LCR14475

Labour Court Database __________________________________________________________________________________ File Number: CD94218 Case Number: LCR14475 Section / Act: S26(1) Parties: CONSTRUCTION INDUSTRY FEDERATION - and - IRISH CONGRESS OF TRADE UNIONS;CONSTRUCTION INDUSTRIAL COMMITTEE

Subject:
Use of sub-contractors.

Recommendation:
The Court, having considered all of the views expressed by the
parties in their oral and written submissions considers that until
the parties can agree arrangements, which have a more universal
acceptance and which provide adequate protection for employees
employed under a contract of service, fewer opportunities for
abuse of the system, and which create a more level playing field
for contractors, the 1981 Agreement on sub-contractors should
apply.

It is clear however, that as a consequence of changes in the
industry the agreement needs to be amended as a matter of urgency
to effectively meet the needs of the Industry to-day.

Accordingly the Court recommends that the framework of proposals
put forward by the CIF together with the views of the Working
Party be negotiated between the parties as expeditiously as
possible with a view to an agreement being put in place which is
more applicable to the needs of the Industry and protects the
employees.

Progress on this issue should be reviewed six months from the date
of issue of this recommendation.



As there are adequate arrangements for the orderly resolution of
problems in place for the Industry the Court considers the absence
of a formal N.J.I.C. as referred to in the agreement should not
preclude it being operated in an effective manner pending the
outcome of discussions referred to above.

The Court so recommends.

Division: MrMcGrath Mr Keogh Ms Ni Mhurchu

Text of Document__________________________________________________________________

CD94218 RECOMMENDATION NO. LCR14475

INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990

PARTIES:
CONSTRUCTION INDUSTRY FEDERATION

AND

IRISH CONGRESS OF TRADE UNIONS
(CONSTRUCTION INDUSTRIAL COMMITTEE)

SUBJECT:

1. Use of sub-contractors.


BACKGROUND:

2. 1. In July 1991, the Labour Court recommended significant
increases in pay rates of craftsmen and general
operatives in the Construction Industry. (LCR13340
refers). The Court also recommended that "the parties
immediately commence negotiations with a view to
reaching agreement on the following issues ......... (b)
sub-contractors. That negotiations be completed on or
before 30th November, 1991. Failing agreement the
parties arrange for the outstanding issues to be
referred to the Labour Court for recommendation."

2. The negotiations did not take place until 1993, when at
a conciliation conference under the auspices of the
Labour Relations Commission the parties agreed to set up
a Working Party to establish guidelines for the
employment of sub-contractors throughout the
Construction Industry. The Working Party met on a
number of occasions and agreed that any new agreement on
the issue of sub-contractors should be registered with
the Labour Court under the Industrial Relations Act,
1946 thereby ensuring uniformity in its application as
between members of CIF and non-members. The parties
could not reach agreement on the form of sub-contracting



permitted. The Unions sought to maintain the intrinsic
value of the current Agreement (1981). The employers
sought variation of its terms to permit the use of
sub-contracting firms supplying labour only,
unrestricted use of sub-contractors in all categories of
work and the use of unregistered labour-only
sub-contractors. The Unions sought a strengthening of
the Agreement to provide for the bonding of
sub-contractors. Details of the parties final proposals
to the Working Party supplied to the Court.

3. A further conciliation conference held on the 21st
March, 1994, failed to resolve the issue. The dispute
was referred to the Labour Court on the 18th April,
1994, in accordance with Section 26(1) of the Industrial
Relations Act, 1946. The Court investigated the dispute
on the 12th May, 1994.


ICTU'S ARGUMENTS:

3. 1. There is no significant problem with regard to
legitimate sub-contractors who meet the legal
requirements in accordance with the C2 Authorisation
Certificate. There has however been an abuse of the C45
system specifically in relation to workers being
designated as self-employed sub-contractors when in
reality the relationship is an employer - employee one.
The Unions cannot agree to a proliferation of this
system. The general use of the C45 system on members
means that is affects the CIF pension fund (they would
be ineligible for membership). There is also a loss of
revenue to the State through income tax, PRSI etc.

2. The Industry Agreement of 1981 provides a fair and
reasonable basis for the use of sub-contractors in the
Construction Industry. Circumstances have not altered
significantly since that time and there is no
sustainable argument as to why the terms of that
Agreement should be modified. It was designated to
protect the interests of both workers and legitimate
employees. It was also intended to limit the scope of
the black economy operation within the industry. Any
dilation of its provisions could serve only to defeat
the purposes for which it was originally designed.

3. Maintaining the Agreement in its current form with the
amendments proposed by the Unions provides



the best method of ensuring that the legitimate
requirements of employees for the use of sub-contractors
can be met while safeguarding the fundamental interests
of their employees and the industry's workforce
generally.


