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Are Minimum Wage Rates in Construction Unconstitutional?

The High Court has delivered a significant judgement in the long-running saga regarding minimum wage rates in particular sectors of the economy, including construction.

Construction Workers behind Scaffolding

The Oireachtas introduced a system that enabled the setting of minimum wage rates in Ireland in the the mid-20th century. That system was partly dependant on unions and employers in particular sectors reaching agreements regarding core terms and conditions of employment (including minimum wage rates). Those agreements (Registered Employment Agreements or REAs) could then be registered with the Labour Court and have legally binding effect throughout the relevant sector or industry.

REAs were important in protecting wage rates and terms of employment for employees in the relevant sectors (including construction) for many years. However, they were patchy in terms of covering the entire economy with workers in many sectors not having any protection.

The introduction of the National Minimum Wage Act 2000 dramatically changed the picture. From that point on, almost all workers enjoyed the benefit of a nationwide legally enforceable minimum wage. That development caused some to question the need for Registered Employment Agreements which gave significantly enhanced entitlements to workers in certain sectors and was seen by some smaller employers as effectively pricing them out of the market.

In McGowan & Ors v Labour Court, Ireland & Another, [2013] IESC  21 (9 May 2013), the Supreme Court effectively concluded that the 1946 legislation that set up the REA system was unconstitutional. The Court expressed particular concern that the Act in question involved:

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’.

The overnight collapse of the REA system marked a significant diminution in the power and importance of trade unions. It led to calls for Government intervention in relation to wage rates in certain sectors.

The Oireachtas responded two years later, introducing the Industrial Relations (Amendment) Act 2015. The 2015 Act effectively reintroduced the REA system, although this time the agreements were described as "Sectoral Employment Orders" (SEOs). In the years that have since passed, SEOs have been introduced in the construction sector, in electrical contracting and in the awkwardly-described mechanical engineering building services contracting sector. In essence, construction has been singled out by the State as meriting significantly higher minimum wage rates.

Construction Workers

On 23 June 2020, however, the High Court found that the provision in the 2015 legislation allowing for the making of SEOs is unconstitutional. The Court had been asked to consider the legality of the electrical contracting SEO but Mr. Justice Simons' judgement effectively deemed all pre-existing SEOs unlawful.

The effect of the judgement is to render the existing SEOs unlawful and inoperable (subject to any appeal). That leaves employees in the construction sector relying on the wage rates and terms and conditions of employment set out in their contracts of employment and/or the Minimum Wage legislation that applies to workers generally. The Government has signalled its' intention to appeal the High Court decision but - for the moment - the legal position regarding minimum wage rates in the construction sector is, once again, lacking the desirable degree of clarity.

For the moment, both employers and employees engaged in construction should carefully review their employment contracts to check what legally enforceable terms and conditions apply in the absence of legally binding SEOs.

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