HSM
COVID-19 - Supporting Businesses in a Time of Crisis
A Presentation given to the Cayman Islands Chamber of Commerce
Presented By: Huw Moses, Nick Joseph, Hilary Brooks and Alastair David April 1, 2020
Two Systems
HSM The Common Law:
Obligations imposed on the Employer and Employee by the Contract of Employment The Contract – written terms Actions in the Court – Summary or Grand Court The Statutory Framework: Obligations imposed by the Labour Law (2011 Revision) and other laws Tribunals – Labour, Gender Equality
HSM Can I? •
Require staff to take vacation?
•
Require staff to take sick leave?
•
Reduce the hours/days my staff work?
•
Reduce my staffing levels?
•
Do I have to continue to pay health insurance and pensions?
•
Get compensation from Government as they have forced me to close my business?
•
Stop paying my staff or reduce their pay?
HSM
Solutions for the Employer in Difficult Times
•
Redundancy – Termination of Employment
•
Lay-off – Temporary Termination of Employment
•
Agreement – between Employer and Employee varying the contract of employment
HSM
Redundancy
Redundancy is defined in Cayman Islands Law as:
“a situation in which, by virtue of a lack of customers or of orders, retrenchment, the installation of labour-saving machinery an employer’s going out of business, force majeure or any other reason, tasks which a person was last employed to perform no longer exist.” A redundancy is a form of “fair dismissal” provided it is carried out in accordance with the Labour Law ( s. 51 (1) (d) )
HSM
Unfair Dismissal – Did the Employer Act Reasonably?
Equitable
Consider the merits of the case
Have regard to all the circumstances
Employer acted reasonably - s 51(3)
Unfair Dismissal – Redundancy –s.51(2)
HSM
Ensure it is a true redundancy Consider the following:
Whether the circumstances constituting the redundancy applies to 1 or more Employee
In the same or very similar position
The other Employee(s) is not dismissed & does not hold the same immigration status
Unfair dismissal
Employee selected in contravention of customary procedure without reason
HSM Redundancy & Immigration Status •
The Law provides for preference in employment. If a group of persons carrying out a specific role within an organization are to be made redundant, the Law requires that preference be given according to immigration status. It follows that: 1. Work permit holders are expected to be made redundant before permanent residents 2. Permanent residents are expected to be made redundant before the spouse of a Caymanian holding a Residency and Employment Rights Certificate, and; 3. Caymanians are expected, by Law, to be the last to face redundancy. This is entirely academic if a business is closing down. All persons (without regard to immigration status) will likely be made redundant together.
•
Given that a redundancy constitutes a form of termination, it triggers a series of entitlements.
Permanent vs. Temporary Termination •
HSM
There is an important distinction between a temporary lay off and a permanent employment termination by reason of redundancy or other action by the Employer in connection with the payment of severance pay under Part V of the Labour Law.
Permanent Termination
Temporary Termination / Laying Off
Where a redundancy is In circumstances where an employer intends to lay off an employee, the employer is not required to pay intended to be permanent, severance at the time when the employee is laid an employee will be paid off. Instead, the laying off letter should specify that severance simultaneously the Laying off period is on a ‘temporary basis’, and upon the termination of state the date upon which the employee intends to the employment ‘recall’ the employee for employment. As long as the recall date is less than 30 days from the laying off date, no severance pay is due.
Temporary Termination Option aka “Lay Off” – s. 42 (2) •
This viable alternative to a permanent termination can be found in The Labour Law (2011 Revision) for employers who anticipate that there is a possibility for business to return to somewhat normal conditions within a few weeks (or in the case of construction and agriculture, a few months).
No pay Health Insurance The Lay-off period – 29 Days or becomes a redundancy and triggers severance pay.
HSM
Immigration Requirements on Redundancy or Temporary Lay-off •
It is unclear what the effect of a temporary termination “lay off” is in relation to the treatment of work permit holders under the Immigration (Transition) Law. We do not believe there is a notification requirement at least within the first 30 days in regards to work permit holders.
