Employment Law in Bermuda

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1 Employment Law in Bermuda

2 Foreword This memorandum has been prepared for the assistance of those who are considering issues pertaining to employment law in Bermuda. It deals in broad terms with the requirements of Bermuda law. It is not intended to be exhaustive but merely to provide brief details and information which we hope will be of use to our clients. We recommend that our clients and prospective clients seek legal advice in Bermuda on their specific issues and concerns. Copies of the Bermuda Employment Act have been prepared and are available on request. This memorandum has been prepared on the basis of the law and practice as at the date referred to below. Conyers Dill & Pearman February 2013 Page 2 of 19

3 TABLE OF CONTENTS 1. INTRODUCTION 2. TERMS OF EMPLOYMENT 2.1 The Statement of Terms of Employment 2.2 The Itemised Statement of Pay 2.3 Provisions Relating to Overtime Pay and Similar Matters 3. TERMINATION OF THE EMPLOYMENT CONTRACT 3.1 Termination with Notice 3.2 Termination without Notice 3.3 Redundancy 3.4 Unfair Dismissal 4. REMEDIES/ENFORCEMENT OF RIGHTS CONFERRED BY THE ACT 4.1 The Employment Tribunal 4.2 Remedies 4.3 Severance Allowance Page 3 of 19

4 1. INTRODUCTION The Employment Act 2000 (the "Act") creates a codified regime governing relations which are created under an employment contract. The Act is not all encompassing; there are other important areas of employment law which are governed by other statues or common law. Under the Act: (a) an employment contract means any contract, whether express or implied, verbal or written and whether or not in compliance with the requirements of the Act, which provides for an employee to perform specified services for an employer; (b) an employer is a person in Bermuda who employs employees; and (c) an employee is (i) (ii) a person who is employed wholly or mainly in Bermuda for remuneration under a contract of employment; or any other person who performs services wholly or mainly in Bermuda for another person for remuneration on such terms and conditions that his relationship with that person more closely resembles that of an employee than an independent contractor. Since this legislation is designed to provide protection for the employee, the Act provides that (except in limited circumstances) it is not possible to contract out of the provisions of the Act. Any provision in an employment contract purporting to exempt a particular employment relationship from the terms of the Act will BE deemed invalid. Page 4 of 19

5 Conversely, it is perfectly acceptable for the employer and employee to negotiate a contract which grants greater rights to the employee than the Act provides. Where rights of an employee by any agreement, employment contract, custom or practice are more favourable than those established by the Act, then the agreement or custom will prevail. The Act can be conveniently divided into three sections: 1. those provisions which apply to the terms of employment and ancillary matters; 2. those sections which apply to termination of the employment contract; and 3. those sections which apply to remedies for unfair and wrongful dismissal. 2. TERMS OF EMPLOYMENT 2.1 The Statement of the Terms of Employment The Act requires employers to provide an employee with a statement which shows the terms under which he or she has been employed. Section 6 (2) sets out the issues which need to be addressed by this statement and are: (a) the full names of the employer and employee; (b) the date the employment commenced; (c) a brief description of the work for which the employee has been engaged; (d) the place where the employee will be working; (e) the gross wage or the method of calculating the gross wage and the intervals at which it is to be paid, i.e. weekly, monthly, etc; (f) the days and hours of normal employment; Page 5 of 19

6 (g) the contractual entitlement to holidays including public holidays and the portion which will be paid annual vacation; (h) the terms relating to sickness and other injury related sick leave; (i) the notice period that the employee is entitled to give or to receive in order to terminate his contract; (j) pension provisions whether under the National Pension Scheme or otherwise; (k) the disciplinary and grievance procedures; (l) where the employment is not of a permanent nature, the period for which it is expected to continue, or if it is for a fixed term, the date on which it is to end; (m) the length of any probationary period; (n) the existence or otherwise of any dress code; and (o) the existence or otherwise of a collective agreement which may directly affect the terms and conditions of the employment. Where there are no particulars to be given under (k) to (o) then the fact that no such particulars exist must be noted in the employment statement. Employers should ensure that new employees are provided with a statement or job description which sets out all of the above. Any failure to do so will result in a breach of the provisions of the Act. 2.2 The Itemised Statement of Pay In addition, the Act imposes an obligation upon the employer to set out in some detail an itemised pay statement. The pay statement shall contain particulars of: Page 6 of 19

