A partnership which employed 27 Portuguese workers on a road project in Ireland could legally make deductions from their wages for accommodation, but the workers are entitled to claim damages because that accommodation was “substandard”, the Court of Appeal has ruled.

Mr Justice Gerard Hogan said the issues arising from the workers’ treatment “all have a distinctly Victorian feel to them”.

Allegations of illegal deductions made by employers of “foreign and generally poorly-educated construction workers” would have “seemed familiar to late-19th-century judges in different jurisdictions”, he added.

He was giving judgment on an appeal by three Portuguese companies that traded here as the RAC Éire partnership, against a High Court decision the workers were entitled to recover total damages of €1.25m, including 8 per cent interest dating back to 2008, over breach of their employment contracts.

The companies – Rosas Construtores SA; Construcoes Gabriel AC Couto SA and Empresa Deconstrucores Amandio Carvalho SA, traded as RAC Contractors and/or RAC Éire Partnership. RAC Éire traded as a contractor or sub-contractor to a consortium, Bóthar Hibernian, comprising three companies – Mota-Engil (Portugal; Michael McNamara and Company and Coffey Construction Ltd).

The case arose after Limerick County Council awarded Bóthar Hibernian a public works contract to design and build the N7 Nenagh to Limerick dual carriageway.

The 26 construction workers and one cleaner, represented by solicitor Tom O’Regan, were employed under contracts with the defendants between 2007 and 2009 which involved daily deductions of €15 for board, €17.50 for lodging and €3.75 for a laundry service.

Hours of work were stated as from 8.30am to 5pm Monday to Thursday and 8.30am to 4pm on Fridays with the workers to work overtime if asked.

In March 2016, the High Court ruled the firms engaged in “systematic and deliberate” under-recording of hours of work, leading to underpayment of the workers. It also found the defendants were not entitled to deduct €17.50 daily (€520 monthly) from the workers’ wages for accommodation of a “deplorable, even dangerous” standard.

That accommodation, for up to 150 workers over some 12 months, was an “unacceptably cramped” prefab “work camp” in a slip road near the road project, with “substandard and inadequate” sanitary arrangements and no drinking water. Conditions in prison were better, Mr Justice David Keane was told.

Giving the three-judge Court of Appeal judgment, Mr Justice Hogan noted the firms had not appealed the High Court findings concerning underpayment of workers but they appealed other findings.

He allowed the firms’ appeal only in relation to the High Court finding the defendants could not lawfully make deductions for the accommodation services.

However, he would “temper” his finding by directing a re-trial on the issue of the damages to be awarded to the workers for inconvenience, distress and general loss of enjoyment caused by the substandard accommodation provided in breach of their contracts. The exact sum of damages will be determined at the re-trial.

He dismissed other claims the High Court erred in finding the firms were not entitled to make deductions from wages for “laundry services”, primarily due to the firms’ failure to weigh laundry despite being contractually obliged to do so.

The High Court had discretion to apply Courts Act interest to the damages award, he also ruled.

While the firms correctly argued the 8 per cent Courts Act rate was “far in excess” of prevailing interest rates, the courts have no discretion to interfere with the rate provided for in the relevant legislation, he said.