High Court upholds Labour Court decision in hotel wages case

In a significant ruling, the High Court rejected an appeal by a luxury hotel against a Labour Court ruling in favour of substantial pay rises for unionised employees who have been refused trade union recognition.

On 21 June 2006, an appeal by Ashford Castle Hotel against a Labour Court ruling in support of pay rises for workers represented by the Services Industrial Professional and Technical Union (SIPTU) was rejected by the High Court. The luxury hotel has since agreed to comply with the ruling, which means that it will be forced to back date pay increases of up to €15,000 for some of the workers involved.

Labour Court decision

Since 2002, SIPTU members working at Ashford Castle Hotel in county Mayo, in the west of Ireland, have been seeking the right to be represented by the union with regard to industrial relations issues; however, management of the hotel has steadfastly opposed any encroachment by unions, insisting on a direct employment relationship with workers.

In its original recommendation, the Labour Court instructed Ashford Castle Hotel to apply average pay increases of 15% to 20%, to allow for new weekly minimum pay rates ranging from €350 a week for receptionists up to €450 a week for waiters and chefs. The case was taken by the SIPTU union under the Industrial Relations Acts 2001–2004, which provide for trade union representation on issues of concern to members, but where trade union recognition and collective bargaining are absent.

The majority of Labour Court recommendations are voluntary, in that acceptance or rejection is the prerogative of the parties involved. However, under the 2001–2004 Industrial Relations Acts, the Labour Court has the power to issue a binding and legally enforceable decision. In the case of Ashford Castle Hotel, the Labour Court issued such a decision after the company rejected its initial, non-binding recommendation of February 2004.

High Court ruling

In its determination, issued in January 2005, the Labour Court instructed Ashford Castle Hotel to apply the pay increases. In response, Ashford Castle Hotel sought an order seeking to overthrow the binding Labour Court decision.

In its submission to the High Court, the hotel and its legal advisers contended that the payment of the new pay rates would result in additional annual labour costs of €300,000. However, according to Justice Clarke of the High Court: ‘The figure needs to be seen in the context of a business with an annual total revenue in the order of €9 million, total operating profits of €2 million and an annual payment into the replacement reserve in the order of €450,000.’

Upholding the original Labour Court decision, Justice Clarke explained that the Labour Court was entitled to take into account the fact that other comparable hotels ‘seem to be able to maintain financial viability while paying rates of pay comparable to those which were recommended in respect of Ashford Castle’.

Six grounds for appeal

In response, Ashford Castle Hotel contended that the High Court should overturn the Labour Court’s determination concerning pay rates, alleging that the Labour Court was wrong on six grounds by determining the rates of pay in the following ways:

• by referring to broad categories, not to the position of workers actually employed by Ashford Castle;

• by failing to take into account the actual guaranteed service charge received by workers;

• by fixing wage rates far in excess of the minimum required by the determination;

• by fixing wage rates higher than those requested by SIPTU;

• by not having regard for pay surveys in the hotel sector submitted by Ashford Castle;

• by requiring the employer to pay rates that it was financially unable to pay.

In relation to the first ground for appeal, Justice Clarke said he could ‘see nothing wrong’ with the Labour Court paying particular attention to the rates of pay for comparable hotels presented by SIPTU in respect of which the employers concerned engaged in collective bargaining.

The judge went on to dismiss the third and fourth grounds, criticising the hotel for including ‘significantly misleading information’ in a schedule of hotel workers’ pay rates attached to an affidavit by the hotel’s General Manager, Niall Rochford.

In rejecting the sixth ground concerning financial viability, Justice Clarke made his remark that the Labour Court was entitled to look to the financial viability of other comparable hotels paying wages comparable to those recommended in respect of Ashford Castle.

In essence, the High Court deferred to the expert knowledge of the Labour Court in the area of industrial relations, as illustrated by its conclusion:

‘Precisely what is fair and reasonable in the context of terms and conditions of employment is a matter upon which the Labour Court has great expertise and, in my view, the Labour Court is more than entitled to bring its expertise to bear on the sort of issues which arise in this case…it does seem to me that a very high degree of deference indeed needs to be applied to decisions which involve the exercise by a statutory body, such as the Labour Court, of an expertise which this Court does not have.’

Strong message to employers

SIPTU National Organiser, Noel Dowling, stated that the decision sent out ‘a very strong message to workers whose employers refuse them the right of union representation’.

The High Court decision would appear to vindicate the view held by some employment lawyers, namely, that the higher law courts would be reluctant to overturn binding determinations made by the Labour Court, which is the specialist court in the area of industrial relations. The higher courts generally tend to defer to the decisions made by this specialist industrial relations court, and the circumstances would have to be rather exceptional to alter this state of affairs.

Brian Sheehan, IRN Publishing