Industrial Relations (Amendment) (No. 3) Bill 2011: Discussion

I welcome everyone to the meeting. The subject of our discussion today is the Industrial Relations (Amendment) (No. 3) Bill 2011 and related issues. Each of the three sessions is scheduled to last approximately 45 minutes and I will try to stick to this time limit as far as possible in order to facilitate the witnesses who have agreed to meet us. If extra time is needed, we can provide it, but to facilitate everyone, we will not delay. In the first session we will hear from IBEC and the Local Jobs Alliance, in the second from ICTU and UNITE and in the third from Mr. Rossa Fanning, a barrister at law who is a leading expert in this area. I welcome from IBEC Mr. Brendan McGinty; Ms Rhona Murphy, head of the employment law service; and Mr. Loughlin Deegan, senior adviser - employment rights; and Ms Tara Buckley, Mr. Tim Fenn and Mr. Padraig Cribben from organisations under the umbrella of the Local Jobs Alliance.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to this committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a person or persons or an entity by name or in such a way as to make him, her or it identifiable. Members should be aware that under the salient rulings of the Chair, they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I call Mr. McGinty to make his presentation. He will be followed by Ms Buckley.

Mr. Brendan McGinty

I thank the Chairman and members of the select sub-committee for giving us the opportunity to discuss with them some of the main issues which we believe should be central to their consideration of the Industrial Relations (Amendment) (No.3) Bill 2011. The irony of this matter being discussed today, just one day after the Government announced its jobs action plan, is not lost on us. Given the ambition outlined in that document to tackle the unemployment crisis which the Government has stated is the number one priority, the acknowledgement in the plan that governments do not create jobs, that they are created by successful businesses and entrepreneurs should be at the heart of the sub-committee's consideration of this issue in terms of the implications for labour costs and the ambition of businesses and employers in Ireland to try to protect the jobs we have and create new ones in order that we can return to growth. It is also fair to say that at the heart of the unemployment crisis is the impact the JLC-ERO system has had on some key sectors such as the retail, hospitality and catering sectors, among others, as a result of having what is effectively a second tier minimum wage, a system of premium and additional payments that have contributed to high costs and undermined the sustainability of jobs. All of that is central to the argument, bearing in mind that labour costs account for approximately 60% of domestic input costs in sectors like retail and hospitality. Our mission, and it should be the shared mission of everybody in this room, is to help business find the right wage levels and get them back in line to ensure we can sustain existing jobs and create new jobs.

The Bill has a number of intentions. They are: to restore an amended version of the statutory provisions on employment regulation orders which were struck down as unconstitutional by the High Court in the Quick Service Food Alliance case; to reform and amend the procedures for registering, cancelling and varying registered employment agreements; and to make several significant amendments to the Terms of Employment (Information) Act.

To be clear, our view is that the effort to revive the system of employment regulation orders is misguided and unnecessary. The system should have been consigned to history. It is worth noting that the High Court decision of last summer did not provoke the crisis that some had predicted would follow. Employers have behaved responsibly and have respected the fact that existing workers have contractual rights to the former employment regulation order, ERO, rates unless and until such workers freely agree otherwise.

As to a number of positives, it is worth acknowledging that the Bill represents a marked improvement on the provisions of the Industrial Relations Bill 2009, which was the last statutory proposal to reform the structures then being considered. The main elements include the following: a much improved set of principles and policies which would guide the formation of employment regulation orders; the provision of an inability to pay mechanism which would allow employers temporary exemptions from the terms of registered employment agreements, REAs, and employment regulation orders, EROs; the exclusion of Sunday premiums and other matters from their ambit; limiting the number of scales of pay to a basic rate plus two service related rates; and, importantly, granting the Minister for Jobs, Enterprise and Innovation discretion to refuse to make an ERO or to confirm an REA if he feels it is not appropriate to do so.

We believe the Bill fails to include a number of key issues that we urge the committee to consider positively. First, the Bill fails to propose realistic limits on retrospective payments to which employers can be liable further to EROs and ERAs. In particular, we believe there is a need to standardise the approach to bring retrospective periods into line with the limitation periods in the Payment of Wages Act, which is a maximum of 12 months prior to the date of a claim.

The Bill fails to abolish the casting vote held by chairmen of joint labour committees, JLCs. That fundamental issue has bedevilled this institutional framework for some considerable years. The basic principle should be that if these are genuine agreements they should be capable of being entered into on a genuinely voluntary basis. The existence of a casting vote means that many EROs are not genuine agreements but measures imposed by one side on the other. There are proposals to ameliorate the problem by introducing a greater role for the Labour Court but that proposal does not address the fundamental problem. The basic tenet of the procedural arrangements should reflect genuine agreement between the parties rather than running the risk that EROs could be imposed by the use or threat of the use of a casting vote which is, typically, what has arisen in the past.

We also believe that in any case where the Labour Court is involved, which might lead to the creation of an employment regulation order, the Labour Court should be required to give written reasons for its recommendations and decisions.

Furthermore, the Bill fails to extend the availability of REAs to workers who are not members of a trade union. A bizarre situation arose where, under our industrial relations legislation, workers, through what is called an accepted body, which is not a trade union, can enter into an agreement in the normal way with their employer but our legislation does not render such an agreement to be an employment agreement within the meaning of the Industrial Relations Act 1946. That should be allowed to come within the remit of an REA.

The inability to pay issue has been controversial in public discourse around the JLC-joint industrial councils, JIC, arrangements. The Bill provides for a possible exemption of between three and 24 months but that needs to be revisited to ensure that where employers are in genuine difficulty they can avail of the maximum period of 24 months and are not caught by the five-year exclusion currently provided for in the Bill.

We also believe that the list of exclusions needs to be elaborated further and, in particular, that there must be express exclusions in respect of pension and sick pay.

We have particular issues around definitions which have proved to be particularly difficult for employers and workers in trying to understand their full liability and coverage. In the past, for example, we have had difficulties where pubs end up being classified as catering establishments and petrol stations end up being classified as grocery stores. To avoid that difficulty we have proposed a double lock mechanism where the scope of JLCs would be limited to specific categories of businesses as well as specified categories of workers.

As far as the REA system is concerned, we have maintained the position through the course of this debate that the REA system should be retained, albeit with significant reforms, because they give rise to the potential of more genuine voluntary agreements within our institutional arrangements. However, the proposal in the Bill to permit the Labour Court to impose variations of REAs on parties that do not want to vary an REA is of particular concern and must be re-examined.

We have major difficulties with the regulatory impact assessment in the explanatory memorandum because in reviewing that and examining the various options set out, the analysis points to a number of key issues that clearly point to the impact on employment and the impact of this additional tier of sectoral minimum wage on the cost base of doing business in Ireland but, amazingly, the REA concludes that the better option is to persist with reform.

In our view the REA has failed to properly assess the impact of special sectoral wage agreements. The reality is that these have been significantly higher than the national minimum wage. How can it be the case that just 100 miles from where we are sitting, employers, relative to their comparator in the Republic of Ireland, are looking at having to apply a minimum wage in the retail grocery sector, for example, of €7.27 and that relative to what was applicable in the retail grocery JLC one is looking at a rate in the Republic of Ireland that is 32% higher?

If we are serious about the jobs agenda, and we believe the Government is serious about it, this must be a fundamental issue. We must get real because we cannot seek to reimpose an institutional arrangement on employers who are operating in the most hard-pressed sectors of this economy, particularly in the domestic services sector where on every high street we are seeing businesses close. We must give those employers a fighting chance and if we are serious about that, the answer is not reinstituting these arrangements in the way they have operated to date. Our desired position is that they will be consigned to history but if the Dáil, in its wisdom, decides to progress with this Bill, some of amendments and further changes to it that we have put forward are essential.

I thank Mr. Brendan McGinty for that. Before we proceed to questions, I invite Ms Tara Buckley from RGDATA, representing the Local Jobs Alliance, to make her contribution.

Ms Tara Buckley

Thank you, Chairman. I thank the members of the committee for the invitation to address them on behalf of the Local Jobs Alliance which, for the record, is a grouping of organisations representing Irish family-owned businesses in the hospitality, retail and services sector. We cover a range of trade associations, including RGDATA, the Local Groceries Trade Association, the Licensed Vintners Association, the Irish Hotels Federation, the Restaurants Association of Ireland, the Vintners Federation of Ireland, the Convenience Stores and Newsagents Association and the Irish Hairdressers Federation. Our respective organisations represent more than 20,000 local entrepreneurs who employ more than 200,000 people and we have all been subject to joint labour committee wage-setting mechanisms.

