PRACTICAL LAW LABOUR AND EMPLOYEE BENEFITS MULTI-JURISDICTIONAL GUIDE 2011/12. The law and leading lawyers worldwide

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1 PRACTICAL LAW 2011/12 LABOUR AND EMPLOYEE BENEFITS The law and leading lawyers worldwide Essential legal questions answered in 36 key jurisdictions Rankings and recommended lawyers in 49 jurisdictions Analysis of critical legal issues Top 10 global firms identified AVAILABLE ONLINE AT

2 Cyprus Natasa Aplikiotou, Sarah Forster and Kimon Zakkas George Z Georgiou & Associates LLC (member of Ius Laboris) SCOPE OF EMPLOYMENT REGULATION 1. Do the main laws that regulate the employment relationship apply to: Foreign nationals working in your jurisdiction? Nationals of your jurisdiction working abroad? Age restrictions There are no specific age restrictions, but in practice minors are not appointed as managers or directors. Nationality restrictions There are no nationality restrictions on who can be a manager or company director. Laws applicable to foreign nationals The terms and conditions of employment of all foreign nationals must be the same as those for Cypriot nationals, and this is ensured by the model employment contracts required by the Ministry of Labour and Social Insurance. A valid work permit is required for a non-eu foreign national to legally work in Cyprus, and a serious criminal offence is committed if this permit is not obtained, which can result in a fine and/or imprisonment for both the employer and employee. However, EU nationals can work in Cyprus without any restrictions. The right to work is safeguarded by Article 25 of the Constitution of the Republic of Cyprus. The main laws that apply to the employment relationship are the following: Termination of Employment Law of 1967, as amended. Annual Paid Leave Law of 1967, as amended. Social Insurance Law of 1980, as amended. Safety and Health at Work Law of 1996, as amended. Protection of Maternity Law of RECRUITMENT INCENTIVES 3. Are any grants or incentives available for employing people? If so, please give details. The Human Resources Development Authority (HRDA) of Cyprus and the Cyprus Productivity Centre (CPC) provide a number of incentives and grants for employers to hire young graduates from various specialisations. These incentives and grants are offered through training packages and programmes which take place in collaboration with employers. The primary aim is to provide adequate training to employees so that they can become valuable assets to their employers, leading to either the creation of new positions or the development of the company, encouraging growth and avoiding dismissals or collective redundancies. These incentives and grants are part of the measures taken in order to reduce unemployment. In addition and subject to certain criteria, the government offers employers wage subsidies for employing persons registered as unemployed. Minimum Salaries Law Cap 183, as amended. Equal Treatment at Work and Employment Law of 2004, as amended. Laws applicable to nationals working abroad Cypriots working abroad are subject to the law governing the employment contract, as well as the relevant host nation s laws. RESTRICTIONS ON MANAGERS AND DIRECTORS 2. Are there any restrictions on who can be a manager or company director? No restrictions are prescribed by the law. However, the internal policy of a company can implement restrictions on these matters. PERMISSION TO WORK 4. What prior approvals do foreign nationals require to work in your country? Visa Procedure for obtaining approval. Visas are issued by all the Diplomatic Missions (Embassies and General Consulates) of the Republic of Cyprus, and by all the Honorary Consulates of the Republic of Cyprus abroad in their respective countries. Regarding short-stay or travel visas a completed and signed application must be submitted to the competent Consulate along with a valid passport with two passport sized photographs attached. In the event of visiting friends or family, a letter of invitation from them with their full address, phone number and occupation in This article was first published in the Labour and Employee Benefits 2011/12 Volume 1 multi-jurisdictional guide and is reproduced with the permission of the publisher, Practical Law Company.

