New Legislation for REAs and JLCs

There has been a new basis for wage-setting mechanisms put in place, with the legislation planned to come into force at some point in this month. The important point to note is that this is the basis by which Employment Regulation Orders (EROs) and Registered Employment Agreements (REAs) will be set up, and has not actually set up any new EROs or REAs. The Industrial Relations (Amendment) (No. 3) Act, 2012, will set out the new ground rules for the establishment and updating of EROs and REAs. The reasoning behind the need for new legislation on this matter is two fold:

1. The Landmark High Court case on 7^th July 2011 which deemed all existing EROs as unconstitutional; and
2. The EU/ECB/IMF Troika stipulated in Ireland’s bailout programme that these sectoral wage mechanisms be reviewed.

The legislation was first published in December 2011, and after debate in the Oireachtas was signed by President Higgins on July 24^th The Act has set out that Joint Labour Committees, can continue to set minimum rates of pay for employees who would fall under the EROs, however this is limited to no more than two hourly rates above the lowest rate of pay.   The Act has also specified that the JLCs cannot deal with Sunday premiums or redundancy payments. This was a contentious issue as previously employees could earn anywhere from time plus one third to time plus one half for working on a Sunday. Currently the Organisation of Working Time Act, 1997 set outs that persons working on a Sunday are entitled to a premium for Sunday hours worked however this exact rate is left at the employers own discretion EROs had been criticised in the High Court’s ruling on the grounds that no ‘principles and policies’ existed to guide JLCs in formulating such agreements. The new Act will require JLCs to take into account eight factors such as the legitimate commercial interests of employers, efficient work practices, levels of employment and wages in comparable sectors, including those outside the State. It should be highlighted that REAs were not struck out by the High Court ruling like the JLCs/EROs, and as such remain in force, although any variation will fall under the new legislation. These ‘Variation orders’, which change the minimum pay and conditions in an REA, can be made by the parties as before, but can now also be made by the Labour Court. The Court can also seek to cancel an REA, but only on the grounds that there is a substantial change in the business and/or the parties to the agreement are no longer representative of the sector. Also, employers who are not party to the REA can also seek a variation of the REA. Employers would need to demonstrate “a substantial adverse change” in the sector and cannot apply for a variation if another such application has been made by any other employer in the last 12 months, or in the first 12 months of a new REA. Exemptions may be sought by employers from EROs/REAs. These will be approved by the Labour Court, which must be satisfied that agreement has been reached with either a union or other employee representatives. Employers can only get one such exemption every five years and it can be for between three and 24 months, it can be extended once up to a limit of 24 months, only if the original period was less than 24 months. To ensure that workers do not collude with an employer to undercut competitors etc. to get contracts, the Court must be satisfied that the business is in “severe economic difficulty” and it must not distort competition in the sector, in order to qualify for any exemption.