•
Regulation 9 of the Immigration Regulations (2019 Revision) provides: “Where a person whose employment in the Islands is authorized under a work permit, the grant of which is conditional upon his remaining in the employment of a particular employer ceases to be employed by that employer – a) The work permit ceases to be valid; and b) The employer shall forthwith give written notice of the termination of the employment to the Chief Immigration Officer [now the Director of WORC], and if he/she fails to do so commits an offence and is liable on conviction to a fine of five thousand dollars.”
HSM
Entitlements: Severance Pay
HSM What Is It?
Who qualifies?
It is compensation paid to an Employee when his employment is “severed”.
The Employee’s term of continuous employment must exceed 1 year.
•
Severance Pay is calculated as being one week’s pay, at the latest “basic wage”, for each completed year of service.
•
“Basic wage” means the ordinary wage due to an employee under his or her contract of employment. It does not include such matters as future anticipated gratuities and commissions.
HSM
Severance Pay – Termination
Due upon termination by the Employer for any reason other than‌
Poor Performance following a written warning
Serious Misconduct by the Employee
Misconduct following a written warning
HSM
Severance Pay – Calculation Accordingly, for many, the basic wage will be CI$6.00 (or such other higher number set out in their contract of employment). Where no formal contract exists, the amount can be determined by reference to the conduct of the employer and employee – i.e. what is the basic wage that has in fact been paid.
One weeks’ wage for each year of completed service
At the Employee’s latest basic wage
Due Immediately
Not pensionable
HSM
Severance Pay – Rehire & Transfers
Where the Employee Where the successoris recalled, given Employer terminates equivalent the Employee, that employment or Employer must pay rehired; he is severance for the considered a new Employee’s tenure with Employee for him and all severance predecessorpurposes. Employers. Where the ownership of a business is transferred & without a break in service, the Employee is offered the same employment by the successorEmployer, no severance is payable.
Entitlement: Notice Pay •
Notice pay is determined by reference to the contract of employment.
•
Where no notice period is prescribed it is deemed to be the interval between pay days.
•
For the notice period, the employee will be entitled to all contractual benefits such as payments for any accrued vacation (not taken), pension and health insurance.
HSM
HSM
Entitlements Example
An employee who is made redundant on 31 March and who: • has been employed by that employer for 3 years and 2 months • earns CI$6.00 per hour at basic wage for a 40 hour week (CI$12,480 per annum) and is paid monthly; and • has a 10 day annual vacation entitlement and has taken none this year; would generally expect to be entitled to payment on redundancy of: 1. 3 weeks severance of CI$720 2. One month’s notice pay of CI$1,040 (assuming the employee is not asked to work during their notice period); and 3. 2.5 days accrued but untaken vacation pay of CI$120. – A person in this situation would accordingly expect payment on redundancy of CI$1,880. Such payment is payable immediately on termination.
National Pensions Law •
There is generally no entitlement to access pension monies prior to retirement. However, severance payments made on redundancy are not pensionable, but accrued untaken vacation pay, and any payment due in lieu of notice, are considered to be pensionable under the National Pensions Law.
•
Also it should be noted that any additional voluntary contributions made by the employee can be withdrawn due to unemployment.
HSM
HSM
Health Insurance Law
•
All residents in the Cayman Islands are required to have “adequate” health insurance.
•
As a general rule the obligation to ensure that health insurance is in place rests with employers. Upon termination of employment employers are generally required to ensure that health insurance is maintained for 3 months following the termination of employment.
•
Employers are however entitled to charge those premiums to the employee. The employer’s obligation to maintain health insurance ends upon the person becoming employed elsewhere, being covered by an alternative qualifying policy of insurance, upon the expiry of 3 months, or upon the person leaving the Cayman Islands (whichever happens first). It follows that it may be of direct economic benefit for persons who held work permits, but who have been made redundant (or otherwise terminated), to leave the Islands as soon as practicable.