7 (a) the period of time for the work for which the wages are being paid; (b) the rate at which the wages are being paid and the number of hours worked where the number of hours varies week to week; (c) the gross amount of wages to which the employee is entitled; (d) the amount and purpose of any deduction made from the amount; (e) any bonus, gratuity or living allowance or other payment to which the employee is entitled; and (f) the net amount of money being paid to the employee. The Act does not allow the making of a deduction from an employee s wages unless the deduction is required or authorised to be made under the Act, a Collective Agreement, or a provision of the employee s contract, or by order of a Court or Tribunal, or where the employee has previously indicated in writing his agreement or consent to the deduction. 2.3 Provisions Relating to Overtime Pay and Similar Matters The Act further addresses the issue of overtime. Overtime is any hour worked by an employee in excess of 40 hours and shall be paid at the overtime rate of 1 ½ times the normal rate. Alternatively, the employee shall be paid the normal hourly wage and compensated by the same number of hours time off in lieu. The overtime provision does not apply to professional and managerial employees whose statement of employment indicates that salary has been calculated on the basis that he is required on occasion to work more than 40 hours per week. Nor does it apply where employer and employee so agree. This is a rare instance where it is possible to contract out of the provisions of the Act. Page 7 of 19

8 The Act stipulates that the employer shall provide each employee with a rest period of at least 24 consecutive hours in each week. The Act lays down rules relating to the provision of time off and provides that an employee shall be entitled to public holidays as defined by the Public Holidays Act, 1947 and these shall be paid. Where a public holiday falls on an employee s rest day, then the employer shall grant a holiday with pay on the working day immediately following the public holiday or another day agreed between the employer and the employee. This allows some flexibility but requires that a day off paid be provided with respect to each public holiday for which the public holiday fell upon an arranged rest day. Where an employee is required to work on a public holiday, the employer shall pay the employee at the overtime rate at least, or alternatively, pay him at regular wages and grant him a holiday with pay on another day as may be agreed by the employer and the employee. An employee is entitled to an annual period of two weeks paid vacation after he has completed the first year of continuous employment and for each subsequent year of continuous employment. Furthermore, employees (subject to the requirements of the business, and where practicable) are entitled to take reasonable time off during their working hours to attend a meeting of any of the bodies set out in Section 13. These include the Government Board, the Bermuda Regiment, the Bermuda Reserve Police, the Senate and the House of Assembly. In addition, there is an entitlement for time off for jury service and to vote in a Parliamentary election. Employees are entitled to eight days sick leave with pay after the first year of continuous employment except that the employee will not be entitled to more than two consecutive days unless he provides the employer with a doctor s certificate. In addition, the Act provides for maternity leave, ante natal care and bereavement leave. Page 8 of 19

9 3. TERMINATION OF THE EMPLOYMENT CONTRACT An employee s contract of employment cannot generally be terminated by an employer unless there is a valid reason for termination connection with the ability, performance or conduct of the employee or the operational requirements of the employer s business. The Act sets out the various notice periods (or pay in lieu thereof) required for termination in such circumstances. Termination without notice is permitted in certain circumstances, which are discussed below Termination with Notice Termination under the Act occurs when the employment contract is brought to an end. An employment contract may be terminated for reasons which are valid under the Act as well as for reasons which are not valid. Valid termination of a contract may give rise to a right to severance allowance, whilst invalid termination gives rise to a remedy for unfair dismissal. In any event the employment contract is subject to minimum notice periods (save where termination without notice is permitted, as described below). There are effectively two valid reasons that allow for the termination of the employment contract: (a) the ability, performance or conduct of the employee; and (b) the operational requirements of the employer s business. Section 20 provides a regime for notice. An employment contract may be terminated by giving the following minimum periods of notice in writing: (a) where an employee is paid each week, then that period will be one week; (b) where an employee is paid every two weeks, then that period shall be two weeks; and Page 9 of 19

10 (c) one month in any other case. The provisions of notice do not apply where an employee has reached retirement age or where the notice periods are regulated by the contract itself or by a collective agreement or otherwise by an agreement between an employer and the employee. Similarly, they do not apply where the giving of longer notice periods is customary, given the nature of the functions of the work performed by the employee. Please note that the Act permits payment in lieu of notice by giving the employee a sum equivalent to the remuneration that he would have received had he been given due notice. On the termination of employment, the employee can request the employer to provide a certificate of termination indicating: (a) the name and address of the employer; (b) the nature of the employer s business; (c) the length the employee had been in continuous employment; (d) the capacity in which the employee was employed; (e) the wages and other remuneration payable at the date of termination; and (f) the reason for the termination, where the employee makes a specific request for such Termination without Notice The Act specifies three circumstances in which an employee s contract of employment may be terminated without notice: Page 10 of 19