All the businesses that we represent - local shops, hairdressers, pubs, hotels and restaurants - have been badly hit by the economic downturn. For many of the businesses we represent it is a major challenge just to survive. In the current climate everything is about survival, retaining jobs and covering basic costs rather than making money. When one considers that consumer spending is down by up to 30% in some sectors, the impact on our members, who rely almost exclusively on business generated in the domestic market, is acute. These family-owned businesses have been forced to tightly control all elements of their costs. For most of them, there is a very limited potential of alternative markets in which to generate new business. If they are going to survive over the next few years and keep the 200,000 people working for them in jobs, they must control costs, continually adapt their businesses and increase their competitiveness. The people who work in our members' shops, restaurants, pubs, hotels and hairdressing salons know exactly how challenging these times are. They, too, are working hard to try to keep their businesses viable. Our members value the team who works with them. Their employees are a vital part of their businesses. Good staff are valued as they make the difference between success or failure in a local business.

The Local Jobs Alliance believes that it is imperative as an economy that we prioritise the maintenance of local jobs in local communities. New investment by foreign companies is of critical importance but the jobs in the enterprises that our members represent are the backbone of local employment in communities throughout the country. In many places our members are the only employers providing local jobs. In many instances, our members give people their first job and we also provide vital local part-time work. Our members are good employers. They are honourable people who work with their employees on a daily basis and who want to keep their staff in jobs and keep their businesses going. Unfortunately, the last four years have been a traumatic time and each of us in our representative organisations has dealt with distressed members who are fighting for the survival of their business. We should bear in mind that when one is a self-employed entrepreneur and one's business fails, the protections that are available for such an entrepreneur and his or her family are few and far between.

It has long been our contention that the JLC structure which was established in 1940s, which has involved the imposition of a higher starting hourly rate for people employed in our members' businesses is unfair, outdated and unnecessary. It imposes additional costs on our members by compelling them, with the threat of prosecution, to pay a higher rate than the national minimum wage to employees working for them. It has been an erratic system that fails to distinguish between different types of outlets involved in the same sort of business.

During the past number of years we have seen considerable developments and evolution in the retail, hospitality and catering sectors. The law has not kept pace with these changes and instead has seemed content to categorise different businesses and the employees working in those businesses by reference to how commerce was conducted in the 1940s and 1950s. For example, in my sector, the retail sector, shops are not treated in an entirely arbitrary way but depending on whether they sell certain limited products such as cold pressed ham. The distinctions drawn have been on the basis of geographical difference. If we are serious about maintaining jobs in these difficult and distressed sectors, we must aggressively tackle any inflexible and arbitrary conditions which impose costs on businesses. They were not justified in normal times and they are certainly not justified in times of acute distress.

The Local Jobs Alliance also believes that it is important to inject some balance into this debate. The impression has been created in some quarters that these controls are required to protect vulnerable employees from unscrupulous employers. That is to polarise consideration of the question and to expect policy-makers to make decisions solely on the basis of emotive and often unproven criteria. In effect, the JLC regime has been in abeyance since July 2011 when it was found unconstitutional. The impression was given by supporters of the system that the roof would fall in if the system was found unconstitutional. However, this has not happened. The vast majority of employers have not cut the rates of pay of existing staff; rather, to the largest extent possible, employers have sought to honour existing terms and conditions. We are aware that there have been some instances where employers in businesses facing really difficult times have had to sit down with their employees and with their consent have agreed lower hourly pay rates. This option would not have been open to them had the JLC structure been maintained. In addition, there is also evidence that jobs have been created since the JLC structure was placed in abeyance. In RGDATA's case, we carried out a survey of more than 500 of our members and 60% have employed new staff members since last July, with most of them having come in on the national minimum wage as their starting salary, and others having come in on the JLC rates.

We note the Minister has committed to introducing legislation to reform the JLC structure. Our major issue is that this is unfair, obsolete and unnecessary and we believe that all employees in the country should be treated equally and the employees who work in our businesses should not be treated differently from the employees who work in other businesses. We are concerned that much of this legislation will merely reinstate the discredited regime which the High Court ruled to be unconstitutional. In light of the difficulties that our members face, we believe that this is regrettable and avoidable. It is totally counterproductive for the Government to advance any legislative measure which results in a reduction in employment or the removal of any incentive to create new jobs. Re-imposing the JLC regime, which has as its starting point a higher earning rate than the national minimum wage, will have such an effect.

If the Government is to proceed with this legislation, as it seems intent on doing, we have a number of suggestions that we believe should be included in the Bill to address some of the difficulties that arose with the JLC structure previously. The suggestions we propose will allow the new Bill to operate without damaging the jobs and businesses of the employers we represent. The key recommendation we would make is that in the context of any new JLCs being established, the basic rate which the JLC should assess at the outset of its considerations should be the national minimum wage. It should not be a given that where a JLC is established, the starting point for consideration of rates of pay in that sector is a rate in excess of the national minimum wage. Any increased rate in addition to the national minimum wage must be objectively justified and sustained rather than being imposed by foisting the old discredited system on distressed businesses at this stage. We also believe that the JLC should focus solely on issues relating to pay and should not have any remit over other conditions of employment. These are covered by other legislation, with which all employers must comply, and we believe that is entirely justifiable. They also need to address some of the penalties that are imposed on employers who fail to pay the JLC rates and to align them with other employment legislation in the Payment of Wages Act 1991. We will submit a list of detailed amendments to the Bill to the committee for consideration on Committee Stage.

Given the distress that is in the economy at present and the imperative to maintain and create new employment, the Local Jobs Alliance hopes that this committee and the Minister will recognise that the vast majority of employers who have been impacted by the JLC system in the past are genuine local business people who have no interest in exploiting staff but wish to retain existing employment and are struggling hard to keep their businesses alive. These employers require that any new JLC system should have at its focus the extremely difficult economic conditions that currently exist. The JLC structure must not work to inflate wages at a time when it cannot be afforded or to impose new costs and obligations on employers which are either not necessary or which have the effect of reducing the viability of businesses, many of which are teetering on the brink of survival at present. I hope this committee can focus on some of these people and ensure there is balanced consideration which has regard to the 20,000 businesses we represent and the 200,000 people who work for them in local jobs in towns, villages and communities all over the country.

We are happy to answer any questions that committee members may have.

I thank Ms Buckley and also Mr. McGinty. We will take some questions from members now.

Ba mhaith liom buíochas a ghabháil leis na finnéithe as teacht isteach inniu. Tá fáilte rompu don choiste.

There are many matters on which I agree with the delegates and some on which I disagree with them. I was self-employed until last February and in that role I worked with more than 2,000 individual businesses, so I have good experience in knowing what is affecting small businesses. I agree with the delegates' contention that demand is a major impediment to growth in businesses, and the way in which demand has fallen off a cliff is causing serious danger. Local business is the sector suffering the most and that has had the least support to date. I agree that costs are too high, and when businesses want to become competitive it is important they focus on that. I agree that this reform is necessary, although I would deviate to a certain extent on some aspects of the reform. There is a plethora of areas in which costs are too high, including upward-only rents. Rent in Ireland is 100% more than in the rest of Europe, on average. Grafton Street is the second most expensive street in Europe and the fifth most expensive street in the world.

The cost of labour is something that certain vested interests and groups focus on, maybe because they believe there is an opportunity to achieve a competitive advantage. I would like to hear the views of the delegates on what other costs - for example, upward-only rent reviews - are important. These may include energy costs and rates, which are rigid and do not allow for the difference between profitable and unprofitable businesses.

It is my experience that a business that is drowning will grasp at any competitive advantage or decrease in costs. That is unfortunately what we can see happening. The Duffy Walsh report - one of the most important pieces of empirical research in this area - has stated that there is no evidence that any new jobs would be created. I disagree with Mr. McGinty in one respect, namely, governments create jobs. The Government is probably one of the biggest employers in the State and, if one looks at the top 100 employers in the world, one will find that a good chunk of them - and this is increasingly the case - are state companies. The State has a strong role in creating jobs. However, there is no doubt the State also has a strong role in creating an environment in which private enterprise can grow.

With regard to JLCs, it is important that we as an Oireachtas focus on increasing the general well-being of all people within society as best we can. There is a balance there, but given that the average wage of JLC workers is €18,000, which is half the average industrial wage, they are probably the people who can least afford to take some of the slack in the current system. I would like to hear the ideas of the delegates about what other costs they would suggest.

Mr. McGinty suggested that the JLCs should operate at the minimum industrial wage. Is Mr. McGinty in favour of the current minimum wage, or would he have sought a reduction in that minimum wage? That is an important question. If there is pressure on the minimum wage, to a certain extent, it shows where the argument is. I ask the delegates to detail empirical research their organisations have carried out into the effects of JLCs on employment levels in general across the sectors and with regard to competitiveness. I would like to see some of the research they have been involved in.

I thank the groups for their presentations. Like Deputy Tóibín, I agree with some of what they say, but I also agree on the issue of costs for businesses. Some amendments were suggested in the submissions. With regard to the role of the casting vote, historically, when a casting vote is used, have these decisions favoured employees or employers? Is that information to hand? Mr. McGinty mentioned inability to pay. He stated that if employers can prove their inability to pay, they can avoid implementing the agreements for up to 24 months, and that there is a five-year exclusion period. Which body would determine whether there is inability to pay for the next five years? There are concerns that employers may use this to renege on agreements involving moneys they are able to pay. I ask Mr. McGinty to clarify that.

