1. We refer to your email of 21st April 2020 seeking our legal views on two issues, mainly:
(i) Whether an employer can “suspend a worker’s employment contract” without pay in light of the impact that the current COVID-19 pandemic has had on the Fiji’s tourism industry and hotel operations in Fiji.
(ii) Whether workers can be requested to take ‘family care leave’, the qualifying requirement for a worker to take family care leave and the rate(s) of payment of wages/salary.
2. For purposes of this legal opinion, we have considered the legal provisions of the Employment Relations Act (“ERA”) and relevant case law.
3. Our views
Suspension of Employment Contract
3.1 “Suspension” is a term which is generally synonymous with an employer’s powers to discipline a worker.
3.2 “Standing down” or “Lay-off” is a process by which an employer can direct a worker not to undertake work for a short period in a difficult economic situation which may be envisaged of a temporary nature as opposed to the employer making a decision to dismiss a worker.
3.3 “Standing down” or “lay-off” is where there is no work for the employees and no remuneration provided.
3.4 Unlike Australia and New Zealand, the ERA does not have any legislative provisions which govern or regulate a ‘stand down’ or ‘lay-off’. The right to ‘stand down’ or ‘lay-off’ must be expressly included in a worker’s employment contract or collective agreement to entitle an employer to invoke a ‘stand down’ or ‘lay-off’. In the absence of an express right to do so in the contract, a unilateral action to ‘stand down’ or ‘lay-off’ workers will be regarded as repudiation of the worker(s) contract, and hence, a dismissal.
3.5 Given that there is no legislative provision governing and regulating a ‘stand down’ or ‘lay-off’, the employers in Fiji in the premises, will need to resort to the employment contracts in place to found such a right to ‘stand down’ or ‘lay-off’ worker(s).
3.6 It is therefore axiomatic, that if an employment contract / collective agreement contains ‘stand down’ or ‘lay-off’ provisions, the process stipulated within the contract will need to be strictly adhered to by an employer to invoke ‘stand down’ or ‘lay-off’. If the employer wishes to vary the conditions of the ‘stand down’ or ‘lay-off’ these must be negotiated and mutually agreed between the employer and worker(s) and /or their representatives.
3.7 If an employer has no contractual ‘stand down’ or lay-off’ terms, then legally the options available to an employer is to lawfully dismiss the workers which is available under Section 24 of the ERA or make workers redundant.
3.8 In our view, COVID-19 is an unprecedented event in Fiji and whether in terms of Section 24, a pandemic will be regarded as an “act of God” is yet to be judicially tested and determined.
3.9 Whilst Section 24 appears to be a situation which may lawfully enable an employer to exit an employment contract, it is however in our view, not a definitive solution for employers currently faced with the economic impacts of COVID-19.
3.10 Under the Section 24 employers will be still required to prove that the COVID-19 pandemic is an Act of God and as such this has resulted in them being unable to provide work. The Courts are unlikely to draw an inference in favour of an employer if the employer is merely trying to retain profits by reducing wages or dismissing workers, if there is work that still can be performed by workers.
3.11 “Acts of God” is defined as:
“An overwhelming, unpreventable event caused exclusively by forces of nature such as an earthquake, flood or tornado. The definition has been statutorily broadened to include all natural phenomenon that are exceptional, inevitable, and irresistible, the effects of which could not be prevented or avoided by the exercise of due care or foresight. – Also termed act of nature; act of providence.”
3.12 Section 24 provides for “frustration of employment contract”. It reads:
Duty of employer to provide work
24. An employer must –
(a) Unless the worker has broken his or her contract of service or the contract is frustrated or its performance prevented by an act of God, provide the worker with work in accordance with the contract during the period for which the contract is binding on a number of days equal to the number of working days expressly or impliedly provided for in the contract.
3.13 Section 24 imposes a duty on an employer to provide work to employees. However this duty is negated where employer is prevented by ‘an act(s) of God‘ to provide work. “Act of God” will include situations involving a natural catastrophe or calamity such as cyclones, earthquakes, fire and tsunami. Accordingly, an employer is not obliged to pay a Worker if their absence from work is due to events or incidents caused by the act(s) of God.
3.14 An employer can invoke a force majeure clause if there is one in the employment contract or collective agreement. In the absence of a force majeure clause, the frustration doctrine may excuse performance. Related to the historical doctrine of impossibility, frustration of contract occurs “when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances”.
3.15 Force majeure refers to an event beyond the control of the parties that prevents a party from fulfilling its contractual obligations. The concept has its roots in Roman law, and the term-translated literally from French means “superior force.” The doctrine of force majeure is recognized in many civil law systems and is loosely related to the doctrines of impossibility, impracticability, and frustration of purpose that exist in some common law jurisdictions in that it may discharge a party from certain contractual obligations in narrow circumstances in which performance has been rendered impossible or impracticable, or the purpose of the contract has been frustrated due to events beyond the parties’ control.
3.16 For redundancy, an employer would be required to follow redundancy process to dismiss workers on grounds of redundancy. Workers will be entitled to redundancy pay if workers are made redundant.
4. Family Care Leave
4.1 Amendments to the ERA has seen the introduction of a new leave entitlement called “Family Care Leave“.
4.2 A worker is entitled to family care leave after he/she has served 3 continuous month of service. Care is only for “immediate family members” or “household”. Immediate family means, spouse, children, parent or sibling.
4.3 Household means “persons living together in the same house who are financially dependent on each other”.
4.4 “Financial dependence” is not defined. This will have to be assessed on a case to case basis.
4.5 Family care leave cannot be accumulated and unused family leave care will automatically lapse in the following year, similar to sick leave.
4.6 Family care leave is in addition to the normal 10 days paid sick leave.
4.7 In the current COVID-19 situation, an employer may request that staff take outstanding annual leave including family care leave so that employers can retain the staff as opposed to dismissing them. Employers need to be cautious in their decision in sending workers on leave without pay. If there are clear provisions in the employment contract or the collective agreement entitling an employer to send workers on leave without pay, then such a decision would be within the ambit of the employer’s contractual right. However if no such express contractual right exists, any decision to send workers on unpaid leave will need to be negotiated and agreed with the workers. In terms of the ERA, workers are entitled to leave pay.
4.8 The current pandemic is causing grave economic hardship to the hotel industry and employers may decide that sending workers on leave without pay is the best solution as opposed to outright dismissal. In our view, employers may resort to Section 24 of the ERA to argue that they are no longer in a position to provide work hence they cannot pay their workers. Having stated the foregoing, we do stress our views contained in paragraph 3.10 herein.
4.9 For those entitled to family care leave and where a worker has already accrued leave, prior to the implementation of wage reductions, the leave pay should be calculated on the worker’s original base salary.
5. However for those workers who may not have accrued family care leave prior to the wage reduction implementation but are requested to take leave after the wage reduction, the employer can calculate family care leave pay based on the new / reduced base wage rate.