11 1. An employer is entitled to dismiss without notice an employee who is guilty of serious misconduct which is directly related to the employment relationship or which has a detrimental effect on the employerʹs business, such that it would be unreasonable to expect the employer to continue the employment relationship. 2. Where an employee is guilty of misconduct which is directly related to the employment relationship but which does not otherwise fall into the serious misconduct category, the employer may give him a written warning. If, within six months of the date of the warning, the employee is again guilty of misconduct, the employer may terminate the employeeʹs contract of employment without notice. 3. Where an employee is not performing his duties in a satisfactory manner, the employer may give him a written warning and appropriate instructions as to how to improve his performance. If the employee does not, during the period of six months beginning with the date of the written warning, demonstrate that he is able to perform his duties in a satisfactory manner and is in fact doing so, the employer may terminate his contract of employment without notice. An employer may take disciplinary action when it is reasonable to do so in all the circumstances. In deciding what is reasonable, the following should be taken into consideration: (a) the nature of the conduct in question; (b) the employee s duties; (c) the terms of the employment contract; (d) any damage caused by the employee s conduct; (e) the employee s length of service and his previous conduct; Page 11 of 19

12 (f) the employee s circumstances; (g) the penalty imposed by the employer; (h) the procedure followed by the employer; and (i) the practice of the employer in a similar situation. 3.3 Redundancy An employer may terminate the employment of an employee who is redundant. An employee is redundant if the termination is a result of a reduction in the employer s work force which is a direct result of: (a) the modernisation, mechanisation or automation of all or part of the employer s business; (b) the discontinuance of all or part of the business; (c) the sale or other disposal of the business; (d) the reorganisation of the business; (e) the reduction of the business which has been necessitated by economic conditions; (f) a contraction in the volume of work or sales or demand; and (g) the impossibility or impracticality of carrying on the business as usual. An employer who contemplates making an employee redundant must as soon as possible inform the employee s trade union or other representative body of the circumstances giving rise to the redundancy and the reasons for the termination contemplated. The employer shall also provide details of the number and categories of the employees likely to be affected and the period over which such termination is likely to be carried out. Page 12 of 19

13 In addition to termination for reasons of redundancy, an employer may also lay off an employee for a continuous period not exceeding four months and where the layoff exceeds the period of four months then the employee shall be deemed to have been terminated for redundancy and be entitled to the severance allowances set out in the Act. In the case of the winding up of a company or the insolvency of the employer s business, then the employee s employment contract will terminate one month from the winding up date. The Act provides that subject to Section 232 of the Companies Act, 1991 which relates to expenses of liquidation and Section 236 of that Act relating to the priority of creditors, all claims by an employee to wages and other payments due under his employment contract or under this Act shall have priority over all other creditors, including the Crown. 3.4 Unfair Dismissal The Act establishes a regime relating to unfair dismissal. The following do not constitute valid reasons for dismissal or for the imposition of disciplinary action: (a) an employee s race, sex, religion, colour, ethnic origin, etc. (these are quite uncontroversial); (b) an employee s age; (c) any reason connected with an employee s pregnancy, unless it involves an absence from work which exceeds the allocated leave entitlement; (d) an employee s trade union activity; (e) an employee s temporary absence from work because of sickness or injury; (f) an employee s absence from work relating to public duties; (g) an employee removes himself from a work situation which he reasonably believes presents an imminent and serious danger to life or health; Page 13 of 19

14 (h) participation of industrial action which takes place in conformity with the Labour Relations Act, 1975; and (i) the filing of a complaint or the participation and proceedings against an employer and following the alleged violations of this act. A dismissal which is based on any of the grounds set out above is deemed unfair. This list is not exhaustive and it should be remembered that any dismissal which is not made for proper cause, in accordance with the terms of the Act and on proper notice as discussed above will be "unfair". It is likely that the Employment Tribunal will impose standards of procedural fairness on employers who wish to dismiss employees for misconduct or inadequate performance. The Act expressly refers to the procedures followed by the employer and the practice of the employer in a similar situation as two of the factors which govern the reasonableness of disciplinary action taken by the employer. The following factors have been developed by the English Courts in considering the obligation to act fairly: Employer s knowledge at the time of dismissal is relevant. Events which are discovered by the employer after dismissal are not relevant. Reasonableness and equity require consistent treatment of employees and uniform enforcement of standards. A dismissal which would otherwise be considered as fair, would not be considered so, if it can be shown that the employer has not dismissed other employees in similar circumstances. A reasonable procedure should be followed. Failure to do so, can make a fair dismissal unfair unless there is no possibility that a decision would be changed, had a proper procedure been followed. Page 14 of 19