Another Solution Please!!! •
An agreement with your employee – share the pain – unscrupulous employers
•
Risk of constructive dismissal claims
•
Risk of undue influence claims – they made me sign
•
What is reasonable for me to ask as an Employer?
•
Written agreement – evidence of acceptance
HSM
HSM
Can I?
•
Require staff to take Vacation? NO, employee must consent
•
Require staff to take sick leave? NO, statutory entitlement
•
Reduce the hours/days my staff work? MAYBE
•
Reduce my staffing levels? YES
•
Do I have to continue to pay health insurance and pensions? YES, if employee is still employed
•
Get compensation from Government as they have forced me to close my business? NO
•
Stop paying my staff or reduce their pay? MAYBE
Work Permits: Potential Issues Some businesses may see the demand for new and/or additional services. If this is the case, these businesses and relevant employees should be aware of:
1. Working Outside of the scope of any Immigration (WORC) Permission: • Example: you have permission to employ someone (or be employed) as a cook and are working as a delivery driver. 2. Being licensed to Carry on each Trade or Business undertaken: • Example: you are a licensed restaurant that seeks instead to operate as a food delivery service. In either scenario, permission should be sought from the relevant agency (WORC or DCI) to ensure compliance with legal expectations.
HSM
Work Permits: The Right to Remain in Cayman •
Regulation 9 of the Immigration Regulations provides that where a person on a work permit is no longer employed, any work permit ceases to be valid, and the employer must forthwith notify the Department of Workforce Opportunities & Residency Cayman (WORC).
•
Redundant employees who were on a work permit to be in Cayman have no right to remain once their employment ends.
•
In normal circumstances that means that persons are expected to register as tourists and remain in accordance with permissions extended by WORC/Customs and Border Control. Customs and Border Control have announced that where a permission to work in Cayman ends before 22 March persons should have left before the airport closure on 22 March 2020 without first having to “regularize” their permission to be in the Islands.
HSM
Work Permits: The Right to Remain in Cayman (Cont)
HSM
•
As matters stand, no expatriate can work in the Cayman Islands without express permission or exemption from requirements. It will not be impossible for an expatriate made redundant to seek and obtain alternative employment without first having to leave, and if normal rules continue to apply, Caymanians, Spouses of Caymanians and Permanent Residents will be given preference for any opportunity.
Repatriation •
Unless provided for by contract, there is no obligation on an employer to ensure that an expatriate employee is able to return to their home country. It is worthy to note that employers have paid substantial “repatriation fees” to the Cayman Islands Government in the expectation that those funds could be applied by the Government towards the costs associated with workers getting to their homeland.
•
Returning home is not a reasonable possibility with Cayman’s airport closure. It requires closed third party borders to be crossed, even if flights are available. They may be stuck in Cayman, perhaps for an extended period. The Government has recognized this and it, employers, and the community will have to come together to ensure that everyone’s basic needs can be met unless and until evacuation flights can be arranged.
HSM
Other Matters to Consider •
Insurance – Business Continuity
•
Insolvency – risk of personal liability as a director or bankruptcy risk
•
Health insurance risks
•
Landlord & tenant issues – Employer and Employee
•
Contracts with third parties
•
Powers of Attorney
•
Wills
•
Electronic Signatures
HSM
HSM
Questions?
Huw Moses Managing Partner E: hmoses@hsmoffice.com T: 345 815 7400
Nick Joseph Partner E: njoseph@hsmoffice.com T: 345 815 7425
Thank you for attending this presentation on Immigration and Employment matters arising out of COVID-19.
Tel: 345 949 4766 www.hsmoffice.com info@hsmoffice.com Hilary Brooks Associate E: hbrooks@hsmoffice.com T: 345 815 7426
Alastair David Associate E: adavid@hsmoffice.com T: 345 815 7354
Disclaimer This presentation is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this presentation without first obtaining specific professional advice. Alternative solutions also exist which may better suit the requirements of a particular individual or entity.
HSM