On 9 May 2013, the Irish Supreme Court held that the Registered Employment Agreement (REA) system whereby collective agreements are endorsed by the Labour Court and set industry-wide pay rates and working conditions, is unconstitutional. The decision is likely to have a significant effect on thousands of employers and workers in the construction industry in Ireland and also on foreign construction companies which may have an interest in Ireland as a place of business.
The immediate impact for employers is that they may hire new employees on terms and conditions which are less favourable than those set by the REAs. We are therefore likely to see a gradual fall in construction wage rates in Ireland.
For existing employees whose terms and conditions of employment complied with the requirements under a particular REA, the Minister for Jobs, Enterprise and Innovation has stated that existing contractual rights are unaffected by the ruling, and can only be altered by agreement. We do not believe this issue to be black and white and depending on the circumstances (such as the wording of the employment contract), there may be situations where employers may lawfully vary certain terms arising out of this decision.
Terms and conditions would of course still have to comply with standard Irish employment legislation such as the Minimum Wage Act, 2000 and Organisation of Working Time Act, 1997.
In a reduced labour cost environment, the Irish market is likely to see more competition from contractors in lower-cost jurisdictions (as close as Northern Ireland) tendering for work, and this will, undoubtedly, have consequences for public contracting and public tendering going forward.
Following a Labour Court recommendation in 2012, negotiations have been ongoing between construction employers and unions regarding various terms of employment and compliance measures. However, following this Supreme Court decision, such negotiations are likely to be at a standstill. The entire REA system could be under threat.
Further developments are eagerly anticipated by interested parties both in Ireland and overseas.
Ian O’Herlihy
Head of Employment Law and Benefits
Mason Hayes & Curran
‘Client Service Law Firm of the Year’ Chambers Europe Awards for Excellence 2013
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