With recent developments concerning the global spread of COVID-19 and the impact it has had on the economy, the Cayman Islands Government (CIG) has implemented an amendment to the Labour Law (2011 Revision) (the "Law") and enacted the Labour (Extension of Severance Pay Period) Regulations, 2020.
The Labour (Amendment) Law, 2020
The amendments that have been made to the Law are largely procedural and will have a minimal impact, if any, on the day to day working relationship between the employer and employee.
The Law has made an amendment to the procedure relating to the service and sending of documents by adding provisions under s.84 of the Law that allow a person that is required to serve any document required under the Law to be able to properly affect service by electronic means. Not only is this amendment a welcome addition due to the effect of the Government's stay at home regulations but it also recognises the role that email and other forms of electronic communication now play in modern society.
The other change to the Law is the inclusion of a power to allow the Cabinet in the time of emergency or calamity, to grant, on a case by case basis, extensions or exemptions in relation to any prescribed period of compliance set out in the Law. This new power is then transferred to the Director of the Department of Labour enabling him to issue temporary certificates reflecting the grants and setting out any necessary conditions or procedures in relation to the grant made by the Cabinet. These grants can be made retrospectively if the Cabinet decide that the best way forward is to turn the clock back or if necessary stop it from running all together.
The Labour (Extension of Severance Pay Period) Regulations, 2020
Under s.42 (2) and (3) of the Labour Law (2011 Revision) an employer has the power to temporarily terminate or lay-off an employee for a certain amount of time without the need to pay that employee. During this lay-off period the employer/employee relationship continues, including the requirement to continue the employee's health insurance coverage.
This means that in circumstances of a temporary lay-off under s.42 (2) of the Labour Law (2011 Revision) the employer is not required to pay severance at the time when the contract of employment is temporarily terminated. The notification of temporary termination sent to the employee must state that the termination of employment is on a 'temporary basis', and state the intention to recall the employee at a future unspecified date or specify a specific date on which the employee must return to work. Under s.42 (2) of the Labour Law (2011 Revision) the maximum permitted time allowed for an employee to be temporarily "laid off" is 30 days, except for those employed in the construction or agriculture industries where the maximum permitted time allowed for a temporary lay-off is 6 months (s.42 (3) of the Labour Law (2011 Revision)). If the employee is not recalled on or before day 30 or within 6 months as the case may be the employer is then obliged to pay severance pay to the employee (provided they have been employed for 12 months). Severance pay is calculated at the rate of one weeks' pay for each completed year of service.
In recognition of the adverse economic impact of COVID-19 and the implementation of Government policies and regulations whose objective is to suppress the local transmission of the COVID-19 virus, the Government has enacted the Labour (Extension of Severance Pay Period) Regulation, 2020 to extend the period of permitted lay-off from 30 days to 60 days, which now means that, for employees that do not fall under s.42(3), that as long as the recall date is less than 60 days from the temporary termination date, no severance pay is due to be paid to the employee. For employees that fall within the scope of s.42 (3) as long as the recall date is less than 7 months from the date of termination, no severance pay is due to be paid to the employee. The extension of the lay-off period can only be relied upon by the Employer if the extension of the lay-off period is COVID-19 related.
If, for whatever reason, the employer is unable to specify a recall date, severance will now be payable 60 days' after termination if the employee has not been 'recalled' within that period; and, the employee will also be entitled to interest on the amount of severance pay due at the rate of 10% per annum for the interval between the date of temporary termination date and the date of actual payment of the severance pay.
It should be noted that provided the employee is recalled within 60 days of termination, continuity of employment is preserved for the purposes of future employment rights. If, however, severance is paid and the employee is subsequently re-employed by the employer, the employee is treated as if he/she has been newly hired and the commencement date of his/her employment (for the purposes of future employee rights under the Labour Law) shall be from this date.
We are advising clients on the proper way to implement temporary terminations and the extension of existing lay-offs already in progress. A number of questions have arisen between the interaction of s.42 with contractual provisions and the redundancy provisions set out in the Labour Law. Any employer seeking to implement a s.42 temporary termination should obtain legal advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.