An argument AGAINST the Labour Relations Bill

To view the full special report on labor reform in Cayman, visit the Compass Data Desk. 

The workplace regime in the Cayman Islands is regulated by the Labour Law (2011 Revision). Originally enacted in 1987, this law has been amended eight times to address specific issues, but fundamentally the law has remained unchanged for almost 30 years. Cayman has changed dramatically during this period, so it is time to update this law.

A previous administration attempted a comprehensive change to the regulation of the workplace regime and passed the Employment Law (2004), but due to industry concerns that law was never implemented. It was clear at the time that the appropriate balance between the interests of the employer and the employee had not been achieved.

The Government recently released the Labour Relations Bill, 2015 (which I will refer to hence as “the Bill”) for public consultation. The Hon. Minister of Education, Employment & Gender Affairs Tara Rivers has made it very clear that this initial draft is very much a working draft and that amendments will be made prior to tabling a revised bill in the Legislative Assembly, after which there will be additional public consultation. The minister should be commended on her approach to ensure that this important legislation has the necessary consultation to ensure the appropriate balance is achieved.

The objective of the Bill should be to improve on the existing regime, by strengthening the framework which regulates the relationship between the employer and the employee in a fair and proper manner given the (sometimes) unequal bargaining power inherent in that relationship. The Bill would therefore inform an employer’s human resource policies and provide employees with certainty regarding their contractual rights.

The inclusive approach being taken by the minister provides a sense of optimism that the actual bill presented to the Legislative Assembly will be significantly improved, having taken consideration of what is likely to be substantial private sector feedback. Here are some of the material concerns in the Bill.

Preliminary Concern

The Bill, as drafted, provides a much more punitive approach toward employers. It introduces a number of severe sanctions which are criminal in nature that are directed at individuals in the business, rather than the business itself. This is a flawed approach. Some concerns with the approach include: (a) every sanction will more than likely result in the involvement of lawyers and court time, (b) there is no point creating sanctions which are unlikely to be imposed and if they are, will create expense and delay which are counterproductive to a healthy business environment; (c) it could encourage those employers that can, to move jobs outside of Cayman or cease to directly employ Caymanians and instead do all hiring through agencies; (d) there is no differentiation between a small and large business and for a small business some of the provisions could be crippling whereas for a large business they may not be the deterrent intended; (e) it could dissuade entrepreneurs from venturing into a new business; and (f) any law which is unfriendly, expensive and punitive for employers is likely to reduce employment opportunities for Caymanians.

A better approach to ensuring compliance would be to create an environment where, if an employer is not complying with the law and regulations, there would be the ability for the employee to report the infraction and for the employer to be given a notification to cure the infraction. Failing remedial action by the employer within a reasonable time, the sanction would be directed at suspending or limiting the employer’s right to carry on business as it is not properly adhering to the laws and regulations necessary for it to operate in the Cayman Islands.

Further concerns

The Bill should apply to all employees in the Cayman Islands including those in the civil service. There is little if any justification for continuing to have two separate regulatory regimes for labor in a country with a workforce of less than 40,000 workers.

The Bill creates a requirement that every employer must enter into a written contract of employment within 10 working days with every employee (including household domestics); failure to do so is an offence which makes one liable of a $10,000 fine upon summary conviction. This penalty seems excessive and the inclusion of household domestics is likely to result in widespread default which the government and the courts would be unable to manage.

The Bill requires that reasonable training is provided to the probationary employee and provides for the possibility for termination during the probation period to be considered as unfair dismissal given certain requirements. The requirement for training during probation is reasonable; however the ability for termination during the probation period to be considered as unfair dismissal is not. The point of probation is to allow employers and employees to make determinations on suitability for continued employment and to be able to sever their relationship with very limited cause and obligations. Often these are very personal relationships and sometimes there will be individuals who do not fit within the culture of a business. It also allows employers to take a chance on employees who may not have the requisite experience, qualifications or may have had past problems, but have reformed and are looking for a second chance. Employers would need to become far more cautious in the hiring of any new staff and would not be willing to hire anyone except those with the requisite experience and qualifications. This would most likely impact young Caymanians the most.

The Bill increases severance pay and compensation for unfair dismissal. While there may be some confusion between severance and unfair dismissal, a further concern is that, linking these payments to the highest basic wage could be significantly different if the employee’s wage has been reduced for sound business reasons. The intention is to clearly stop salaries from being reduced prior to the dismissal; however a better option could be the highest wage during say the previous 12 months. Where wage reductions are a reaction to poor business performance, imposing increased awards on struggling businesses (particularly small businesses) is likely to lead to those businesses closing down and further jobs for Caymanians being lost.

The Bill provides that employers who replace a work permit holder with a Caymanian or a permanent residency holder would not be liable to pay severance or unfair dismissal compensation. While the Immigration Law (2014 Revision) requires that all work permits are only granted when a Caymanian is not available to fill the position, this provision would negatively impact the ability of Cayman to attract foreign workers, including professional and highly skilled workers.

The Bill requires employers to report to the director of the Department of Labour and Pensions any instances of specified employee redundancies and terminations and this reporting is required for at least two years and can be extended. This would be very onerous for employers and one wonders what government will do with all these reports.

The requirement in the Bill for appropriate instructions in a warning letter is reasonable. However the extension to 90 days for the employee to start performing their duties in a satisfactory way is unreasonable. Currently only 30 days is given. It is difficult to understand what behavior would take 90 days for the employee to start to improve and it is unreasonable to expect businesses to keep the employee for 90 days performing unsatisfactorily.

The Bill provides the Tribunal with the option to order reinstatement (as if the dismissal had not taken place) or re-engagement (comparable or other suitable work).This has obvious serious practical challenges as it contemplates forcing an employer to rehire a disgruntled employee. The law generally recognizes that contracts for personal services are not contracts where an employee can be forced to work in a position when he or she does not wish to. This principle should apply from the employer’s side as well.

The Bill provides that the director, deputy director, and labour inspectors shall have, when performing duties regarding the obligation of administrative penalties, the same powers conferred on a constable under the Police Law and may enter any workplace without prior notice at any time during work hours to ensure compliance of the law. Police officers have the relevant training while labor inspectors do not. This power should remain with the police and not be delegated, or the delegation should be limited to the director and deputy director, who should receive additional training.

Stability and predictability are desirable goals for any labor law and regulations. The costs of enacting and implementing major changes to the legal framework are substantial, both in terms of parliamentary resources, and the need for employers, and employees to educate themselves about the changes and adjust their practices accordingly. The potential to pursue improvements in productivity through means other than changes to labor law should be emphasized. Arguably, we should be talking more about education and training and the use of technology. 

To view the full special report on labor reform in Cayman, visit the Compass Data Desk. 

Mr. Bergstrom

Mr. Bergstrom