With regard to retrospective provisions, Mr. McGinty is stating that where EROs and REAs are made, they can apply retrospectively, back to the time when an employee started in the business. Could he clarify that?

We will take answers to those questions and then we will have more questions.

Mr. Brendan McGinty

I will try to capture as much of that as I can. Deputy Tóibín is absolutely right that this is but one set of issues that underpins our capacity to sustain and increase the number of jobs. The issues mentioned by the Deputy include energy costs. Many of the concerns of local businesses are to do with local authority rates, notwithstanding the commitment in the Government's action plan to urge local authorities to show restraint in respect of rates that are set. It is not restraint we want; it is a reduction, bearing in mind the implication of this for many local businesses when there is not much clarity about what those businesses are getting in return for the money they pay. The rent issue has continued to rumble on; this is serious and has an impact on many businesses, notwithstanding the Government's announcement in the budget, which was affirmed in the Finance Bill, of its approach to the NAMA process.

With regard to the cost of labour, we have to understand that for the vast majority of businesses that are covered by these JLC arrangements in particular, the labour cost element is the single biggest factor that influences their capacity to provide a service to their customers. We have mentioned examples before. How is it credible that under the ERO system, as we had it, if a pub decided to serve food on a Sunday it was looking at having to pay a rate of about €12.42 per hour to its workers, while the legal minimum wage is €8.65, although one must consider the issue of Sunday premiums? The key point is that this is capable of being addressed by an individual employer at local level with his or her employees in exactly the same way as for any other employer. The point we are trying to get across is this: why do we feel the employers in these sectors should suffer the implications of this additional imposition, which is effectively a second-tier minimum wage structure? It does not make sense. It did not make sense last year, two years ago or five years ago, but now, given the jobs crisis, with ambitious targets being set for job creation in the hospitality sector, it makes even less sense. In 2011, in the area of hospitality alone, employment rose by about 1,400, according to figures from the third quarter. We know there are seasonal factors - that is fair enough - but we must give these businesses a fighting chance. We will kill that fighting chance if we reimpose a structure that is not capable of sustaining jobs. The committee's foremost consideration must be to ask where the sustainable employment test is in this. That must be the guiding force in its consideration of these issues.

The Deputy made the point that the average wage for those on JLCs is approximately €18,000. However, the national minimum wage, at €8.65, is the second highest in the European Union. The current Government made the decision to put the minimum wage back up to €8.65. We did not agree with that at the time but the decision was made by the Government. If that remains the political position of the Government, it should at least make sure not to kill the potential for growing jobs in the domestic sector among the employers upon whom the jobs strategy will be significantly reliant.

Deputy Kyne referred to the role of the casting vote. To be blunt, we believe history will show that in the vast majority of cases the casting vote would have gone with the workers' side in most of the JLC proposals. That is at the heart of our concerns. An effort is made in the Bill to ameliorate that by putting the Labour Court on the pitch and giving it a much greater role. However, in our review of the Bill there is a real fear that where even JLCs do not bring forward proposals for an employment regulation order, one could have the bizarre situation where the Labour Court, by the back door, might end up bringing forward a proposal to establish an ERO. We do not believe that was the intention of the Government or the Minister, but that is a point of detail where we believe a solution can be achieved in the Bill.

With regard to the inability to pay provision, the main issue is that we want those provisions to be more flexible to permit employers to avail of the full 24 month period of exemption. As we understand the Bill, that matter is determined by the Labour Court in assessing the commercial and trading circumstances of the employer. Bear in mind that this is not, by any manner or means, a hospital pass for the individual employer. There is a level of public scrutiny associated with this so it is not an easy route for an individual company to take. Under the Bill, if the Labour Court were to determine, for example, that a six month exemption was appropriate, there would be a preclusion for a five year period on that employer resubmitting an application. Our argument is that if a six month exemption was granted and the individual circumstances of that employer have not changed, why should the employer be precluded from securing a roll-over of that arrangement to a maximum of the 24 months?

On the issue of retrospection, we do not suggest that it should be backdated to the start of an individual's employment. We simply say that where a liability arises as a result of a failure to comply with a potential liability to a rate under an employment regulation order, that should be streamlined to bring it in line with the established arrangements under the Payment of Wages Act, where the maximum retrospection of liability the employer would face would be 12 months.

Mr. Padraig Cribben

Deputy Tóibín asked a specific question about the minimum wage. At no stage did we call for a reduction in the minimum wage. When the higher rate was re-introduced we did not raise our voice against it, and we are not now calling for it to be reduced.

The Deputy made the point that the Oireachtas should be about the general well-being of all the people. We would not disagree with that. However, why pick some small sections of the commercial business world and of the community and try to create a different scenario for those people from that of the rest of the world? The JLCs, and the employment regulation orders that emanate from them, will create one set of rules for one group and another set of rules for another. I can describe a crazy situation that developed with the old system in the sector I represent. If there were two pubs trading side by side with one providing food and the other not providing food, one was covered by an employment regulation order while the other was not. The barman in one establishment, who did not handle food at all, had a different set of conditions of employment from those of the barman in the establishment next door. Both barmen did not actually handle food and did exactly the same job, so where is the equity in that? There is none.

The Deputy asked about costs. It is a valid question. In any business the 80:20 rule applies; that is, 80% of one's costs are generated by 20% of the issues. There is no point in concentrating one's efforts to get a 10% or a 5% reduction in something that is 2% or 3% of one's costs. As Mr. McGinty mentioned earlier, labour is the single biggest cost.

There is another issue that tends to cloud the discussions in the background of this debate. It is the headline that tends to come from the National Employment Rights Authority, NERA, on non-compliance. One will see a compliance rate of 23%, 25% or 30% in various sectors, leaving a non-compliance rate of 70% or more. That is the headline figure, but it does not tell people that the vast majority of the non-compliance is not to do with wage-related issues or money issues, but is to do with administration issues. It is about whether a particular sign was hanging in a premises, whether that sign was in a prominent position and whether rosters were available. Only a small percentage of the non-compliance is related to not paying the actual rates. It is important that it be put in that context.

Yesterday, the Government announced quite clearly that it is as important to retain jobs as it is to create jobs. It is ten times easier to keep a customer than to find a new customer. What we are seeking is a scenario that allows our members to retain the jobs they have and, where possible, to grow. Initially, we must retain them and in the sector I represent the new profit is survival. We are seeking a scenario where our members are allowed to trade on the same basis as everybody else in the community, with the same rules and regulations as apply throughout the business community, whether they are laid down in the Holidays Act, the Payment of Wages Act, the Working Time Act or otherwise. That is all we are seeking.

Mr. Tim Fenn

The important point about these proposals is that they will not create a single job. In fact, they will lead to a reduction in employment. In our industry, particularly outside Dublin, most businesses are just seeking to survive. In the past three to four years, we have lost approximately 30% of our overseas visitors.

Our biggest problem is in the Great Britain market in the context of payroll costs. Our payroll costs have increased from 32.2% of turnover in 1999 to 42% in 2010. The national minimum wage is €8.65; in Great Britain the minimum wage is £7.06. That represents a premium of 23%. In our last JLC, before it was found to be unconstitutional, there was a basic rate of €9.09. That was 29% higher than the minimum rate in our most important market.

The issue of JLC review was first mooted when the troika came to Dublin. It asked the Government to look at ways of increasing flexibility and reducing the complexity of the labour regulating mechanisms in the Irish market. To restore the constitutionality of this mechanism, the Bill is increasing complexity and reducing flexibility. It is doing the opposite to what we and the economy need at this time.

I welcome the delegates. Let me ask Mr. Brendan McGinty a general question. It is my understanding that in many other European countries there are safeguards for employees such as those we are discussing today and that these arrangements have not acted as constraints on employment or undermined job retention. Is that Mr. McGinty's view? Does he have widespread experience of the arrangements made in other European countries?

I thank the delegation for coming to the meeting. I am fascinated by a figure given by Ms Buckley. She has told us 60% of her members have employed one extra staff member since the removal of the JLCs last July. This means an additional 12,000 people have been employed since. That is a figure the press might publish as a positive story. I see some members of the press here. We like to send positive messages from this committee.

Northern Ireland which has been mentioned is our nearest competitor. What are the working conditions there? I have been struggling to find information on the Northern Ireland equivalents of JLCs. Representatives of trade unions which have members in Northern Ireland will address the sub-committee later and I will be fascinated to find out about that.

Will Ms Buckley tell me how many of her members' employees are members of trade unions?

I do not wish to become involved in a discussion back and forth, as I know there will be differences of opinion. However, there are wage contrasts between Ireland and Great Britain. There is a massive contrast between the wages of university academics, for example.

