In March 2011 the High Court heard a constitutional challenge initiated by members of the Quick Service Food Alliance against the rights of the Catering Joint Labour Committee (JLC) and the Labour Court to set minimum rates of pay and employment conditions for workers in the catering industry.(1)
In this landmark decision, delivered by Justice Kevin Feeney, the High Court ruled that the JLC system is unconstitutional, as the provisions of the Industrial Relations Acts permit an excessive delegation of law-making power to the Labour Court. The judgment is far reaching and has ramifications not only for employees in the catering sector and other sectors governed by the 13 JLCs currently in existence, but also for the wider landscape of Irish industrial relations.
The Catering JLC is a body established under the 1946 Industrial Relations Act and the 1977 Catering JLC Establishment Order. The Catering JLC is responsible for formulating proposals regarding pay and conditions for employees of establishments engaged in the preparation or service of food or drink. JLC proposals are submitted to the Labour Court and, if approved, the court creates an employment regulation order which legally binds employers to wage rates and employment conditions.
The Quick Service Food Alliance – whose members include Supermac's, Burger King, Eddie Rocket's, Subway, Abrakebabra, Italian takeaways and sandwich bars – argued that Parliament has already put in place a statutory national minimum wage under the 2000 Minimum Wage Act, and provides for the payment of a fair Sunday premium under the 1997 Working Time Act. In addition, there already exists a raft of employment legislation establishing minimum conditions of employment. The alliance argued that this existing employment legislation properly protects employees, and that the Catering JLC and the Labour Court had fixed minimum wages and Sunday premiums in excess of the national statutory minimum and set conditions for catering staff that are more favourable than those provided for in employment legislation enacted by Parliament.
The alliance sought a declaration from the High Court that certain sections of the 1946 and 1990 Industrial Relations Acts, from which JLCs derive their power, are unconstitutional on the grounds that:
- Article 15 of the Constitution states that Parliament has the sole and exclusive power to make laws, and no other authority has the power to make laws for the state; therefore, employment regulation orders created by the Labour Court are an unconstitutional delegation of this law-making function which should be reserved for Parliament;
- the imposition of higher rates of pay and conditions on alliance employers represents an unwarranted and disproportionate interference with their property rights under the Constitution;
- the application of different Sunday pay rates for employers in the Dublin/Dun Laoghaire areas unlawfully infringes property rights of members outside of that area; and
- the relevant sections of the Industrial Relations Acts are incompatible with the state's obligation to protect property rights under the European Convention of Human Rights.
In effect, the alliance sought to quash current employment regulation orders and the entire JLC system.
The court found that the plaintiffs were entitled to a declaration that the relevant sections of the Industrial Relations Acts were invalid with regard to Articles 15(2)(1), 43 and 40(3)(1) of the Constitution. Article 15(2)(1) vests the sole and exclusive power of making laws for the state in Parliament. In considering whether there had been an unconstitutional delegation of this law-making function, the court referred to the principles and policies test as set down in the seminal Supreme Court decision in Cityview Press Co Ltd v AnCo. In essence, this test provides that such a power may be delegated only where it amounts to giving effect to the principles and policies contained in the legislation. The court found that the power to make employment regulation orders is a power of a fundamental nature, and that no guidance as to principle or policy was provided in the legislation. In the circumstances, the court held that the delegation of this power to the Labour Court offends against the Article 15(2)(1).
The court also found that the plaintiffs were entitled to a declaration that the employment regulation order was an unreasonable, unlawful and disproportionate interference with the first and second named plaintiffs' property rights. The court found that the determination of rates and conditions had been undertaken in an arbitrary and illegal manner, in breach of the plaintiffs' property rights.
The court also considered the lack of uniformity in terms and conditions, where businesses immediately adjacent to one another were required to adhere to significantly different statutory obligations. Feeney found that there was no identifiable basis for this discrimination. On this basis, the court found that Statutory Instrument 142/2008 unlawfully interfered with the property rights of the first two plaintiffs.
As a result of the court's finding on the above issues, the declaration sought pursuant to the European Convention on Human Rights did not arise.
The issue of damages has yet to be heard by the court. This aspect of the matter was adjourned for hearing until a later date.
This decision clearly has ramifications for other sectors governed by the JLC system, including contract cleaning, agriculture and hotels. The judgment will also impact on the constitutional challenge to the JLC system for agricultural workers which was launched by the owners of the Coolmore Stud and Ballydoyle training facility in May.
While the ruling may not affect existing workers employed in areas covered by the JLC system (depending on the particulars of their contractual arrangements), it seems likely that, going forward, employers will not be obliged to pay JLC rates to newly recruited employees, and that such employees will in many cases be engaged on lesser terms and conditions, but subject to the National Minimum Wage Act and other relevant statutory minimums. Pending legislative reform in this area, employers will therefore be permitted to pay new employees the national minimum wage, currently €8.65.
Individual circumstances will depend on the contents of specific contracts of employment, and it should be borne in mind that a contract may exist, albeit not in writing. Another likely consequence of the decision is that it will encourage local bargaining in those sectors once subject to the JLC regime.
A report by the Independent Review of employment regulation orders and registered employment agreement wage setting mechanisms, published in May, concluded that the current JLC/REA regulatory system should be retained, but "requires radical overhaul so as to make it fairer and more responsive to changing economic circumstances and labour market conditions". The report concluded that lowering the basic JLC rates to minimum wage would be unlikely to have a substantial effect on employment. Since its publication, the minister for jobs, enterprise and innovation, Richard Bruton, has embarked on discussions with employer and union representatives. It was originally intended to announce an action plan on reform of the JLC/registered employment agreement system before the end of June irrespective of the outcome of the High Court challenge. However, drafting of the reforming legislation will not commence until the autumn and the High Court decision will clearly affect how reform in this area proceeds.
For further information please contact Paul Glenfield or John Dunne at Matheson Ormsby Prentice by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email ([email protected] or [email protected]).
(1) John Grace Fried Chicken Limited v The Catering Joint Labour Committee.