Even in a pandemic, incorrect layoff procedures can lead to future liability

THE COVID-19 pandemic is hitting businesses and the economy in a manner perhaps not seen since the Second World War. This, of course, has affected the ability of employers to pay their employees.

The COVID-19 pandemic for most employers has given rise, or will give rise, to genuine redundancy situations with respect to their workforce.

Some employers are responding to the COVID-19 pandemic economic crisis by laying off employees without following the correct procedures. Although this may not have any immediate adverse consequences, it is storing up a potentially substantial financial liability for the future. It is important to note that this problem can be avoided – by following the law, which, if properly applied, can reasonably be expected to give a satisfactory result.

THE ERRORS

Despite popular belief, even among some lawyers, no employer in Jamaica has the right unilaterally to lay off an employee without pay or on reduced pay, or otherwise reduce their pay or benefits.

The idea that an employer has the right to lay off workers for 120 days is equally erroneous.

This is so even if there is a crisis, as there undoubtedly is now.

These erroneous positions arise from a misunderstanding of the provisions of Section 5A of the Employment (Termination and Redundancy Payments) Act.

There is no basis for these errors, as the meaning of the section has been made clear by the president of the Court of Appeal in the case of Branch Developments Limited v Taylor, in which The Iberostar Rose Hall Beach Hotel was held liable for having acted on the same misunderstandings currently doing the rounds.

Every employer has the right to make an employee redundant if there is insufficient work for that employee to do, provided the employer consults with the employee correctly before doing so.

Every employer has the right to agree with an employee that as an alternative to redundancy:

The employee can be laid off without pay or on part pay;

The employee can work parttime, and/or share a job with another employee; or

There can be some other arrangement that enables the business to survive.

One might ask: Why should employees agree to this, if they are not obliged to?

The answer is simple and practical. An employee who refuses to agree will be likely to lose his job by reason of redundancy, so at the end of this, he will be seeking work in a most negative environment; and furthermore, he may not get any redundancy payment for up to a year, because an employer can legally delay paying out redundancy for at least that long.

And who knows what the position will be in a year’s time?

From practical experience in the pandemic, so far, employees are not inclined to choose redundancy in these circumstances.

PRACTICAL CONSEQUENCES TO WRONG PROCEDURE

If an employer follows the law, and acts by agreement, the employee stays laid off until asked to return, unless the employee chooses to take redundancy at any time after 120 days have passed.

This is an option the employee has, with all the risks of delayed payment, as mentioned.

If the employer acts unilaterally, in breach of the law, the layoff amounts to a breach of the employee’s contract of employment. The employee continues to accrue entitlement to full pay, which he can claim at any time.

This will give the employee the option of: walking off the job immediately and claiming wrongful or unjustifiable dismissal (but in the current climate, few may be expected to do this); or waiting, and claiming full back pay at an opportune moment in the future at the Industrial Disputes Tribunal. Such back pay, when accumulated, can be substantial.

Taking the correct approach can save an employer from unwittingly incurring substantial future financial liability.

Even those who have already acted incorrectly may now be able to cauterise the liability.

The bottom line is that every employment situation is unique, and employers should get proper, specialist advice on these matters.