3 Cyprus is needed. Moreover, solid evidence that there are sufficient funds to cover the cost of the intended stay in Cyprus (for example, a bank statement or travellers cheques) may be presented along with a recent (less than one month old) official letter from the employer addressed to the Cyprus Consulate with proof of the applicant s wages. The Consulate may also ask for a copy of a Bank Guarantee Letter from the host throughout a visitor s stay in Cyprus, so as to cover the possible cost of repatriation. Any third country national who intends to stay in Cyprus for more than three months must apply for a long-stay visa in order to enter Cyprus legally. After arrival they can immediately apply for a work and residence permit. Therefore, a long-stay visa is a prerequisite for legally entering Cyprus in order to obtain a work permit. Cost. The fees for short-stay or travel visas are EUR10.25, while long-stay or group visas are EUR34.17 (as at 1 August 2011, EUR1 was about US$1.44). Time frame. The application takes up to one week. Permits Procedure for obtaining approval. All EU nationals require a residence permit if they intend to stay and work in Cyprus for over three months. During the first three months, EU nationals must apply for a Certificate of Registration within eight days after their arrival to Cyprus. However, given that the process is procedural, EU nationals can start and/or continue working during the application procedure. Fines can be imposed for non-compliance, but in practice this is rarely done. A valid work permit is a prerequisite for all non-eu foreign nationals wishing to work in Cyprus. Most work permits are granted through the temporary residence permits system. Depending on the category of the temporary residence permit, the permit can enable the foreign national to reside and work in Cyprus for up to a period of five years and is renewable. The application procedure that needs to be followed is determined by whether or not the employee will be considered an executive. The illegal employment of non-eu foreign nationals is taken very seriously in Cyprus, with fines and imprisonment for the employer, and deportation for the employee, used as punishments for not complying with the relevant laws. The Civil Registry and Migration Department of the Ministry of Interior of the Republic of Cyprus is the competent authority for granting entry permits as well as temporary and/or permanent residence permits to EU and non-eu foreign nationals. Non-EU foreign nationals should apply to obtain an immigration permit (temporary or permanent), on the basis of one of the Categories referred to in Regulation 5 of the Aliens and Immigration Regulations of REGULATION OF THE EMPLOYMENT RELATIONSHIP 5. How is the employment relationship governed and regulated? Written employment contract Although a written employment contract is not required in Cyprus, the Law Providing for an Employer s Obligation to Inform Employees of the Conditions Applicable to the Contract or Employment Relationship 2000 (Law 100(1)/2000) imposes an obligation on the employer to provide to the employee, in writing, specific information regarding the terms of employment. That information must include: The identity of the parties. The place of work and the registered address of the business. The position or the specialisation of the employee. The commencement date of the contract and its duration if it is for a fixed period. Notice periods. Annual leave entitlement. All the payments (salary, bonuses, and so on) to which the employee may be entitled and the time schedule for their payment. The usual duration of daily or weekly employment. The application of any collective agreements. Employment contracts can be written in any language that is understandable to both parties or, if the contract is written in a language that the employee does not understand, the provisions of the contract must be orally explained to the employee. It is advisable for the employer to obtain the confirmation of an independent professional (for example, a lawyer) that the terms of the contract have been appropriately explained to the employee. Collective agreements Although there are no workers who by law must be represented by one or more trade unions, it is very common for certain industries to be represented by trade unions and have collective agreements which regulate their working status. The main industries which are organised in trade unions are the building industry, the transportations industry, dockworkers, maritime workers and farmers. 6. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment? Cost. The fees for the granting of immigration permit are EUR and are paid against a receipt following the approval of the application and before the issue of the immigration permit. The costs for the work permit depend on the category of employment, for example, workers fees are EUR34.17 while domestic assistants fees can amount to EUR Time frame. The procedure can take up to two years for the immigration permit. A work permit can take up to six months to be examined. There are no specific legal limitations concerning amendments to the employment relationship. However, any unilateral change in employment terms that is detrimental to the employee may give rise to a claim for constructive dismissal and/or damages and, therefore, it is advisable that any major changes are agreed between the employer and employee.

4 MINIMUM WAGE 7. Is there a national (or regional) minimum wage? HOLIDAY ENTITLEMENT 9. Is there a minimum holiday entitlement? Salary, like all other benefits (which are not regulated by law), is negotiated by the employer and the employees or their representatives through individual or collective agreements. However, for certain occupations a minimum wage is set annually by an Order of the Ministerial Council that comes into force on 1st April of each year. The occupations covered by the minimum wage provisions are: Clerks. Shop assistants. School assistants. Assistant baby and child minders. Nursing assistants. Security guards. Employees with sanitation and caring duties in clinics, private hospitals and houses for the elderly. For 2011, employees working in the private sector and covered by the Order are entitled to EUR909 per month after a continuous period of employment of six months. RESTRICTIONS ON WORKING TIME 8. Are there restrictions on working hours? Working hours Generally, the number of working hours for a five-day week should not exceed 48 hours per week, including overtime. However, in certain sectors (such as the hotel industry) different limitations can apply. Minimum holiday entitlement All workers are entitled to paid leave for at least four weeks per year, consisting of at least 20 days leave for those working five days a week and 24 days for those working six days a week. This requirement can be replaced with cash only in the event of the termination of the employment relationship. Public holidays The number of official holidays when offices and organisations are closed varies from 14 to 17 annually. In general, the public holidays in Cyprus are listed below, although additional days can be included by employers: New Year s Day: 1 January. Epiphany: 6 January. Green Monday (beginning of Lent): a day in March (the date changes). Good Friday: a day in March/April (the date changes). Easter Saturday, Sunday and Monday: during March/April (the date changes). National Day: 1 April. Labour Day: 1 May. Holy Spirit Day: a day in May (the date changes). Assumption Day: 15 August. Cyprus Independence Day: 1 October. Greek National Day: 28 October. Christmas Day: 25 December. Boxing Day: 26 December. Rest breaks Employees are generally entitled to a minimum of 11 continuous hours of rest per day, and 24 continuous hours of rest per week. Either two rest periods of 24 continuous hours each, or a minimum rest period of 48 continuous hours within every 14-day period, must also be given. Shift workers Night workers should not, on average, exceed eight working hours per day within a period of one calendar month or within any other period specified in a collective agreement. Night workers whose work is hazardous or physically or mentally demanding should not exceed eight hours of night work in 24 hours. ILLNESS AND INJURY OF EMPLOYEES 10. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Can an employer recover any of the cost from the government? Entitlement to time off In practice the majority of employers do not demand a sick note for any absence less than three days. Under the law, no payment is made for the first three days of sick leave. After the three days, a sick note is required. An employer can lawfully terminate the employment of an employee who has been absent for more than 26 consecutive weeks. Entitlement to paid time off Under the law, no payment is made for the first three days of sick leave. An employee who is absent for more than three consecutive days is then paid a percentage of their salary by the Social Insurance Fund (not by the employer). It is at the employer s discretion if it wishes to pay either for the first three days of absence or for the additional percentage of salary.

