The legacy of layoff

Layoff provisions are not provided for in the Industrials Relations Act Chapter 88:01 nor in our Retrenchment Severance and Benefit Act Chapter 88:13. Indeed there exists no statutory scheme that gives such an event a legal construct.

This must be noted as we are in the season of international furloughs, layoffs and retrenchment due to the current global economic situation, courtesy the covid19 pandemic.

Are there any differences between these terms? The terms are being used interchangeably without people realising that they mean different things in different jurisdictions.

Furlough is a common North American and English term which means temporary layoff from work. It was originally used as the leave of absence given to soldiers. England adopted a formal furlough scheme during the peak of the coronavirus.

The Americans also use furlough identically as the English do but now use layoff as a dismissal for no reason or fault of the employee, though it was originally used as temporary leave without pay.

However, in our industrial relations circumstances the word furlough is generally an unknown term. A layoff is however a widely known event that refers to, or rather defines a temporary suspension of an employee’s contract of employment (not due to any fault of him/her) with the intention that the employee resumes work when the situation causing the layoff improves. It is clear therefore, that a layoff cannot be for an indefinite period and can possibly lead to retrenchment if the adverse circumstances do not improve within some specific period of time.

The judgement delivered by president of the Industrial Court Deborah Thomas-Felix in the matter of GSD-IRO 031 of 2015 between Steel Workers’ Union of TT and ArcelorMittal Point Lisas Limited, contains the most in-depth legal guidance pertaining to employee layoff.

According to the judgement, an employer has no inherent right to suspend a worker and fail to pay wages due to layoffs because of redundancy (having surplus labour) and as such presents a legal difficulty, unless provided for in a collective agreement or contract of employment, or implied using the regular principles of the law of contract or the custom and practice of the particular trade or industry.

Since that decision, I always advise clients to clearly stipulate in their job offer letters, a layoff provision that gives the right to the employer to temporary layoff employees given that prevailing circumstances impacting the business so justifies.

Prior to this judgement, it was widely held within industrial relations circles, that a layoff decision was one that is exercisable as an inherent right or within the prerogative of the employer. This view was supported by the three leading authorities at that time from the Industrial Court as articulated in I.C.A No. 9 of 1986 TIWU vs Consolidated Appliances Ltd, TD 99 of 1990 CWU vs J.N. Harriman & Co and IRO 2387 TIWU vs Bata Ltd.

The Bata judgement not only reinforced that temporary layoff is an established practice in industrial relations, but went on to state that the employer is “entitled” to layoff where circumstances arise which make this necessary. In my view where one is entitled to do something then that person has a “right” to so do. Likewise, in the Consolidated and JN Harriman cases, the Industrial Court did not only express the view that a temporary layoff is well recognised in industrial relations practice, but Addison Khan, president of the court as he then was, opined as follows: It is a right which an employer may use only when the circumstances demand it.

Where layoffs are necessary the court asks that it be done fairly and equitably. A laid off worker does not receive wages or severance benefits, therefore his/her only hope is re-employment and now the ArcelorMittal case demands that the Retrenchment and Severance Benefits Act serve as a guideline not only for redundancy and retrenchment, but also for layoffs.

Redundancy comes about due to an event or a series of events (yet again) due to no fault of the employee, which causes certain job functions to become surplus and therefore no longer needed. Such circumstances may require a permanent or a temporary reduction in the workforce. Good examples of such circumstances are where a workplace invests in technology allowing it to produce much more at a cheaper cost, or where the business changes owners or the business is restructured. These examples normally result in permanent reductions in the workforce (retrenchment) while events relating for example to major unplanned machinery breakdowns and national wide orders to stay at home will normally result in layoffs

To note again, laid off workers are not entitled to severance benefits as would retrenched workers. However, laid off workers can be re-employed and therefore there is no break in service and the company may still contribute to a worker’s private insurance or pension plan etc.

A period of layoff for any worker will very likely be traumatic and financially challenging, but it still creates a window of hope that his job is not gone forever. Employers must however always be humane and act fairly when there is no other alternative but to implement a layoff of some members of its workforce.