It is now well accepted that the fortunes of the construction industry are on the rise. How firmly this recovery establishes itself and how quickly it will return to healthy employment levels will, however, depend in no small part of the attitude of trade unions in the face of changing labour regulations.
In the past few weeks, a few have chosen a path of conflict and strikes in an attempt to preserve boom-time wage levels. Such action not only flies in the face of recent court judgment but could threaten the industry’s nascent recovery.
In the second half of 2013, there was a 56% increase in the number of construction-related permanent vacancies registered with Hays Ireland and a 198% increase in temporary positions over the same period in 2012. More importantly, construction firms appear optimistic that the signs of improvement will continue.
Construction projects such as the Gort/Tuam motorway project, the Bernal Project in the University of Limerick, and a new Cork prison& will commence this year.
A decision by the Supreme Court last May could prove pivotal in helping the sector turn the corner. If the consequences of the ruling (in relation to registered employment agreements) play out as some predict, we can expect to see job creation happening on a significant scale.
Registered employment agreements are deals between employer and employee representative groups (unions) which outline the terms and conditions of employment in the relevant sector, including pay. Despite the recession and the decrease in wages and pay in almost every other part of the economy since 2007, registered employment agreement rates remain excessively high.
The legal challenge in question concerned a number of electrical contractors who had previously sought to have the registered employment agreements cancelled at the Labour Court.
The electrical contractors were arguing that the registered employment agreements were in breach of the Constitution, which states that “the sole and exclusive power of making laws for the State is hereby vested in the Oireachtas: no other legislative authority has power to make laws for the State”; on May 9, 2013, the Supreme Court agreed with the contractors’ argument and ruled that the registered employment agreement system for determining pay rates and working conditions was unconstitutional.
As many as 75 individual employer registered employment agreements are unconstitutional and as such, employers and employees are no longer bound by them.
The immediate impact for employers in any sector previously covered by a registered employment agreements is that they may hire new employees on terms and conditions that are less favourable than those set by the registered employment agreements.
Only the agreements created under the 1946 act have been rendered unconstitutional. This means that any registered employment agreement that is created under the Industrial Relations Act 2012 will still be valid, so I would expect an increase in trade union activity to seek employers to create new agreements under the 2012 act.
For many employers, the Supreme Court ruling will be viewed as an opportunity to cut costs. A new and uncertain time in the field of industrial relations beckons. We are currently seeing this with a number of unions already beginning to speak out and considering strike actions.
The Technical, Electrical and Engineering Union, for example, said the ruling erodes existing protection. General secretary Eamon Devoy believes foreign contractors will enter the country to undercut domestic operators. There is no immediate evidence of this as existing subcontractors here are able to amend their own pay rates accordingly.
The union has decided not to allow the court ruling to affect pay rates and will hold strikes to give them some leverage at the negotiating tables with employers. It said the dispute is about stopping employers from cutting current hourly pay rates of members by 10%, from €21.49 to €19.34.
Clearly, it would be more stable for the industry to have agreed rates; however, unions and employers face massive challenges in trying to find a solution to the current impasse.
More unions may well follow their lead. Siptu workers at the Liebherr plant in Killarney, Co Kerry, recently rejected Labour Court proposals aimed at resolving a four-year 2.5% pay claim dispute. They have already staged a strike, with more on the cards.
As these registered employment agreements are now unconstitutional, the country must become more competitive. The cost of construction will ultimately come down as competition feeds into the economy. This can only be good for Ireland as a whole.
There has not been a flood of subcontractors from the North (where pay rates are considerably lower) winning business since the Supreme Court ruling, which indicates that their counterparts in the south have acted accordingly and reduced their own rates of pay. Firms that adapt will win more business.
The Supreme Court has done the economy and the jobs market a massive favour. This decisive ruling will act as a catalyst for change that will bring both economic and employment growth. That is, unless the trade unions decide they are not going to stand by and commence strike actions.
Many are wondering what role unions have to play in all this. Will they allow the market forces of supply and demand to set out what rates of pay workers ultimately get or will they stamp their authority with threats of strike actions and force employers around the table to set new enforceable rates? 2014 could prove to be a watershed moment for the construction industry and unions in Ireland.