CIF'S ARGUMENTS:

4. 1. There has been a significant growth in the trend towards
sub-contracting and self-employment in the Construction
Industry. The existing agreements on sub-contracting
have not kept pace with these developments. There must
be an amendment to the existing REA for the Construction
Industry. The CIF proposes that contractors and
sub-contractors covered by the REA should be free to
engage specialist sub-contractors and generally
self-employed persons in any trade or activity in the
industry provided they meet the criteria as outlined in
the CIF's proposals.

2. The existing agreement on sub-contracting excludes
certain key trades. This is no longer sustainable Main
contractors must be free to sub-let work across the full
range of their activities. There is no evidence that
the use of bona fide labour-only sub-contractors
encourages black economy operations.

3. Labour-only sub-contractors fall within the scope of
Section 17 of the Finance Act, 1970, in exactly the same
manner as other sub-contractors. Sub-contractors and
the self employed who choose to operate on the tax
deduction system must be free to do so.

4. Construction work is now generally carried out by a
combination of direct employment, sub-contracting and
self-employed workers. There is effectively no
agreement to cover the last category. While
self-employment is growing in the construction industry,
the rate of increase is lower than in other industrial
sectors. Developments in the industry merely reflect
changes in the economy in general.

5. The CIF recognises the need for some regulation of
labour-only sub-contractors and the self-employed and
has put forward considered and serious proposals (which
have the support of the whole industry).



6. It is of major concern to the CIF that the existing
agreements on sub-contracting are not part of the
Registered Employment Agreement. As a consequence,
their terms cannot be enforced on firms outside the
Federation, thereby frustrating one of the objectives of
the REA, i.e., to provide "a level playing pitch". This
situation puts CIF members at a distinct competitive
disadvantage and if it is not addressed, has potentially
disastrous consequences for many CIF members.

RECOMMENDATION:

The Court, having considered all of the views expressed by the
parties in their oral and written submissions considers that until
the parties can agree arrangements, which have a more universal
acceptance and which provide adequate protection for employees
employed under a contract of service, fewer opportunities for
abuse of the system, and which create a more level playing field
for contractors, the 1981 Agreement on sub-contractors should
apply.

It is clear however, that as a consequence of changes in the
industry the agreement needs to be amended as a matter of urgency
to effectively meet the needs of the Industry to-day.

Accordingly the Court recommends that the framework of proposals
put forward by the CIF together with the views of the Working
Party be negotiated between the parties as expeditiously as
possible with a view to an agreement being put in place which is
more applicable to the needs of the Industry and protects the
employees.

Progress on this issue should be reviewed six months from the date
of issue of this recommendation.



As there are adequate arrangements for the orderly resolution of
problems in place for the Industry the Court considers the absence
of a formal N.J.I.C. as referred to in the agreement should not
preclude it being operated in an effective manner pending the
outcome of discussions referred to above.

The Court so recommends.
~
Signed on behalf of the Labour Court


17th June, 1994 Tom McGrath
T.O.D./M.M. _______________
Deputy Chairman



Note

Enquiries concerning this Recommendation should be addressed to
Mr. Tom O'Dea, Court Secretary.

APPENDIX A

IRISH CONGRESS OF TRADE UNIONS

CONSTRUCTION INDUSTRIAL COMMITTEE

PROPOSALS TO WORKING PARTY ON SUBCONTRACTING

1. Introduction

1.1 The Unions understand that the employers wish to have the
industry agreement amended so as to allow for the use of
legitimate specialist sub-contractors in all aspects of
construction work. They are also seeking some facility
within the agreement for the use of genuinely self-employed
persons, principally on short term once-off contracts. The
Unions for their part are primarily concerned with the abuse
of the C45 system whereby workers are being designated as
being self-employed sub-contractors in circumstances where,
in reality, the relationship is one of employer, employee.
It appears to be accepted by the employers that this type of
arrangement amounts to an abuse of the system and should be
controlled. The Unions are also concerned to ensure that in
any new arrangements the interests of their members are
adequately protected and that only firms who demonstrate a
commitment to observance of the Registered Agreement and
their statutory obligations with regard to tax and social
welfare are recognised as legitimate sub-contractors. In
that regard the Unions propose that a system of
self-regulation of entry into sub-contracting be established
by both sides of the industry.

1.2 The trade unions believe that any new agreement on
sub-contracting must carry a commitment on the part of unions
and employers to observing and enforcing its terms. This is
best achieved by having the agreement registered with the
Labour Court with both parties undertaking to jointly pursue
a complaint to the Court under the relevant provisions of the
Industrial Relations Act, 1946 in cases where a breach of the
terms of the agreement is brought to their attention.

