Sectoral Employment Orders – the current position?

20 July 2020

The recent High Court decision 1 striking down as unconstitutional a wage setting mechanism providing for minimum wages in certain construction industry sectors, known as sectoral employment orders (SEOs), has led to legal uncertainty as to the application of these SEOs and threats of industrial unrest if they are not applied.

So what’s next for SEOs?

On 9 July 2020, Tánaiste Leo Varadkar confirmed that the High Court decision is being appealed to the Supreme Court. It appears the High Court Order has not yet been finalised and it remains to be seen whether a stay will be put on the Order pending the outcome of the appeal. A stay would ensure that the terms of the SEOs remain in place until the outcome of the appeal. It is expected that there will be an update from the courts circa 24 July with respect to the High Court Order and stay. There would then be a time period from the date of the order to appeal, so employers, unions and practitioners alike will certainly be watching this space in the coming weeks. If the High Court declines to grant a stay, the judgment applies, and the SEOs will be struck down with immediate effect.

Meanwhile, the Industrial Relations (Sectoral Employment Orders Confirmation) Bill 2020 has been proposed by Labour TD Ged Nash, the purpose of which is to give statutory effect to the current SEOs. This bill has passed the first stage in Dáil Eireann. Leo Varadkar has stated that the Government will not publish primary legislation on the issue until the appeal is heard – but the need to deal with the issue and the legal uncertainty now created will become urgent and acute in the event that the High Court does not grant a stay on its order.

So what are SEOs?

SEOs place a legally binding floor on employers to provide certain rates and comply with certain obligations in the following three sectors: the Construction sector, the Mechanical Engineering Building Services Contracting sector and the Electrical Contracting sector.

Do SEOs apply to me as an employer?

There are usually two main criteria which help determine whether an SEO is applicable to an employer:
1. The employer must operate in the relevant economic sector set out in the relevant SEO; and
2. It is only applicable to specific categories of workers who work within that economic sector.

Therefore, employers would need to review the three SEOs and consider whether they fulfil the above criterion.

How does this affect existing terms and conditions based on an SEO?

For existing employees, the effect of the SEO was to provide for legally binding rates of pay and conditions which applied to all employees in the relevant sector without the need to agree those terms with the employer individually. It applied by operation of law across the board to relevant employees in relevant sectors.

The Unions have called upon employers to abide by the SEOs and have threatened industrial action if they are not adhered to. In any event, it is likely that any employees to whom the SEOs applied will have contracts of employment which may refer to the relevant SEO, or set out the SEO terms expressly or perhaps incorporate the terms of the SEO by reference or implicitly by way of custom and practice (potentially). Such employees remain entitled to rely on the terms and conditions of their individual contracts of employment, notwithstanding the invalidity of the SEO.

What about new hires?

If an employer was to hire an employee today who would have previously benefited from the terms of an SEO, the terms of the SEO will not apply to them unless a stay on the High Court Order is granted pending the appeal. This could lead to a situation where there would be employees working for an employer on very different terms and conditions of employment side by side.

Employers should proceed with caution and be live to potential industrial relations issues with respect to SEOs and their applicability. Therefore, specific legal advice should be taken.

For further information please contact Edel Flynn, Associate or Maura Connolly, Head of the Employment & Employee Benefits Law Group at Eugene F Collins.

1 Náisiúnta Leictreach Contraitheoir Eireann Cuideachta Faoi Theorainn Ráthaíochta v The Labour Court, The Minister for Business Enterprise And Innovation Ireland, The Attorney General, 2019 No. 280 J.R. Available here

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