Employment Law Update
As the global pandemic COVID-19 continues to race across the globe, small and tranquil as Anguilla prides herself, she too is not immune. While currently there are three (3) confirmed cases, the impact of the epidemic is being felt as measures to protect the health of the island community are imposed.
As the closure of the borders at 1159 hours on 20th March 2020 approached, there was an impetus for guests wishing to avoid a mandatory two-week extension of their visits to paradise, to depart. This followed the earlier restrictions in Sint Maarten on flights from Europe, Asia, and the USA. These along with the closure of the passenger ferry terminal of Saint Martin, and the various directives issued by Government’s worldwide to its citizens to avoid non-essential travel, meant an inevitable contraction of an economy largely driven by tourism.
Combined, these were a collective final death knell to the 2020 hopes and fortunes in the economy’s struggling tourism sector. The focus turned quickly from projections and forecasts to protection. The resounding question: how can employers reduce operating costs during these challenging times? This guidance, while intended for those in tourism, is also applicable to every other employer who is faced with the unenviable task of managing their human resource capital in this time of crisis.
Lay-off
It is important at the outset to clarify that a lay-off is not the same as redundancy. While the cause of both actions are usually similar, the aims of each are not. One is temporary and the other is not. A lay-off happens when the employer asks employees to not come to work because there is not enough work. A redundancy on the other hand is a dismissal, sometimes born out of circumstances similar to those that necessitate a lay-off.
In Anguilla, employment is regulated by the Labour Relations Act 2018 and where there are gaps, the common law. This Act acknowledges the possibility of lay-offs in the local context and provides that a temporary lay-off does not constitute a break in an employee’s continuity of employment. It also declares that any such lay-off does not affect the computation of time in a fixed term contract or otherwise prejudice an employee. It however does not provide an employer with a statutory right to lay-off, and indeed, details no specific steps as to how lay-offs may be effected or their duration. This option therefore remains one which at common law, an employer can only legally take if there is an express contractual right to do so. Alternatively, they may do so where this is an agreed right under a collective bargaining agreement. Absent either scenario, although the Act recognises lay-offs, such an action arguably constitutes a dismissal.
The Canadian case of Bevilacqua v. Gracious Living Corporation, 2016 ONSC 4127 provides useful guidance. In that case, Gracious Living Corporation was aware of the Ontario Employment Standards Act, 2000 which provided that a temporary layoff will not trigger a termination of employment if the layoff does not exceed 13 weeks in a period of 20 consecutive weeks, or 35 weeks in a period of 52 consecutive weeks. Having regard to these, Gracious Living Corporation believed that it could, in September 2014, lay off for three months Giuseppe Bevilacqua, its Facilities Manager of 15 years, while it navigated an economic storm. Despite cordial relations with the owners of the family business, Mr. Bevilacqua sued for wrongful dismissal.
When the judgment of the Ontario Superior Court was rendered on 22nd June 2016, the Court reiterated the Court of Appeal’s determination in Elsegood v. Cambridge Spring Service, 2011 ONCA 831. Justice E M Morgan held that “The Ontario Court of Appeal has held that a unilateral layoff by an employer is, absent agreement to the contrary, a substantial change in employment, and that it therefore constitutes a constructive dismissal…An employer has no right to impose a layoff either by statute or common law, unless that right is specifically agreed upon in the contract of employment. The fact that a layoff may be conducted in accordance with the Employment Standards Act, 2000, SO 2000, c. 41, is irrelevant to the question of whether it is a constructive dismissal.”
In quite direct language, the judge found that the employer “…was not legally authorized to “simply place employment status on hold without pay and expect that this will not constitute a constructive dismissal”
Accordingly, attractive as the proposition of a well-intentioned temporary cessation of work and pay is, even where there is a statutory formulation, lay-offs without express agreement may be deemed unlawful unless there is a contractual right to do so. This is so, even as with Gracious Living Corporation, where the employer does not mean to repudiate the employment contract and the layoff is temporary in nature. Without a contractual clause permitting it, a layoff repudiates a fundamental term of the employment contract and the employee will be entitled to resign and claim constructive dismissal. Employers should therefore take such steps advisedly as a misstep may lead to a finding of unfair dismissal with financial obligations for compensation and redundancy payments.
Redundancy
Section 105(4) of the Labour Relations Act 2018 stipulate that “an employer has the right to terminate the contract of employment for reasons due to redundancy.”
Importantly, termination by redundancy requires the identification of one of the stated reasons for such a termination in the Act. These are listed at section 106. Focusing on the present situation (COVID-19), those at section 106 (f) and (g) may be applicable. They are:
“(f) it has become impossible or impracticable for the employer to carry on his business at its usual rate or level or at all, due to a shortage of material, a mechanical breakdown, a force majeure or an act of God; or
(g) a reduced operation in the employer’s business has been made necessary by economic conditions including a lack of or change in markets, contraction in the volume of work or sales, reduced demand or surplus inventory.”
