On 9 May 2013, the Supreme Court held that the Registered Employment Agreement (REA) system for determining pay rates and working conditions is unconstitutional. This decision is likely to have significant consequences for employers and employees in the electrical industry (it was the Electrical REA being challenged), but also other sectors governed by REAs, including construction, retail and printing.

The basis for the Supreme Court decision is similar to that which led the High Court in July 2011 to strike down the Joint Labour Committee (JLC) system, (a similar, but distinct system for regulating terms and conditions of employment in certain industries).

The Supreme Court held that whilst the legislature may delegate the power to make administrative rules and regulations, and to exercise certain functions under statute to subordinate bodies, such delegated authority should not, and could not, extend to law-making. In delivering his judgment, Mr Justice O’Donnell stated that “What appears to be law is being made by persons other than the Oireachtas”. The Supreme Court concluded that the Industrial Relations Act, 1946 (“the 1946 Act”) permitted an excessive delegation of law-making power in the absence of guidance or instruction. Furthermore, the Supreme Court found “striking”:

“...the fact that both EROs and REAs are made part of the criminal law and bind everyone who participates in the relevant sector. Furthermore, the relevant provision of criminal law is made not by the Oireachtas, but rather by private individuals, themselves participants in the industry to be regulated.”

In response to the Supreme Court’s decision, the Minister for Jobs, Enterprise and Innovation, Richard Bruton, has already issued a statement acknowledging the Supreme Court decision has the effect of striking down REAs which have been put in place under the legislation. The Minister confirmed that the Government intends to study the Supreme Court decision and take legal advice on it. This is not surprising, given recent reform and debate in this area and the introduction of the Industrial Relations (Amendment) Act, 2012. This legislation aims to set stricter conditions for the establishment and variation of Employment Regulation Orders (EROs) and REAs.

The immediate impact for employers in any sector previously covered by an REA is that such employers may hire new employees on terms and conditions which are less favourable than those set by the REAs. Such terms would of course have to comply with standard employment legislation such as the Minimum Wage Act, 2000 and Organisation of Working Time Act, 1997.

For existing employees whose terms and conditions of employment complied with the requirements under a particular REA, the Minister has stated that existing contractual rights of workers in sectors covered by REAs are unaffected by today’s ruling, and that contractual rights can only be altered by agreement.

With respect to the Minister, we do not believe this issue to be black and white and depending on the circumstances (including the wording of the employment contract, if any), there may be situations where employers may lawfully vary certain terms arising out of this significant decision.

Finally, no further or fresh criminal prosecutions for non-compliance with the REAs can be taken and any current prosecutions are likely to be struck out.

Further developments are eagerly anticipated by interested parties.