2. Trade Union Proposals

Approved Sub-Contracting

2.1 The agreement should be amended so as to provide that firms
covered by the Registered Agreement may engage approved
specialist sub-contractors in any trade or activity of the
industry. For the purposes of the agreement approved
sub-contractors should be defined as firms which


(i) Comply with the terms of the Registered Employment
Agreements for the industry and in particular are
registered with the Operatives Pension/Sick Pay Scheme
for the industry in respect of all their employees who
are covered by those agreements;

(ii) Employ the appropriate grades of trade union labour
who possess the qualifications and competencies
necessary for the performance of the work for which
they are employed;

(iii) Have an established business base within the Republic
of Ireland;

(iv) (a) Are registered for the purposes of the Social
Welfare Acts and Section 17 of the Finance Act
1970 and hold a current C2 Certificate.

(b) For the purpose of this agreement a firm which is
awaiting the renewal of a C2 Certificate or in
respect of which the issue of a C2 Certificate is
actively under dispute will be regarded as
complying with this provision;

(v) Supply plant, materials and equipment necessary for
the work in which they are engaged;

(vi) Maintain a safe and healthy working environment and
comply with the provisions of the Safety in Industry
Act, 1990 as a minimum;

(vii) Carry Public and Employer Liability Insurance in
respect of the work in which they are engaged and
their employees.

*See Note 1

(viii) Employ the appropriate number of apprentices relative
to the number of craft workers employed.

(ix) Have appropriate bonding arrangements to cover wages
and other emoluments due to employees in the event of
their inability to meet such liabilities.

*NOTE 1

It is acknowledged by the parties that the requirement at
Clause 1(vii) can be met where the employing contractor
maintains adequate Public and Employers Liability Insurance
in respect of sub-contractors and their employees.


3. C45s

The parties to this agreement acknowledged that C45s should
only be used in respect of approved sub-contractors in the
circumstances described in paragraph (iv)(b) of Clause 1 and
in no other circumstances.

4. Special Adjudication Committee

Where a dispute arises concerning the application of this
agreement the dispute will, in the first instance, be the
subject of negotiations between the union concerned and the
CIF and failing agreement the matter will be referred to a
Special Adjudication Committee comprising one person
nominated by the Construction Industrial Committee of ICTU
and one person nominated by the Construction Industry
Federation together with the Chairperson of the Consultative
Committee for the Construction Industry. The decision of the
Adjudication Committee as so constituted will be binding on
all parties.


APPENDIX B


CONSTRUCTION INDUSTRY FEDERATION

SUB-CONTRACTOR AND SELF-EMPLOYMENT IN THE CONSTRUCTION INDUSTRY


The last decade has seen a significant growth in the trend towards
sub-contracting and self-employment in the Construction Industry.
The existing agreements on sub-contracting have not kept pace with
these developments. The parties to this agreement now recognise:

1. the desirability of providing an agreed framework within
which these categories may operate, and

2. that the success of any new agreement in this area depends on
a commitment from the employers and trade unions to observe
and enforce its terms and that this is best achieved by means
of amendment to the existing Registered Employment Agreement
for the Construction Industry.

The parties agree that contractors/sub-contractors covered by the
Registered Employment Agreement for the Construction Industry may
engage registered specialist sub-contractors in any trade or
activity in the industry.

The parties further agree that contractors/sub-contractors may
engage genuinely self-employed persons in any trade or activity in
the industry.

This agreement is contingent on a commensurate increase in the
release of C2 Certificates by the Revenue Commissioners and
adequate provision where tax affairs are in dispute.


DEFINITION OF REGISTERED SUB-CONTRACTOR

For the purposes of this agreement registered sub-contractors are
defined as follows:-

(a) comply with the terms of the Registered Employment
Agreements for the industry

(b) employ the appropriate grades of trade union labour

(c) comply with the Social Welfare Acts and Section 17 of
the Finance Act, 1970



(d) maintain a safe and healthy working environment and
comply with the provisions of the Safety in Industry
Act, 1990

(e) carry Employers' liability insurance in respect of their
employees and the work in which they are engaged; unless
provided by main contractor or the client

(f) employ appropriate number of apprentices



DEFINITION OF SELF EMPLOYED PERSONS

Self employed persons are those who:

(a) are employed on a contract for service;

(b) comply with income tax legislation;

(c) contribute PRSI as self employed persons;

(d) are covered by a pension scheme for the self-employed;

(e) are members of an appropriate trade union;

(f) are engaged only on a short term basis.

NOTE 1: It is clearly understood that registered contractors
will not engage a multiplicity of workers on a C45 basis
in any one discipline.

NOTE 2: It is agreed that persons whose weekly or monthly
earnings are calculated by reference to time worked
rather than on a contract sum or price basis are to be
regarded as employees.