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The widely anticipated Supreme Court judgement in McGowan & Ors v Labour Court Ireland & Anor which was handed down on 9th May 2013 by O’Donnell J is now available on the courts website and can be accessed in full here. 

We have referred extensively to extracts from the judgement below however we would highly recommend that our readers access the full Supreme Court judgement to understand the court’s reasoning for declaring Part III of the Industrial Relations Act 1946 (“the 1946 Act”) as unconstitutional.

Background

The appellants in this case were electrical contractors and thereby affected by an employment agreement registered by the Labour Court on the 24th of September 1990 (pursuant to the provisions of Part III of the Industrial Relations Act 1946) setting out certain terms and conditions of employment of electricians within the construction sector. As part of the background to this case, the Supreme Court looked in detail at the Industrial Relations Act 1946 and Registered Employment Agreements.

The Court noted that the 1946 Act contained two mechanisms under which a general sectoral agreement made in respect of terms and conditions of employment in a specified industry or sector of an industry may become legally enforceable both in civil and criminal law. It noted that Part IV of the Industrial Relations Act (namely sections 34-58) permitted the Labour Court to establish Joint Labour Committees (“JLCs”) either where there was substantial agreement among groups representing employers and employees, or where it was considered that the existing mechanism for the regulation of remuneration and other conditions made it expedient to establish such a body.

A JLC could then make a submission to the Labour Court which, if accepted by the Labour Court, would result in the making of an Employment Regulation Order (“ERO”) giving effect to the proposals of the JLC. The effect of such an ERO was to make its provisions concerning remuneration and conditions of employment part of the contract of employment between an employer and an employee within the sector (whether represented in the JLC or not). Failure to comply with such terms was not only enforceable in civil law, but also gave rise to a criminal offence punishable by a fine and provision was also made for an inspectorate to assist in the enforcement of the provision.

Part III of the Industrial Relations Act 1946

Under Part III of the 1946 Act, an employment agreement, (defined as an agreement regulating remuneration and conditions of employment of work and made between trade unions and an employer or a group of employers or at a meeting of the registered Joint Industrial Council), may on the application of the parties, be registered by the Labour Court. On any such application the Labour Court is obliged to register the agreement if it is satisfied that the conditions of six subparagraphs of section 27 of the Act have been complied with. Once registered, an REA, like an ERO under Part IV, becomes incorporated in the contract between the employer and employee and is enforceable by criminal prosecution.

The Supreme Court looked at Section 30(1) of the Act which provides:

“A registered employment agreement shall, so long as it continues to be registered, apply, for the purposes of this section, to every worker of the class, type or group to which it is expressed to apply, and his employer, notwithstanding that such worker or employer is not a party to the agreement or would not, apart from this subsection, be bound thereby.”

The Court noted that “the most striking feature of Parts III and IV of the 1946 Act to modern eyes is the fact that both EROs and REAs are made part of the criminal law and bind everyone who participates in the relevant sector” and that “it was perhaps inevitable that this scheme would come under increasing scrutiny”

It further noted that the first significant challenge in the context of Part IV of the 1946 Act arose in Burke v. The Labour Court [1979] I.R. 354 which concerned an ERO that had been made in relation to the hotel industry without regard to submissions made on behalf of the employers. In that case, Henchy J. in the High Court noted in respect of Part IV:

“It will be seen, therefore, that the power to make a minimum-remuneration order is a delegated power of a most fundamental, permissive and far-reaching kind. By the above provisions of the Act of 1946 Parliament, without reserving to itself a power of supervision or a power of revocation or cancellation (which would apply if the order had to be laid on the table of either House before it could have statutory effect) has vested in a joint labour committee and the Labour Court the conjoint power to fix minimum rates of remuneration so that non-payment thereof will render employers liable to conviction and fine and (in the case of conviction) to being made compellable by court order to pay the amount fixed by the order of the Labour Court. Not alone is this power given irrevocably and without parliamentary, or even ministerial, control, but once such an order is made (no matter how erroneous, ill judged or unfair it may be) a joint labour committee is debarred from submitting proposals for revoking or amending it until it has been in force for at least six months. While the parent statute may be amended or repealed at any time, the order, whose authors are not even the direct delegates of Parliament, must stand irrevocably in force for well over six months.” (pp. 358 and 359)

The Supreme Court noted that thereafter a number of challenges were brought to the provisions of Part IV of the 1946 Act but most of them were compromised or resolved without reaching the issues set out in the Burke case and further noted that ultimately, in John Grace Fried Chicken v. The Labour Court [2011] 3 I.R. 211, Feeney J. held that the Act lacked any principles or policies for the exercise of the power of law-making conferred on JLCs and that accordingly, the provisions of Part IV were repugnant to the Constitution. As a result of the Grace decision, the Industrial Relations (Amendment) Act 2012 was introduced.

