In modern times the world community has not faced a situation like the present, created by the Covid-19 pandemic. The Republic of Cyprus is among many countries fighting desperately to minimize damage on all fronts.
In an effort to limit the spread of the virus, the government has taken drastic measures. In particular, the Minister of Health issued between 11/3/2020 and 23/3/2020 Regulations on the basis of the Quarantine Law (Cap.260 as amended). Under these, the operation of a large number of businesses has been suspended and the free movement of citizens has been restricted, save in exceptional cases.
The measures taken have inevitably caused enormous damage to the country's economy. The economic loss to businesses that have been shut down is incalculable, while the turnover of most businesses whose operations still continue has been substantially reduced.
In order to prevent mass dismissals the government has announced what are, importantly, incentives for preserving employment. These include an "unemployment" allowance to employees of businesses whose operations have been suspended for as long as the suspension remains in place and, under certain conditions, the payment of part of the salaries of employees of businesses which are still running.
Despite these measures, several companies have already started to dismiss staff or are considering dismissals as they predict that economic activity in the country and, as a result, their own turnover will continue to be adversely affected even after the crisis is over.
The present unprecedented situation, with the sharp decline in the operations of business undertakings, should in no way be considered as justifying, without further considerations, immediate dismissal of employees without compensation.
The termination of employment is governed by the Termination of Employment Law of 1967 (Law 24/1967 as amended) which specifies the circumstances under which termination of employment may be justified. If the dismissal does not fall within these, it is considered unlawful and gives to employees the right to claim compensation for unlawful dismissal. Such compensation, depending on the circumstances, may amount, at a maximum, to two years' pay.
One of the instances where dismissal may be justified is where the turnover of a business has sharply fallen. This can then bring it within the ambit of what one might reasonably call a redundancy. However, it needs to be emphasized that, according to case law, a seasonal or periodic decline in turnover cannot of itself justify redundancy: see decision A. xxxxx. Ltd v xxxxx Christou and another (1994) 1 CLR 703.
At this stage, when one cannot predict clearly the outcome of the crisis and the true impact on business turnover has yet to be crystalized, dismissing employees is risky and is to be avoided. If not, compensation may be awarded against the employer. This applies both to businesses which have suspended their operations and to those which continue, since the payment by the government of an "unemployment" allowance or part of the employees’ salaries, as the case may be, may remove the grounds justifying redundancy. Even when the crisis is over and employees return to their jobs, businesses should not be in a hurry to decide redundancy issues since any precipitate action on their part, without sufficient documentation, may probably not satisfy the requirement of demonstrating a turnover reduction that was not just seasonal or periodic.
Each case should be considered on its own merits. Account should be taken of the nature of the business, the impact on the particular sector of the economy in which the business operates, the type of work which the employee performs, the degree to which the business has been affected, and various other factors, before an employer comes to a conclusion that it is appropriate to declare a redundancy.
Consequently, employers must be careful and would do well to obtain appropriate legal advice before dismissing employees. Otherwise they may incur further financial damage in the future, in the form of compensation to employees. Employees, too, must act prudently and obtain proper advice as to what their rights may be on the matter.
Advocate - Senior Associate
Litigation department, Nicosia office
ELIAS NEOCLEOUS & CO LLC