15 In appropriate cases, like an allegation of dishonesty, the employer must make appropriate enquiries. In relation to disciplinary matters, it is appropriate for the employer to give a warning, an opportunity for the employee to explain, and possibly the right of appeal. Section 29 of the Act provides for constructive dismissal. An employee is entitled to terminate his contract without notice to the employer where the employer s conduct has made it unreasonable to expect him to continue the employment relationship having regard to the employee s duties, length of service and circumstances. Where an employee terminates his employment contract as a result of a constructive dismissal as outlined above, then that dismissal shall be deemed to have been an unfair dismissal for the purposes of this Act. 4. REMEDIES/ENFORCEMENT OF RIGHTS CONFERRED BY THE ACT 4.1 The Employment Tribunal The Act creates an Employment Tribunal for the first time in Bermuda. The Employment Tribunal will have jurisdiction to hear and determine complaints and other matters referred to under this Act. In addition, the Minister shall designate inspectors to enforce the Act and shall give every such person a certificate of his designation. Complaints are made in the first instance to an inspector by way of a complaint in writing alleging that his employer has, within the preceding three months, failed to comply with the provisions of the Act. The Act allows for such complaints to be made by a trade union or other representative group for and on behalf of an employee and also that a single employee may make a complaint in a representative capacity where a group of employees has the same or substantially the same interest. Page 15 of 19

16 Where an inspector receives a complaint and he has reasonable grounds to believe that the employer has indeed failed to comply with the Act, then he must enquire into the matter as soon as is practicable. An employer can be compelled to provide information in writing and can also be required to produce documents to the Inspector. After conducting an investigation where an inspector has reasonable grounds to believe an employer has failed to comply with the provisions of the Act but is unable to bring about a settlement between the employer and the employee, then the inspector shall refer the complaint to the Tribunal. The Tribunal must hold a hearing as soon as practicable and give the employer and employee, or their representatives, a full opportunity to present evidence on oath and make submissions. As far as evidence is concerned, in any claim arising out of the dismissal of an employee, it shall be for the employer to prove the reason for the dismissal, and if he fails to do so there shall be a conclusive presumption that the dismissal was unfair. However, where an employee claims a constructive dismissal it shall be for that employee to prove the circumstances which made the continuation of his employment relationship unreasonable. 4.2 Remedies If after the hearing of a matter the Tribunal upholds an employee s complaint of unfair dismissal, it shall make one of three possible awards: (a) an order for reinstatement whereby the employee is to be treated in all respects as if he had never been dismissed; (b) an order for reengagement whereby the employee is to be engaged in work comparable to that in which he was engaged prior to dismissal; or (c) financial compensation. Page 16 of 19

17 Where the Employment Tribunal makes a compensation order having first had regard to reinstatement and reengagement, the Tribunal shall make an award which it considers just and equitable taking into account: (a) the loss sustained by the employee in consequence of the dismissal; and (b) the extent to which the employee caused or contributed to the dismissal. In any event, the amount of compensation ordered to be paid shall be not less than: (a) two weeks wages for each completed year of continuous employment for employees with no more than two complete years of continuous employment; and (b) four weeks wages for each completed year of continuous employment in other cases up to a maximum of 26 weeks. This means that there is a long stop provision by which no employee shall receive more than 26 weeks wages for unfair dismissal. In addition, the employee would be entitled to be paid all outstanding wages and benefits, including unpaid wages in respect of the notice period. 4.3 Severance Allowance On the completion of one year s continuous employment, an employee terminated for redundancy or a similar reason shall be entitled to a severance allowance. The severance allowance shall be an amount no less than two weeks wages for each completed year of continuous employment for the first ten years and three weeks wages for each completed year of continuous employment over ten years, up to a maximum amount of 26 weeks wages. These severance allowance provisions apply for a termination of employment by reason of: Page 17 of 19

18 (a) redundancy (see above); (b) the winding up or insolvency of an employer; (c) the death of an employer; or (d) the death of an employee from an occupational disease or accident resulting from that employment. An employee will not receive severance pay where he unreasonably refuses to accept an offer of reemployment at the same place of work under no less favourable terms than immediately prior to his termination. There are also other circumstances which relate to the non payment of severance allowance and these include the termination of an employee of a partnership when that partnership is dissolved, and termination of an employee by an employer who dies. Page 18 of 19

19 This publication is not a substitute for legal advice nor is it a legal opinion. It deals in broad terms only and is intended merely to provide a brief overview and give general information. About Conyers Dill & Pearman Founded in 1928, Conyers Dill & Pearman is an international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius. With a global network that includes 140 lawyers spanning eight offices worldwide, Conyers provides responsive, sophisticated, solution driven legal advice to clients seeking specialised expertise on corporate and commercial, litigation, restructuring and insolvency, and trust and private client matters. Conyers is affiliated with the Codan group of companies, which provide a range of trust, corporate, secretarial, accounting and management services. Page 19 of 19

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