Richard Bruton (Dublin North Central, Fine Gael)

I move: "That the Bill be now read a Second Time."

The Bill's main purpose is to implement the commitment in the programme for Government to reform the joint labour committee, JLC, system and to provide for the more comprehensive measures required to strengthen the legal framework for employment regulation orders, EROs, and registered employment agreements, REAs, in sectorial wage-setting mechanisms under the Industrial Relations Acts 1946 to 2004 in light of deficiencies in the original legislation identified in the July 2011 High Court judgment in the John Grace Fried Chicken case.

The Government has been clear on the need for reform. To do that it is necessary to make our economy more flexible, more competitive and more productive. In the programme for Government, we pledged to restore the national minimum wage and to reform the JLC system. While we need a robust system to protect vulnerable workers, we also need a system that is sufficiently flexible to maximise job opportunities.

The independent review report on statutory wage-setting mechanisms - the Duffy Walsh report - found the system was in need of radical overhaul and that substantial competitive gains in some sectors worst affected by job losses could be achieved by reforming the structure of decision-making to make it more responsive and flexible to the needs of particular sectors. This is particularly important at a time of enormous challenge for job creation. With the numbers out of work at record levels, it is vital we do all we can to protect those in jobs and to give those out of work the best chance possible to get back to work in key sectors of the economy. The system was designed in another era and needs to be modernised to reflect the current environment.

The fact the process of making EROs was found by the High Court to be unconstitutional, together with the identified lack of adequate Oireachtas scrutiny of this process, only underscores some of the main features of the recommendations for reform that were put forward by the independent review report. The High Court action in the John Grace Fried Chicken case was only one of a continuing series of legal challenges to the statutory wage-setting mechanism systems. A challenge to the electrical contracting REA was successfully defended in the High Court in 2010 by the State. It is, however, under appeal to the Supreme Court. In addition, there are several pending High Court challenges to the current electrical and construction REAs, all of which challenge the constitutionality of the legislation underpinning the REA system.

Following the High Court ruling of July 2011, it has been my priority to prepare and deliver a comprehensive reform package as the implications of the High Court judgment are not confined to the JLC system. What is required is a programme of reforms to the JLC and REA systems that can address all of the recommendations for reform put forward in the Duffy Walsh report, as well as the broad implications of the High Court ruling in the John Grace Fried Chicken challenge.

The Bill is divided into three Parts. Part 1 deals with general and preliminary matters such as the Short Title. Part 2 deals with reforms to the REA system. Part 3 deals with the JLC system and the making of EROs. Part 2 also makes the necessary amendments to four sections in the Industrial Relations Act 1946 to provide for new procedures for registering, varying and cancelling REAs. Agreements may be registered with the Labour Court under the Industrial Relations Act 1946 and they are then made universally applicable to all employers and workers to whom they relate, even those who are not signatories to the agreement.

The recent High Court judgment confirmed the Oireachtas may devolve certain law-making powers on other bodies, such as Ministers, the Government or the Labour Court. However, it also made clear that where the Oireachtas devolves a law-making power on some other body, it must give that body guidance as to how the law-making power is to be used. That guidance should be set out in primary legislation by way of clear principles and policies.

Section 5 sets out more detailed principles and policies than currently exist in the 1946 legislation. These are the principles and policies to which the Labour Court must have regard before registering an employment agreement. The additional principles and policies would apply only where an employment agreement relates to more than one employer. Currently, there are 73 REAs on the register maintained by the Labour Court. Some 50 of these agreements are specific to individual employments and were registered because the parties wished them to be binding in law. In future, it will be simpler and easier for a single-employer agreement to be registered than one which relates to a number of employers or to an entire sector. New REAs may not come into force until they have been confirmed by the Minister. Sections 6 and 7 make necessary changes to the 1946 Act to ensure that variations or cancellations of new or existing REAs must also be confirmed by the Minister before such variations or cancellations would have effect. Henceforth, the confirmation, variation or cancellation of an REA may be annulled by either House of the Oireachtas within a specified period. The new procedures introduced in the Bill will not affect the validity of the more than 70 REAs made and in force before the commencement of Part 2, when enacted.

