Law would affect dismissal process, severance payments

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

The proposed Labour Relations Bill includes many changes to the process for dismissing or terminating an employee. While these changes are designed to offer more protection to employees, some employers are concerned they will be too onerous to comply with and will negatively affect their businesses.

Payments upon termination

One change to the law which will cost employers more is in regard to severance pay. If the law is enacted as currently proposed, employers will be required to provide more severance pay for employees who are dismissed either fairly or unfairly than is required in the current law.

Employees of more than one year’s tenure are entitled to receive severance pay when they are made redundant or terminated on notice. According to lawyers who have examined the draft of the new Labour Relations Bill, it contains an error which makes it read as though employees who are made redundant are not eligible for severance pay. This error is expected to be removed in the final draft of the bill.

Currently, employers are required to provide severance pay of one week’s wage for each completed year of employment only for fairly dismissed employees, and that pay is based on the employee’s latest base wage. Under the new law, employers would be required to provide fairly dismissed employees with two weeks’ wages for each completed year of employment, and that pay will be based on the highest wage the employee has earned. However, the new law sets a limit that fairly dismissed employees can receive only up to 24 weeks’ wages.

Under the new law, the base amount of severance pay required for employees who have been unfairly dismissed is quadruple that which is required by current law, from one week’s wage for every completed year of employment to at least four weeks’ wages for each completed year of employment. The new law states that an unfairly dismissed employee can receive a maximum of 48 weeks’ wages in severance pay.

In cases of unfair dismissal, employees can also be granted compensation if their complaint is found valid by a Labour Tribunal. Currently, such an award cannot exceed one week’s wages for each year of completed employment. The new law states that the award will be no less than four weeks’ wages for each year of full-time or equivalent employment, but does not set a maximum limit.

Termination and unfair dismissal

The new labor law expands upon the list of reasons an employer can cite to justify termination for serious misconduct. The current law allows employers to terminate employees if they have committed a criminal offense during the course of their employment, if they are under the influence of drugs or alcohol while working, or if they have behaved in such a manner that demonstrates the employment relationship cannot reasonably be expected to continue.
Under the new law, employees can
also be terminated for making false representations, for carrying out reckless or unsafe practices after being trained or warned, for extensive use of electronic communications in the workplace during working hours that are contrary to policies in place, or for conduct that has a detrimental impact on the performance, reputation or conduct of the employer or employees.

The proposed labor law contains key changes to the section pertaining to unfair dismissal. One such change is that employees who have been terminated during the probationary phase of their employment (unless the termination was for gross misconduct or for good cause) can bring forth a complaint of unfair dismissal. At present, employees can file a complaint for unfair dismissal only if they have finished the probationary period or, if they have not been employed on probationary terms, if they have completed three months of continuous employment.

Another key change to this section of the law is the introduction of the concept of constructive dismissal as grounds for unfair dismissal. Constructive dismissal would include circumstances in which an employer creates or allows circumstances in the workplace that would make it impossible for a reasonable person to remain in employment, and force him or her to quit. Such circumstances might include ongoing harassment by a fellow employee, for instance.

Reactions from employers

Heber Arch, chairman of construction company Arch & Godfrey, said the Cayman Contractors Association met to discuss the bill last week and concluded that “most of the changes are going to be detrimental to construction companies.”

He said businesses expect they will see more claims for unfair dismissal and more legal costs.

“The general feeling of the Contractors Association is that the bill is already onerous on small companies, and smaller companies feel that it’s really going to be an administrative burden on them,” Mr. Arch said.

He noted differences in the construction industry compared to  legal or accounting businesses, which typically feature large firms that can afford large human resources staffs capable of handling more administrative tasks. (Many employers and lawyers predict the new labor law will increase the number of such tasks.) Many construction companies, on the other hand, have small administrative staffs which could easily be overwhelmed by the increase in the tasks likely to be required by changes to the labor law.

Mr. Arch also said that the Contractors Association is “100 percent” in agreement that severance pay as defined by the current law is already too high.

Altee Thompson, co-owner of A.L. Thompson’s home store, said the labor law “has been heavily tilted in favor of the employee for many years,” and that the changes proposed in the new law have “tilted it even more in favor of the employee” without giving employers “anything.”

He thinks the proposed dismissal process could put small companies out of business.

“You are rewarding individuals who are lazy and don’t want to work,” Mr. Thompson said. “People don’t get dismissed because they’re good employees.”

Chamber of Commerce

The Cayman Islands Chamber of Commerce hosted a “Be Informed” session to provide its member businesses with an independent review of the proposed changes to the law. During that session, presented by attorneys Huw Moses and Venesha McLean from HSM Chambers, several areas of concern were raised, including the changes to the unfair dismissal section.

Chamber President Barry Bodden said the Chamber was finalizing its submission to the ministry to meet the Aug. 31 public consultation deadline, and that the Chamber Council’s comments were expected to be released next week.

“This is a significant piece of legislation with some very stringent requirements for employers and very high penalties,” said Mr. Bodden. “We will be recommending several amendments that we urge the ministry to consider.”

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

Extensive use of electronic communications in the workplace during working hours, contrary to policies in place, would be grounds for fair dismissal under a new Labour Relations Law.
use of electronic communications in the workplace during working hours, contrary to policies in place, would be grounds for fair dismissal under a new Labour Relations Law. – Photo: Charles Duncan