Bermuda's reinsurance market has not been immune to changes in the world's economic market. A rise in M&A has led to an increase in redundancies within the Bermuda workforce. Employees should be aware of their rights when made redundant and should always seek legal advice to ensure that their redundancy is both lawful and fair.
The Employment Act 2000 provides that an employer can make an employee redundant only under certain conditions, such as:
- the modernisation, mechanisation or automation of the business;
- the discontinuance, sale or reorganisation of the business;
- a reduction in business necessitated by economic conditions, contraction in the volume of work or sales, reduced demand or surplus inventory; and
- the impossibility or impracticality of carrying on business as usual as a result of a shortage of materials, mechanical breakdown, acts of God or other circumstances beyond the employer's control.
If a redundancy is not lawful and fair or determined not to be genuine, an employee may be in a position to challenge the redundancy as wrongful and may have a claim for unfair dismissal.
When a decision is made to make an employee redundant, an employer should:
- advise the employee of the reasons for the redundancy;
- advise the employee of the reasons why they have been selected;
- consult with the employee prior to making any redundancy; and
- consider alternative employment options within the company for the employee.
While not strictly required under law, employers should follow these steps in order to be able to demonstrate that the redundancy is fair and reasonable. Employers must also inform the employee's trade union or other representative if the employee is unionised.
An employee has several rights under the act in the event that they are made redundant.
Notice of redundancy Employers must give an employee notice before terminating them by reason of redundancy. The period of notice to be given to an employee is determined by the terms of their employment contract or, where silent, the act. Employers may either require an employee to work their notice period or make a payment to the employee in lieu of notice.
Severance pay Under the act, employers must make a lump sum severance payment equal to:
- two weeks wages, for each completed year of continuous employment up to the first 10 years; and
- three weeks wages for each completed year of continuous employment thereafter, up to a maximum of 26 weeks wages (ie, six months).
Under the act, employees are entitled to a written itemised pay statement before the payment of any severance entitlement. An employee's employment contract may provide for other payments in addition to those provided under the act in the event of redundancy.
Vacation payment Employees are entitled to be paid an amount equal to the pro rata value of their annual leave accrued and untaken.
Health insurance and benefits Employers must maintain all benefits to which an employee is entitled for the entirety of the notice period. At the end of the notice period, if an employee is unable to secure health insurance from another employer, the employer is required to continue to provide health insurance for the employee for a period of four weeks.
Pension Employers must continue to make all contributions to an employee's pension plan during the notice period. The vested portion of an employee's pension is transferable on redundancy. The employer must ensure that the administrator of the employee's pension plan provides the employee with a pension statement.
Certificate of termination Employers must provide (if requested by the employee) a certificate of termination setting out the terms of and reasons for the employee's redundancy.
On receiving notice of redundancy, an employee should review the terms of their employment contract and their employer's handbook and policies and procedures to identify any rights provided in addition to those under the act. For example, an employee may be entitled to receive a contractual bonus payment under their employment contract. Expatriate workers should also be mindful that on redundancy, their work permits will cease and that an application will be required to be made to the Department of Immigration to remain in Bermuda and seek alternative employment.
Employees should always seek legal advice from an attorney in the event of redundancy. An attorney can assist by providing advice and guidance regarding the legal and statutory requirements. In addition, an attorney can review the terms of an employee's employment contract as well as assist with the negotiation of the terms of any settlement agreement.
For further information on this topic please contact Cheri Minors at Carey Olsen Bermuda by telephone (+1 441 542 4500) or email ([email protected]). The Carey Olsen Bermuda website can be accessed at www.careyolsen.com.
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