5 The maximum number of days for which sick pay is payable is 156 days during a single period of interrupted employment. This can be extended for a further period of 156 days during the same period of interrupted employment, provided that the insured is eligible to receive an incapacity (disability) pension but is not expected to remain permanently incapacitated (disabled) from working. The weekly rate of the basic benefit is equal to a percentage of the weekly average of the basic insurable earnings of the employee in the previous contribution year, increased by one third for a dependent spouse and by one sixth for dependent children or other dependants (to a maximum two dependants). The increase for the dependent spouse is payable only if the employee s earnings from their employment (or the rate of the benefit they can receive from the Social Insurance Fund) are not higher than the amount of the increase for dependants. In the case where both spouses are entitled to a benefit for the same period, the increase for dependants is payable only to the spouse who is entitled to the increase of benefit at a higher rate. There is no difference between long-term and short-term sick pay. The weekly rate of supplementary benefit is equal to a percentage of the weekly average of insurable earnings of the employee in excess of the basic insurable earnings, but in no case is the supplementary benefit higher than the weekly amount of the basic insurable earnings. Insured employees who are receiving part of their earnings from their employer for the period they are entitled to sickness benefit have the benefit reduced so that the total amount of the earnings and the benefit do not exceed the insured s full earnings. Under the Social Insurance Law, a woman who has given birth is also entitled to a maternity grant in the form of a lump sum payment, provided that either she or her husband satisfies the relevant contribution conditions. A separate claim must be made for the grant, no later than 12 months after the date of delivery. Paternity rights Under the Law Providing for Parental Leave and Reasons of Force Majeure, Law 69(I)/2002, as amended, provides that any employed parent, male or female, is entitled to take unpaid parental leave of a total duration of up to 13 weeks, due to the birth or adoption of a child, for the purpose of taking care of and participating in the raising of that child. This right is individual and non-transferable except in the event that the father has taken up parental leave of only two weeks, in which case two weeks of parental leave can be transferred to the mother. The mother will then be entitled to 15 weeks of parental leave in total. Both parents can take their leave either at the same time or separately. Surrogacy The rules applicable to a surrogate mother are similar to those which apply in the case of adoption (see below, Adoption rights). Adoption rights An employed woman who has adopted a child under 12 years of age and who has notified the Department of Social Welfare Services of this event is entitled to 16 weeks maternity leave, provided that she informed her employer, in writing, at least six weeks in advance, of her intention to adopt a child, and of the date she is taking care of the child. Recovery of sick pay from the state Sick pay paid by the employer cannot be recovered from the state. STATUTORY RIGHTS OF PARENTS AND CARERS 11. What are the statutory rights of employees who are: Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)? Carers (including those of disabled children and adult dependants)? Maternity rights An employed pregnant woman is entitled to maternity leave for 18 consecutive weeks. Of this, 11 weeks is compulsory for both the employer and the employed woman (the period two weeks before the week of the expected delivery date, the week of delivery and eight weeks after the week of delivery). In order to be entitled to maternity leave, the pregnant woman must produce, in time, to her employer a medical certificate stating the expected week of her delivery. With respect to pay during the maternity leave period, the Maternity Protection Law of 1997 (Law 100(I)/1997) makes reference to the Social Insurance Law. Under the Social Insurance Law, the insured woman is entitled to maternity allowance payable out of the Social Insurance Fund, subject to certain contributions and other conditions. Maternity allowance is composed of the basic and the supplementary benefit. Parental rights Any employed parent, male or female, is entitled to take unpaid parental leave of a total duration of up to 13 weeks, by reason of the birth or adoption of a child, for the purpose of taking care of and participating in the raising of a child. The employee is obliged to give their employer five weeks advance written notice specifying the dates of commencement and termination of the parental leave. This right is individual and non-transferable. An employee can take parental leave for a minimum period of one week and a maximum period of four weeks, per year. Carers rights In the event of force majeure, defined as any urgent family reason related to an accident or illness of an employee s dependant and which demands the direct absence of the employee from their work, the employee is entitled to seven unpaid days off per year. The employee is obliged to inform their employer as soon as possible of the need for the leave. There is no other specific provision for carers. CONTINUOUS PERIODS OF EMPLOYMENT 12. Does a period of continuous employment create any benefits for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer? Benefits created There is a minimum probation period of six months prescribed by law, during which time an employer can dismiss an employee

