The costs of compliance: What will labor law require?

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

The old adage “if you’re not breaking the law, you have nothing to fear from the police” applies to the new Labour Relations Bill, 2015, according to Ministry of Education, Employment and Gender Affairs representatives.

“As long as employers use best efforts and comply with the law, they should not fear incurring any penalties or added short-term administrative burden,” the ministry noted in a three-page response to Cayman Compass questions on the subject of enforcement of and compliance with the newly redrafted law.

However, a veteran attorney looking at the new legislation, which aims to repeal and replace the old Labour Law, warned the Cayman Islands Chamber of Commerce in a presentation last month that local businesses could generally expect to see larger monetary awards in employee dismissal cases, more claims of unfair dismissal and, therefore, more labor-related appeals where legal costs borne by the businesses may not be recoverable from employees.

Huw Moses, managing partner of HSM Chambers, said he believes government should make some legal “tweaks” to the current draft, particularly with an eye toward giving local companies a grace period to comply with the new legislation.

“The big unknown is what the cost per employer will be for a particular business…to get compliant,” Mr. Moses said. “It will vary dramatically from business to business.”

New rules

The “police” of the law, if approved, would be the Department of Labour and Pensions, and the “courts” considering a particular case in the first instance will be the Labour Tribunal, appointed by elected representatives. It is still possible that some labor disputes can be taken to the Grand Court, but the legislation essentially seeks to mitigate the need to do so if a resolution can be achieved earlier in the process.

The bill does not apply to employment in government agencies, where employment is governed under the Public Service Management Law and regulations.

The bill, as currently written, introduces the ability to impose administrative fines against companies who violate the dictates of the law. Fines for noncompliance can total $2,500 on the first offense with the option of the person responsible for the offense serving up to six months in prison. On a second offense, the fines increase to $5,000 and a one-year possible maximum term of imprisonment.

The highest fine under the law is $10,000 in the case of an employer who fails to provide a written statement of working conditions to the employee. Employers can also be fined up to $5,000 for failing to state the “established retirement age” in a working contract.

There are a number of new workplace health and safety requirements set out in the new legislation, including that companies must provide adequate drinking water, a hurricane plan, fire evacuation rules, adequate rest rooms and proper waste disposal facilities, among other requirements. Cabinet can make regulations to penalize employers who violate these requirements.

The new requirements in the Labour Relations Bill will be enforced by labor office inspectors who are, for the purposes of this law, given the same investigative powers as a police constable when it comes to imposing administrative penalties for violations.

One major change the bill seeks to make is extending the time the department has to bring criminal proceedings against a company from six-months to two years. Also, failing to pay administrative penalties imposed by a labor tribunal can lead to additional fines of $500 a day, which would be payable upon summary conviction of the offense.


So how many new employees will the Department of Labour and Pensions need to enforce workplace monitoring and respond to complaints?

Strictly speaking, no one has been hired specifically because of the Labour Relations Bill. However, the ministry points out that since 2013, the department has increased its overall staff by nine employees. That includes one additional post added in the current government budget to assist with legal enforcement requirements. The staffers are also required to review complaints regarding pensions, in addition to labor-related complaints.

In most cases, ministry officials said the department will try to mediate labor disputes, reducing the need to bring sometimes complex and lengthy cases before the labor tribunals. Complaints relating to unfair dismissal, severance pay and retirement allowances can be heard by the Labour Tribunal. During the government’s last budget year, some 72 decisions were made in cases that came before the tribunal, but the majority involved “historical” disputes. Only 12 of the complaint cases had been filed during that year.

Enforcement efforts by the Department of Labour and Pensions can be triggered by complaints, tip-offs and proactive work-site inspections, ministry officials said. In certain cases, the department may choose to focus on specific industries or sectors where there is determined to be a “greater need for enforcement.”

“The most important strategy that the government as a whole is moving toward … is establishing a ‘culture of compliance,’” the ministry statement noted. “This strategy … envisages a close working relationship and intelligence sharing between, agencies such as the Department of Labour and Pensions, Health Insurance Commission, Immigration Department, Trade and Business Licensing, etc.

“This will hopefully deter businesses from breaking the law, because if they do, they may not have the ability to continue to conduct business in the Cayman Islands.”


The ministry noted in its response that Mr. Moses’s – and others’ – advocacy for a grace period prior to the law coming into effect had not fallen on deaf ears.

What the government defines as a “transitional grace period” – not stated in the law – will be provided before the legislation comes into force, to allow companies time to prepare for compliance.

The ministry noted that the Department of Labour and Pensions would provide templates of sample employment contracts to small businesses or households that employ individual workers such as domestics or gardeners.

“It should be noted that many of the major changes in the Labour Relations Bill are to align with best human resources practices, which many employers already follow,” the ministry statement read.

Mr. Moses believes there could well be added HR costs for employers, particularly smaller businesses, who need legal help or human resources assistance. For larger businesses, owners may have to update existing worker contracts, revise policies and the like.

“All that has a cost but is hard to put in dollar terms as it will depend on the size of the business and the existing level of compliance with the existing law,” he said. “The greatest impact will be on smaller businesses.”

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

The proposed new labor law will require businesses to produce and maintain certain documents, possibly increasing administration costs.
The proposed new labor law will require businesses to produce and maintain certain documents, possibly increasing administration costs.