Hotels employers’ challenge to wage regulation body could set precedent

A legal challenge made by the Irish Hotels Federation (IHF) to the Joint Labour Committee – which sets legal minimum pay rates for the hotels subsector – could have far-reaching implications for all such pay-setting regulations. If the IHF succeeds in its appeal, this could mean that the only effective minimum wage mechanism for the industry would be the national minimum wage.

A legal challenge being made by the Irish Hotels Federation (IHF) is due to be heard by the High Court in early February 2008, with a judgement on the case expected a few weeks later. If the High Court judgement restricts the wage-setting ability of the hotel industry’s Joint Labour Committee (JLC) – and by implication possibly all other such wage-setting tools – this would mean that the only effective minimum wage mechanism remaining would be the national minimum wage.

Details of legal challenge

The legal challenge is questioning the constitutionality of the 1946 Industrial Relations Act, insofar as it empowers the Labour Court to issue Employment Regulation Orders to set wages for sectors covered by JLCs.

Should the High Court judgement rule that JLCs are unconstitutional, this would have a significant effect on talks in the next stage of the national social partnership framework agreement, [Towards 2016 (2.9Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf). A basic tenet of the current Towards 2016 agreement is to ensure that employment standards are maintained. Trade unions and employers will be watching the outcome closely.

If the High Court was to reject the challenge and leave the existing system largely intact, this may not necessarily resolve the question, as the IHF could decide to appeal the case in the Supreme Court. Such a move could take another 12 months or more. The same option could be open to the government and trade unions, if the claim were to succeed.

Implications of challenge

A new National Employment Rights Authority (NERA) will be fully operational this year, comprising almost 100 labour inspectors. If the JLC rates are upheld – and the IHF thus fails in its legal challenge – the increased enforcement activity will pose a difficulty for hotels that cannot afford to pay the legal minimum rate for the sector.

On the other hand, if the challenge succeeds, it could have serious implications for the employment rights elements of the Towards 2016 national wage agreement. This is because regulations are among the key legal tools used to ensure enforcement of employment rights in relation to pay – apart from the national minimum wage itself.

The IHF, however, is not a member of the major employer body and social partner, the Irish Business and Employers’ Confederation (IBEC). Moreover, it has a large amount of smaller hotels among its members, which may feel cost pressures more keenly than the larger players which have traditionally been members of IBEC.

Success of previous legal challenges

One example of a successful legal challenge regarding a sectoral minimum wage system took place in the 1990s, and concerned the minimum wage agreed at that time for the security industry. The National Union of Security Employers (NUSE), affiliated to the Security Congress of Ireland (SCI), challenged the basis of the agreement, arguing that since its association was not party to the sectoral JLC, the latter was not representative of the industry as a whole.

The challenge succeeded in the High Court, leading to the demise of the security industry agreement. It was not until 2000 that a successor finally emerged, in the form of the current security industry JLC, which includes representation from NUSE.

Brian Sheehan, IRN Publishing