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Industrial Relations (Amendment) (No. 3) Bill 2011: Second Stage (Resumed)

Thursday, 19 January 2012

Dáil Éireann Debate
Vol. 752 No. 2

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Question again proposed: “That the Bill be now read a Second Time.”

Deputy Seamus Healy: Information on Seamus Healy Zoom on Seamus Healy I welcome the opportunity to speak on the Bill. The Bill arises from the striking down of the joint labour committee, JLC, and employment regulation order, ERO, legislation by the courts. It had been hoped that the Bill would have been introduced earlier than this but it is before the House now and I intend to oppose it.

The effect of the Bill is a decision by the Government to cut the wages of the lowest paid workers in this country. The exclusion of the Sunday premium is a direct cut in wages for the lowest paid workers. More than 200,000 low paid workers are affected by this legislation. This comes at a time when everybody, particularly the low paid, is under significant pressure due to the recession. The Government is ensuring that people such as these workers, who had no hand, act or part in the creation of the recession, are being made to pay for it and is piling more misery on them by effectively cutting their wages.

It is all very fine for Members of the Dáil and the Seanad who have healthy incomes and are effectively immune from the recession. However, we are introducing a Bill the effect of which will be to reduce the income of people on the lowest rungs of the ladder. In doing that we are increasing inequality in the country. There is already clear evidence that the gap between rich and poor has been widened in the past number of years and this Bill will widen that gap further. It piles further misery on a group of workers who are being hit left, right and centre to pay for a recession they did not create.

At the same time, very wealthy individuals are not paying their fair share of tax. Figures from the Central Statistics Office in October last year showed conclusively that the net financial assets of the wealthiest people in this country had increased by €46 billion in 2009 and 2010. In the teeth of the recession very wealthy people in this country have increased their wealth by enormous amounts. These people pay no wealth tax, even though a wealth tax is a normal method of taxation in other countries, including in the United States of America. They have [256]huge incomes and assets but no wealth tax, yet this Bill will reduce the weekly income of the lowest paid people in the country. That is unacceptable. It is an insult to those people and it should and must be reversed.

The reduction in income of these workers will also have an effect on the economy by reducing demand, which will have a knock-on effect on every high street in every town and city in the country. We already have seen the closure of retail businesses in towns and cities. This Bill will mean there will be less money circulating and fewer people going into the shops, which will lead directly to further closures and further reductions in employment.

As bad as that scenario is, the stakeholders on the employers’ side are opposing this legislation. The Irish Business and Employers Confederation, IBEC, has said that the legislation is misguided and unnecessary, and that the entire JLC system should have been consigned to history. It also said, which I consider to be a threat, that the JLC system will be fraught with constitutional uncertainty and will be open to further legal challenge. That is the type of comment we get from the employers’ side on this legislation.

There are no economic studies or statistics and there is no economic evidence to show that cutting the wages of the low paid will create employment. All the indications point in the other direction, namely, that reductions in wages reduce demand and deepen the recession.

Irish labour costs are significantly lower than the European Union average. The most recent figures available show labour costs were 6% below the EU average in 2008 and since then labour costs have declined further. Not only are Irish labour costs not out of line, if anything the figures show they are significantly below the EU average.

The Bill refers to comparisons between wages here and wages in “other relevant jurisdictions”. This is a flawed approach because when making such comparisons, one cannot focus solely on wages. One must take account of purchasing power and various social supports that are available in other jurisdictions. The Bill will effectively abolish the Sunday premium which amounts to a reduction in wages for the low paid.

The inability to pay clause undermines the joint labour committee system. The Duffy Walsh report recommended that inability to pay periods should not exceed 12 months whereas the Bill provides for a two year period. This is a significant departure from the report and one which undermines the JLC system. In addition, the legislation does not provide workers affected by an inability to pay provision with a right to examine the books of their employer. Such a right should be included in the Bill.

The Bill includes an unusual reference to unemployment as a factor which may be taken into consideration. Does this mean that the higher the unemployment rate, the lower the wage rate?

