Lay Offs: A practical analysis of the legislation for employers
The choice to make lay offs is never an easy one. It is also an area of business where the commercial and the personal inevitably overlap, making it even more challenging. It is important therefore that employers are well-equipped to manage the lay off of employees.
The lay off provisions in the Employment Act 2000 (“the Act”) allow employers to lay off employees for a period “not exceeding four months” where there are conditions of redundancy. This can be very beneficial to those businesses facing downturns or off-seasons but at the end of the four-month period, an employer has a decision to make: do they bring the employee back to work and if not, how can the situation be properly managed?
The Act states at s.32(3): “Where the lay off continues for a period which exceeds four months, it shall be deemed to be a termination for redundancy pursuant to section 30”. The first issue to unpick is whether the lay off can continue for a period which exceeds four months given that, rather contradictorily, s.32(2) of the Act states that the period of lay off cannot exceed four months. One common-sense interpretation is that the intention of the legislation is not for lay off to last more than four months, but rather if the redundancy conditions remain at the conclusion of the lay off period, and are likely to continue beyond, then this is when “it shall be deemed a termination for redundancy”.
Next to consider is whether the legislators intended for the contract of employment to be automatically terminated for redundancy if the redundancy conditions remained at the end of the lay off period, or whether the inclusion of “pursuant to section 30” means that the employer is required to conduct a process of informing and consulting in line with s.30(4) of the Act. There is no authority on this in Bermuda.
There are two main arguments that can be made. The first argument is that, because of the use of the word “deemed”, the legislation intends to treat the employee as automatically redundant at the end of four months of lay off. Arguably the legislation implies that the termination is for redundancy in such circumstances and therefore one could say that the legislation intends for an employer to treat the role as redundant. This is certainly an approach which employers are likely to be inclined to favour as it is simple and achieves the desired outcome without any procedure.
The second argument is made on the basis that employment legislation is generally designed to provide employees with a degree of protection. As such it could be said that an employer must go through the process of informing and consulting as it gives the employee the opportunity to propose measures which could be taken as an alternative to dismissal and to be made aware of other available roles. What if the employee was able to suggest a way for the company to keep his/ her role?
The first approach carries a degree of risk because, if the interpretation is incorrect, an employee could bring a claim for unfair dismissal on the basis that they were not informed nor consulted about the redundancy. The second approach is very much a ‘belts and braces’ approach and guards against any potential claims of procedural unfairness, however it does require more administrative power.
One point for cautious employers preferring the second approach is that given that s.30(4) of the Act requires the informing and consulting process to take place “not less than 14 days before giving notice”, and in light of the legislation suggesting that a period of lay off cannot exceed four months, then employers are going to want to keep a close eye on the calendar and be sure to conduct the consultation meeting not less than 14 days before the end of the lay off period.
First Published in the Bermuda Chamber of Commerce Newsletter (Chamber Insider), October 2023
