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Offshore Services - Cayman Islands

Employment law in the Cayman Islands is complex, intriguing and ever evolving. The basics of the relevant employment laws, especially the Labour Law (2007 Revision), and what should and should not be in an employment agreement, go a long way to ensuring peace in the workplace and clarifying parties' rights if war breaks out.

 

The Laws

 

There are several laws governing and regulating employment:

  • the Labour Law (2007 Revision) and the regulations;
  • the National Pensions Law (2000 Revision) and associated regulations;
  • the Health Insurance Law (2005 Revision) and regulations;
  • the Workmen’s Compensation Law (1996 Revision); and,
  • the recently passed Immigration Law (2006 Revision).

The draft Employment Law from 2004 has not been brought into force and is not applicable in the Cayman Islands.

 

Employment Agreements

 

Employment agreements are the cornerstone of every employment relationship and should, along with the Labour Law, serve as a ready reference to the rights of the employer and the employee during their relationship.

 

Section 3 of the Labour Law states that the law does not apply to the public service, charitable organizations or churches. By implication, the Labour Law applies to all other employers and employees.

 

'Employee' is defined very broadly to include any person working or standing ready to work under a contract of employment, whether oral or written. The Labour Law defines 'employee', 'employer' and 'contract of employment' in very similar and very broad terms.

 

Employment agreements may be either oral or written. Many precedent contracts exist in industry; some are very bad and others are even contrary to the Labour Law. Section 6 of the Labour Law serves as an excellent guide to what needs to be covered at a bare minimum in any employment agreement. This includes:

  • the employee’s job title;
  • a description of his or her duties and responsibilities;
  • the hours and days of work;
  • the rate of remuneration;
  • the interval between pay periods;
  • the hourly rate or equivalent for salaried employees;
  • the period of employment;
  • any probationary term, holiday and sick leave entitlements; and,
  • the notice requirements that the employee and the employer owe to each other.

Paid Leave

 

The employment agreement should set out the employer's leave policies for vacation, public holidays, sickness and maternity leave. Typically, vacation entitlement runs from a minimum of two weeks for employees with less than four completed years to a minimum of four weeks' entitlement after 10 completed years of employment. Sick leave entitlement is 10 paid sick days, with a doctor’s certificate of the illness required after three consecutive days of illness. Maternity provisions allow for 12 weeks of maternity leave, with the first four weeks at full pay, the next four weeks at half-pay and the final four weeks with no pay.

 

Overtime

 

The employment agreement should set out the standard workday and week, as well as the overtime pay for hours worked in excess of those periods (one and a half times normal pay for overtime and two times for public holidays). Management and professionals may be treated differently and denied overtime pay with their consent. For non-management employees, overtime must be paid or time off may be agreed to in lieu of overtime pay. There is a provision for such employees to waive overtime, but any such agreement to waive entitlement to overtime must be approved by a labour tribunal.

 

Probation and Notice

 

Section 8 of the Labour Law provides for an initial six-month probationary period and, with the consent of the employee, a further six-month probationary period. Any probationary period should be set out in the contract as this affects the proper notice period on termination. The employment contract must provide for notice on termination during probation and after the probationary period is complete. Notice by law is tied to the pay interval for an employee and the employer may pay the employee in lieu of providing working notice. Contracts of employment can and often do provide for greater notice periods than the minimum periods set out in the Labour Law. Notice periods during probationary periods can be a minimum of only 24 hours. Termination for good cause may void an employee’s entitlement to notice entirely.

 

Termination

 

Some employment agreements set out severance entitlement. As this entitlement is by operation of law, it is not strictly necessary that this be specified. Severance under Sections 40 and 41 of the Labour Law typically entitles employees who have completed at least one year of employment to one week's pay at their basic rate (ie, not including any payments in kind or allowances) for each completed year of employment. There are successor employer provisions to be considered at the sale of any business which can affect the responsibility for and commencement of severance pay. Terminations of the employee for good cause or for misconduct may disentitle the employee to any severance.

 

The employment agreement often sets out the termination policy of the employer. These rights of termination and of the employee to unfair dismissal compensation are by operation of law and it is not necessary that the grounds for termination for cause be specified in the contract. The employer may want to elaborate on grounds of termination in addition to those included in the Labour Law. Sections 49 to 55 of the Labour Law set out the law of unfair dismissal compensation. Each termination is deemed to be unfair unless it fits into the exceptions set out in Sections 50 and 51:

  • when the employee has reached the end of a fixed-term contract;
  • when there has been misconduct (as defined by the Labour Law at Section 52); or
  • when there is a redundancy.

