Déjà vu - Sectoral Employment Orders make a come-back in the Construction Sector

Construction worker

Déjà vu - Sectoral Employment Orders make a come-back in the Construction Sector

Shane MacSweeney, Managing Partner

The Sectoral Employment Order (Construction Sector) 2017 (the "SEO"), became law on 19 October 2017. The SEO implies into contracts of relevant construction workers certain minimum terms and conditions, including pay, pensions, sick leave and a new dispute resolution procedure.

Replacing the old “REA” System

The SEO replaces the Registered Employment Agreement (REA) system that had been in place since 1946, but which was declared unconstitutional by the Supreme Court in 2013.

The Industrial Relations (Amendment) Act 2015, provides a framework for similar arrangements affecting specific sectors to return, with certain safeguards provided for, with a view to ensuring that the new regime will be constitutionally sound.

CIF request

What may come as a surprise to many involved in the construction sector is that it was the sector’s umbrella/representative group that initiated the SEO, specifically requesting the Labour Court (the "Court") to examine the issue in early 2017.

It should be observed that there is likely to be a considerable divergence of views as between larger concerns within the construction sector and smaller firms, some of whom may well find the cost of compliance to be financially burdensome.

Regardless, workers will certainly welcome the improved terms of employment, both financially and in terms of pensions, sick leave, overtime and other benefits.

What employers are covered by the SEO?

The SEO is legally binding on “construction” and “civil engineering” firms each of which is given a relatively broad definition, capturing what will typically match a layman’s understanding of the work which those firms undertake. It includes firms involved in the "construction, reconstruction, alteration, repair, painting, decoration and demolition of" a various structures.

Where only a small proportion of a firm’s business involves on-site work (e.g. a manufacturing enterprise that does limited site installation of steel etc), its activities are likely to fall outside the scope of the SEO.

What will come as a surprise to many is that all “construction” and “civil engineering” firms are legally bound by the terms of the SEO, whether or not they are CIF members.

What is affected by the SEO?

Hourly Rates
The new minimum hourly rates of pay (essentially supplanting the National Minimum Wage, which is currently €9.55/hour for affected workers) are:

• New Entrant Workers: €13.77 per hour
• General Operatives (1 year +' experience) (Category 1 Workers): €17.04 per hour
• Skilled General Operatives (Category 2 Workers): €18.36 per hour
• Craft Workers: €18.93 per hour
• First year Apprentices: 33.3% of the Craft Worker rate, to increase up to 90% for fourth year Apprentices

Unsocial Hours

The SEO provides for 'time and a half' or 'double time' payments for certain unsocial hours. For instance, time and a half is payable for work done between "Monday to Friday normal finishing time and midnight", and double time is payable on Sundays.

Sick Pay & Pension Scheme

The SEO provides for mandatory pensions and sick pay schemes, akin to what was provided under the abolished REA.

Travel Allowance

Notably, the travel allowances provided for under the old REA have not been reinstated.

Dispute Resolution

The SEO prohibits strikes/ lock-outs unless prescribed dispute resolution procedures have been exhausted. This requires employees to initially raise disputes directly with the employer at local level (with an employer response time of just 5 days), before referring the dispute, if necessary to the Workplace Relation Commission (WRC).

Collective (trade union) disputes must be raised with the employer before being referred to the Conciliation Service of the WRC. If that fails, there is provision to investigate and issue a recommendation.

What now?

The purpose of the SEO is to restore stability in the construction sector – and this was what prompted action by the CIF. The SEO certainly does bring certainty to employers and workers alike. However, it is likely that smaller and/or less financially robust firms will undoubtedly consider aspects of it a step to far.

There are certain provisions under the Industrial Relations (Amendment) Act 2015, which allow for employers to apply to be exempted from the pay provisions of the SEO, but in practice, this is likely to be difficult to avail of.

Construction sector employers will need to act quickly ensure that their pay and other structures conform with the provisions of the SEO, failing which it is likely that litigation will arise in this area.