The economic implications of COVID-19 (lay-offs and redundancies)
The economic implications of the COVID-19 pandemic ought to be of concern for both employers and employees alike. Many businesses deemed “non-essential,” were compelled to close their doors in an effort to prevent the spread of the virus. While the Government of Trinidad and Tobago’s phased reopening of the economy has resulted in some of these businesses recommencing operations, others remain closed. It comes as no surprise, therefore, that many businesses are suffering from the economic fallout of this pandemic.
It is expected that even with the Government’s phased reopening of the economy, there will still be businesses that are unable to recover economically and will sadly be facing a considerable drop in business volumes. These businesses may very well find that they cannot afford to keep many of their staff on their payroll on their current terms of employment. In these circumstances, it is likely that the management in these businesses will have some difficult choices to make in relation to their staff.
Although the exact approach to be taken will depend on the specific business, in this article, we have sought to address some of the options that may be available to employers and how these options ought to be applied so as to ensure that even in a time of crisis, employers act in accordance with good industrial relations practices.
N.B. The content of this article does not constitute legal advice and is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Directing an employee to take vacation leave
An employer may ask their employees to take their vacation leave while they experience a downturn in business. In Trinidad and Tobago, vacation leave provisions may be found in different sources:
- State employees have their entitlements set out in the individual pieces of legislation which deal with each service;
- Certain industries have their leave entitlements stipulated in the Minimum Wages Orders, found in the Minimum Wages Act Ch 88:04; and
- In other instances, leave entitlements may be provided for in collective agreements, in an employee’s contract of employment or at the discretion of the employer.
The contract of employment
An employer’s ability to direct how and when an employee may take their vacation leave may be governed by the terms of the employee’s contract of employment.
The contract may provide, for example, that the taking of vacation leave is subject to managerial approval, that a vacation leave request can be refused, given the reasonable requirements of the business or even that subject to reasonable notice being given, the employer can stipulate that the vacation leave is required to be taken at a particular time.
Accordingly, the precise terms of each contract must be considered.
Providing notice
Should an employer wish to ask its employees to use their vacation leave, the employer, in accordance with good industrial relations practices, should provide its employees with sufficient notice.
In the United Kingdom, the usual period of notice must be for twice as many days as the days that the employer is asking the employee to take as holiday. Therefore, if an employer wishes to close for 7 days, his employees are required to have 14 days’ notice.
However, this position only exists if the employee’s contract of employment does not contain a requisite notice period.
Considerations for the employer and employee
The novelty of the present circumstances calls for a reasonable and understanding approach to be taken by both employers and employees. Since the option to allow employees to take their vacation leave falls within one of the less drastic approaches in dealing with the economic fallout of the COVID-19 pandemic, it is advisable that all parties maintain a flexible approach. It may be that employees accede to this request, instead of running the risk of their employment being terminated.
Where an employer can direct when a worker or employee can take their holiday, the employer should consider:
- Their duty not to treat the employee in a wholly unreasonable manner under the implied term of trust and confidence;
- That they ought to act in accordance with good industrial relations practices and
- That the right to take time off from work for holidays benefits both employers and workers by allowing workers a period of relaxation and recuperation. This may be an important consideration for employers who are asking workers to take their accrued vacation leave.
In fact, the Advisory, Conciliation and Arbitration Service (ACAS), a key organization geared towards the promotion of strong industrial relations in the United Kingdom, has suggested that the following steps should be considered when discussing the use of vacation leave:
- Talk about any plans to use the vacation leave during Coronavirus as soon as possible;
- Discuss why the vacation leave might need to be taken;
- Listen to any concerns, raised by either the employees or the employer;
- Welcome and suggest ideas for other options;
- Consider everyone’s physical and mental wellbeing; and
- Be aware that it is a difficult time for both employers and staff.
Short-time working and lay-offs
Definitions
The Short-time working deals with a partial lay-off, where a reduction in the work given to the employee by the employer results in the employee receiving a substantially reduced wage.
A lay-off is defined as “a temporary suspension of an employee’s contract of employment at the employer’s instigation due to no fault or misconduct by the employee with the intention that the employee resumes the contract when the situation causing the layoff has abated…” (SWUTT v Arcelormittal Point Lisas Ltd [2016]).
Circumstances leading to a lay-off
A lay-off may occur:
- Where an economic situation necessitates at least a temporary reduction of staff
- But dismissal is viewed as a last resort and
- It may prove impossible for an employer to re-negotiate or re-structure the contracts of its employees.
However, it must be noted that an employer should only choose to lay-off employees when the circumstances demand. An employer’s ability to lay off staff ought not to be abused or be as a result of a whimsical decision.
Thus, lay-offs must be required by circumstances which are beyond the control of the employer and not of his own making.
Unilateral contractual changes
Generally, an employer cannot unilaterally impose a period of short-time working on his employees, since this would entail a change to the employees’ terms of employment.