6 without cause. This period may be extended up to two years. After the completion of the probationary period, an employee cannot be unfairly dismissed. Employees are entitled to annual leave after six months of employment and redundancy payments after two years of employment. Consequences of a transfer of employee An employee transferred to a connected (subsidiary/parent) company retains continuity of service and the same benefits that they previously enjoyed. There is also general protection under Directive 2001/23/EC on safeguarding employees rights on transfers of undertakings, businesses or parts of businesses (Transfer of Undertakings Directive) (Law 104(I)/2000, as amended), which adopted the European Directive into Cyprus law. TEMPORARY AND AGENCY WORKERS 13. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? The law makes no distinction between the rights of temporary and agency workers and permanent employees. They are subject to the same probationary period rules. Fixed term workers have the same level of protection as permanent employees, except for the fact that they can be lawfully dismissed at the end of their contract. DATA PROTECTION DISCRIMINATION AND HARASSMENT 15. What protection do employees have from discrimination or harassment, and on what grounds? Protection from discrimination The Cypriot Constitution of 1960 contains a general anti-discrimination provision that corresponds to Article 14 of the European Convention on Human Rights (ECHR). More specifically, Article 28 of the Constitution states that every person is equal before the law and it prohibits any kind of discrimination against any person on the ground of their: Community race. Religion. Language. Sex. Political or other convictions. National or social descent. Birth. Colour. Wealth. Social class. Or on any ground whatsoever, unless there is express provision to the contrary in the Constitution. 14. What data protection rights do employees have? The employer must ensure that data is processed in accordance with the law and for specific and legitimate purposes. The processed data must be relevant, appropriate and not excessive in relation to the purpose of processing. For the data processing to be considered lawful, the employer must notify the Commissioner for Personal Data Protection in writing about the establishment and operation of a filing system or the commencement of processing. Furthermore, for data to be legally processed, the employee must explicitly give their consent, unless the processing is either: Necessary for compliance with a legal obligation to which the employer is subject. Necessary for the performance of a contract to which the data subject is party. At the employee s request. Necessary to protect the vital interests of the employee. The employer is under the obligation to take the appropriate organisational and technical measures for the security of data and their protection against accidental or unlawful destruction, alteration, unauthorised dissemination or access and any other form of unlawful processing. In addition, the employer is responsible for updating and destroying personal data that has been collected and is no longer needed or that was collected unlawfully. However, age, disability and sexual orientation are not covered by the Constitution. Cyprus has ratified most international conventions on human rights which include anti-discrimination provisions and there are numerous of laws which prohibit different forms of discrimination within the working environment (for example, religious discrimination, disability discrimination, age and gender discrimination, and so on). Protection from harassment Under Article 6(1) of Law 58(I)/2004 on Equal Treatment in Employment and Occupation, any form of harassment is prohibited. More specifically, sexual harassment is a prohibited type of sex discrimination under the Equal Treatment for Men and Women in Employment and Vocational Training Law of (Law 205(I)/2002). Sexual harassment is defined as any form of unwanted verbal, non-verbal or physical conduct of a sexual nature, which has the purpose or effect of violating the dignity of a person, particularly where it creates an intimidating, hostile, degrading, humiliating or offensive environment. WHISTLEBLOWERS 16. Do whistleblowers have any protection? This is not regulated by the law and so it falls within the employer s wide discretion to regulate it through its internal policies. It is up

7 to the employer whether it provides any additional protection to whistleblowers, but generally the usual unfair dismissal provisions would apply. DISMISSAL OF EMPLOYEES 17. What rights do employees have when their employment contract is terminated? Notice periods The notice period under the Law providing for the Termination of Employment Law of 1967, as amended, depends on the employee s continuous length of service, and must be given in writing. The following notice periods must be given: More than 26 weeks but less than 52 weeks service: one week s notice. More than 52 weeks but less than 104 weeks service: two weeks notice. More than 104 weeks but less than 156 weeks service: four weeks notice. More than 156 weeks but less than 208 weeks service: five weeks notice. More than 208 weeks but less than 260 weeks service: six weeks notice. More than 260 weeks but less than 312 weeks service: seven weeks notice. 312 weeks service or more: eight weeks notice. Severance payments Severance payments are calculated according to years of employment as follows: Two weeks wages for each year of service up to four years. Two-and-a-half weeks wages for each year of service from five to ten years. Three weeks wages for each year of service from 11 to 15 years. Three-and-a-half weeks wages for each year of service from 16 to 20 years. Four weeks wages for each year of service beyond 20 years. The above are multiplied by the last weekly wage of the employee, including commissions and bonuses, if these have been incorporated as part of the employee s remuneration package (and do not merely constitute one-off payments) or are payable under employee s contract of employment. The severance payment must be paid as soon as possible after dismissal. Procedural requirements for dismissal Dismissals that cannot be justified under any one or more of the grounds below are considered unlawful and give rise to a right to compensation: Unsatisfactory performance (excluding temporary incapacitation due to illness, injury and childbirth). Redundancy. Force majeure, act of war, civil commotion or act of God. Termination at the end of a fixed period. Conduct rendering the employee subject to summary dismissal. Conduct making it clear that the relationship between the employer and employee cannot reasonably be expected to continue, commission of a serious disciplinary or criminal offence, indecent behaviour or repeated violation, or ignorance of employment rules. 