I have asked about other costs because there are several reasons such as microfinancing businesses are finding it difficult. The other costs we have discussed are major issues on which we want to see work being done.

Joint labour committees, JLCs, were introduced to prevent the exploitation of workers in specific sectors because the likelihood of exploitation was higher in some sectors than in others. The security industry, for example, has worked well under the JLC legislation. In that industry the JLC defended against exploitation and was in the long term a benefit to the quality of workers and the industry as a whole.

I have focused on rents because it is my understanding rents make up between 20% and 40% of business costs.

The sub-committee would appreciate seeing whatever empirical research the delegates have available on these issues, as we are trying to develop an evidence-based policy. That is the most important point.

In his submission Mr. McGinty outlined significant improvements he would like to see in the Bill and for which he might have argued in the old days. Is it not fair to say that in legislation such as this which is trying to reach a compromise between the two traditional positions of workers and employers one can never achieve everything one wants? Does Mr. McGinty agree that the five improvements mentioned in the Bill which he outlined are genuine and will deliver quite a bit?

Mr. McGinty has outlined some provisions that are lacking in the Bill. With regard to retrospection, I fail to see why there should be a limit on the amount of money returned to a worker if the money is owed to him or her. With regard to the casting vote, if it were abolished, would this not provide a veto for one side if it simply refused to agree?

Why does IBEC not simply put its trust in the JLC process?

Ms Tara Buckley

To clarify the position for Deputy Anthony Lawlor, the survey was of the 4,000 RGDATA members, some 60% of whom have created a job since last July.

We were asked about the position in other EU countries. Retail workers in the United Kingdom are paid the minimum wage, £6.08 which equates to approximately €7.25. Under the JLC, the basic rate is €9.65 which is about 25% higher than that figure. Members of the sub-committee may say that is not a fair comparison. However, my members have to listen on a daily basis to people telling them that things are much cheaper in the North. If the wage bill is that much lower in the North, that is one of the key factors in offering lower prices.

Members of RGDATA who are retail grocers are in a JLC process because of some of the items they sell. Deputy Brendan Ryan made a point about sustainability across all sectors. It is frustrating for someone who owns a shop to be subject to a JLC arrangement because he or she sells a limited selection of products when the owners of the shops on either side of him or her may not be. If we are to have fairness and equity, we must have a system that applies to everyone - that is the employment and minimum wage legislation we have in place - not a different system for certain people simply because they sell pressed ham or a limited range of goods.

We have some figures on the impact of the finding that the JLC system is unconstitutional which we can make these available to the committee. Some of the trade associations have conducted research of their members which shows that jobs have been created as a result of the JLC system having been found to be unconstitutional. Businesses which were only able to cut the number of hours offered and staff found themselves once again in a position where they were able to take on people. Of my members who were surveyed, 60% said they had taken on another person. Of those who had taken on another person, 80% said they had taken on the person at the minimum wage, while 20% said they had taken on him or her at the JLC rate.

Many of my members pay their staff well above the JLC rate. My members value their good staff who are provided with training and their employers want to keep them. Many are paid much more than the minimum wage. We are not arguing so as to drive everything to the bottom. We are trying to ensure there will be a base rate that will be workable in order that we will be able to run our businesses in a competitive way. We do not want a system under which, when things get tough, we will not be able to sit down and negotiate with our staff who can see clearly that things have got tough in the business and know very well how difficult things are. We certainly did not argue for a reduction in the minimum wage. We would love to be operating with the minimum wage as the base rate in the sector.

Mr. Brendan McGinty

To reply to Deputy Michael Conaghan, the arrangements in other EU countries are disparate. For example, it is a little known fact that in Germany there is not a minimum wage, as we would recognise it. There are collective agreements which, subject to certain conditions, are legally enforceable to underpin rates applicable in the particular circumstances. Similarly, in Sweden there is no minimum wage. In the United Kingdom, our nearest neighbour, the equivalent of the JLCs was the system of wage councils which were abolished, I think, in 1993. That is why Deputy Anthony Lawlor cannot find comparisons north of the Border. Since last October the UK minimum wage has been £6.08 an hour which, subject to the daily exchange rate, equates to roughly €7.20. On a like for like basis, relative to the minimum wage applicable in these particular sectors up to last July, the differences to which employers in the retail grocery, catering, agricultural and hotel sectors had to adhere were 32%, 28%, 25% and 25%, respectively. Regardless of how one does the maths, this is not credible if we are about trying to sustain and grow jobs.

Deputy Tóibín referred to the security industry having worked well under the JLC system. It is interesting that in recent weeks the security industry has moved to establish a registered employment agreement, REA. This is a testament to that for which we have been arguing, namely, that those wishing to enter into these types of arrangements for their own particular reasons be permitted to do so within a structure wherein genuine agreement can be forged. While there are other problems associated with this, the REA system allows one to do this without the added imposition of a chairman holding a casting vote. It is worth mentioning that as a barometer for how the institutional arrangements can be moved away from the JLC structure towards a registered employment agreement structure under a joint industrial council.

Deputy Ryan commented on the improvements in the Bill relative to what was contained in the 2009 Bill. I have acknowledged that as a matter of record before this committee. However, the reality is that our economy has gone over a cliff since the arrangements in the 2009 Bill were being considered. We are now having to consider many things previously unimaginable relative to the position in 2009. We are making the argument that if the Government is going to insist on bringing forward a legislative structure, it must be one in which the balance is firmly in favour of sustaining the jobs we have and of creating opportunities for employers to create jobs. The Bill, as drafted, will not in our view help employers create one additional job in any of the sectors that historically have been covered by the JLC system. This should be a wake-up call in terms of how this committee approaches the framing of amendments to address the issue.

The issue of unionisation was mentioned. We cannot fathom the reason the Government dropped the proposed facility whereby employers and workers could derogate from the terms of an employment regulation order by way of a collective agreement. We saw that as at least providing some hope, even where institutional arrangements were in place and there was a measure of agreement at enterprise level. The difficulty is for this to be done it must, under the Industrial Relations Act 1946, be done with the endorsement of the Labour Court through an accepted body. That mechanism in effect removes the potential for the vast majority of workers who are non-union to enter into an agreement with their employer and to have that registered as an exemption from an employment regulation order. This, even from the basic principle of fairness and equity, disadvantages those employers who are operating with a direct engagement model, which is the vast majority of employers in this country.

We recognise some of the positives in the Bill relative to the arrangements proposed in 2009. We have a long way to go to make this fit for purpose. I reiterate that the one issue that must be to the fore in the committee's consideration of this Bill is whether its provision passes the sustainable employment test.

There are many issues for consideration by the committee. I thank Mr. McGinty for attending today's meeting and for his assistance in this matter.

Sitting suspended at 3.07 p.m. and resumed at 3.08 p.m.

I welcome Ms Patricia King, Mr. John Douglas, Mr. Eamon Devoy and Ms Esther Lynch from the Irish Congress of Trade Unions, and Mr. Walter Cullen, Mr. Michael Taft and Mr. Tom Fitzgerald from UNITE.

Before we start, I draw the attention of witnesses to the situation in regard to privilege. By virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of the evidence they give this committee. However, if they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.

I invite Ms King to make her presentation, which will be followed by a questions and answers session.

Ms Patricia King

The Irish Congress of Trade Unions is the representative body for workers and their unions on the island of Ireland. It has 49 affiliated trade unions directly representing almost 820,000 workers across all sectors. Given the history of challenges to registered employment agreements, REAs, and employment regulation orders, EROs, we have sought for a long time to have a well-founded legal underpinning for them to protect them from legal and constitutional challenge. We welcome the publication of the Industrial Relations (Amendment)(No. 3) Bill 2011 and acknowledge that it embodies a good deal of progress on the matters of concern. Given the inclusion of policies, procedures and so on in the Bill, it provides the necessary legal framework to address the deficiencies identified in the High Court judgment.

Notwithstanding this, a number of matters should be drawn to the committee's attention. There are criteria for establishing wages and registering agreements. As part of the policies and procedures included in the Bill, a long list of matters in respect of competitiveness and international comparisons must be taken into account by a joint labour committee, JLC, or REA. We are seeking an amendment to the Bill to ensure a fair and reasonable comparison is made, particularly taking account of comparative purchasing power, levels of taxation, etc. Like with like should be compared and there should be no cherry-picking. If there is a gap in the wording of the provision, it must be addressed.

The Bill provides for a derogation. The 1946 Act made no such provision and it was only introduced with the creation of the minimum wage. Under section 9 of the Bill, the derogation can have two prongs. The employer can seek to agree with the employee or employees or, in the absence of agreement, seek to inform, after which the employer goes to court to apply for a derogation. There is not enough protection of workers' interests. Some cases involve small employments, as it were, and non-unionised workers. There would be an imbalance of power between the worker and employer. Under the Bill, all an employer is expected to do is claim that it is in financial difficulty. However, the Bill makes no provision for an employee who wants to gain more information on whether the company is in financial difficulty.

