120 days later: The Lay-off Dilemma
In every Hollywood movie involving an epidemic, someone is faced with the difficult decision of who to save and who to sacrifice. The Hon. Mike Henry, our new Minister of Labour and Social Security, is that person now. Businesses are lobbying him to extend the shield from redundancy claims whilst trade unions insist that laid-off workers should now receive their due compensation.
Employers have a limited immunity from redundancy claims because of COVID-19. Pursuant to the Employment (Termination & Redundancy Payments) Act (ETRPA), they can temporarily lay-off staff without pay, but if the lay-off lasts for more than 120 days, the workers can give notice electing to be treated as dismissed by reason of redundancy. In some countries, including Canada, they have amended their laws to give 6-month extensions on these deadlines in response to COVID-19.
The Jamaica Hotel and Tourist Association (JHTA), among others, has asked the Minister of Labour for a similar extension. Some trade unions have made it clear, however, that they will be opposing any such move. The Ministry of Labour responded to the JHTA and said that the Minister does not have the power to grant the extension, which, whilst correct, does not mention that Parliament does have that power. Instead, the Ministry has encouraged employers and employees to negotiate suitable terms as between themselves. In other words, they should create their own safe zone.
The plot thickens because critical regulations related to the lay-off process that ought to have been created in 1986, were not. These regulations were meant to prescribe (i) the notice form already mentioned, (ii) the extent to which an employee who receives some pay or is recalled to work for a limited time may still be regarded as being on lay-off and (iii) the mechanism to resolve any dispute as to the date the lay-off commences. Without these regulations, both employers and employees are understandably confused as to their options. Here are a couple of alternative endings currently being discussed.
Because there’s insufficient work available to sustain a 40-hour work week, some employers are proposing part-time employment contracts or arrangements whereby workers are paid by the hour but with schedules ranging from 16 to 40 hours per week. So, for example, if a worker usually earned $20,000 for a 40-hour work week, they might now be asked to work for $500 per hour with their hours starting out low but increasing over time as the economy reopens fully. Unless the employment contracts already provide for this type of hourly arrangement, it will require the workers’ agreement, preferably in writing. If an employee agrees to this variation of the contract, he or she would no longer be on lay-off and therefore ineligible to elect to receive redundancy pay unless laid-off again. If the employee does not agree to that arrangement and is not recalled on his normal terms and conditions after 120 days, he can still elect to receive his severance payment.
Workers should be aware that for the purpose of redundancy calculations, we use the average weekly salary earned over the last 13 weeks or the salary earned in the last week, whichever is greater. Therefore, if you are made redundant by your employer before you are returned to your normal work schedule, it could result in a significantly lower redundancy payment unless the parties agree otherwise.
Extending the Lay-off
The second option is extending the lay-off without the statutory shield. Many employers are under the mistaken impression that a worker can only be laid off for a maximum of 120 days, but there is nothing in the law that says that. Similarly, many workers believe that they are automatically entitled to get their redundancy payment after 120 days, but that is also incorrect as they must give notice to the business. A template for that notice is available on the Resource Page on Myers, Fletcher & Gordon’s website. Contrary to what you may have heard elsewhere, there is no 60-day deadline in the ETRPA for workers to elect to receive their redundancy. Thus, they won’t lose any rights if they continue to wait for their employers’ business to recover.
Unfortunately, for many workers, the 120-day deadline is like a mirage in a desert. Many businesses cannot afford to pay severance at all, and certainly not all at once. There is no penalty for late payment, other than possibly interest on the unpaid debt. So an employee who elects to be dismissed by reason of redundancy may find himself without a job or a cheque anytime soon. Or, they may be forced to accept a payment plan that spans 12 months or more. The business, on the other hand, will be free to immediately hire someone else to replace the worker who has opted for redundancy, and there is no shortage of people who are prepared to work on a part-time basis until things improve.
As for our Minister of Labour and our elected representatives, they need to quickly decide how, not whether, to intervene and avoid this horror movie type situation. Amending the ETRPA and passing balanced lay-off regulations would be good places to start.
Gavin Goffe is a partner at Myers, Fletcher and Gordon, and is a member of the firm's Litigation Department. He may be contacted at email@example.com or through the firm's website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.