Discussing the possibilities of employee dismissals following the government schemes issued in the wake of the COVID-19 pandemic.

The blow has also been severe in the economic sector and consequently in the job seeking and employment of a significant portion of the population. The decision of the Government of Cyprus, to impose a complete or partial lockdown for a period of several weeks and the complete or partial suspension of operations, has forced a large number of businesses to take various measures in an attempt to either reduce their costs or even to survive the volatile situation that the spread of COVID-19 has created.

The financial support of affected businesses as well as the protection of employees, were the primary concerns of the Ministry of Labour, Welfare and Social Insurance which issued a series of decisions and regulations for the adoption of emergency measures to tackle the pandemic. Some of these measures had a direct impact on labour relations and amended the employment law in force up until today, which are laws mainly derived from the basic Cyprus employment legislation on the one hand and from the legal notion of freedom of contract on the other. To some extent, these measures aimed at the protection of employment and the prevention of dismissals. However, in light of the deteriorating economic situation faced due to the severe hit suffered by the tourism and other economic sectors, the matter of employee dismissals and related employee rights is extremely relevant and perplexing, especially since special legislative provisions, force majeure events, contractual frustration and others have been added to the existing equation of  basic employment legislation and freedom of contract.

Protection of employees against dismissals until October 2020

Firstly, on the basis of the authorisation which was given to the Minister of Labour for the issuance of special measures to tackle the pandemic, a special scheme was issued, amongst others, for the support of employees in the private sector as well as businesses. A fundamental requirement for participating in the aforementioned scheme and its applicable extensions, as these were issued by the said Ministry, was for the employees to not have been dismissed from the 1st of March 2020 and in case of approval of the application, not to dismiss any employee both for the period of participation of the business in the scheme and for an additional period equal to the period of participation in the scheme plus an additional month (except for reasons where dismissal without notice is justified). This meant that the businesses choosing to participate in the aforementioned scheme were unable to dismiss any employees for financial reasons, during the abovementioned timeframe. On the basis of the aforementioned wording of the scheme’s participation requirement, it is clear that employers are being substantially limited in dismissing any of their employees. An employee’s dismissal can only take place if it is justified on the basis of the requirement included in the scheme and by the reasons expressly set out in Article 5 of the Employment Termination Law 1967 (24/1967).

Protection of employees against dismissals after October 2020

Based on the scheme’s provisions as these are set out above, employers who chose to participate in the said scheme, as opposed to those who did not, are unable to proceed with employee dismissals when these relate to financial reasons, including redundancies, until the expiration of the timeframe set out in the scheme.

The reasons for which an employer can render an employee redundant, are specifically set forth in Article 18 of the Employment Termination Law 1967.

The issue which therefore arises is whether an employer can proceed with redundancies for reasons attributed to a reduction in the volume of work or the business itself, following the expiry of the period of its participation in the Ministry’s scheme. According to case law, the volume of work is determined on the basis of a standard denominator which reflects the volume of the employer’s work in the context of its usual business activities/turnover.

If the reduction in the volume of work is periodic, meaning that it is reduced merely due to the emergence and spread of the pandemic, then an employer would be unable proceed with redundancies on this basis. Purely financial reasons, as these have been defined by Cyprus case law, cannot be characterised as redundancies i.e. in the sense of cutting costs to increase profits.

If a significant reduction was evident in the employer’s volume of work prior to the emergence and spread of the pandemic for a specific period of time, and the pandemic contributed to the worsening of this reduction and was not the root cause, then under specific conditions the employer can proceed with employee redundancies.

As established by case law, it is important that the employer is able to prove that the factors giving rise to the redundancy are not anticipated to be remedied in the near future but rather that they shall extend into the unforeseeable future since the process cannot be deemed to be a redundancy if such factors are resolved. Such assertions should of course be proved through the submission of financial data on behalf of the employer.

In case the redundancy cannot be proved, the dismissal shall be deemed unfair.

Dismissal due to a force majeure event

For businesses that chose not to participate in the governmental schemes and consequently are not estopped from proceeding with dismissals, the issue which arises is whether the COVID-19 pandemic can be considered a force majeure event, given that Article 5(c) of the Employment Termination Law of 1967 (24/1967) provides for the possibility of termination of employment due to force majeure.

This issue is especially crucial, both because it arises extensively due to the current situation but also because there is no relevant case law in Cyprus, issued either by the Supreme Court or the Employment Tribunal, on which employers can rely on with certainty to conclude that the events which followed the emergence and subsequent spread of COVID-19 can be considered as falling within the notion of force majeure, in which case the dismissal of an employee could be considered justified. In cases to be filed before them, Cypriot courts will at some stage be called upon to decide whether the COVID-19 pandemic can be considered to be included within the remit of the definition of force majeure. In any case, in the event that employers invoke the aforementioned provision they would have to be in a position to prove that at the time in question, the performance of the employee’s duties was practically impossible.

Frustration of Employment Contracts

Another question which has arisen is whether one can claim, either the employer or the employee, that an employment agreement has been frustrated and is therefore voidable at the option of either party. This presupposes that the said party would be required to prove that, due to the circumstances, there was an objective difficulty in fulfilling a fundamental contractual obligation. In future cases to be filed before them, Cypriot courts will be able to determine whether COVID-19 could be considered as a reason for frustrating a contract of employment, which is not an easy task in light of some previous judgments which have been issued regarding the frustration of employment contracts. However, there may be circumstances where the nature of the contract itself renders its performance impossible due to COVID-19.

Resignation under duress due to wage reductions or revisions to the terms of employment

In view of Covid-19, issues also arise with employee pay cuts (or other benefits which an employee received before the pandemic, e.g. the 13th salary) or compulsory reductions in working hours. In a recent judgment, the Supreme Court stressed that the purpose of enacting the Law on the Protection of Wages N. 35(I)/2007, is to protect employees and specifically to safeguard their right to receive the wage and benefits they are entitled to under the agreement governing their employment relationship. Pursuant to Article 10 of the Law on the Protection of Wages 2007 (35 (I)/2007), deductions from wages are not allowable, except in specific circumstances which the Law provides for, such as for example deductions set out in specific legislation or regulations, deductions under a court order or other deductions following the consent of the employee. Furthermore, the aforementioned legal framework imposes strict penalties in the event the legislation is infringed by the employer.

In view of the above, any employer decision to reduce wages or working hours, to the extent that such decision is not based on an agreement or mutual decision with the employee or is otherwise justified by the Law on the Protection of Wages 2007, may give rise to civil and criminal liabilities for employers.

Dismissal due to a refusal to offer employment because of an unsafe workplace and the offer to work from home

The Law on Safety and Health at Work 1996 (89(I)/1996) has as its objective aim, the implementation of measures to promote the safety and health of persons at work.

Each employer, on the basis of the provisions of the aforementioned Law, must ensure the safety, health and well-being at work of  all its employees, which includes amongst others, the obligation to provide and maintain a safe working environment. An employer who does not comply with the provisions of the abovementioned Law, is guilty of an offence and is subject to a fine which does not exceed €80,000, or imprisonment not exceeding four years, or  both.

On the basis of the strict provisions and penalties of the aforementioned legal framework and in conjunction with the interpretation and spirit of the provisions of the Employment Termination Law, as well as the fact that the responsibility to provide a safe working system is the sole and continuous responsibility of the employer, we do not consider that a dismissal of an employee who denied to provide work in an unsafe working environment will be deemed lawful and fair. The Court, however, is certainly the one with the substantive jurisdiction to decide upon this matter when such a case is brought before it upon evaluating all the facts and the relevant testimony.

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