When an application is made to the court to derogate from the law of the land in terms of pay rates and conditions, trade unions should automatically be invited to make submissions. Irrespective of whether employees were in a union, this would give them an avenue to gain the information they sought without needing to fear what the employer might do upon being asked questions it did not want to answer. As the provision on a derogation due to an inability to pay creates a gap in the legislation, we are seeking an amendment. The threat of penalisation should not be present in any REA or ERO, yet it is rampant in many workplaces, in that people are afraid to raise their heads above the parapet in case they ask the wrong questions and the employers react accordingly. Unfortunately, this is how people in many employments operate. The Bill should ensure their protection.

Regarding REAs, the phrase "substantially representative" is not too unlike what was contained in the 1946 Act. However, circumstances have changed since then. Under the Bill, the court will make a decision on what is substantially representative on the basis of who the workers are. In the construction industry, for example, many avenues are used to ensure employers get around such provisions. The phrase "workers or those engaged by an employer" should be utilised to ensure that the court is legally allowed to take account of everyone working in an employment. This amendment would be useful for people.

Under section 9, employers might still be allowed to seek to engage in public procurement contracts despite claiming an inability to pay. This could be dangerous, in that it might lead to a black economy scenario. The Department of Public Expenditure and Reform has agreed that employers providing public utilities and servicing public procurement contracts must implement the law of the land. This agreement should be copper-fastened in the Bill - if one is to service such a contract, one cannot claim an inability to pay.

While some amendments should be made, the legislation goes a long way towards dealing with the matter and countering the High Court judgment. There has been a great deal of commentary on the necessity for set rates of pay. A group within the employer community believes that the only rate of pay that should apply is the minimum wage. My colleagues will address other matters in more detail, including the value of REAs, but my union has spent a considerable amount of time in recent months conducting surveys of low-paid workers, primarily in the catering and hotel sectors. According to our internal surveys, it is a myth that the removal of the JLCs created jobs. The CSO figures substantiate my statement. Hours were cut and redistributed and one or two more people might have been hired for fewer hours, but there was no substantial increase in employment.

According to our surveys, it was also a myth that no one would lose pay as a result of removing the JLCs. We surveyed approximately 390 workplaces across the country comprising approximately 700 workers. Pay had been cut to minimum wage levels in Dublin in particular. People wrote on the survey sheets that they were afraid to ask, or were not going to bother. To us there was a very clear pattern from July that employers had moved to disimprove people's conditions or reduce the level of pay to the minimum wage. We have been engaged in working to substantiate the claims, so that we are not making an emotive call. The other question we asked in the survey was whether the VAT rate reduction had been passed on, but that is not a matter for today's discussion.

I thank Ms King. I now call Mr. Walter Cullen.

Mr. Walter Cullen

I thank the chairman and members for their invitation to make a submission to the select sub-committee. Ms King has eloquently outlined all the issues where we see difficulties arising with the Bill. In a general sense, the Minister is on record as saying the JLC structure was totally inflexible and too rigid to deal with the current situation. The proposals in the Bill are more rigid than what is in place, and there is no flexibility for employers or unions to be able to agree among themselves on pay and conditions.

Producing legislation to try to deal with the decline in business at industry level will not work. The 13% fall in consumer spending in Ireland is much higher than the fall in consumer spending in the rest of Europe. To deal with this drop, we must find alternatives to the blunt instrument of legislation. Reducing the pay rates of low-paid workers, who predominantly spend all their disposable income, exacerbates the situation further. In our view the proposed legislation will only contribute to the austerity trap.

I will now take questions from members before we take additional statements from the witnesses.

Go raibh míle maith agat and fáilte romh insteach inniú. I thank the delegation for appearing before the committee. Their input is very useful.

I support the approach the unions have taken on the matter. We received their help to develop our legislation in July. Our efforts should be directed at protecting people from exploitation and the payment of decent wages in society. Dangers have arisen in the past. We have evidence that quite a number were employed in particular roles that were governed by JLC rates. There is no doubt that some individuals want to reduce the JLC rate to the minimum wage and in the next breath they want to reduce the level of the minimum wage. Pressure is being applied by a sector that is finding it very difficult to survive and is seeking cuts in costs. I think they should be seeking to cut costs in other areas before they look at cutting wages. There is no doubt that unscrupulous employers will use every loophole possible to gain advantage for themselves. That is the reason it is important for members, the workers and for decent employers that they do not get a chance to do that. We are worried about Sunday pay rates, as we see that as a cut to wage rates. The rules governing inability to pay need to be tight enough to ensure that they are not used as a loophole. Trade union recognition is a general issue but also fits into this sector. I do not know what others think of some of the language used in the Bill. For example, it states the Labour Court must exclusively have regard to "the potential impact on employment levels" and then only have regard to "the desirability of agreeing and maintaining fair and sustainable rates of remuneration in the sector". In certain sections, the Labour Court is obliged to do something, which is often coupled with the needs of the employer but on the flip side, the obligations are couched in less strong language.

I thank the delegation and express my appreciation to them for appearing before the sub-committee.

I missed the figures that Ms King called out and I would like her to repeat them for me. In referring to fair and reasonable wages in another jurisdiction, most business people, particularly in the Border areas, would see their nearest competitors as being in the UK. Would Ms King see it as reasonable to draw a comparison between wages and salaries in this jurisdiction with those in the United Kingdom, as their minimum wage is 25% below our minimum rate? How many union members are currently affected by JLCs?

Ms Patricia King

If I may, I will respond to Deputy Tóibín. We encountered significant resistance in any consultation we had on the Sunday premium. The Sunday premium code of practice needs to be linked directly into the JLC. At present the code of practice allows for the LRC to set the rate, which states that a rate can be nominated, which is somewhat better than the original ministerial pronouncement on it. However, for the Sunday premium rate not to be treated any differently, it should be linked in the same way as overtime, sick pay and pensions into the JLC. In fact, it should be treated in this Bill precisely as it was treated in the temporary agency work directive and listed as a term and condition of employment. That should be the beginning, middle and end of it. It has not been treated in that way and we have failed to convince others to do so. The wording in the code of practice allows a Sunday premium rate to be set, but the difference is that it is negotiated at individual level rather than through the ERO mechanism. In our view that needs to be amended.

We agree with Deputy Tobin's point on the use of language. It would even go as far as depending on the view the court takes on the meaning of the word "desirability" in this context. We have had experience in the court regarding a very solid view of what the desirability of something means, but that may not always be the case. From our point of view, having the workers' interests listed, we then must strike a balance on the weight given to the workers' interests in the lists of policies and procedures. It must pass the fair and reasonable test before one decides whether it is desirable. In our judgment passing the fair and reasonable test before considering whether it is desirable would make it more balanced.

This flows nicely into my response to Deputy Lawlor's question on the conditions obtaining in Northern Ireland. As the Deputy is probably well aware, the original proposition was that Northern Ireland and the United Kingdom would be specifically mentioned in the Bill, but we argued everywhere we could that this would be inappropriate. Notwithstanding that point, other jurisdictions are mentioned and when one is drawing a comparison, fair and reasonable to us means that one looks at the cost of living in the jurisdiction one is talking about and then one looks at the cost of living for a worker on a similar wage in other jurisdictions. When we appeared before the committee on the last occasion to discuss the temporary agency, we mentioned the figure of 18% to 20% difference between ourselves and many states across Europe. If that is taken into account and is balanced in terms of the minimum rate of pay under this legislation, one has to take account of a gap of that order when making that judgment. For example, one cannot drop the Northern Ireland piece of the UK out of the sky. The court and others who would make those comparisons would have to take everything that goes in the round of living in Northern Ireland, the costs and advantages and disadvantages of NHS, the cost of health in the state as against in the UK to workers at that level. When making those comparisons they should be fair and reasonable.

In terms of our trade union membership, on the ERO side we represent just under 50,000 workers in the services area, the vast majority of whom are cleaners and security people and on the construction side we represent approximately 25,000 workers. I hope that is helpful to Deputy Lawlor.

Mr. John Douglas

I wish to come in on the two points made by the two Deputies. Mandate trade union represents workers broadly in the retail and bar sectors. Therefore, we have a keen knowledge of what is happening in these sectors, both of which are covered by the JLC sector. We represent approximately 45,000 workers between the two sectors across the whole country. To set the scene in terms of what is happening, while employers may make great play that existing employees who are covered by the JLC rates of pay and conditions have not seen a rate reduction, there is a significant shift and loss of earnings for many workers in the retail grocery trade and in the bar trade. Members may not be aware that the vast majority of workers in the retail trade have no certainty of hours or earnings. They are on flexible contracts, in fact, flexibility is gone mad. Their contracts state that they can work anywhere and the employer is only liable to give them anything between eight and 39 hours per week. That means one's hours can be flexed up or flexed down anywhere within that band which is a huge problem for our members.

