1. SEO – 12 months on! Mary Liz Mahony, Senior Associate

2. The Sectoral Employment Orders
Sectoral Employment Order (Construction Sector) 2017
announced 19 October 2017
Sectoral Employment Order (Mechanical Sector) 2018
announced 9 March 2018

3. Overview Recap on the SEOs
Background and Notable Features
Future SEOs
Price Variation under the Public Works Contracts
Amendments to the Public Works Contracts
Circular 08/2018
PW-CF1 v2.3
Managing Legacy Issues
Avenues for claims
Strict legal interpretation: is it fair?

4. Background Registered Employment Agreement regime unconstitutional in
McGowan & Ord v Labour Court Ireland & Anor
Industrial Relations (Amendment) Act 2015 allows Labour Court to examine the terms and conditions of workers in a particular economic sector
Examination requested by CIF with input from various stakeholders
Recommendation made to the minister for a sectoral employment order
Both SEOs provide for binding terms and conditions for employees in the construction sector in relation to rates of pay, unsocial hours payments, pension schemes, sick pay and a dispute resolution procedure

5. Notable Features of the SEOs
The General SEO:
applies to both “Building Firms” and “Civil Engineering Firms”
very broadly defined (definitions “well-established, have stood the test of time and have been the basis on which the industry has defined itself for decades")
The Mechanical SEO
applies to the following categories of worker:
qualified plumbers and registered apprentice plumbers (Craftsperson) and qualified pipefitters and registered apprentice pipefitters (Craftsperson)
directly employed or employed through an employment agency
in the Mechanical Engineering Building Services Contracting Sector

6. Base Rates of Pay General SEO Mechanical SEO
New Entrant Worker: €13.77
Category 1 Worker (1 year experience): €17.04
Category 2 Worker (skilled operatives): €18.36
Craft Worker: €18.93
Apprentice:
33.3% of Craft Rate (Y1)
50% of Craft Rate (Y2)
75% of Craft Rate (Y3)
90% of Craft Rate (Y4)
Mechanical SEO
Category 1 (newly qualified): €22.73
Category 2 (3rd Year): €23.33
Category 3 (6th year): €23.60
Apprentice: 33.3% of Category 1 (Y1)
50% of Category 1 (Y2)
75% of Category 1 (Y3)
90% of Category 1 (Y4)

7. Additional Entitlements
Additional pay for unsocial hours rising to either time and a half or double time depending on the time/day of the week
A sick pay scheme to include no less comparable benefits and contributions than the Construction Industry Sick Pay Scheme
Pension entitlements to mirror the Construction Workers Pension Scheme (entitlements to begin at 18)
Both SEOs set minimum contribution rates and for a death in service benefit scheme.

8. Additional Entitlements
Dispute Resolution
Access to:
WRC Adjudication Service (for individual disputes)
WRC Conciliation Service (for collective disputes)
Appeal by application to the Labour Court.
SEOs does not include any travel allowance for workers, the General SEO specifically states that this will not affect those workers who have a contractual right to payment for travel time.
Remit
Electrical Sector
The SEOs do not include the electrical sector
Likely to arise in the future
Severe financial difficulties – application for an exemption

9. Price Variation under the Public Works Contracts
Two price variation mechanisms provided for under the Public Works Contract (PV1 and PV2) “whichever is stated in the Schedule, part 1M”
Both Pv1 and Pv2 purport to allow for adjustments to the Contract Sum for an increase in workers’ wages or expenses after the Base Date
defined under Pv1 as the first date of the 31st month after the Contract Date
defined under Pv2 as “the first day of the 37th calendar month after the Designated Date
BUT each mechanism requires close examination

10. Price Variation However
Pv1 (proven cost method)
Allows for adjustments in costs only in respect of increases or decreases that occur in workers’ wages or expenses, or material prices, or are made by Law in accordance with Pv1…
After Base Date but before Date for Substantial Completion
Pv2 (formula fluctuations method)
The Contract Sum…shall be subject to adjustment for price fluctuations or changes in the Law only in the circumstances set out in Pv2. No increase or decrease shall be made in respect of any amount that relates to the works before the Base Date except as provided in sub-clauses Pv2.4 and Pv.8.4.
However
When SEOs were announced, both Pv1 and Pv2 made reference to the old REA regime.