Section 5 also amends the Act to provide that every application to register an employment agreement must be accompanied by confirmation by the parties to the agreement that they are substantially representative of the employers and the workers to whom the agreement applies. The original provisions regarding the representativeness of the parties to an agreement had given rise to controversy, especially in scenarios where a group of employers might constitute a minority of the total number of relevant employers but, nonetheless, employ the majority of the workers normally employed within the relevant sector. In establishing the representativeness of a trade union party to an REA, the court will have regard to the number of workers represented by the trade union. Similarly, the Labour Court must have regard to the number of workers employed by the employers involved in promoting the registration of the agreement. A consequential provision under section 7 amends the 1946 Act in that the Labour Court may cancel an REA if either the worker or employer parties have ceased to be substantially representative of workers or employers concerned.

Section 6 amends the Act to reflect the recommendation of the Duffy Walsh report concerning the introduction of a time-bound process by which the terms of an REA may be varied by the Labour Court in exceptional circumstances without obtaining the consent of all parties to the agreement. The amendment, which is based on a recommendation in the report, is intended to facilitate more rapid adjustment to changing economic circumstances and the imperative of maintaining employment.

Section 7 makes the necessary changes to the Act to enable the Labour Court, on its own initiative or acting on the request of the Minister, or following an application by an interested person, to conduct a review of the circumstances of an industry to which an REA applies to establish whether there has been a substantial change in the circumstances of the relevant industry and whether the continued registration of a particular REA is desirable.

Section 8 amends the Act to provide a new straightforward enforcement mechanism to secure compliance with REAs instead of resorting to a criminal prosecution. A complaint about non-compliance by an employer with an order of the Labour Court for compliance with an REA may be brought before the Circuit Court by or on behalf of the worker concerned or the Minister if he or she considers it appropriate to do so. The Circuit Court shall make an order directing the employer to comply with the terms of the Labour Court order.

Section 9 amends the Act by introducing new inability to pay provisions in respect of REAs. While these are substantially the same as those proposed in regard to EROs, to which I will refer later, the inability to pay mechanism would only apply where the REA itself permits it to apply. Accordingly, where an REA so provides, an employer in financial difficulty may apply to the Labour Court seeking temporary exemption from the requirement to pay the rates of remuneration in the agreement.

Part 3 deals with the JLC system and the making of EROs. Section 11 amends the 1946 Act to provide that the Labour Court will, following the commencement of this Act and at regular five year intervals thereafter, conduct a review of each JLCs. Following such review the Labour Court may recommend that a JLC be abolished; a JLC be amalgamated with another JLC; or that the establishment order for a JLC be amended.

The Duffy Walsh report had recommended that reviews of the establishment orders of existing JLCs be undertaken periodically to ensure the range of establishments to which they apply remains appropriate and that necessary amendments might be made to the establishment orders by which they were created. I intend to proceed in advance of the enactment of this Bill to apply to the Labour Court requesting the abolition of a number of JLCs that were identified in the report as having ceased to function effectively or to be unduly small in terms of the numbers employed. I shall ensure the general review of the establishment orders of all remaining JLCs shall take place before a JLC proposes a new ERO under the terms of the Bill, when enacted.

The High Court in the John Grace Fried Chicken case declared section 42 of the 1946 Act to be unconstitutional because it was invalid having regard to the provisions of Article 15.2.1 of the Constitution, which provides that the sole and exclusive power of making laws for the State vests in the Oireachtas. The High Court judgment found that section 42 failed to prescribe sufficient principles and policies to govern the exercise of the powers conferred on JLCs under the Act. Section 12, accordingly, introduces the necessary amendments to the 1946 Act to establish the "principles and policies" to which a JLC must have regard from now on when formulating proposals to submit to the Labour Court for EROs.

The new provisions will guide the formulation by JLCs of proposals on the fixing of remuneration and conditions of employment and will also provide for the regulation of the JLC's own decision-making process. The constitutionality of the restored JLC system should be strengthened as the Bill not only provides for a direct role by the Minister in making EROs in future, but also ensures that, with regard to all such orders, including orders for the establishment, variation or abolition of JLCs, he or she may refuse to make any order that he or she considers inappropriate. If the Minister is not satisfied that it is appropriate to make an order, he or she may refuse to do so and notify the Labour Court of the reasons for the decision. These measures are also complemented by the standard scrutiny procedure for the laying of orders before both Houses of the Oireachtas.

Whereas previously an ERO could provide for any number of different rates of pay for different categories of workers, the Bill provides that a JLC may make proposals for a basic rate and two service-related increments. The Government has decided, moreover, to examine how the fixing of the two additional higher rates might take account of the standards and skills recognised for the sector concerned. The adult wage rates that may be proposed by a JLC will also be linked to sub-minimum rates that will apply in the same proportions as were originally fixed under the National Minimum Wage Act 2000 in respect of employees aged under 18 years, first-time job entrants, and employees undergoing training.