It is contended that the legislation will not affect existing contracts. Anyone who lives in the real world will be aware that while this may be the case on paper, the outworking of the legislation on the ground and conditions in the workplace will ensure that, far from not having an effect on existing contracts, the Bill will make it easier for employers to force employees into changing contracts. They will give staff the impression that contracts must be changed as a consequence of the introduction of this legislation.

As I noted in respect of the Protection of Employees (Temporary Agency Work) Bill, enforcement is an important issue. The labour relations machinery of the State is in turmoil, with those seeking to avail of it facing long delays. As we all know, justice delayed is justice denied. Despite the significant problems being experienced in the area of labour relations, the legislation does not provide for additional resources to ensure enforcement is carried out properly and expeditiously.

[257]The National Employment Rights Authority, NERA, is under-resourced. According to its most recent report, it carried out 2,350 inspections in 2011, a significant reduction on the previous year when it carried out 3,000 inspections. The authority also found a low rate of compliance with employment law. For example, the rate of compliance in agriculture, catering, retail and hotels was 42%, 26%, 28% and 26%, respectively. Compliance in the area of contract cleaning, which was among the better performing sectors, was above 50% and the general compliance rate was around 55%.

The enforcement of employment legislation, including this Bill and the Protection of Employees (Temporary Agency Work) Bill, both of which fall under the remit of the labour relations machinery and NERA, is insufficient because inadequate resources are available to ensure proper compliance. While I understand NERA has increased the number of its inspectors by approximately 15, these additional staff will not be sufficient to properly resource the authority.

The main problem with the Bill is that it effectively introduces a wage cut for the lowest paid workers in the State at time when very wealthy people are not paying their fair share. This is not good enough. The legislation must be amended to provide for a legal entitlement to a Sunday premium, as was the case in the past. Failing that, I will oppose the Bill because it is unthinkable that Deputies and Senators, who live comfortably and are effectively immune from the recession, would introduce legislation that would cut the wages of low paid workers.

Deputy Andrew Doyle: Information on Andrew Doyle Zoom on Andrew Doyle I welcome the progression of this Bill through the House. Some people say one should never waste a crisis to create an opportunity. Last year when John Grace challenged the constitutionality of the JLCs and REAs in the High Court, it proved what we suspected, that is, that they were not fit for purpose in today’s environment and for employees, employers and the economic position which the country is in. The opportunity arose to bring in more pragmatic, relevant and up-to-date legislation which reflected the needs of employers and allowed them to create and maintain employment and maintain a viable business while at the same time being fair to workers.

In regard to what Deputy Seamus Healy said, those subject to a JLC or a registered employment agreement are not the lowest paid people.

Deputy Seamus Healy: Information on Seamus Healy Zoom on Seamus Healy They are in low paid employment.

Deputy Andrew Doyle: Information on Andrew Doyle Zoom on Andrew Doyle Every JLC rate is set higher than the minimum wage which was increased by €1, as per the jobs initiative last year. Anyone employed under the terms of a JLC or a registered employment agreement is in receipt of a payment in excess of the minimum wage, so he or she is not the lowest paid.

Sunday working time is recognised as having a special position. Under the Organisation of Working Time Act 1997, a special code of practice is to be devised. Already, it must be recognised by extra payment, time off in lieu or a special rate of overtime. There is already legislation in place to protect the Sunday premium.

This is about trying to maintain employment and protect workers. It is meant to be fair. Generally speaking, if one tries to be fair to everybody, one will probably please nobody. That is a general rule of thumb. That this legislation has not exactly enthused everybody is significant and shows it is being fair to everybody.

We had 13 JLCs which reflected a different time and a different employment structure. Some of the positions and sectors covered no longer exist. There are new sectors which were not even considered when JLCs, REAs and EROs were devised. A minimum wage was not in place nor were other employment and employee protection rights. The High Court ruling was [258]that they were no longer constitutionally valid. In 1976 or 1977 when a constitutional challenge was about to be taken in regard to poor law valuation rates, we know what happened. A pre-emptive decision was taken to abolish rates because poor law valuations reflected a different era when canals and railways were more important than roads and other sorts of infrastructure. If it was to apply today, it would probably include access to broadband, etc. Things move on and it is necessary that legislation reflects that.