18. What protection do employees have against dismissal? Are there any specific categories of protected employees? Protection against dismissal Employees are generally protected from dismissal for any reason that is not a legally justified ground for dismissal. Employees are protected from dismissal for participating in trade union related activities. However, the only remedy that can effectively be ordered by a court for unlawful dismissal is statutory and contractual compensation, which is often insufficient. Reinstatement is theoretically available but in practice this is very rarely ordered by Cyprus courts (we are aware of only one instance since 1967). Protected employees It is a criminal offence to dismiss a pregnant employee from the time of being presented with a doctor s certificate of pregnancy up to three months after the end of maternity leave. It is also illegal to dismiss an employee on sick leave unless they have been absent for over six months. Furthermore, an employer cannot dismiss an employee based on their race, gender, religious beliefs, nationality, social origin, and so on. REDUNDANCY/LAYOFF 19. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Definition of redundancy/layoff Redundancy is a valid reason for dismissal under the Termination of Employment Law of 1967, as amended. Article 18 states that an employee is redundant when their employment has been terminated: Because the employer has ceased trading. Because the employer ceased trading in the geographic location where the employee is working. Due to operational reasons causing a reduction in the number of employees either: due to a reduction of turnover/production materials; due to the adoption of modern more efficient production methods. In the event of a redundancy, payments, which are calculated in accordance with Table 4 of the Termination of Employment Law 1967, are made by the government redundancy fund. It is a national

8 fund to which employers pay contributions so that compensation payments can then be made in the case of redundancy. An employer is obliged to inform the Ministry of Labour and Social Insurance about any redundancies (though they are not for dismissals), and is further obliged to re-hire redundant employees if a position becomes available up to eight months following the redundancy. Collective dismissals under the Collective Redundancies Law of 2001 (Law No. 28(I)/2001) are dismissals for one or more reasons not related to the employees, and where the number of employees dismissed within a 30-day period is either: At least ten employees, if the establishment employs more than 20 but fewer than 100 employees. At least 10% of the workforce, in cases where the establishment employs at least 100, but fewer than 300, employees. At least 30 employees, in cases where the establishment usually employs at least 300 employees. Procedural requirements An employer intending to implement a collective redundancy has a statutory obligation to notify and engage in consultations with the employees representatives as soon as possible to reach a settlement agreement. The employer must also give notice to the Minister of Labour and Social Insurance of any proposed redundancy dismissal at least one month before the intended date of termination. Notice must be given on a standard form and include the following particulars: The reasons for any proposed collective dismissal. The number and the description of the employees it proposes to make redundant. The total number of employees and the description of employees normally employed at the establishment. The time period during which the proposed redundancies are to take place. The criteria for selecting the employees to be dismissed. The method of calculating any redundancy payment, other than the redundancy payments provided by the Termination of Employment Laws of and tax depend to a great extent on the individual arrangements made by the person, as well as any applicable double taxation treaties that exist between Cyprus and the foreign national s originating country. Nationals working abroad See above, Foreign nationals. 21. What is the rate of taxation on employment income? Are any other taxes or social security contributions levied on employers and/or employees? Income tax The main employment related taxes prescribed by law are income tax and social insurance. Employment income (after all allowances) is taxed as follows: Income of up to EUR19,500: 0%. Income of between EUR19,501 and EUR28,000: 20%. Income of between EUR28,001 and 36,300: 25%. Income of above EUR36,301: 30%. Social security contributions Employer s total contributions include: Social Insurances contributions amounting to 6.8% over the employee s monthly salary. Contributions to Social Cohesion Fund equal to 2% of the employee s monthly salary. Contributions to Redundancy Fund equal to 1.5% of the employee s monthly salary. Contributions to Industrial Training Fund equal to 0.5% of the employee s monthly salary. The employee s total contributions amount to 6.8% of their monthly salary. EMPLOYER AND PARENT COMPANY LIABILITY 22. Are there any circumstances in which: If the number of dismissals is less than the number stipulated in the Collective Redundancies Law of 2001, the Termination of Employment Law 1967 applies. As regards notice periods, the rules of the Termination of Employment Law 1967, as amended, apply. TAXATION OF EMPLOYMENT INCOME 20. What is the basis of taxation of employment income for: Foreign nationals working in your jurisdiction? Nationals of your jurisdiction working abroad? Foreign nationals Any person residing in Cyprus for more than 183 days per year is taxable in Cyprus on their worldwide income. Pension payments An employer can be liable for the acts of its employees? A parent company can be liable for the acts of a subsidiary company s employees? Employer liability Generally, an employer will be liable for the acts of their employees if the damage occurred during working hours and was an act which the employer adopted/accepted. This liability arises either under tort or under contract, depending if there was a contractual relationship between the employer and the injured party. Parent company liability Parent company liability rarely arises, unless there is a direct contractual link or guarantee between the parent company and the injured party.

