The highly anticipated Supreme Court decision in NECI v The Labour Court, The Minister for Business, Enterprise and Innovation, Ireland and The Attorney General was delivered on 18 June 2021.
We have set out below the background to this case, a summary of the High Court and Supreme Court decisions and the implications of the Supreme Court decision on the construction sector.
Chapter 3 of the Industrial Relations (Amendment) Act 2015 (the “2015 Act”) sets out the procedure to be followed in making a Sectoral Employment Order (an “SEO”). An SEO sets out the terms and conditions of employment relating to pay rates, sick pay or pension entitlements and applies to all employers within the economic sector concerned.
To summarise, the procedure prescribed under Chapter 3 of the 2015 Act is as follows:
- Request – a trade union or employers’ organisation makes a request to the Labour Court to examine the terms and conditions relating to pay rates, sick pay schemes or pension schemes for the economic group concerned;
- Examination – once the Labour Court is satisfied that the applicant is “substantially representative” of the workers and employers of the particular class, type or group in the economic sector concerned, it must publish a notice of its intention to undertake an examination and invite representations from interested parties before undertaking the examination;
- Recommendation – if the Labour Court considers it appropriate, having heard all interested parties and having regard to the submissions concerned, it shall make a recommendation to the Minister for Business, Enterprise and Innovation (the “Minister”). In order to make a recommendation, the Labour Court must be satisfied that to do so would (a) promote harmonious relations between workers and employers and assist in the avoidance of industrial unrest in the economic sector concerned and (b) it is reasonably necessary to promote and preserve high standards of training and qualification and ensure fair and sustainable rates of remuneration in the economic sector concerned.
- Report – the recommendation must be accompanied by a report to the Minister setting out the circumstances around the making of the recommendation and confirming that regard was had to the matters set out in Section 16(2) of Chapter 3 of the 2015 Act.
- Minister – on the basis of the above-mentioned report, the Minister must satisfy himself that the Labour Court has complied with the provisions of Chapter 3 of the 2015 Act. If satisfied, the Minister is required to lay out a draft of the SEO before each House of the Oireachtas. Each House must pass a resolution approving the draft SEO before the Minister can sign it into law. If the Minister is not so satisfied, he must refuse to make the draft SEO and notify the Labour Court of the decision and reasons for same.
Prior to the High Court decision, the following SEOs were made pursuant to Chapter 3 of the 2015 Act:
- Electrical Contracting Sector SEO (SI No. 251 of 2019) (the “Electrical Contracting Sector SEO”)
- Mechanical Engineering Building Services Contracting Sector SEO (SI no 59 of 2018) (the “Mechanical Engineering Building Services Contracting Sector SEO”)
- Construction Sector SEO (SI No. 234 of 2019) (the “Construction Sector SEO”).
Summary of the High Court Decision:
In June 2020, National Electrical Contractors Ireland (“NECI”) a representative company for small and medium sized electrical contractors, successfully challenged the Electrical Contracting Sector SEO and Chapter 3 of the 2015 Act in the High Court. The High Court held that the Minister had acted unlawfully in making the order as the Labour Court had failed to give adequate reasoning for its decision. Furthermore, the court held that Chapter 3 of the 2015 Act was unconstitutional on the basis of Article 15.2.1 of the Constitution.
The High Court order setting aside the Electrical Contracting Sector SEO became effective on 31 July 2020. However, the specific declaration that Chapter 3 of the 2015 Act was unconstitutional was suspended pending appeal, meaning that the other SEOs, Construction Sector SEO and Mechanical Engineering Building Services Contracting Sector SEO remained in full force and effect until the outcome of the appeal.
In the event that the Supreme Court upheld the High Court decision regarding the constitutionality of the 2015 Act, the declaration would have come into force, and it would have followed that all SEOs made pursuant to the 2015 Act would have been invalid, resulting in employers being no longer bound by conditions set out therein, including rates of pay, sick pay or pension entitlements. The appeal was heard in February 2021 and judgment was delivered 18 June 2021.
Summary of the Supreme Court Decision:
The Supreme Court had to deal with a range of issues. However, for the purposes of this note, we have focused on the two key issues before the Supreme Court namely, the constitutionality of Chapter 3 of the 2015 Act and whether the Labour Court and the Minister complied with the provisions under Chapter 3 of the 2015 Act.