The number of JLCs will be reduced from 13 to six and those that remain will have to be confirmed by the Labour Court which will monitor them. It will also have the ability to review them from time to time. This is very important in the context of trying to ensure JLCs reflect the time in which they function.

Deputy Seamus Healy said NERA had increased its inspectorate by 15. We have been told, with some justification, that regulation has a stranglehold on many businesses. One will know from talking to those in the hotel business that there are probably in excess of 30 different pieces of employment law to which they must adhere, especially if dealing with food. Between employment law and compliance, it is almost a full-time administrative job for one person in a modest sized business. None of us wants to add to that. We want to make it easier to create a job and to take a job, and for both sides to be incentivised.

This is not about trying to reduce the disposable income of low paid workers but about trying to be fair to them. It will be a little while before the effect of these measures, which are all incremental, becomes tangible.

If we get more people working, we will get more people spending, more businesses paying commercial rates and more PAYE income. Each time we transfer one person from jobseeker’s benefit to employment, the State gains at least €20,000. Conversely, anyone who goes on the live register probably costs the State that amount. That is the financial aspect. The social aspect is for another discussion.

This legislation is being introduced to provide a fair system for employers and employees and to protect their rights using existing legislation. It will ensure the JLCs, REAs and EROs which follow are not too cumbersome and bureaucratic. That is the key and is what the Government is setting out to achieve. I commend the Minister on bringing in this legislation so swiftly, as he promised.

Deputy Mary Mitchell O’Connor: Information on Mary Mitchell O'Connor Zoom on Mary Mitchell O'Connor I broadly welcome the provisions of the Industrial Relations (Amendment) (No. 3) Bill 2011. This legislation will strengthen the constitutionality and the legal framework of EROs and REAs in light of deficiencies in the original legislation. It will ease the concerns of some of our most vulnerable workers by reinstating protection for workers in the relevant sectors. A balance needs to be struck between the interests of employees and employers. The previous legislation in this area was outdated and inflexible.

Evidence has proved that the sectors covered by the JLC and the ERO system have been hit hardest by this recession. There has been a 60% loss of employment in construction and 15% in the retail-wholesale sector. Retail and catering have seen a 20% loss in employment in the past three years. I understand the lack of demand in these sectors is clearly a key factor but labour costs represent a relatively high proportion of total costs.

However, in this environment, it is necessary to ensure that structures are flexible and adaptable in changing circumstances and that they reflect the realities of our modern economy. Future wage rates must be tailored to the specific circumstances and the needs of the Irish economy. The focus of reform should be on the process and procedures relating to JLCs and REAs. The suggestion that reform is designed to penalise is simply wrong. If the process and [259]procedures are right, sustainable long-term wage rates will be established and the boom-bust cycle of the past decade broken.

The State, businesses and workers and their families are now experiencing the painful unwinding of previously unsustainable wage agreements which were out of sync with real growth rates in the economy and which pushed up costs elsewhere in the economy to the detriment of people’s purchasing power. Reforming the process and procedures is of two-way benefit to workers and employers. The provision in the legislation allowing companies to derogate from the EROs and REAs in cases of financial difficulty will provide essential support to viable companies that are struggling due to the economic climate. I am aware of cafes, restaurants and family businesses in the Dún Laoghaire-Rathdown area that close their doors on Sunday due to high staff costs imposed by the Sunday premium rate. This will streamline work in this area and make it more accessible. My recommendation is that agreements should have a defined lifetime to prevent sectors becoming stranded with uncompetitive rates as economic circumstances change. Unions and employers would be forced to engage in realistic negotiations if they realised the existing agreement was due to wither within a defined timescale. Variation procedures for both sides are cumbersome and need to be streamlined.

