Huw Thomas and Matthew Thompson of Ogier provide an employment law perspective from the jurisdictions of Jersey, Guernsey and the Cayman Islands
A global approach to HR means that clients and their advisers must come to terms with the differing approaches to employment law taken in the key offshore jurisdictions of the Cayman Islands, Jersey and Guernsey. In terms of employment protection, all three jurisdictions draw to varying degrees from previously enacted UK legislation.
In particular, however, mechanisms used in the three jurisdictions relating to liability for unfair dismissal are derived from PartX of the Employment Rights Act 1996 (or its antecedents). UK unfair dismissal law has its roots in the Industrial Relations Act 1971. It is worth noting that this Act grew out of the recommendations of the Royal Commission on Trade Unions and Employers Associations in 1968 – which was primarily concerned with collective employment rights rather than individual employment rights. The Actwas an attempt to provide a general reform of labour law and to place trade union relations on a statutory footing.
While the Act itself did not survive for more than three years – it was repealed by the Trade Union and Labour Relations Act 1974 – the unfair dismissal provisions were re-enacted almost in their entirety and, subsequently amended, are now contained in PartX of the Employment Rights Act 1996 in much the same form. But recent legislation has radically changed the way in which disciplinary and grievance issues are handled. The 1971 Act introduced a specialist industrial relations court – the National Industrial Relations Court. The idea that industrial relations, and particularly individual employment rights, required a specialist tribunal was radical. While in Guernsey, Jersey and the Cayman Islands, the idea was to keep formality and the presence of lawyers to a minimum, the sheer complexity of modern employment law has driven the involvement of the legal profession – and often highly specialised members of the legal profession at that.
The 1971 Act incorporated two new and interlocking themes. Individuals were given a statutory right to complain of ‘unfair’ dismissal; in addition, they were given the right to join a registered trade union and, just as importantly, not join a union. Registration gave unions certain bargaining rights in relation to employers. It is notable that it tied together individual and collective rights in the belief that the two were indivisible. Since that time, individual employment rights have arguably been the dominant theme of UK employment law – although industrial relations on a collective scale remain undeniably important.
Displaying a lack of flair for originality, a similar initial process is happening in Jersey. The Employment (Jersey) Law 2003 provides a raft of individual employment rights, including the right to paid annual leave, a minimum wage and the right to claim unfair dismissal in certain circumstances for qualifying workers. In addition, collective employment rights are to be provided under the Employment Relations (Jersey) Law, which at the time of writing was still awaiting final approval.
This draft law is likely to be amended prior to enforcement, under proposals lodged by Jersey’s Minister forSocial Security that will enable the Jersey Employment Tribunal to make binding orders in relation to recognition requests by trade unions where an employer employs 21 or more employees.
Such attention to trade union and other collective issues is notable by its absence in Guernsey law (although a limited power of intervention in industrial disputes exists under the Industrial Disputes and Conditions of Employment (Guernsey) Law 1993). Guernsey has had a UK-based employment law since 1998, under the Employment Protection (Guernsey) Law 1998, which came into force in 1999. In the same way, the Labour Law 1987 (2001 revision) in the Cayman Islands does not address collective employment issues, although there is separate legislation dealing with trade union issues. Trade union activity is almost non-existent in the Cayman Islands, in contrast to the Channel Islands’ public sector.
Jersey v Guernsey
It would seem that the government in Jersey is following a more interventionist path than that of its near neighbour Guernsey. A non-employment relation example is the Competition (Jersey) Law 2005, which imports a UK standard of competition compliance; Guernsey has rejected such a move, notwithstanding the fact that it has many of the same economic concerns as Jersey.
However, Guernsey is well ahead in the development of individual rights – it has had unfair dismissal protection since 1998 (the Employment Protection Law 1998) and it has enacted sex discrimination legislation that is similar, but not identical to, the UK’s Sex Discrimination Act 1975. The declared intention in Guernsey is to enact legislation covering a range of discrimination issues. In addition, Guernsey was several years ahead of Jersey in enacting a data protection regime equivalent to the UK Data Protection Act 1998. Guernsey has also extended its unfair dismissal regime. The compensatory award is now a fixed sum of six months’ basic salary, with a discretion for the tribunal to reduce the amount where appropriate. The qualification period to bring a claim has dropped to a year and employees have three months to bring a claim. Guernsey has also instituted a specialist tribunal to deal with employment and discrimination matters.
In Jersey, the intention is to introduce employment law in phases. Phase one, now largely complete, includes the introduction of a minimum wage, unfair dismissal legislation and various collective rights concerning trade unions. Phase two, which is likely to begin in late 2006 and continue into 2007, is to include further individual rights relating to redundancy, maternity, equal pay and equal opportunities, and issues regarding discrimination in the workplace.
It is also likely to include flexible working and familyfriendly policies and the protection of employees involved in business mergers and acquisitions.
To UK legal practitioners and HR professionals, nothing about this programme will appear unfamiliar or controversial. But should Jersey (and other small jurisdictions) go down this route? It largely depends upon what employment law is for. In jurisdictions such as Guernsey, Jersey and the Cayman Islands, where the problem is normally not too much labour (and thus unemployment) but too little labour, the function of employment law is likely to be quite different from their near neighbours France and the UK. The potential downside is also much greater – if unemployment is the result of more employment regulation then it is difficult to see who benefits from greater protection of this nature. Instead, the function of employment law in these jurisdictions is more likely to be linked to two primary considerations – the type of employment rights that should be provided to employees and/or workers in a modern society, and those employment rights that make the economy work better and more flexibly.