Since the collapse of the JLC system we have had ongoing reports of bands being flexed substantially and workers losing substantially. The hours in the shop remain the same but there is a variance between worker A, who is on the old JLC rate of €9.60 per hour or higher on the second or third point of the scale, to new entrants into the shop who are on the minimum wage of €8.65 per hour. There can be a substantial flex up, even a ten-hour flex up to a worker who was doing 30 hours per week, whose hours are being redistributed among new employees, is a loss of more than €96 for that worker. Add to that the double whammy of what happens on a Sunday, given the lack of any provision for Sunday premium. Let us be clear on this issue, retail workers did not invent Sunday premiums. Sunday premiums are in industries, hospitals, schools, manufacturing and in the stall. The lowest paid workers are being targeted for the abolition of the Sunday premium.

Let me explain what is happening in terms of the Sunday premium. Heretofore, as part of one's contract of employment, retail workers on the eight to 39 hour contracts had to make themselves available seven days per week and on some occasions 24 hours per day. They got five days over seven over an indeterminate number of hours from start to finish. Where one worked on Sunday as part of a normal roster, that is, between eight and 39 hours per week, one would have received time and a half and a person on €9.60 per hour would have received an extra €4.80 per hour. Most people would have worked six hours on a Sunday. They have seen those hours being reduced by new employees coming in and taking those hours on a Sunday for €8.65 per hour. The rate they receive, the additional premium, is not time and a half. We have strong evidence that employers give €1 per hour extra for working on a Sunday. It complies with the terms of the Act as does the premium, but the premium has collapsed from a miserable time and a half, 50%, to one ninth. That is causing more distress and is a double whammy for low-paid workers. The debate must move on and low-paid workers must be protected. This is a decency threshold. It cannot be all about economies. This is a decency threshold where low-paid workers in very profitable sectors are being treated extremely poorly.

We welcome the Bill as it restores a decency threshold and some protection against the race to the bottom. All employers are not bad, there are good employers. However, there is a minority of employers who abuse loopholes because there is no JLC system and they are racing to the bottom. The problem for the trade union movement is that conditions will have sunk so far that it will be extremely difficult to get them back anywhere near to where they were. There are massive consequences for low-paid workers who spend 90% of their income in the local economy, in the local pubs, restaurants, shops and bookies. It is a self-fulfilling prophesy, therefore the sooner we get on with the business and put in place a decency threshold which will tax low-paid workers and their earnings, the better. That is a view of what is happening right across the retail trade. I speak with some certainty on this matter because all my members are in the retail trade, be it the bar or the grocery trade.

I welcome the representatives. Earlier IBEC and the Local Jobs Alliance gave their view of the world in respect of the proposed legislation. The key recommendation made by the Local Jobs Alliance is that, in the context of any new JLCs being established, the basic rate which the JLC should assess at the outset of its consideration should be the national minimum wage. How do the representatives respond to that?

Obviously the concern is to protect the conditions of existing workers. How would the representatives respond to the view that the Bill will not create any additional jobs but will be a disincentive to job creation? In regard to the casting vote of the JLC chairman, would the representatives agree this means no real agreement but is an imposition of an ERO? If there is a five-year prohibition on applying for the inability to pay clause and this obviously affects the survival of a business and impacts on employees, is there room for leeway or support for any relaxation?

Before I call Ms Patricia King I wish to make a couple of comments. Deputy Ryan touched on the basic wage. It is important that we get a response to that issue. Ms King said she had done research on wages being reduced. Ms Tara Buckley agreed to forward research and evidence. Anything the delegates can give us would be useful. I will be honest and say I have had no telephone calls from people who say their wages have been cut. Therefore, I would like to see the research because we want to give this issue proper consideration. If they can provide data and research we will examine it. It is unusual that we would have heard it.

The decency threshold is an issue on which the committee has to work. Everyone sees the minimum wage and it was important that it be restored. It is in place and now we must ensure there are jobs for people. There is the argument between various sides that the Bill could cost or lose jobs, therefore we must try to get the balance right. Following on from Deputy Kyne's question, is there a fear that we will lose out on jobs or the opportunity of jobs? I realise conditions and so on have to be protected but do the representatives share the view that we might lose out on some jobs or is that a myth? It was mentioned that a minority of businesses will abuse the conditions but it is fair to say the majority are good. In trying to protect employees in a few minority cases, is there a danger of infringing on other job creation?

In the earlier debate it was stated that the rules are unfair on businesses that one shop dealing in certain goods is not affected by these agreements while others are affected.

Ms Patricia King

I invite Mr. John Douglas to deal with some of the questions.

Mr. John Douglas

I will take some of them. The inability to pay clause and the five years that must elapse before applying for another derogation is sensible but at the extreme end of long. One is dealing with someone's legal rights and entitlements. It is a serious matter when an employer can go to a State institution and say that it is looking for a derogation to not give someone their legal rights. The measure should only be considered in exceptional circumstances with no multiple applications. Unfortunately, there are occasions when businesses are no longer sustainable. The danger of having multiple applications and ones with short timeframes is that unfair competition will be created. The shop on the other side of the street that tries to pay, and do the decent thing by paying the rates of pay and meeting conditions of employment, becomes uncompetitive because its competitor across the road has multiple applications for derogations. That is an important issue and cannot be overlooked.

With regard to the casting vote of the chairperson, it has been tightened greatly in the present Bill. The JLC chairperson will not have an absolute casting vote. Where parties disagree then the case is referred to the Labour Court to consider all of the arguments from the employer and employee sides before making a determination. The case then reverts back to the JLC chairperson and if the parties do not reach an agreement a second time then the chairperson has no latitude. The parties must do what the Labour Court directs. The casting vote is handcuffed to what the Labour Court determines and is not a free casting vote. Frankly, it makes some sense and gives a wider breadth to the arguments that can be made on a topic. The Labour Court is a pan-employer and pan-employee trade union body that will take into consideration all matters before it issues an arbitration type decision. There is no danger in that.

In terms of the JLC and the re-establishment of decency threshold and its danger to jobs, more people were employed in the retail sector with a JLC than there is now.

I asked for confirmation. Mr. Douglas has not answered my question but he knows what I meant.

Mr. John Douglas

I will deal with the Chairman's question. The problem with the retail sector is the collapse in the domestic economy. People have no money to spend which has impacted on the retail economy and on consumer spending. Until we, or someone, comes up with a plan to put money back in people's pockets, including low-paid workers, to spend in the local economy and keep pubs, restaurants, bookies and newsagents going then we are in serious trouble. It is not the difference between €8.65 and €9.20 in the JLC that will make the difference. There is a sensibility around. It took us over 20 years to reach €9.60 per hour in the groceries JLC. It is hardly a king's ransom nor will it enable people to buy a second home. Men and women are working for extremely profitable retailers yet they are paid a rate of €9.60 per hour for working a breadth of hours over a seven day liability and is no more than they deserve. The national minimum wage is the ultimate safety net. There are sectors that can bear slightly higher rates of pay and conditions than the national minimum wage.

Ms Patricia King

I wanted to make a point about job losses. If we examine the issue in the round, since the end of June the Government has provided the sector with VAT and PRSI reductions in an attempt to underpin the claims being made that it was a beleaguered sector covering various areas. The employer side claimed that if it got all of those reductions they would create jobs. The CSO figure does not substantiate their claim and no more jobs were created in that period. When somebody asks why a cleaner is paid €9.10 per hour instead of €8.65, they should consider where they work. For example, if cleaners work in the intensive care unit in the Mater Hospital they have a set of standards to follow. If they are not followed and utilised to the letter of the law then one has the spread of a variety of different infectious diseases in all parts of the hospital. A cleaner is a key cog in the correct running of a hospital.

I do not frequent too many but who is the first person that anyone meets when they go into a restaurant? Who creates the ambiance, comfort and value for money for a customer? The first is the person one meets there and the second is the person who produces the food and is covered by a JLC. In order for business people to have a thriving business where people will return and feel good about the place, they need staff who feel valued and get a decent rate of pay for what they are doing. What will that person do in human terms for a business? They will respond and deliver the goods. Why would you want somebody saying they are paid only €8.65 and that their boss would not give you the itch? That defies all of the rules of business. There are people that might attempt to rubbish my comment. I can tell the committee that I have walked into more employments than I would like to admit and from judging them and the people who work in them, I can quickly identify who will deliver a good service. It is staff that are treated correctly. The difference between €8.65 and €9.10 is very small. I am talking sense here.

My last comment is that ISME, which does not see eye to eye with us a lot of the time, has been out there, and again this morning, heavily criticising the Government's efforts to create jobs and everything else. It has a list of measures that impede job creation and force employers to make decisions, and labour costs rank fifth. The first item on its list is the lack of credit availability, then upward rent review which is a major problem in this city, in particular. Mr. John Douglas knows about it because it affects a lot of his members. The third item on the list is local authority charges. Finally, to let everybody know that I have conquered economics - and everyone who knows me is aware that I hate the subject - I had reason to look at the World Economic Forum that ranks 189 countries in terms of labour costs, etc. Where did Ireland rank on flexibility and labour costs? It was ranked 17th based on minimum rates of pay applied. To me the economists are making an argument on our rate of pay. There is good reason to pay people for the value of their work.

