The Public Works Contracts And The New Sectoral Employment Order

The Minister for State at the Department of Business, Enterprise and Innovation signed into law the Sectoral Employment Order for the Construction Industry ("the SEO") on 19 October 20171.

In our view, there is a good argument to the effect that contractors are entitled under the Public Works Contracts to recoup from their employers the increases in rates of pay mandated by the SEO.

Background

The old Registered Employment Agreement ("REA") system set out in the Industrial Relations Act, 1946, was held to be unconstitutional by the Supreme Court in 2013 20132.

In essence the Court found that the REA system was an emanation of the legislative role being carried out inappropriately by an unelected Labour Court and other interested parties.

In order to replace the old system the Government brought in a new Sectoral Employment Order system under the Industrial Relations (Amendment) Act, 2015.

There is some doubt as to whether the new Sectoral Employment Order system is constitutional. There remains an argument that the new system still, in effect, permits an unelected Labour Court to draft what is a form of legislation contrary to the Constitution.

This may explain the delay in establishing the SEO for the Construction Industry, as the Labour Court and the Minister were likely to be more sensitive to ensuring that the SEO had the support of a large number of affected industry participants.

Effect of the SEO

The effect of the SEO is that relevant construction industry employees are now entitled, as a minimum, to the pay and benefits set out in the SEO.

It is a matter of contract as to whether or not a contractor will be entitled to recoup from its employer the additional costs that the contractor will incur in performing a contract as a result of the SEO.

Private Sector Contracts

The situation that prevails under the RIAI contracts is straightforward: contractors will, under clauses 4 and 36 of the RIAI, be able to recoup the additional costs from their employers once the SEO was introduced after the Designated Date stated in the Appendix to the Contract.

Bespoke, amended, versions of the RIAI will have to be assessed on a contract-by-contract basis.

In our experience, however, most bespoke versions of the contract will pass to the Contractor the risk of such increases.

The Public Works Contracts

Part 1M of the Contract Schedule will specify which of the price variation options – PV1 or PV2 – is incorporated (or is intended to be...