It is important to note here that interestingly, section 106(f) places force majeure on the level of a statutory cause. Ordinarily, force majeure provisions are incorporated into the contract by express language and where this is absent, the contractual tool does not exist independently at common law. The Act having expressly provided for it however, means that the employer can be excused from performance of its contractual liabilities and assert a redundancy event where, as here, there are extenuating circumstances beyond its control. This is useful as the alternative requiring application of the doctrine of frustration is arguably more difficult to establish.
If as it appears the economic landscape dictates considering this course, employers should be aware that this is a formal process involving the Labour Department. Section 107 provides that if the employer is contemplating making 3 or more employees redundant, the employer must before taking any decision, consult with the Labour Commissioner. This step is mandatory. Additionally, notice of the intended redundancy must be given to the Labour Commissioner not less than 4 weeks before the intended date of redundancy.
Further, if the decision to terminate for redundancy is taken; the Commissioner is advised and she has not requested exploration of alternatives, then the employer also must inform the trade union and if none, the employee’s representatives and/or the employees. This consultation should include discussion of measures that could be taken to avoid or minimize the adverse effects of redundancy as well as those that could mitigate the adverse effect of terminations. It may be here that agreement to a contractual variation could be achieved. Caution and legal advice should both be taken here as in some circumstances the agreement may not be binding and may lead to a finding of redundancy nonetheless.
Employers should note that redundancy is not without costs. Once the statutory criteria are satisfied, making an employee redundant triggers certain payments contemplated by the Act. Redundancy (severance) payments of one week’s wages for each completed year of service up to the first 5 years; and two week’s wages for each completed year of service in excess of 5 years are required. These are calculated on the highest wage earned by the employee over the last year preceding termination.
In addition, section 110(4) makes clear that “Redundancy payment shall not affect the employee’s entitlement to payment in lieu of notice, outstanding wages, wages in lieu of accrued annual holiday, remuneration for work performed by the employee or any other termination benefits.”
As such, If an employee being made redundant has holiday which s/he is entitled to receive holiday pay in lieu. Also in accordance with section 99, an employee paid at intervals less than a month would be entitled, in addition to severance pay, to notice or pay in lieu as follows:
- Less than 1 year service – one week
- 1 year to 5 years – two weeks
- 5 years and over – four weeks
Employees paid monthly are entitled, in addition to severance pay, to notice or pay in lieu as follows:
- Less than 1 year service – one month
- 1 year to 5 years – two month
- 5 years and over – three months
Supervisors, managers, professional, higher technical or managerial level employees all are entitled, in addition to severance pay, to three months’ notice or pay in lieu regardless of their length of service.
Employers should also be aware that if within 6 months of making the employee(s) redundant the employer intends to reinstate a position that was the same or similar to the position held by the redundant employee, the employer shall provide the former employee with a reasonable opportunity to resume to position.
Throughout the process it must also be borne in mind that the employer is required to consider the ability, experience, skill and occupational qualifications of individual employees; length of service of employees; age of employees; or other criteria as may be appropriate having regard to the circumstances in selecting employees for redundancy. Performance of the employee, that is, the employee’s conduct, skills, qualifications, hours of work and any other matter pertaining to performance is irrelevant to the employer’s decision relating to redundancy.
Reduced Working Hours
This too must depend on the terms of the employment contract , except where the employee is employed on an hourly rate basis. An employee who is employed on an hourly rate basis, once s/he reports for work, is entitled to be paid for the time worked using his/her basic rate of pay, even if s/he is prevented from doing so by reason of force majeure or the directive of the employer.
In respect of employees not paid on an hourly rate basis, in the absence of a contractual provision, it would have to be agreed with the individual employees or their representative as a variation of their employment contracts.
Holiday
Finally, employers may wish to consider that the Act provides that annual paid holiday of 15 days accrues from the anniversary date of employment. This holiday shall be given and taken in one period unless there is a signed agreement to take it in more than one period. It must be taken unless there is an agreement otherwise, within 3 months of the entitlement. Accordingly, once the holiday has accrued the employer can direct that it be taken. This may be a legal and palatable half-way house between lay-off and redundancy.
Conceivably, the employer can also encourage the taking of holiday in advance of accrual; once the employees agree to do so.
Conclusion
These are times of great uncertainty on several levels. Survival, in both medical and economic terms, will assume paramountcy globally and the conventional may give way to novel responses in uncharted territory. Employers are however cautioned to assess this fluid situation and to take advice in advance of fashioning their action plans to avoid legal issues once we have come out on the other side of this pandemic.