9 HEALTH AND SAFETY OBLIGATIONS 23. What are an employer s obligations regarding the health and safety of its employees? Employers are obliged to do the following: To ensure the health and safety of workers in every aspect concerning their work, primarily on the basis of the general principles of prevention and without any financial cost to the employees. To evaluate the occupational risks, among other things, regarding the choice of work equipment and outfitting the workplace, and to make provision for adequate protective and preventive measures. To keep a list of, and prepare reports on, occupational accidents. To take the necessary measures for first aid, firefighting, the evacuation of workers and the action required in the event of serious and imminent danger. To inform and consult workers and allow them to take part in discussions on all questions relating to health and safety at work. To ensure that each worker receives adequate health and safety training throughout the period of employment. Employees are obliged to do the following: To correctly use machinery, other means of production, personal protective equipment and safety devices. To give warning of any work situation presenting a serious and immediate danger and notify the employer of any shortcomings in the protective arrangements. To co-operate in fulfilling any requirements imposed for the protection of health and safety, enabling the employer to ensure that the working environment and working conditions are safe and impose no risks. EMPLOYEE REPRESENTATION AND CONSULTATION 24. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)? determine the terms of employment, including payment levels and increases. These agreements are usually renewed every two years. Employees are not generally entitled to be represented on the board of directors of the company. Employees can be represented by trade unions in matters that affect them directly. Consultation Employees consent is not required for major transactions. However, it is required if it affects their terms of employment (such as a change of duties, salary, and so on). Major transactions Trade unions can represent employees during the negotiation of a major transaction in order to safeguard the employees rights but this is not a right transferred by law. 25. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead? Remedies The settlement of labour disputes is regulated by the Labour Relations Code. The Code has been agreed and signed by the employers organisations and the trade unions. The primary employers and professional organisations are: the Employers and Industrialists Federation of Cyprus and the Cyprus Chamber of Commerce and Industry. The Code recognises disputes concerning rights arising from the interpretation or implementation of existing collective agreements. This includes personal complaints stemming from the implementation of a collective agreement. Complaints of this sort are submitted for examination by the employer. Representatives of both the unions and the employers organisations can take part in the discussion of the complaint. If the problem is not resolved through direct negotiations, it is forwarded to the Ministry of Labour and Social Insurance for mediation. As a final resort there is binding arbitration. Any conflicts of interest that arise during the negotiations or the renewal of collective agreements are also recognised by the Code. Employee action The dispute resolution procedure consists of the following stages: Resolution by direct negotiation. Mediation by the Ministry of Labour and Social Insurance (Department of Labour Relations). If the dispute is still unresolved, referral to arbitration or to a public inquiry with the agreement of both parties. Management representation The right of association, including the right to form and to join trade unions in workplaces, is safeguarded under Article 21 of the Constitution. It includes the right for the workforce to decide who represents them in the workplace, without any kind of input, interference or compulsion from or by the owners or employers. Matters concerning collective negotiations, collective agreements, the settlement of disputes, the conditions governing the calling of strikes and the imposition of lockouts are regulated by the Labour Relations Code of Negotiations between unions and employers associations culminate in collective agreements that CONSEQUENCES OF A BUSINESS TRANSFER 26. Is there any statutory protection of employees on a business transfer? Automatic transfer of employees Employees are not entitled to object to a business transfer. Objecting to working for a new employer can constitute a material breach of the employment contract. If the working conditions

10 or the contract of employment are changed to the employee s detriment (for example, if the employee s duties radically change) this can constitute a breach of contract by the employer. Both the transferor and transferee must consult either the employees affected by the transfer or their representatives. Before employees are transferred to the new employer, it is advisable that the relevant government departments are notified, although this is not a legal requirement. Protection against dismissal A transfer cannot in itself constitute grounds for the dismissal of an employee by either the transferor or the transferee. However, there is a right to dismiss due to economic, technical or organisational reasons which require changes to the workforce. Essentially, lawful dismissals can arise in cases where the business transfer results in redundancies, as provided for in section 18 of the Termination of Employment Laws of 1967, as amended. If the employment contract or employment relationship is terminated because the transfer involves a substantial change to the terms of employment which are to the employee s detriment, the employer will be deemed responsible for the termination of the contract or employment relationship. Harmonisation of employment terms All the rights and duties of the transferor stemming from the employment contract or employment relationship as it exists at the date of the transfer must be transferred to the transferee. The transferee must retain the same terms that have been agreed upon in any collective agreement, in the same way as was done by the transferor, for the remainder of the term of the collective agreement and for at least one year after the transfer. Furthermore, employees retain all the rights that they had with the transferor concerning old age and disability benefits, plus any rights to supplementary occupational retirement benefits. PENSIONS State pensions 27. Do employers and/or employees make pension contributions to the government in your jurisdiction? Contributions paid to the government For employees, the total rate of contribution is 17.9%, of which: 6.8% is payable by the employer. 