector” was also in dispute, in this case. The High Court found that the Labour Court had discretion, in this regard.]
An application can only be submitted by (a) a trade union of workers, (b) a trade union or an organisation of employers, or (c) a trade union of workers jointly with a trade union or an organisation of employers.
- The Labour Court first has to determine whether the application is made by a group “substantially representative” of the workers of the particular class, type or group in the economic sector.
This is a condition precedent to the Labour Court carrying out its examination of the sector.
Prior to making any recommendation, in order to carry out its own examination, the Labour Court is required to hear all relevant interested parties who wish to be heard. Furthermore, there is a list of requirements, under statute, which the Labour Court is required to consider.
- The third stage is that if the Labour Court considers it appropriate to do so, it may make a recommendation to the Minister that a sectoral employment order should be made.
It is an express requirement that a recommendation from the Labour Court has to be accompanied by a report to the Minister on the circumstances surrounding the making of the recommendation, including that the Labour Court has had regard to the matters which it is, under statute, to have regard to.
- This report, required under statute, will be used by the Minister to determine whether the Labour Court has complied with the requirements of Chapter 3, which it is required to do, under s. 17 of the legislation.
- If the Minister is satisfied that the Labour Court has complied with the requirements of Chapter 3, then the Minister is required to confirm the terms of the order. [In this event, a draft of the order is laid before each House of the Oireachtas].
- If, however, the Minister is not satisfied that the Labour Court has complied with the terms of Chapter 3, he is required to refuse to make the sectoral order confirming the terms of the recommendation. The Minister must notify the Labour Court of his decision, and the reasons for the decision.
The High Court found that neither the procedures leading up to, nor the content of the report produced by the Labour Court were compliant with the legislation. It found the statutory report submitted to the Minister on 23rd April 2019 to be deficient in two significant respects:
- First, the report did not contain the conclusions of the Labour Court on crucial matters, nor any rationale for those conclusions.
- Secondly, the report did not set out a fair and accurate summary of the submissions made by those interested parties who opposed the making of a sectoral employment order and did not engage with the issues raised in those submissions.
Furthermore, the High Court noted that The Labour Court’s report either inadequately engaged with or was completely silent as to several matters which it is specifically required to address its mind to, under statute.
The Labour Court’s report and recommendation also did not specify the class, type or group of workers to which the recommendation shall apply (as required by subsection 16(3)(a)); and the position of workers employed by state and semi-state organisations was not expressly addressed.
The High Court highlighted the principle of the “right to reasons”, citing Balz V. An Bord Pleanala  IESC 90; 1 ILRM 367 , stating that in this case: “The statutory obligation to notify interested parties and to hear their submissions, would be undermined if not accompanied by an implicit obligation to engage with those submissions and to provide some sort of explanation as to why they have not been accepted (where this is the case).”
The Court emphasised that “The report must demonstrate that the Labour Court has addressed its mind (emphasis added) to the mandatory statutory considerations.”
The Minster’s Jurisdiction
In order for the Minister to exercise his jurisdiction to make a sectoral employment order, first, he has to satisfy himself that the Labour Court has complied with the requirements of Chapter 3 of Industrial Relations (Amendment) Act 2015.
The High Court held that the Minister erred in law in concluding, on the basis of the report and recommendation submitted to him, that the Labour Court has complied with those provisions.
The Court stated that neither the procedures leading up to, nor the content of, the recommended sectoral employment order complied with Chapter 3.
The Court held that: “On receipt of the report, the Minister should have refused to make a sectoral employment order confirming the terms of the recommendation. The Minister acted without jurisdiction in purporting to make the order.”
The Court found that the Minister acted ultra vires his jurisdiction in purporting to make the impugned order.
Consequently, the High Court found the SEO not to be legally valid.
Delegatus non potest delegare
The High Court found that the terms of the recommended sectoral employment order were also invalid insofar as they purported to fix the rate of pension contributions payable by reference to the actions of a third party (emphasis added). This breached the principle that a delegate cannot further delegate their function, i.e. delegatus non potest delegare.
The Court stated that: “The terms of the sectoral employment order should be precise and self-contained.”