The Bill provides for a commonsense or straightforward definition of "remuneration" for the purposes of formulating proposals for EROs, which excludes the following matters from the scope of employment regulation orders: pay or time off work in respect of public holidays; Sunday premiums or equivalent compensation for Sunday work; payments in lieu of notice; or redundancy payments. JLCs will no longer set Sunday premium rates or other specified conditions of employment covered by universal standards provided for in existing legislation but the special position of Sunday working will still be recognised under the Organisation of Working Time Act 1997

Section 12 inserts a new provision in the 1946 Act to provide for the regulation of the decision making procedures the reception of representations by a JLC and a requirement that the committee's chairman shall have regard to a relevant Labour Court recommendation in the event of a casting vote being exercised. These provisions address a significant weakness in the constitution of JLCs, as the original legislation did not contain an express provision whereby an affected party could make an objection directly to the Labour Court before it made an ERO nor did it require the chairman of a JLC to include details of the objections made in his or her report to the Labour Court. The Bill provides that the chairman must furnish the court with all the material considered by the JLC in formulating the proposed ERO, including submissions received from interested parties. It also provides that the court can hear all interested parties before making a decision on the proposals.

The Bill provides that a JLC chairman will be responsible for facilitating the parties represented on a committee in seeking to reach agreement and, where no further efforts are likely to advance the resolution of the difference between the parties, the outstanding matters may be referred to the Labour Court. It also sets out clear guidance regarding the factors to be taken into account by the Labour Court in making a recommendation in the circumstances of a reference made by a JLC that has failed to reach agreement upon specific proposals. In the event that agreement is not reached within a joint labour committee following its consideration of a Labour Court recommendation made in these circumstances, the JLC must vote on the issues in dispute and if the votes are tied, the chairman of the JLC shall exercise a casting vote having regard to the recommendation of the court.

Section 13 inserts a number of amendments to replace provisions struck down by the High Court judgment in the John Grace Fried Chicken case. The High Court judgment highlighted how questions about the appropriateness of criminal sanctions exacerbated concerns about the delegation of broad regulatory powers to bodies such as JLCs and the Labour Court. The new Bill follows the recommendation of the Duffy Walsh report by introducing an alternative enforcement mechanism to criminal prosecutions. The new enforcement mechanism will offer an alternative to a criminal prosecution by enabling a complaint about non-enforcement to be brought before the Labour Court.

The new provision will enable a complaint about contravention of an employment regulation order to be made to a rights commissioner. Up until now the District Court could, in the event of a successful prosecution, order payment to the worker concerned of the difference between the remuneration prescribed by an ERO and the amount actually paid. The Bill establishes a new remedy for workers which puts them in a stronger position than they were before for the purposes of claiming money from employers who are found not to have complied with EROs. The objective is to bring sanctions for breach of EROs into line with the generally accepted standard that sanctions should be effective, proportionate and dissuasive.

Where an employer fails to carry out a determination of the Labour Court the new Bill ensures that it can be enforced by the employee, the trade union or the Minister in the Circuit Court without hearing the employer or any evidence on the complaint. The court may order the employer to pay interest on the award. The compensation payable to a worker by virtue of a rights commissioner's decision or a determination of the Labour Court shall be given priority in the distribution of the assets of a company being wound up or in bankruptcy.

The new enforcement mechanisms are strengthened by enabling the Minister to present a complaint to the rights commissioner in circumstances where a breach of an ERO has occurred and it is unreasonable to expect the employee to present a complaint. The complaint so presented by the Minister shall be treated in the same way as if it were a complaint from the employee.

Section 14 provides for a derogation from the scope of EROs for companies in cases of financial difficulty. These provisions mirror the mechanisms for claiming an exemption from the requirement to pay the rates of remuneration in an REA at section 9.

The basis for claiming an exemption on grounds of inability to pay is less restrictive than the equivalent measure under the National Minimum Wage Act 2000 which has never been used to date. While the objective of the provision in the Act of 2000 was that the relief sought by an employer would be available in cases where a majority of employees so agree, the new provision covers situations where a majority of employees may not necessarily agree, but where it can be proved to the satisfaction of the Labour Court that there is a genuine, albeit temporary, inability to pay and that appropriate safeguards can be assured.