6.8% is payable by the employee. 4.3% is payable by the state. In the case of apprentices who work without receiving any remuneration, the employer is obliged to pay both his own and the apprentice s contributions (13.6%). Taxation of contributions Employees are taxed on their gross annual income. Monthly amount of the government pension The government pension is calculated, amongst other things, on wages earned (if applicable), with a starting tier of EUR300 to EUR400 per month. Supplementary pensions 28. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? Do these schemes provide pensions, the value of which: Is linked to the employee s salary? Is linked to employer and/or employee contributions and investment return on those contributions? Linked to the employee s salary The only obligatory retirement payment is the Social Insurance contribution payable in equal amounts by the employer and employee. Linked to employer and/or employee contributions Supplementary pension schemes can be provided through either private provident or private pension funds and are usually linked to salary, or a percentage of salary. The internal regulations of the fund determine the minimum and maximum contributions of both parties, as well as the calculation upon the employer s dismissal (for example, a common provision is that if an employee leaves their employment within five years, the employee will only be entitled to their contribution, and not the employer s). 29. Is there a regulatory body that oversees the operation of supplementary pension schemes? Regulatory body There are two supervisory bodies with overlapping authority: The Registrar for Provident Funds, whose authority is derived from Law 44/1981. The Supervisory Authority for Pension and Provident Funds, established under Law 146(I)/2006. Both have wide authority to supervise and discipline both Institutions for Occupational Retirement Provision (IORPs) and members. Law 146(I)/2006 also gives the regulator authority to initiate criminal proceedings for failure to comply with the law in certain circumstances (for example, failure to file accounts within the nine-month deadline). Regulatory framework IORPs must be authorised and registered by either of the regulatory bodies: The Supervisory Authority for Pension and Provident funds under Law 146(I)/2006. The Registrar of Provident Funds under Law 44/1981. Once a scheme has been registered, it will receive a certificate of registration. The fund is given legal personality at the point of registration. Law 146(I)/2006 permits the establishment of cross-border pension schemes, once authorisation from the Supervisory Authority for Occupational Pension Schemes has been obtained. The fund must submit an application together with written regulations which contain all the provisions agreed between the sponsoring undertaking and its members, as well as all compulsory provisions prescribed by the law itself.

11 Tax on pensions 30. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)? 33. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? Tax relief on employer contributions There is no tax relief on employer contributions. Tax relief on employee contributions Employee contributions are exempt from income tax provided they do not exceed one-sixth of the employee s annual income. 31. Is there any legal protection of employees pension rights on a business transfer? Before Law 146(1)/2006 there was no legal framework regarding pension funds. This law provides that the fund should have sufficient reserves to cover employee benefits. In cases of insolvency, the fund is usually wound up. BONUSES 34. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded? Automatic transfer of pension rights Employees retain all the rights that they had with the transferor regarding old age and disability, plus any rights to supplementary occupational retirement benefits. Employees who have already left the transferor s business at the time of the transfer retain the rights they obtained. In the event that the new employer does not have the facilities to provide a benefit that the transferor used to provide, then the employer must consult with the employees or their representative in order to negotiate a solution. Pension entitlements rights remain unaffected on a business transfer. Other protection for pension rights There is no other protection for pension rights. A 13th salary payable on or about mid-december of each year is customary and widely practiced in Cyprus. There are no other mandated bonuses but this largely depends on the industry (for example, in the banking and insurance sector, bonuses are often included in the employment contracts). There are no legislative rules regarding the payment of commissions and it is a matter for agreement between the parties. Commissions are considered part of remuneration and are therefore included in the computation of payable social insurance, tax and other contributory payments. INTELLECTUAL PROPERTY (IP) 32. Can the following participate in a pension scheme established by a parent company in your jurisdiction: Employees who are working abroad? Employees of a foreign subsidiary company? Employees working abroad Employees working abroad and employees of a foreign subsidiary company can participate in a pension scheme established by a parent company through the cross-border activities of a Provident Fund. It is specified in the Law that Provides for the Establishment, Registration, Operation and Supervision of Professional Pension Benefit Funds Law 146(I)/2006 that: In compliance with current social and labour legislation on the organisation of pension plans, including compulsory membership and the results of collective bargaining, undertakings in the Republic of Cyprus can sponsor the funds of a member state. The fund has the right to receive sponsorship by an undertaking of another member state. The law goes further and specifies the process which the fund should follow if it wishes to accept sponsorship from a sponsoring undertaking located within the territory of another member state. Employees of a foreign subsidiary company See above, Employees working abroad. 