  1 o’clock

Deputy Terence Flanagan: Information on Terence Flanagan Zoom on Terence Flanagan I also support this Bill, the main purpose of which is to implement and reform the proposals in line with the Government’s commitment in the national recovery plan and to reform the JLCs and provide for a stronger legal framework under the Industrial Relations Acts 1946 to 2004. Until 7 July, the Labour Court made EROs, confirming proposals submitted by JLCs. The orders were legally binding until 7 July, when the High Court ruled that legislation delegating powers concerning pay and conditions to JLCs was unconstitutional. The High Court came to the conclusion based on the fact that the 1946 Industrial Relations Act provided for JLCs to make orders on wages but the Act did not contain any principles to guide them in doing so. Furthermore, they were empowered to act without any supervision from the Executive or the Parliament. Infringement of the 1946 Act was a criminal offence, making the employer liable for conviction or payment of compensation to an aggrieved worker. Therefore, a committee with delegated powers was enabled to make an order, the breaking of which was a criminal offence without any accountability. Mr. Justice Feeney considered that the lack of principles in guiding JLCs to make a decision could lead to arbitrary and unreasonable orders, which is why that case on 7 July effectively served to remove the protection of workers after the section of the Act setting up JLCs were deemed to be invalid. The Government was keen to act as a consequence of this and new legislation is necessary in order to reinstate a robust system of protection for workers in sectors covered by such arrangements affected by the High Court decision.

The objectives of the Bill are to put the JLC system on a more secure legal and constitutional footing, to take full account of the judgment by the High Court and to ensure certain provisions of the Industrial Relations Acts are no longer contrary to the Constitution. A further objective is to meet the State’s requirements to carry out labour market structural reforms under the EU-IMF programme of financial support for Ireland.

Regarding the main provisions of the Bill, JLCs will have the power to set adult rates and two additional higher rates based on the length of service in the sector or enterprise concerned and the standards or skills applicable for that sector. The new system will set the hourly rate of pay for 200,000 workers. The introduction of one main wage level will eradicate the major variance in hourly rates present under the old system. There were 300 different hourly rates under the old system, which is excessive. JLCs will be required to take into account economic and industrial relations factors and must be more aware of pay rates in comparable sectors at home and in other jurisdictions, benchmarking rates against other countries. JLCs will no [260]longer set Sunday premium rates or other conditions of employment covered by universal standards that are already provided for in legislation. However, special recognition will be given to the status of Sunday working and will be achieved mainly through adherence to the Organisation of Working Time Act, which sets provisions such as time off in lieu. This will be a flexible measure for employers and gives them the opportunity to give employees more time off as opposed to having to pay workers extra. We know about the lack of competitiveness and the major costs for employers at present, making this a welcome development for both sides.

In order to ensure the legislation does not stifle competition and hamper new opportunities for employment, companies will be entitled to derogate from EROs in cases of financial difficulty. This will be policed strictly by the Labour Court, which must be satisfied that the criteria have been met before the employer is entitled to claim inability to pay. The derogation will be granted for a limited period where it is proven that there is economic difficulty on the part of the employer. The employees must be consulted about this. The Minister for Jobs, Enterprise and Innovation is also providing for civil remedies in the Bill as opposed to criminal sanction. The burden of compliance in small companies, which must employ one person to keep up to date with the current system, will be reduced and record-keeping requirements will be reduced. Consequently, hiring costs should be reduced. Overall, this is a positive development and will improve our competitiveness.