The maximum period of an exemption will be 24 months and must be for a minimum of three months. An employer will not be entitled to seek an exemption if he or she has already been granted an exemption in respect of the same workers in the previous five years.

In the absence of an agreement with the majority of the workforce, the Labour Court must be satisfied that the employer has informed the workers concerned of the financial difficulties of the business and has attempted to reach agreement with the workers concerned; the employer is unable to maintain the terms of the ERO; and requiring the employer to comply with the ERO would result in a substantial risk that a significant number of the workers concerned would be laid-off or made redundant, or that the sustainability of the employer's business would be significantly adversely affected.

The Labour Court must also have regard to whether granting an exemption might have an adverse effect on employment levels and cause a distortion of competition in the sector to the detriment of employers not party to the particular application. In addition, the Labour Court must have regard to the implications of granting an exemption for the long-term sustainability of the employer's business.

Section 15 provides that, in the context of the reconstitution of existing joint labour committees, all current independent members of the JLCs would cease to hold office and that new appointments will be made. Independent members will in future hold office for a period not exceeding five years.

Section 16 provides for consequential amendments to the Employment Permits Act 2006 and the Organisation of Working Time Act 1997.

Section 17 amends the Protection of Employees (Employers' Insolvency) Act 1984 to ensure that payments due to a worker arising from a decision of a rights commissioner or a determination of the Labour Court made under this Bill when enacted will be treated as debts for the purposes of employees' rights on the insolvency of their employer. Section 18 strengthens the provisions relating to informing workers of their statutory entitlements by requiring the employer of any worker to whom an ERO or REA applies to include the terms of that ERO in the written statement of terms of employment to be given to the worker under section 3 of the Terms of Employment (Information) Act 1994. The section also provides for prompt rectification of incomplete or incorrectly stated terms by allowing a NERA inspector to give directions to the employer concerned.

The present arrangements for effecting compliance with the obligation to provide employees with a written statement of their terms of employment have proved unsatisfactory. The only remedy for employees has been to make a complaint to a rights commissioner and seek compensation, which can be up to four weeks' remuneration. This procedure can result in delays and is often contrary to the best interests of employees. Improving the arrangements for providing timely information are preferable to focussing exclusively on an eventual award of compensation. The new approach will enable matters to be rectified earlier at workplace level thereby avoiding unnecessary recourse to rights commissioners and on appeal to the Employment Appeals Tribunal.

It is my intention on Committee Stage, and following further more detailed consultation with the social partners and other interests affected, to bring before the House a number of amendments in order to clarify or strengthen certain provisions of the Bill, in particular, those dealing with the principles and policies applying to the framing of REAs and EROs, the timeframe for the variation of REAs, and the provisions regarding the granting of temporary exemptions from the obligation to pay the terms prescribed under EROs and REAs.

To complement the provisions of the amending legislation, I intend to proceed with the following additional reforms: taking steps to reduce the number of JLCs currently in place from 13 to 6, through a process of abolition or amalgamation, using my powers under section 40 of the Industrial Relations Act 1946; and standardising benefits in the nature of pay, including overtime and the conditions under which it becomes payable, across sectors covered by JLCs either by means of a nationally-agreed social partnership protocol or a statutory code of practice, through a request to be made to the Labour Relations Commission to initiate social partner consultations to this end. I will arrange for the preparation of a new statutory code of practice on Sunday working to provide guidance to employers, employees and their representatives in sectors covered by EROs, on arrangements that may be put in place to comply with the options specified at section 14 of the Organisation of Working Time Act 1997. The rights commissioner or Labour Court will have regard to this code in making a decision, and implementation and enforcement will be as per the Act of 1997. I intend to request the Labour Relations Commission to prepare the code. The code of practice will subsequently be given formal status by means of a ministerial order.

Together with the restoration of the minimum wage to €8.65 per hour with effect from 1 July 2011, the reform of the statutory wage setting machinery operating at sector level, and putting the JLC and REA systems on a more secure legal and constitutional footing, represents a significant commitment by the Government to protect the lowest paid and most vulnerable workers. The overall effect of these reforms will be to substantially reduce the burden of record-keeping and compliance on employers. The Bill will make the long-established minimum wage setting mechanisms fairer and more responsive to changing economic circumstances and will eliminate rigidities that are considered to have had a negative impact on competitiveness and jobs in the affected sectors.

I commend the Bill to the House.

See this speech in context