35. If employees create IP rights in the course of their employment, who owns the rights? Under the Patents Law 16(I)/98, as amended, if an invention has been invented in the course of employment, the intellectual property rights to the patent belong to the person who gave the order requesting the work, or the employer, subject to any contractual arrangements to the contrary. Nevertheless, the inventor employee has the right to a fair remuneration, taking into account the value of the invention and the benefit accruing to the employer. In the event of disagreement as to what constitutes fair remuneration, it will be determined by the court. The same principle applies to trademarks. RESTRAINT OF TRADE 36. Is it possible to restrict an employee s activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to postemployment restrictive covenants? Restriction of activities During an existing employment relationship, there is an implied duty of fidelity that is the basis for the existence of a contract of employment. It has long been recognised by the Cypriot courts that the employee should offer their services to their employer in a trustworthy

12 and faithful manner. However, under Cypriot employment law, strict and unreasonable covenants not to compete, solicit or deal with customers after the employment ends are usually considered void, as it is considered that the employee is restrained from exercising a lawful profession, which conflicts with Article 25 of the Constitution. However, if a clause is made within the constraints of employment law and is reasonable in geographic and time scope, it may be enforceable. An employer can protect its confidential information through nondisclosure contracts. Employees have a continuing duty of good faith towards the confidentiality and protection of their employer s property. This duty survives the termination of employment for whatever reason. As such, unless anything to the contrary is provided in the employment contract, an employee (former or present) may not use the employer s intellectual property other than in the course of the business or with the employer s express consent. Post-employment restrictive covenants The enforcement of restrictive covenants has not been tested in Cypriot courts; so it is difficult to know how the courts will react if an employer tries to enforce them. From an empirical viewpoint and considering that the Cypriot courts obtain guidance from the UK courts, one would suggest that a restrictive covenant would have a good chance of being enforced only when either: The work is of a particularly sensitive nature. The employee has blatantly acted unethically. The employer has continued paying the employee during the post-employment period (garden leave). PROPOSALS FOR REFORM 37. Are there any proposals to reform employment law or pensions law in your jurisdiction? The reduction of benefits and a revamp of the state pension system are especially hot topics in Cyprus, as is the increased need for private pension funds. Time will tell if any legislative changes will take place as a result of the discussions on these issues. The employment environment is changing in Cyprus. The worldwide economic and financial crisis has resulted in companies internal rules becoming stricter regarding bonuses, and employers have frozen the hiring of employees for all non-essential positions. As a result, employers are in a much stronger negotiating position as employees are willing to negotiate new terms to safeguard their employment. CONTRIBUTOR DETAILS NATASA APLIKIOTOU George Z Georgiou & Associates LLC (member of Ius Laboris) T F E natasa.aplikiotou@gzg.com.cy W SARAH FORSTER George Z Georgiou & Associates LLC (member of Ius Laboris) T F E sarah.forster@gzg.com.cy W Qualified. Cyprus Bar, Areas of practice. Employment; corporate; commercial; litigation. Qualified. England and Wales, 2000; Registered with the Cyprus Bar Association, Areas of practice. Employment; immigration; corporate; commercial. KIMON ZAKKAS George Z Georgiou & Associates LLC (member of Ius Laboris) T F E admin@gzg.com.cy W Qualified. Kimon is a law student assisting the law firm with research and publications.

13 not all legal experts are the same George Z. Georgiou & Associates LLC is an award winning, full-service civil law firm, striving to give its clients the best possible service and advice, when they need it and how they need it. The Firm is acknowledged as having expert knowledge in corporate & commercial work, dispute resolution including arbitrations & mediations, and land law. In addition, as the exclusive Cypriot member of the global human resources lawyers alliance Ius Laboris, the Firm is internationally recognised as being an expert in employment law, pensions and corporate immigration. With a strong and healthy reputation for hard, honest work, performed by perfectionists, no wonder this Firm is one of the fastest growing law firms in the world. Administrative Arbitration & Mediation Banking & Insurance Civil Litigation Contract Corporate & Commercial Employment & Pensions European & International law Immigration Intellectual Property International Finance Land & Real Estate Mergers & Acquisitions Probate Social Security Tax Trusts George Z. Georgiou & Associates LLC 1 Eras Street 1060 Nicosia Cyprus Tel Fax admin@gzg.com.cy