The Minister also wants to reduce the number of JLCs from 13 to six. Overtime will be agreed through a nationally agreed protocol and code of practice, in consultation with employers and trade unions. The Bill is a necessary measure following the High Court decision to strike down a decades old law setting wages for low paid workers. It is necessary to ensure there is protection in place for low paid workers and the last thing the Government wants to see is vulnerable and low paid workers being exploited by employers. By reinstating such protection for low paid workers in this country, the Minister, Deputy Bruton, has taken the opportunity to overhaul the old system and ensure the new system strikes a balance between protecting vulnerable workers and ensuring employers are not tied to an onerous and overly restrictive agreement with employees. The new legislation is a groundbreaking and comprehensive item of industrial relations legislation. It is probably the best in a long time. The Minister has strived to allow for new employment opportunities to be created, while protecting existing employees. The fact that companies can derogate from the terms of EROs in cases of financial difficulty is important and allows flexibility. The legitimate interests of employers and employees will be protected through this legislation.

Minister of State at the Department of Education and Skills (Deputy Ciarán Cannon): Information on Ciaran Cannon Zoom on Ciaran Cannon Most of the contributions to the debate on both sides of the House have welcomed the publication of this Bill. It would be helpful if there were Members from the Opposition side of the House present at the conclusion of this debate.

Deputy Andrew Doyle: Information on Andrew Doyle Zoom on Andrew Doyle Hear, hear.

Deputy Ciarán Cannon: Information on Ciaran Cannon Zoom on Ciaran Cannon Members have acknowledged the progress made in framing the proposals to strengthen the legal framework for EROs and REAs, originally established in the Industrial Relations Act 1946. Deputies have expressed an appreciation for the manner in which it is proposed in the Government’s Bill to give legal effect to the recommendations of the independent review on the reform of these sectoral wage setting mechanisms and to take the necessary action to rectify the deficiencies in the original legislation identified in the High Court judgment of 7 July 2011 in the case of John Grace Fried Chicken Limited.

[261]Deputies Browne and McConalogue have, however, criticised the Bill for failing to accept many of the recommendations of the Duffy Walsh report. This is patently not the case. Let me be clear. The reform proposals for the JLC and REA mechanisms agreed by Government in July last, and now reflected in this Bill, deal comprehensively with the recommendations made and issues raised in the Duffy Walsh report, as well as the outcome of the July High Court ruling.

Some Deputies have, however, taken a negative stance on the proposals in the Bill. They disregard the fact that it is a necessary step to restore the JLC system and to place the mechanisms for setting sectoral minimum wages on a sound constitutional footing. Instead, they chose to see the proposed measures as a part of an attempt to drive down wages, limit worker protections and ultimately wind down the systems of statutory wage protection. They are very much mistaken in this view.

Some Deputies considered the new criteria to be observed in the making of EROs to be too restrictive or to fail to achieve sufficient balance between the interests of employers and employees. Some took issue with the requirement that JLCs and the Labour Court should have regard to factors such as wage rates in comparable sectors in other relevant jurisdictions. Deputies have for the most part, however, recognised the need to strike a balance between striving on the one hand to make our economy more flexible, more competitive and more productive and the necessity to maintain a robust system to protect vulnerable workers. This is what the Bill seeks to achieve.

The new criteria to be observed in the making of EROs take the form of principles and policies that have been prepared in the light of the High Court judgment in the John Grace Fried Chicken case. Whenever proposals for a variation of the ERO are made, these criteria will be used in determining the validity of any variation. Similarly appropriate policies and principles will also have to be observed when REAs are created, varied or cancelled.

The Bill provides that JLCs will be permitted to set a basic adult rate and two supplementary minimum rates. Deputies welcomed the way in which this reform would substantially reduce the number of rates that had been prescribed in 17 different EROs. In addition, JLCs will be free to establish two higher rates based on length of service in the sector or enterprise concerned. The Minister indicated he will examine how the fixing of the two additional higher rates might take account of the standards and skills recognised for the sector concerned.

Deputy Daly was concerned about the issue of skills. She queried how the sub-minimum rates would be applied to employees undergoing training. I can assure the Deputy that a course of training or study will have to satisfy strict statutory criteria in order for an employer to pay an employee the trainee rates. The position will mirror the arrangements under the National Minimum Wage Act and will be supervised by NERA.