Can Ms King give me that research data?

Ms Patricia King

Yes. The data is not published but I will share what I have with the committee.

It could be done privately.

Ms Patricia King

Yes.

Mr. Walter Cullen

I am glad that the question on job creation has been raised because there has been a lot of debate and misinformation. In our view it does not create jobs but the opposite. I ask Mr. Michael Taft to expand on the issue because he has done a significant amount of work on it.

Mr. Michael Taft

I will deal with the question of whether reducing wages and labour costs will result in increased employment. Let us be clear why employers employ additional staff. They do so in order to meet an additional demand for their goods or services. If it is a restaurant then more customers are seeking a meal. If it is a retail outlet then there are more customers entering the premises. The problem is that this additional demand for labour, in our domestic economy, is completely reliant on the consumer demand in the economy. The problem with cutting wages is that one cuts the wages of those who spend nearly 100% of their income. In one sense, if the salary of a person on €150,000 or €200,000 were cut, it would not have that much impact on consumer demand, simply because they save so much of it, they are not less likely to go to a restaurant or to a shop. However, if the pay of a person on €20,000 or €25,000 is cut by, for example, €500 or €1,000 a year, that is probably a one for one trade-off on consumer demand. What happens when demand falls is that there is less incentive for an employer. If an employer serves 1,000 meals a day with the current staff, he or she will not employ additional labour until there is an increase to 1,200 or 1,500 meals a day as there is no incentive to do so.

I will look at the situation from the other side and what happens to an enterprise that decides to cut wages. From the enterprise point of view this is a very rational thing to do if turnover is falling. This will result in an imposition of costs on to other businesses and on to the State. For instance, if a shop on the main street cuts the wages of its staff, then the workers go out of that shop to the other shops on the street but they have less to spend. Those shops, in turn, suffer a turnover loss and they, in turn, have to reduce their wage costs or other costs and then the deflationary cycle arrives. This is not taking into account the impact on tax revenue - because tax revenue, income tax, universal social charge, PRSI and VAT, are all reduced - nor the impact on the social protection budget when unemployment increases from that loss of demand.

On my final point, if there is further downward pressure on wages and particularly within those groups that spend most of their income, the low paid, we will find exacerbation of the domestic demand recession. The Government has already accepted that consumer demand will fall 1.5% this year and it has also accepted that it will flatline in 2013; it will not start rising - and then only minimally - until 2014. If we put further downward pressure on wages, we might find that this recovery in the consumer demand might be postponed to 2015 or 2016.

Mr. Eamon Devoy

The registered employment agreements are an integral part of the Bill. There are 46 registered employment agreements on the Statute Book but the two significant ones are the construction industry and the electrical contracting industry. At the height of the boom there were 271,000 construction workers encompassing all the trades and the workers and the electrical contractors and this number is currently 105,000, which is still a significant number in the national employment context.

Ms Patricia King made the submission on behalf of ICTU. I further emphasise the question of inability to pay as raised by Deputy Lawlor. There is a provision in the registered employment agreement, REA, that the parties to the REA can decide to have a clause or otherwise, on ability to pay. It remains to be seen how that will play out. However, it is important that companies who are allowed to and who avail of the inability to pay clauses in that agreement, are excluded from public tender procurements. It would be wholly inappropriate for people who have the advantage of paying lower wages to then make application to public tender procurement process procedures and be able to displace fully compliant employers. This would be nonsense.

A significant ongoing problem in the construction industry and in the electrical contracting industry, is the level of compliance by employers with the terms of a registered employment agreement. The old mechanisms were bad and inadequate for ensuring full compliance in the industry, but there is a lack of provision in this legislation as regards the NERA process and investigation and enforcement. If there is to be continuance of registered employment agreements - and I hope they will continue - this investigation and compliance element will be a crucial part of ensuring that the decent employers who are paying the proper terms and conditions of employment are allowed to preserve that position and the people who are trying to undermine the employment rights of other people - including other employers - are dealt with swiftly and appropriately.

Ms Patricia King

I did not answer the question on the differences between being covered by a JLC and not. My understanding is that when the Labour Court does its review of which JLCs should exist, all of those questions will be taken into account.

I refer to points made by Mr. Devoy and Mr. Taft and to the tangible evidence about pay cuts in these sectors. Last year, the construction sector incurred a 7.5% reduction in pay and the past 12 months has not seen any growth in construction jobs. The situation is quite the opposite - as Mr. Devoy alluded to in his contribution. On the point about compliance, the ICTU submission covers the points relating to compliance in point ten of the document. We have an extraordinary situation where if a contractor in the construction sector is ultimately non-compliant, it is in that contractor's interest to go all the way to the District Court, pay the fine but not pay the original shortfall in wages and conditions of employment. This is an extraordinary situation and it highlights the importance of examining the issue of compliance. I refer to the question from the Chairman as to whether this is unfair on business. It is unusual to think about that on this side of the table but I gave that point some thought. A central tenet of registered employment agreements is to take wages out of competition but significant parts of this Bill will put wages back into competition. I agree it is unfair on businesses because at the moment our interests are aligned in some ways. The good compliant contractors, who do their business correctly, are being penalised by non-compliant contractors. From the point of view of construction unions, the rate is neither here nor there, as it is about compliance with the rate, which is the central issue from our point of view. If it is the case that one of the central tenets for employers to be involved in registered employment agreements and EROs, is being taken away, it bodes ill for fairness in other businesses.

I thank the delegates for the presentation. The committee will give the issue some thought.

I welcome Mr. Rossa Fanning to the meeting. He has become somewhat of an expert in this area and he will also present a paper on the subject next Thursday in Buswell's Hotel. I thank him for attending the committee to brief us on the outcome of the High Court ruling in the JLC case given on 7 July 2011.

Mr. Rossa A. Fanning

I thank the Chairman and members of the committee for the invitation to attend this afternoon. I am here sort of by accident from my own perspective as I am in full-time practice as a barrister but I lectured in the field of constitutional law for eight years between 2001 and 2009 in UCD. I gave up my faculty position at that stage to concentrate solely on private practice. As somebody with a sharp eye has identified the fact that I am due to give a paper on Thursday at a constitutional law conference on the decision of Mr. Justice Feeney in the John Grace Fried Chicken case, and the parliamentary legal adviser, Ms English, tipped off somebody, the invitation to come to speak to the committee generates out of that.

By way of background information, I present very differently at this committee to all of the other speakers in that I do not have any philosophical perspective I wish to unburden to the committee. There are ultimately political considerations surrounding this topic that may be at the forefront of the minds of committee members in terms of the debate now taking place on the Bill before the Oireachtas to remediate the JLC system following the High Court decision. I have been asked to stand back from the current political debate and give the committee a little of the background legal context. My first point is that I produced a paper for the CPD talk I will give on Thursday and for the benefit of the committee. I distributed that paper to the committee only late last night so I do not know whether that has been placed before the members at this stage.

We got the e-mail about midnight but we have not yet had a chance to examine it.

Mr. Rossa A. Fanning

I could not expect the committee to be familiar with it. In any event, I could not necessarily expect that members of the committee would have an interest in it as it is fairly densely legal in places and I do not propose to bring them through any of it. However, it is perhaps no harm that the committee would have access to it by way of background information.

I will take a step back and explain why the High Court reached the decision it reached last summer and the logic of that decision, which places the context of the Bill in a legal sense that may not be as clear as it ought to have been to the committee. Article 15.2.1° of the Constitution states, in essence, that the business of making law is the business of the Oireachtas and it forbids bodies other than the Oireachtas from making law. There has always been a difficult line to identify between a legitimate delegation, whether it be to a Minister or other inferior body. As a matter of law, a Minister is an inferior person to the Oireachtas passing legislation by way of primary Act of the Oireachtas. In any case, there has always been a difficulty in identifying the legitimate line at which delegation can occur.

As a matter of constitutional doctrine, this is often described as the non-delegation doctrine or the rule in the Cityview Press decision. To use the buzzword, the principles and policies of the legislation must be sufficiently clear from the Act of the Oireachtas. Therefore, one can delegate the ability to join the dots, fill in the blanks or add the details but the governing principles and policies must be clear from the parent statute. That has been constitutional doctrine that is settled since the Supreme Court decision in the Cityview Press case in 1980.

As a matter of constitutional history, it is in an inheritance from the United States, in particular from two decisions of the United States Supreme Court in the 1930s during the Roosevelt New Deal era, when the Roosevelt Democratic Administration was in significant conflict with the US Supreme Court, which was a more conservative, Republican Supreme Court. Two pieces of New Deal legislation in the 1930s were struck down on this basis. That constitutional doctrine was incorporated into Irish law in 1980 by the Cityview Press decision but until the John Grace decision last summer, only one Act had ever actually been struck down as being unconstitutional on the basis that it constituted an excessive and unlawful delegation of powers. Therefore, it is fair to say the doctrine had been referred to in many cases but only one Act had actually come a cropper on account of a breach of Article 15.2.1°.