Constitutionality of Chapter 3 of the 2015 Act
Article 15.2.1 of the Constitution vests the sole and exclusive power of making laws for the State in the Oireachtas. The Oireachtas can delegate this power to a subordinate body but when doing so, they must lay out strict guidelines for the subordinate body/person to abide by – the larger the impact of the secondary legislation, the more guidance required by the primary legislation.
To determine whether there has been an unconstitutional delegation of legislative power, the courts developed the “principles and policies” test in Cityview Press v An Comhairle which was more recently explained in Bedrev v Ireland.
In the present case, the High Court concluded that the Chapter 3 of the 2015 was too vague and did not provide sufficient guidance or limit the power of the Labour Court. The High Court found the procedure leading to a recommendation, vested the Labour Court with powers which were those of a legislator. Accordingly, the High Court found Chapter 3 of the 2015 to be unconstitutional.
The Supreme Court set aside this part of the High Court judgment (together with the suspended declaration of unconstitutionality) having considered each of the stages in the procedure prescribed under Chapter 3 of the 2015 Act and found there was sufficient guidance in the parent legislation and accordingly “no impermissible delegation of legislation in this instance”.
The Supreme Court acknowledged that the extent of the delegation is significant. However, the recommendation for the Labour Court “must take place in conformity with the statutory procedure, each step of which is laid down by the Oireachtas”.
The Supreme Court found that there were, in fact, several identifiable policies set out in the legislation which could guide the Labour Court. In addition, the court pointed to the fact that any SEO required a resolution in both houses of the Oireachtas. Accordingly, on the basis of the above, “the Oireachtas has laid down a high level of legislative safeguard in relation to any potential SEO”.
Compliance with the Provisions of Chapter 3 of the 2015 Act
This was the other key issue considered by the Supreme Court. The question was whether the Labour Court had complied with its statutory duty to give reasons for its decision to make a recommendation.
The High Court held that the report from the Labour Court in respect of the Electrical Contracting Sector SEO “failed to set out a proper summary of the submissions made by those interested parties who opposed the making of a sectoral employment order. And does not engage with those submissions”. It went on to conclude that “the Labour Court had acted ultra vires the statute by not giving reasons, and so, too, had the Minister in promulgating the statutory instrument”.
The Supreme Court found that given the statutory role that the Labour Court was engaged in, “the reasons had to be sufficient, therefore, not just to satisfy the participants in the process, but also the Minister, the Oireachtas, other affected persons or bodies, and the public at large, that the Labour Court had truly engaged with the issues which were raised, so as to accord with its duties under the statute”.
The Supreme Court found there was no full description of the reasons behind the Labour Court’s decision in its recommendation or accompanying report and highlighted that there is a significant difference between merely mentioning issues raised and actually addressing them substantively by responding with reasons.
Mr Justice MacMenamin noted that it was not necessary for the Labour Court to determine each and every point raised by the NECI however, there was no indication in the recommendation or report as to whether any of these points were actually considered.
Accordingly. the Supreme Court found the Labour Court had failed in its statutory duty under Section 16 of Chapter 3 of the 2015 Act to give reasons for its decision to make a recommendation.
To summarise, the Supreme Court overturned the High Court’s ruling that Chapter 3 of the 2015 Act was repugnant to Article 15.2.1 of the Constitution. However, it upheld the High Court’s ruling that the Labour Court failed in its statutory duty to give reasons for its decision to make a recommendation for the Electrical Contracting Sector SEO and ordered that the matter be remitted to a different panel of the Labour Court to prepare and furnish a recommendation giving reasons, in accordance with Chapter 3 of the 2015 Act.
Impact on the Construction Sector
The recent Supreme Court decision will provide some welcomed clarity to the construction industry with regard to the applicability of the Construction Sector SEO, the Mechanical Engineering Building Services Contracting Sector SEO and any future SEOs. Employers will continue to be bound by the conditions set out in these SEOs.
The position regarding an SEO in respect of the electrical contracting sector is less clear cut. Following the Supreme Court decision, the Electrical Contracting Sector SEO remains set aside. However, the matter has been remitted to a different panel of the Labour Court to prepare a recommendation giving reasons in accordance with the statute which means that, subject to the remaining stages in the procedure set out in Chapter 3 of the 2015 Act being complied with, a replacement SEO in respect of the electrical contracting sector may be introduced.
This article was written with the assistance of Michelle Mehigan.