A number of Deputies have spoken against the proposal to exclude the fixing of Sunday premiums from the scope of EROs made by JLCs. Deputy Boyd Barrett is mistaken in claiming that overtime rates will be taken out of the remit of JLCs. That is not so. The only exclusions relate to holiday pay, Sunday premiums, payments in lieu of notice and redundancy payments.

Deputy Dara Calleary made a very thoughtful intervention on the issue of working time options and payment for rest-days. His contribution reflected his past experience of seeking to legislate in this area. He joined with Deputy Buttimer in calling for a wider debate on Sunday work and how to accommodate different preferences and lifestyle choices about days of rest. That is an issue that might be considered when the Labour Relations Commission is called upon to undertake its statutory role to formulate a code of practice. Deputy Nash also recommended that lessons should be learned from the history of the 1998 code of practice on Sunday working in the retail trade.

[262]Some Deputies took issue with the proposal in the Bill that will enable companies to derogate from the terms of EROs and REAs in cases of financial difficulty. Most Deputies welcomed the safeguards that have been built into the Bill to ensure the protection of employees’ entitlements. They welcomed the detailed requirements upon which the Labour Court must be satisfied, especially as regards avoiding any distortion of competition, before it can determine that there is a genuine, albeit temporary, inability to pay.

On clarifying the meaning of “substantially representative parties”, Deputies Tóibín and Daly appear confused about the requirement that parties to an REA be substantially representative of workers and employers in their respective sectors. I can assure the Deputies the provision does not involve any implications for trade union recognition. There is already a requirement under section 27 of the Industrial Relations Act 1946 that the Labour Court be satisfied that the parties to the agreement, whether they be employers or trade unions, be substantially representative of those to whom the agreements relate and their employers. The Duffy Walsh report recommended in favour of an amendment so as to remove an uncertainty that has arisen about how the requirement is applied in practice. That uncertainty has now been removed by a clearer definition.

Deputies O’Dea and Browne voiced concern about the discretion the Minister can exercise about whether to make EROs and-or to confirm REAs following their adoption by the Labour Court. Let me make it clear that this is an additional safeguard that has been deemed necessary to enhance accountability to the Oireachtas in response to the High Court judgment that held that the Act of 1946 constituted an excessive delegation of powers to the JLCs and Labour Court to fix minimum standards of remuneration and terms and conditions of employment for particular sectors.

A number of Deputies have made the point that NERA’s statutory role in the enforcement of EROs has been removed by this Bill. This is not the case. The Duffy Walsh report recommended in favour of decriminalising the enforcement process of EROs. It makes sense, as Kevin Duffy and Dr. Walsh recommended, to enable NERA to bring a complaint to a rights commissioner on behalf of an individual or group of workers rather than retain the current arrangements where enforcement is only by way of a prosecution before the District Court.

Section 52 of the Industrial Relations Act 1946 and section 49 of the Industrial Relations Act 1990 already provide for the enforcement of EROs by NERA. Under these provisions, an inspector can institute civil proceedings on behalf of a worker in respect of the failure of the employer to pay the statutory minimum rate of remuneration or comply with a condition of employment respectively in an ERO. This will continue to be the case. Moreover, in regard to the Sunday premium, NERA inspectors will continue to inspect records of employers to ensure compliance with the obligation under the Organisation of Working Time Act to compensate a worker who is required to work on a Sunday, in addition to compliance with all other relevant employment legislation.

I agree with Deputy Calleary about the need for timely adjudication and the need to avoid delays in processing complaints. He welcomed the timebound process by which REA terms may be varied in future by the Labour Court in exceptional circumstances without consent of all parties. I agree with him that the modernisation of the statutory wage setting machinery has to be viewed in the context of the overall programme of reform of the State’s employment rights and industrial relations procedures and institutions.

The Minister has confirmed that it is his 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 [263]Bill. These should address a number of areas on which Deputies raised concerns, including those provisions 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.

This 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 thank the Deputies for their contributions and assure them that the points they have raised will be given further consideration in the practical work ahead on Committee Stage.

Question put and agreed to.

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