The first point one could make about the John Grace decision is that it is a statistically unusual decision in that it is only the second occasion that legislation has been held unconstitutional on this basis. When or if the committee members read the decision of Mr. Justice Feeney in the case, they will find it does not purport to be a decision identifying any radically new principle but purports to be a decision that simply implements existing law and applies it to the Act in question. In short, he finds that the JLC-Labour Court system, which allowed for minimum pay rates in certain sectors to be implemented by orders of the Labour Court and criminalised breaches by employers of the requirement to pay their employees those minimum rates without any reference to principles and policies contained in the parent Act, was quite simply unconstitutional. There was nothing in the Industrial Relations Act 1946 or the Industrial Relations Act 1990 from which one could have divined any particular basis upon which the Oireachtas had determined that this should happen. In essence, the JLCs and the Labour Court were being given unsupervised freedom to do what they wanted in this area. That is what the High Court decided last summer was ultimately not a delegation of power but a transfer of power, and this was void and unconstitutional under Article 15.2.1°.

The consequence of this is that the old system, whereby the Oireachtas basically had specified nothing from which one could have divined any oversight of the JLC-Labour Court system, had to be reformed. I am conscious, having looked into the matter, that two Deputies in particular moved very quickly last July and published Private Members' Bills in an attempt to remediate this topic - Deputy Tóibín is one of the two and Deputy O'Dea, who is not present, is the other. I have seen both Bills. While I do not say this in any pejorative sense, the Government then moved in December 2011 with more comprehensive, lengthier and more detailed legislation, though, to be fair, it took it six months longer to get out of the blocks and produce it. That Bill, the Industrial Relations (Amendment) (No. 3) Bill 2011, is now, as I understand it, on Committee Stage and is being considered. It proposes to remediate the gap left at a legislative and constitutional level. Even a cursory glance shows that the Bill has been at pains to identify, or least try to identify, the principles and policies according to which the JLCs might purport to set rates and the Labour Court might approve those decisions, in that those principles and policies are set out.

There are a few reflections on the current Bill. The first point is that from the perspective of an individual restaurant owner such as Mr. Grace coming to this area, looking at the new Bill and considering that it will still permit of a structure whereby JLCs and the Labour Court will set minimum rates, the Bill in fact does not cure that fundamental problem in that setting rates is something that will still be outside the Oireachtas. However, the answer for an objecting restaurant owner on the basis of the new Bill will be that there is significant detail in that new Bill, albeit it is an open-ended formula in terms of its ultimate content, that is at least supposed to guide the JLCs and the Labour Court in how they come about matters.

Of course, there are legislative changes. For example, there is a new, straightforward enforcement mechanism to secure compliance with registered employment agreements, EROs, whereby one can go to the Circuit Court and get an order compelling somebody to comply with it in the first instance, as distinct from moving straight to criminal prosecution. Moreover, there are provisions, as under the National Minimum Wage Act, where people can seek an exemption for a period of up to two years. There are also provisions in the new Bill which prohibit future EROs from including the Sunday premium, which I know is a matter of controversy and was agitating the trade union representatives who addressed the committee before me.

At a constitutional level, it is not possible for me to offer a view on all of these provisions, and the debate on the merits of these may ultimately be more political than legal in tone. However, on any fair analysis, one could say the Government Bill seeks to address the legal deficiencies in the prior Industrial Relations Acts machinery and, no doubt, the Government has already been advised by the Office of the Attorney General that the safeguards in the new Bill should be sufficient to pass constitutional muster. In the final analysis, the JLC system will continue to have the power, if the Government Bill is in due course enacted, to set minimum rates of pay for various sectors above and beyond those provided for under the rubric of the National Minimum Wage Act. Whether that is a good thing or a bad thing is ultimately a question of political perspective rather than legal doctrine.

I am here to be of any assistance I can be to the committee. I have produced a paper that is denser and contains some legal background. If one took a step back from the issue of EROs and JLCs and looked at the overall question of legislation, the most interesting aspect of Article 15.2.1° of the Constitution, which insists that the principles and policies of legislation be identified in the parent statute, is how our Constitution interplays with our membership of the European Union. As the committee will be well aware, at this stage the vast bulk of our legislation, whether it be by way of primary Act of the Oireachtas or by way of delegated legislation through ministerial orders is driven by our membership of the European Union to implement, in particular, directives, and sometimes also regulations into Irish law. There is a provision that is very important in understanding Article 15.2.1°, which is Article 29.4.10° of the Constitution which provides a blanket immunity for any measures that are implemented into Irish law that are necessitated by virtue of our membership of the European Union. If a directive is introduced that we have to bring into national law, that is immunised from scrutiny if the content of the national law, whether it be by way of statutory instrument or by way of an Act of the Oireachtas, is necessitated by our membership of the European Union. In another context the debate about principles and policies falls by the wayside if one can identify the fact that the content of the legislation is ultimately compelled by our membership of the European Union because that creates an exemption under Article 29.4.10°.

When one is speaking in general about the passage of legislation that is a very important consideration, but in this case Mr. Justice Feeney's decision last summer, in summary, was as a matter of constitutional doctrine, an orthodox decision. In fact - I might conclude my initial remarks on this point - it had been heralded some 31 years previously by one of our greatest ever judges, Mr. Justice Henchy, who for a long time was a Supreme Court judge and was regarded as a great constitutional lawyer. He had held, in a decision to which I referred in my paper, called Burke and the Labour Court, that the system whereby JLCs and the Labour Court would set minimum rates of pay was a system of doubtful constitutional validity. The question of the actual constitutionality of the legislation was not before him in Burke in 1980 but when one looks at his remarks in Burke, and when one looks at the reliance that Mr. Justice Feeney placed in the John Grace Fried Chicken case upon those remarks, it is very clear that the judgement of 31 years ago was a pathfinder judgment for the High Court last summer. In many ways the legislation had probably been doomed to extinction for a long period and it was really only benefitting from a stay of execution as long as it took for someone to bring a full-frontal constitutional challenge to its validity.

Go raibh míle maith agat. Bhí sé sin an suimiúil. With regards to one of the sections in the Act which determines that the Minister has a right not to implement a JLC, is that as a result of the element where policies have to be driven from the Oireachtas rather than by an outside body? Is it the case that the Minister could not refuse if he had to enact the decision or determination of a JLC, and that it would then negate the necessity for a policy to derive from the Oireachtas?

Mr. Rossa A. Fanning

As a matter of constitutional law, placing the JLC or the Labour Court as subordinate to the Minister does not make the legislation any better constitutionally, because the Minister is no more entitled to set the principles and policies than is the Labour Court. The Act must set the principles and policies, so that it just a policy choice as to whether the Labour Court approach must be approved by a Minister. It would not have been, to look at it in a John Grace Fried Chicken context, any more constitutional for the legislation to transfer all the power to the Minister than it would have been for the legislation to transfer the power to the JLCs and the Labour Court, because neither is a body that is an Act of the Oireachtas. That is a legislative policy choice but it is not a constitutional protection as such.

On the general principles of the decision, from an academic point of view, does Mr. Fanning consider there is other legislation that might fail this test?

Mr. Rossa A. Fanning

There is undoubtedly a lot of legislation on the Statute Book that is vulnerable to challenge. In more modern times the Legislature has become more sophisticated and has built in safeguards but, ultimately, it is a test of degree. It is all a grey area; it is never a black or white analysis. Mr. Justice Feeney in his judgment identified 17 different factors which he lists sequentially, which the committee can review. Perhaps uppermost in significance of them in the John Grace case were the consequences of the breach. In that case it was a criminal sanction. It is one thing if it is a minor or technical issue, but to render something a criminal offence - that is rendered a criminal offence by other than the Act of the Oireachtas - is, legally speaking, particularly problematic. It is a question of analysis, but one could conduct an analysis of 100 different pieces of legislation and one could easily imagine that arguments could be made that delegated authorities exercising power to implement rules and regulations by way of statutory instrument are overstepping the mark.

In the EU domain much of that would be protected by Article 29.4.10° of the Constitution, but outside the EU domain there is potentially much legislation that could be challenged on that basis.

On behalf of the committee I thank Mr. Fanning. He has been most generous with his time. He did not have to attend but I appreciate that he did. We will contact Ms English, no relation, to let her know. It is good to get an unbiased perspective on the situation. If we have any questions after we read Mr. Fanning's paper we will consult with him, perhaps by e-mail if that is agreeable to him? No doubt all members will read the full document. I appreciate Mr. Fanning's contribution.

Mr. Rossa A. Fanning

I thank the Chairman.

The select sub-committee went into private session at 4.15 p.m. and adjourned at 4.20 p.m. sine die.