Legal education | 03 July 2020
New law on varying terms of employment contracts
President Danny Faure has assented to amendments to the Employment Act which will affect what terms can be varied and what the process are to be followed by employers.
Before the June 1, 2020 Amendment
An employer can vary the terms of employment of the worker to make it more favorable for the worker. There is no issue there. [see s49(1) Employment Act]
An employer must seek the written permission of the worker and of the Employment Department to vary the terms of the employment contract of the worker’s union IF the amendment is going to be less favorable to the worker. [see s49(1) Employment Act]
If the worker does not give his permission to vary the terms of his contract in a way that is less favorable to him, then the employer can terminate the worker’s contract by giving the worker the notice period specified in his contract and if none is specified then the one month’s notice will apply for fixed and continuous term contracts. (This excludes casual, part-time, domestic workers, trainees and workers on probation termination. For these categories the notice period is different). In the event that the employer terminates the contract of the worker, the employer can pay the worker the equivalent of his salary in lieu of notice instead. [see s49(2), s57(2)(b) and s63 Employment Act]
The worker will also need to be paid compensation at the normal rate for continuous contracts or double the normal rate for fixed term contracts. The normal rate is five sixths of one day’s wage for each completed month of service. [see s49(3) and s47(2)(b) Employment Act]
After the June 1, 2020 Amendment
The amendment has not removed s49 variation of terms of employment, instead it makes amendments to what parties must do if they are changing the payment terms of the worker in a way which is less favorable for the worker and this section is labelled s39A.
This amendment applies from March 20, 2020 and will continue for as long as the government programme for salary support to employees in the private sector continues to run. [see s81A(2) and s39A(7) Employment Act].
Further, the amendment does not apply to a worker for which the employer has received full salary assistance by the government. If an employer acts contrary to this, the worker has a right to initiate the grievance procedure. [see s39A(6)Employment Act]
During the time in which s39A is operational, an employer who wants to pay the worker’s salary later or part of it later, or reduce the salary of the worker the employer must first initiate and follow the negotiation procedure which is explained below. [see s39A(1)Employment Act]
The negotiation procedure applies “mutatis mutandis”. What this means is that the negotiation procedure as set out in Schedule 1 Part A will apply in so far as it can when read in the context s39A. [see s39A(2)Employment Act]
The negotiation procedure requires the employer to notify the department of labour FIRST of its intention to change the payment terms of the worker’s contract. Within seven (7) days from that notification, a competent officer will discuss with the employer ways (if any) to avoid (or minimise the effect of) changing the payment terms of the worker’s contract. In any event the competent officer will need to decide within 14 days from the time the employer notified the department of labour of its intention to vary the payment terms of the worker’s contract. The decision of the competent officer will be communicated to both employer and worker.
In the event that the competent officer approves the variation to the payment terms of the worker’s contract, the employer must wait until July 1, 2020 before the variation can take effect. [see s39A(4) and s81A (1)(b) Employment Act]
Both the employer and the worker have a right to appeal the determination of the competent officer and must exercise that right within fourteen (14) days from receiving the notice of the decision of the competent officer.
A word of caution – the above are very general guidelines, each of your circumstances are different and even small differences often lead to different conclusions. It is therefore a MUST for each person to seek legal advice in any law related matter before making any decisions.
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