The Court held that this approach was, therefore, “ultra vires” the parent legislation; and that, additionally, approaching the matter in this manner would undermine “legal certainty”
“Exceptional case - Departure from Judicial Restraint”
Generally, a court will only consider a constitutional challenge to legislation, where it is unavoidably necessary to do so, due to the far-reaching consequences of striking down legislation. Applying the principle of “judicial self-restraint”, if it is possible to resolve a matter on non-constitutional grounds, typically a court will opt to do so.
However, in this case, the High Court determined that it was appropriate to decide the constitutional issue as well, as:
- Both parties had agreed that it should be resolved,
- The constitutional issue was fully argued before the Court over six days, and
- The exercise of judicial self-restraint would defer rather than avoid the necessity of a court having to rule on the validity of the legislation.
The legitimacy of the legislation was a matter of intractable dispute between the parties. On each occasion there was an attempt made to invoke it, the Applicant objected to its constitutionality. It seemed likely that this would continue to be the case in the future.
The High Court found the parent legislation, the Industrial Relations (Amendment) Act 2015 also to be invalid, as it is not congruent with the requirements of Article 15.2.1° of the Constitution.
The High Court set out its reasoning, as follows:
- “Article 15.2.1° is intended to ensure that there is no improper trespass on the role of the Oireachtas”
- Article 15.2.1° sets out that: “The sole and exclusive power of making laws for the State is hereby vested in the Oireachtas: no other legislative authority has power to make laws for the State.”
- The Court cited Cityview Press Ltd  I.R. 381 at 399 which sets out that: “[Nevertheless], the ultimate responsibility rests with the Courts to ensure that constitutional safeguards remain, and that the exclusive authority of the National Parliament in the field of law-making is not eroded by a delegation of power which is neither contemplated nor permitted by the Constitution.”
- “Provided that the “principles and policies” test (as elaborated on in O’Sullivan) has been complied with, then a power to make secondary legislation can properly be delegated, and there is no requirement that the delegate or subordinate be a member of the executive branch of government. This is because the focus is on the separation of powers and the role of the Oireachtas in the tripartite system of government.” (emphasis added)
- The Court stated that: “An improper abdication of the Oireachtas’ law-making function is not saved by the fact that the delegate is a member of a different branch of government.”
- The Court noted that: “An enactment which is clearly unconstitutional cannot be saved by the requirement to lay delegated legislation before each of the Houses of the Oireachtas.”
- The High Court stated that the imposing of mandatory minimum terms and conditions of employment across an entire economic sector necessitates making difficult policy choices, with far-reaching consequences, which impacts stakeholders (employers, workers and consumers) whose interests are not necessarily aligned. Further relevant considerations are: The promoting fair competition and the freedom to provide services with the European internal market and ensuring appropriate terms and conditions of employment for domestic workers and posted workers from other EU Member States.
- The High Court found that “the parent legislation abdicates the making of these significant policy choices to the Minister (and, indirectly, to the Labour Court)” and that the parent legislation does not contain sufficient “principles and policies” to guide the “very broad discretion” conferred upon the Minister (and indirectly upon the Labour Court).
- The High Court noted that “the delegates are directed to “have regard to” the potential impact on competitiveness” but are given no guidance as to which objective should take precedence.
- The Court also found the concept of “fair and sustainable” remuneration set out in the legislation to be “hopelessly vague” and “too subjective.”
- The Court concluded that: “In short, Chapter 3 involves a standard-less delegation of law making to the Minister, and one which would be almost impossible to challenge by way of judicial review.”
- Therefore, the High Court found that this renders the parent legislation invalid, by reference to Article 15.2.1° of the Constitution, stating: “The effect of this declaration is that the entire of Chapter 3 is to be struck down.” The Court held: “It follows that the Sectoral Employment Order (Electrical Contracting Sector) 2019 (S.I. No. 251 of 2019) is also invalid and must fall with the parent legislation.”
The effect of the Court’s finding that Chapter 3 of the Industrial Relations (Amendment) Act 2015 is unconstitutional, and striking it down, is to render the Sectoral Employment Orders (SEOs) made under it, legally invalid.
There were three sectors with SEOs in force – the Construction Sector, the Mechanical Engineering Business Services Contracting Sector and the Electrical Contracting Sector (the subject matter of this case).
Whether the Oireachtas legislates for a third time in a bid to cure the legislative and constitutional defects identified by the Supreme Court in McGowan V. Labour Court and by the High Court, in this case, remains to be seen.
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.