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Landmark High Court Ruling on JLCs

AUTHOR(S): Paul Glenfield, Bryan Dunne
PRACTICE AREA GROUP: Corporate Restructuring and Insolvency
DATE: 08.07.2011

In March 2011, the High Court heard the constitutional challenge taken by the members of the Quick Service Food Alliance (“QSFA”) against the rights of the Catering Joint Labour Committee (“the Catering JLC”) and the Labour Court to set minimum rates of pay and employment conditions for workers in the catering industry in John Grace Fried Chicken Limited, John Grace and Quick Service Food Alliance Limited v The Catering Joint Labour Committee, The Labour Court, Ireland and the Attorney General.

In yesterday’s landmark decision delivered by Mr Justice Kevin Feeney, the High Court ruled that the JLC system is unconstitutional, as the provisions of the Industrial Relations Acts permit an excessive delegation of law-making power to the Labour Court. The judgment is far reaching and has ramifications not just for employees in the catering sector and other sectors governed by 13 JLCs currently in existence, but the wider landscape of Irish industrial relations.

Background

The Catering JLC is a body established under the Industrial Relations Act 1946 and the Catering JLC Establishment Order 1977. The Catering JLC is responsible for formulating proposals for pay and conditions of workers employed in establishments engaged in the preparation or service of food or drink. The JLC proposals are submitted to the Labour Court, and, if approved, the Labour Court creates an Employment Regulation Order (ERO) which legally binds employers to wage rates and conditions of employment.

The Quick Service Food Alliance (QSFA) whose members include Supermac’s, Burger King, Eddie Rocket’s, Subway and Abrakebabra, as well as Italian takeaways and sandwich bars, argued that the Oireachtas (Irish Parliament) has already put in place a statutory national minimum wage, under the Minimum Wage Act 2000, and provided for the payment of a fair Sunday premium under the Organisation of Working Time Act 1997. In addition, there is a raft of employment legislation establishing minimum conditions of employment. The QSFA argued that this existing employment legislation properly protects employees, and that the Catering JLC and the Labour Court had fixed minimum wages and Sunday premia in excess of the national statutory minimum, and set conditions for catering staff that are more favourable than those provided for in employment legislation enacted by the Oireachtas.

Legal argument

The QSFA sought a declaration from the High Court that certain sections of the Industrial Relations Acts, 1946 and 1990, from which the JLC’s derive their power are unconstitutional on the grounds that: 

  • Article 15 of the Constitution states that the sole and exclusive power to make laws is vested in the Oireachtas and no other authority has power to make laws for the State, and, therefore, the ERO’s created by the Labour Court were an unconstitutional delegation of this law making function which should be reserved to the Oireachtas;
  • the imposition of higher rates of pay and conditions on QSFA employers represented an unwarranted and disproportionate interference with their property rights under the Irish Constitution;
  • the application of different rates for Sunday pay for employers in the Dublin/ Dun Laoghaire area unlawfully infringed property rights of members outside of that area; and
  • the relevant sections of the Industrial Relations Acts, 1946 and 1990, were incompatible with the State’s obligation to protect property rights under the European Convention of Human Rights. 

In effect, the QSFA were seeking to quash the current EROs and the entire JLC system. 

Judgment

Mr Justice Feeney found that the plaintiffs were entitled to a declaration that the relevant sections of the Industrial Relations Act 1946 and 1990 were invalid having regard to Article 15.2.1, Article 43 and Article 40.3.1 of the Constitution. Article 15.2.1 of the Constitution vests the sole and exclusive power of making laws for the State in the Oireachtas. In considering whether there had been an unconstitutional delegation of this law making function, the Court referred to the principles and policies test as set down in the seminal decision of the Supreme Court in Cityview Press Co. Ltd v AnCo. In essence, this test provides that such a power may be delegated only where it amounts to giving effect to the principles and policies contained in the legislation. Mr Justice Feeney found that the power to make EROs is a power of a fundamental nature and that there was no guidance as to principle or policy provided in the legislation. In the circumstances, the Court held that the delegation of this power to the Labour Court offends against the provisions of Article 15.2.1.

Mr Justice Feeney also found that the plaintiffs were entitled to a declaration that the ERO was an unreasonable, unlawful and disproportionate interference with the first and second named plaintiffs’ property rights. The Court found that the determination of rates and conditions had been undertaken in an arbitrary and illegal manner, in breach of the plaintiffs’ property rights. 

The Court also considered the lack of uniformity in terms and conditions, where businesses immediately adjacent to one another were required to adhere to significantly different statutory obligations. Mr Justice Feeney found that there was no identifiable basis for this discrimination. On this basis, the Court found that SI 142 of 2008 unlawfully interfered with the property rights of the first two plaintiffs.

As a result of the Court’s finding on the above issues, the declaration sought pursuant to the European Convention on Human Rights Act did not arise.

The issue of damages has yet to be heard by the Court. This aspect of the matter was adjourned for hearing until 25 July next.

Implications

This decision clearly has ramifications for other sectors in the economy, including the contract cleaning, agriculture and hotel sectors, which are governed by the JLC system. The judgment will also impact on the constitutional challenge to the JLC system for agricultural workers which was launched by the owners of Coolmore Stud and Ballydoyle training facility in May.

Whilst the ruling may not affect existing workers employed in areas covered by the JLC system, depending on the particulars of their contractual arrangements, it seems likely that employers will not be obliged to pay JLC rates for employees recruited going forward, and that such employees will, in many cases, be engaged on lesser terms and conditions but subject to the National Minimum Wage Act 2000, and other relevant statutory minima. Pending legislative reform in this area, therefore, employers will be permitted to pay new employees the national minimum wage, currently set at €8.65. On a practical level, before taking any steps on foot of this decision, employers should seek legal advice.

Individual circumstances will depend on the contents of specific contracts of employment, and it should be borne in mind that a contract may exist, albeit not in writing. Another likely consequence of the decision is that it will encourage local bargaining in those sectors once subject to the JLC regime.

Planned legislative reform

The Report of the Independent Review of Employment Regulation Orders (EROs) and Registered Employment Agreement Wage Setting Mechanisms, by Kevin Duffy and Dr Frank Walsh, published in May concluded that the current JLC/ REA regulatory system should be retained but “requires radical overhaul so as to make it fairer and more responsive to changing economic circumstances and labour market conditions”. The Report concluded that lowering the basic JLC rates to the minimum wage would be unlikely to have a substantial effect on employment. Since its publication, the Minister for Jobs, Enterprise and Innovation, Richard Bruton, has embarked on discussions with employer and union representatives. It was originally intended to announce an action plan on reform of the JLC/ REA system before the end of June irrespective of the outcome of the High Court challenge. However drafting of the reforming legislation will not now commence until the autumn, and the High Court decision will clearly affect how reform in this area proceeds.

We will keep you updated of developments as they arise.

 

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