11. Amendments to the Public Works Contracts
The suite of Contracts have now been amended to reflect the Sectoral Employment Orders:
Circular 08/2018
PW-CF1 v June 2018
Pv1.1.2 Works’ remuneration and expenses:
The Contract Sum shall be adjusted by the amount of an increase or decrease in workers’ wages and expenses that satisfies all these requirements:
it is made to the rates of remuneration payable to workers according to any sectoral employment orders implemented under the Industrial Relations Act 1946 to 2015 and
It becomes payable after the Base Date in accordance with the relevant sectoral employment order and
the workers in respect of whom the increase is being claimed have received in Ireland for the relevant work at least the increased remuneration

12. Amendments to the Public Works Contracts
Remuneration: “has the meaning set out in Section 13 of the Industrial Relations (Amendment) Act 2015”
Workers:
(a) any individuals employed by, or otherwise working for the Contractor or the Contractor’s Personnel on or adjacent to the Site and fall within any categories of works to whom a relevant sectoral employment order applies in accordance with its terms and
(b) any foreperson, charge hand or other person who supervises or administers while performing duties within (a) but in respect only of the remuneration according to sub-clauses PV1.1.2(i) applicable to those duties and 50% of their total hours worked.
Expenses: PRSI payable by the Contractor as employer.

13. Amendments to Public Works Contracts
Pv2
Appendix 6 amended to remove formula relating to General Round Increases.
Formula now accounts for Labour Percentage in all instances
LV = (CPIA – CPIB)/CPIB X Y x EV

14. Amendments to Public Works Contracts
Clause 10.6 – Adjustments to the Contract Sum
Compensation Event, value of any additional, substituted, and omitted work…
Rates in Pricing Document
Fair Valuation OR
– be determined (in full or in part) on the basis of the cost of performing the additional or substituted work, compared with the Contractor’s cost without the Compensation Event, determined as follows:-
(i) the number of hours worked or to be worked by each category of work person engaged on the work…multiplied in each case by the basic hourly rate of pay for the relevant category of worker in an applicable sectoral employment order…to which is applied a percentage addition to costs of labour as stated in the Schedule, 2D.…

15. Managing Legacy Issues
Significant number of claims relate to live projects contracted under previous forms of PWC which provide for REA
Pv1.1.2, provide for adjustment of the Contract Sum by the amount of increase or decrease in workers’ wages or expenses that satisfies all these requirements:
It is made to the standard normal and overtime hourly wages and expenses payable to workers according to the Labour Courts’ Registered Employment Agreement…
…payable after the Base Date…
It is in respect of General Round Increases conforming to the guidelines of Social Partnership Agreements…in the absence of a Social Partnership Agreement and guidelines, increases in accordance with the guidelines on General Round Increases issued by the Department of Finance and
The workers in respect of whom an increase is being claimed have received in Ireland for the relevant work at least the increased standard wage rates and expense.

16. Managing Legacy Issues
Does Pv1.1.2 allow for recovery for SEOs?
If not, is there no entitlement OR
Is PV1.1.2 completely inoperable such that the Contractor is entitled to adjustment elsewhere?
Does Pv1.1.4 allow for recovery for SEOs?
…changes [whether by alteration, addition or removal] VAT, customs or excise duties, requirements for a licence to import or export any commodity or PRSI…

17. Managing Legacy Issues
For additional, substituted and omitted work it may be possible to receive some uplift:
Clause : fair valuation
Clause :
if the Employer’s Representative directs that valuation of such works takes place under Clause and
where tendered hourly rates are less than 75% of the relevant rate in the current construction industry registered employment agreement current on the Designated Date (to be interpreted as the relevant SEO), these rates will be read as 75% of the relevant rate
This is likely to provide limited relief only in very limited circumstances

18. Managing Legacy Issues
Other Avenues for Redress?
Clause – obligation to comply with employment law
The Contractor shall ensure that the rates of pay and the conditions of employment…comply with all applicable law… The obligations in this sub-clause 5.3 apply regardless of what rates the Contractor has tendered for adjustments to the Contract Sum
Clause – the purposeful meaning?
The Parties intend the Contract to be given purposeful meaning for efficiency and public benefit generally and as particularly identified in the Contract

19. Managing Legacy Issues
Other issues:
How do we evaluate impact/adjustments to the Contract Sum
Vouching documentation?
Is Contractor paying the base rates anyway?
Pv1.4 Efficiency “…increases of the Contract Sum will only apply so far as the increased costs incurred by the Contractor occur despite efficient progress and procurement and reasonable efforts to minimise increases.”

20. Conclusion
Lacuna in terms of worker protection filled by the new SEOs …Certainty in respect of wages and other benefits is a good thing!
Public Works Contract has now been updated to account for Sectoral Employer Orders
Huge uncertainty for public bodies and contractors around legacy issues – what uplift, if any, a Contractor might successfully claim at Conciliation/ Arbitration

21. Thank you Mary Liz Mahony