We are advising a number of persons and businesses as to the requirements and expectations of the Law when businesses are required to make staff redundant. 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."
Cayman Islands Labour Law
A redundancy is a form of "fair dismissal" provided it is carried out in accordance with the Labour Law. 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 work permit holders are expected to be made redundant before permanent residents, permanent residents are expected to be made redundant before the spouse of a Caymanian holding a Residency and Employment Rights Certificate, and 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. That is perfectly lawful.
Given that a redundancy constitutes a form of termination, it triggers a series of entitlements.
These include severance pay, notice pay, and accrued (but untaken) vacation pay.
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. 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.
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.
Accordingly (by way of 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
- has a 10 day annual vacation entitlement and has taken
none this year;
would generally expect to be entitled to payment on redundancy of:
- 3 weeks severance of CI$720
- One month's notice pay of CI$1,040 (assuming the employee is not asked to work during their notice period); and
- 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.
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.
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. 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 can simply proceed to leave before the anticipated 22 March, 2020 closure, without first having to "regularize" their permission to be in the Islands.
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.
The obligation to pay rent will be based on the terms of any applicable lease. In normal circumstances appropriate notice will need to be given, and deposits may be forfeited if notice is not given or there is damage to the rented unit. Some leases may provide for the lease to end upon the termination of a work permit.
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 towards the costs associated with workers getting to their homeland. For some, returning home is not a reasonable possibility. 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 (maintaining social distancing) to ensure that everyone's basic needs can be met.
We are ultimately, all in this together.
This article is intended only to provide a summary of the subject matter. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this article without first obtaining specific professional advice. Alternative solutions also exist which may better suit the requirements of a particular individual or entity.