If the employer is not entitled to impose a period of short time working under an express or implied term of the contract, an attempt to do so will likely amount to a repudiatory breach of the contract of employment and an employee may be entitled to resign and claim constructive dismissal.
Considerations for the employer and employee
If an employer chooses to implement lay-offs or short-time working, this implementation should be exercised by considering the term of mutual trust and confidence implied into employment law contracts. Employers also ought to act in accordance with good industrial relations practices.
A serious breach of the term of trust and confidence, in the manner of implementation of the lay-offs or short-time working, may result in an employee claiming constructive dismissal.
The following may be considered reasonable steps than an employer can take if deciding to implement short-time working or lay-offs:
- Consult with the relevant representative trade union;
- Meet with the affected employee(s) to explain the circumstances, and the proposal to implement a lay-off or period of short time working;
- Provide information about when it will take effect, and for how long it is expected to last, if possible;
- Give the employee(s) an opportunity to ask questions, raise concerns or make alternative proposals;
- Explain what arrangements are proposed in relation to pay (bearing in mind any contractual entitlements in this regard);
- Give the employee(s) as much notice of the arrangement as possible and
- Follow up in writing, confirming the outcome of the meeting.
Redundancy and retrenchment
Termination is normally considered as a last resort taken by employers. However, due to the current economic realities that businesses are facing, it is likely that those who cannot recover may be forced to contemplate redundancies.
In Trinidad and Tobago, redundancies are governed by the Retrenchment and Severance Benefits Act 1985.
In the Act, redundancy is defined as, “the existence of surplus labour in an undertaking for whatever cause.” Retrenchment is defined as “the termination of employment of a worker at the initiative of an employer for the reason of redundancy“.
Who does the act apply to?
The Act generally applies to workers, with exceptions including, inter alia, probationary workers, workers who have not completed more than one year of service, casual workers, seasonal workers and independent contractors (s.3).
The requirement for notice
Where termination of five or more workers is contemplated, formal notice of termination must be given to each worker, the recognized majority union and the Minister (s.4).
The period of notice
The minimum period of formal notice is 45 days (s.6).
However, where due to unforeseen circumstances, it is not practicable for an employer to give the requisite period of notice, he must give the maximum notice that he can reasonably be expected to give and the onus will be on him to prove that the circumstances which prevented him from complying with the requisite period of notice, were, in fact, unforeseen (s.7).
Good industrial relations
The employer is also required, in accordance with the principles and practices of good industrial relations, to notify the worker of the reasons for the redundancy, the criteria used in selecting the worker for retrenchment and the proposed date of termination.
Principles and practices of good industrial relations also dictate that employers must adopt a fair and objective method of selecting the excess workers to be retrenched such as the “Last in First out” principle or some other fair system.
Duties of the worker
During the notice period, the worker is obligated to continue to report to work unless the employer specifically indicates otherwise. During that period, the worker is also entitled to the full terms and conditions of his employment service. The employee is further entitled to reasonable time off to look for a job once that request is reasonable and made in advance but this is subject to the operational needs of the business (ss. 15 and 16).
Severance benefits
Section 18 of the Act provides the minimum severance payments a retrenched worker is entitled to, calculated on the basis of the length of period of employment of the worker.
Penalty for non-compliance
An employer who contravenes the Act is guilty of an industrial relations offence and liable to a fine of $10,000 (s.25).
Frustration and COVID-19
The impact of the doctrine of frustration on an employment contract as a result of COVID-19 is yet to be determined.
On the one hand, frustration does not normally apply when a business shuts down or needs to terminate employees due to a business downtown. In fact, jurisprudence on the issue generally supports the view that any difficult economic circumstance, no matter how bad it is, would not, in and of itself, justify a finding of frustration. This may make it difficult for some employers to claim frustration of the employment contract.
However, on the other hand, theoretically, it could be argued that COVID-19 is an unforeseeable event that is the fault of neither party, which has resulted in workplaces going out of business entirely. There is, therefore, a potential to raise an argument on the frustration of an employment contract due to COVID-19.
Length of frustration
The length of frustration is likely to be a relevant consideration in determining whether an employment contract has been frustrated.
Where COVID- 19 has resulted in the closing of businesses for a relatively short period of time, it is unlikely that a court would find that an employment contract has been frustrated.
On the other hand, if there are businesses that are required to remain closed for an extended period of time due to COVID-19, the potential for running a successful argument based on frustration may be greater.
An employer seeking to rely on frustration ought to seek legal advice since the determination of whether or not a frustration of the employment contract has occurred will be highly circumstantial.
Assistance for affected employees
If, as an employee, you have experienced a loss or reduction in your income or were retrenched or terminated as a result of COVID-19, you may be entitled to receive social assistance from the Ministry of Social Development and Family Services.
The Government has undertaken to provide financial assistance to those who have been retrenched/terminated or those experiencing reduced income for a period not exceeding three (3) months. The financial assistance includes income, food and rent support.
The guidelines for the provision of this assistance can be found at the following link: http://social.gov.tt.