Appeal to the Supreme Court

The Supreme Court noted that the proceedings involved in this appeal were an amalgam of a series of cases all of which relate to the provisions of the REA of the 24th of September 1990 made in respect of the electrical trade in the construction sector. The Court noted that the impetus for the current litigation was a proposal made to the Labour Court by the employee representatives to vary the REA and to increase the minimum pay of electricians in the construction sector.

In essence the appeal to the Supreme Court centred on two issues.

(a) Are the appellants entitled to raise the issue at (b) and; is the Supreme Court entitled to determine this issue in circumstances where although the issue was raised in the proceedings from which the appeal is taken, and argued before the High Court, the learned High Court judge expressly did not determine the issue?

(b) Does Part III of the Industrial Relations Act of 1946 or any section thereof contravene Article 15.2.1 of the Constitution by delegating the making, variation and cancellation of registered employment agreements to the Labour Court and the parties to such agreements?

In determining the above issues the Supreme court looked at Article 15.2.1 of the Constitution which states

“The sole and exclusive power of making laws for the State is hereby vested in the Oireachtas: no other legislative authority has power to make laws for the State.”

The Supreme Court referred to a series of judgements and noted that the differences between those cases in which there has been held to be a breach of Article 15.2.1 and cases in which it is accepted that there has been no such breach was largely one of degree and that it was difficult to detect a precise dividing line between what was permissible and impermissible. The judgement is extensive in this regard and is worth reading the full extracts.

The Court further noted that “What is unusual and possibly unique is that the law making power granted under the 1946 Act is granted over a broad area of human activity to private persons, themselves unidentified and unidentifiable at the time of the passage of the legislation………….therefore, it is clear that this specific provision is being made, not by a subordinate public body governed by public law, but by participants in the industry who were empowered to make regulations for themselves and for all others within that industry who may be competitors and whose interests may not be aligned with the makers of the REA”

In addition the Court stated ” This is not a grant of a power to make regulations over a limited area subject to explicit or implicit guidance and review. It is an unlimited grant of power in relation to employment terms, made to bodies unidentifiable at the time of the passage of the legislation and without intermediate review. On its surface therefore, this appears to be a facial breach of Article 15.2.1. “Law” is undoubtedly being made for the State, and by persons other than the Oireachtas. No direct statutory guidance is given for the exercise of the power.

In reviewing the structural analysis of the 1946 Act , the Supreme Court stated that “it is firstly significant that the power of approval and registration is itself delegated to an intermediate body, in this case the Labour Court. The degree of autonomy and discretion afforded to that body and the lack of a mechanism for appeal or review on the merits, means that any control of the exercise of the regulation making power is necessarily attenuated”.

It further noted that the restrictions imposed by Section 27 of the Act were critical “if the scope of the power conferred by s.27 is to be brought within constitutional boundaries. However no express guidance is given to the Labour Court as to how it should exercise its powers, and any implicit guidance to be deduced from the provisions of s.27 is necessarily limited”

The Court stated that “the provisions of s.28 relating to variation of an REA are a further illustration of what is absent from the scheme. Because the regulation made by the parties to the agreement is, and retains its character as, an agreement between private parties, s.28 is at least consistent in limiting the power of variation of the agreement to the original parties thereto”. In addition “There can be little doubt therefore that Part III of the 1946 Act raises serious issues of compatibility with Article 15.2.1. What appears to be law is being made by persons other than the Oireachtas”.

In differentiating the Cityview Press case which concerned a grant of a limited power to a subordinate body, it noted Instead there is a wholesale grant, indeed abdication, of lawmaking power to private persons unidentified and unidentifiable at the time of grant to make law in respect of a broad and important area of human activity and subject only to a limited power of veto by a subordinate body”.

In effect the Court considered that “Part III allows the parties to an employment agreement to make any law they wish in relation to employment so long as the Labour Court considers them to be substantially representative of workers and employees in the sector, and does not consider the agreement itself to be unduly restrictive of employment or make provision for unduly costly or inefficient methods of work or machinery, and otherwise complies with the formal requirements of s.27……the process permitted by Part III cannot be said to be merely the filling in of gaps in a scheme already established by the Oireachtas: in truth the Oireachtas which enacted the 1946 Act could have no idea of even those areas which may be subject to regulation in an employment agreement sought to be registered under the Act, and no conception still less control of the possible range of regulation that might be made in respect of each such matter. Nor did the Oireachtas retain any capacity for review either by the Oireachtas or by a member of the Executive responsible to it, of the agreements actually made”

The Court concluded that “once such an agreement purports to become binding on non-parties pursuant to s.30 of the Act, it passes unmistakably into the field of legislation which by Article 15 is the sole and exclusive preserve of the Oireachtas. The limited and essentially negative limitations imposed by s.27(3)(d) are plainly inadequate to bring the exercise of such power within constitutional limits”.

In essence the Supreme Court issued a declaration that the provisions of Part III of the Industrial Relations Act 1946 were invalid having regard to the provisions of Article 15.2.1 of the Constitution of Ireland.

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