Unfair dismissal compensation amounts to one week's pay for each completed year or portion thereof. As with severance pay, unfair dismissal compensation may not be awarded should the employee be terminated for misconduct.

 

In addition to notice, severance and any unfair dismissal compensation considerations, the Labour Law provides for retiring allowances for employees who quit or resign and are not entitled to any pension. There are strict requirements to consider and few employees will likely qualify; this need not be specified in the contract. These are the basics required in any sound employment contract and are designed to protect both parties and to ensure compliance with the Labour Law. Any aggrieved employee may bring a complaint against his or her employer under the provisions of Sections 74 to 79 of the Labour Law within 90 days of termination.

 

The Labour Tribunal

 

Boundaries

The Labour Tribunal in Cayman is an administrative tribunal. The main principle of administrative tribunals is that they have the power to do only what they are empowered to do by the statutes that establish them. In the case of the Labour Tribunal, it is empowered by the Labour Law (2007 Revision) and by the relevant regulations. It has no inherent jurisdiction and cannot act or purport to act beyond those powers specifically granted to it by the law and the regulations. Any exercise of power not specifically permitted by the law or the regulations is invalid and subject to judicial review by the courts.

 

Hearing procedure

The Labour Law establishes the Department of Employment Relations and at its head the director of labour. The director oversees compliance with the Labour Law and the complaints and hearing procedure. The Labour Tribunal is established under Section 74 of the law to hear complaints from both employers and employees, although complaints usually originate from employees. Members are appointed and a chairman and deputy chairman are designated by the governor. The governor has the authority to establish regulations for the remuneration, staffing and expenses of tribunal members.

 

Section 75 is at the heart of the Labour Tribunal’s and the director's powers and duties in respect of hearings. Within 30 days of receiving a written complaint, the director must notify the employer or employee concerned, provide copies of the complaint and ask for their written response and representations. This is necessary in order to ensure that the complaint and hearing process run smoothly. For instance, if an employee complains about a termination and asks the director for assistance in receiving entitlements under the law, the employer may respond that there has been no termination; this would end the matter.

 

Next, the director must consider the complaint and any responses or representations made, and report on the complaint to the Labour Tribunal. That report may recommend either that a hearing be held to determine the complaint, or that assistance be offered on behalf of the director by way of conciliation to resolve the matter short of a hearing. Within 21 days of receiving the director’s report recommending that a hearing be held, the Labour Tribunal must fix a date for the hearing within three months of receipt of the report. That date is communicated to the parties and a hearing is held.

 

Powers

Although there have been no regulations passed setting out the procedure for hearings before the Labour Tribunal, it does have the power to control its own procedures according to Section 7 of the regulations. The Labour Tribunal typically sets out the rules for the hearing in its notice of the hearing date. These rules:

  • allow the parties to appear in person or to be represented by an attorney;
  • allow each party to call witnesses and to cross-examine the other side’s witnesses; and
  • specify the order in which the parties are to present their respective cases.

The hearings are closed to the press. The Labour Tribunal may decide the complaint in the absence of one or both parties on the basis of the paper record before it.

 

The Labour Tribunal must decide the case and render its written decision within 28 days of the hearing date. That decision is final and binding unless appealed to the Labour Appeals Tribunal and then ultimately to the Grand Court. Refusal to comply with a Labour Tribunal decision is an offence and its decisions may be enforced in a similar fashion as a Grand Court order or judgment.

 

The Labour Tribunal essentially deals with claims for entitlements under the Labour Law, including:

  • entitlements to notice of termination, vacation pay, unpaid earnings and severance pay;
  • the timing of an employee’s commencement of employment;
  • any entitlement to a retirement allowance; and
  • determinations of the fairness of a dismissal and compensation for unfair dismissal.

Questions regarding any entitlement to damages for unfair dismissal at common law and beyond the statute, and to any contractual entitlements or disputes, are dealt with by civil proceedings in the Grand Court.

 

The Labour Tribunal provides an impartial and ready forum for the resolution of disputes relating to an employee’s statutory entitlements.

 

 

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