On 9 May 2013 the Supreme Court declared the system of making Registered Employment Agreements (REAs) to be unconstitutional.

REA’s are legally-binding agreements that set remuneration rates and conditions within a given sector. Crucially, REAs made in accordance with the regime apply not just to the parties agreeing the terms, but also to every worker and employer in the relevant sector.

The Supreme Court noted that the system of making REAs was anomalous in the modern context of collective bargaining agreements, which are not considered to be legally enforceable under civil or criminal law. Thus, the Court acknowledged the inevitability of such a challenge to the regime.

The REA system was deemed unconstitutional, as it comprised a delegation of the law-making role to “private persons unidentified and unidentifiable” contrary to the Constitution. The limited oversight of the Labour Court in registering REAs could not save this unconstitutional delegation of the legislative role.

Recent Reform

This case mirrors a recent challenge by a fast food chain to the system of making Employment Regulation Orders (EROs) by Joint Labour Committees (JLCs) (reported here). The High Court found that the legislation governing ERO’s lacked the principles and policies required for the delegation of a law-making role. On foot of that decision and in the context of Troika commitments, the Government introduced legislation in 2012 which, amongst other things, seeks to put in place sufficient “principles and policies” to be applied by JLCs and the Labour Court in making EROs and REAs respectively.

Implications of the Supreme Court Decision

The decision of the Supreme Court has wide-ranging implications for both employers and employees, specifically in the construction, electrical contracting and retail sectors.

Existing employees with contracts whose terms were set in accordance with the REA system will continue to enjoy those terms and conditions. While the Minister has noted that these workers are “unaffected” by the Supreme Court ruling, it does mean that parties to those contracts may renegotiate terms and conditions and employers will not be bound by the minimum terms and conditions which previously applied under the REA. REAs created in accordance with the 2012 legislation are unaffected by the decision.

For new employees, new employee contracts can be negotiated in the absence of the sectoral constraints previously in place under the REA regime, as long as they respect the normal statutory minimum employment terms and conditions. This means that employers are free to employ new employees on less favourable terms and conditions than those of existing employees. The result may be a more competitive market or a race to the bottom in terms of wage-setting in certain sectors.