The risk of the phased approach being followed by Jersey is twofold: the first is that, by its concentration on collective employment rights, it appears to be making an already tight employment market more inflexible rather than less; and the second is that it disregards elements that ought to be a priority, such as measures to encourage flexible working and which would assist Jersey in getting themost out of a workforce that is limited in size.
It is noticeable that many larger organisations in Jersey have already adopted measures – such as maternity rights and/or flexible working – out of necessity; in a tight labour market, employees often look more to such issues when deciding where they are going to work.
Instead of this arguably more pragmatic and modern approach, it is proposed that it would be automatically unfair in Jersey to dismiss employees taking duly authorised industrial action – with no time limit on that protection. This dwarfs the protection given to UK employees engaged in similar action, who are protected for the first 12 weeks of any such action. Quite why Jersey employees require such protection is unclear.
Although, as noted, Guernsey is ahead in terms of individual provision, there is a concern that it, too, is adhering too closely to the UK approach rather than developing legislation appropriate to its circumstances. The Sex Discrimination (Employment) (Guernsey) Ordinance 2005 is, while laudable in its aims, a highly complex piece of legislation that will take a long time to come to terms with for both employers and employees. Perhaps the right to take maternity leave might have been a better starting point.
The Cayman Islands
In comparison to the Channel Islands – which prior to 1998 (in the case of Guernsey) and 2003 (in the case of Jersey) had nothing much more than minimum notice periods and requirements for a written statement of terms – the Cayman Islands have, at least, addressed many of the individual employment rights that would be considered fundamental in the UK . Examples are unfair dismissal and basic rights to maternity leave and maternity pay.
While the Cayman approach would not be considered particularly generous in UK terms in relation to those rights, it has at least adopted them. What is notable about the Cayman law is its relative lack of resemblance to the UK. Certain provisions bear some similarity, such as the basic provisions governing unfair dismissal, but it is largely an indigenous creation. The reason for this is the Cayman Islands’ proximity to, and close ties with, North America. These factors caused a number of North American labour relation concepts to be imported into the labour law, such as ‘severance’ pay and ‘workers’ compensation rights’.
In addition, the difference in style is quite striking: the Cayman approach is substantially more prescriptive than the primary Channel Islands law, governing probationary periods, severance pay, retirement and/or resignation allowances, health and safety (which is treated separately in the Channel Islands), sick leave, sick pay and maternity and adoption rights. Discrimination in the employment context is dealt with in a single section (s80 of the Employment Law 1987 (2001 revision)) and is the subject of criminal sanctions.
The current 2001 law does not apply to those working in public services, charitable organisations or churches. Employment issues are decided in a labour tribunal or the Grand Court of the Cayman Islands.
In 2004 the Cayman Islands passed a law – the Employment Law 2004 – which (if and when it comes into force) will replace and update the previous legislation. The 2004 law does include some new elements. In particular, it deals with paternity leave and working time, and introduces a formal regime for disciplinary and performancewarnings. It also sets out standard draft contracts, warning letters and other employment-related documentation – something almost entirely absent in the Channel Islands approach.
The changes that the 2004 law will bring in practice are uncertain. Among the effects of Hurricane Ivan upon the Cayman Islands was the shelving of the new law, perhaps indefinitely. However, it is clear that the development of Caymanian employment law is not finished and that there is considerable movement for further change.
If following the UK legislative example gives rise to problems, departure from that example can create just as many problems, especially for HR practitioners attempting to address issues across more than one jurisdiction. For example, in the UK, unfair dismissal protection (together with certain other elements of employment protection) is limited to employees – those who work under a contract of service. However, Jersey employment protection is extended to workers – those under an obligation to perform work personally, save those in a client/provider relationship or where such workers can be said to be employed by an agency. Guernsey, by contrast, limits protection to employees. While this can be straightforward, it does mean that Jersey employers must ensure that all of their workers (employees or not) get paid holiday, rest periods, bank holidays off (or time off in lieu), and a written statement of pay. Such workers also accrue unfair dismissal protection. This can lead to problems. Historically it has been assumed that contract workers can be disposed of easily and without risk, but not any more.
A related issue is the new Sex Discrimination (Employment) (Guernsey) Ordinance 2005 that came into force on 30 March 2006. It applies to those workers engaged other than under a contract of service and it has differing application depending upon whether such workers are engaged directly or through an intervening corporate vehicle, and will therefore require care on the part of HR practitioners.
In particular, where different laws adopt differing definitions of what an ‘employee’ is, employers must ensure that they are clear on the nature and extent of their duties. The sheer complexity of the new law is likely to mean that some employers will learn the hard way.
It is well established in UK law that a procedural failing will in most circumstances be fatal to an employer’s prospects of successfully defending an unfair dismissal claim. The harshness of this statutory position is mitigated by the availability of a certain amount of discretion awarded to employment tribunals to reduce awards (eg contributory fault reductions and/or Polkey reductions).
While Jersey has adopted the insistence on procedural propriety from the UK, it has not softened that stance by giving the tribunal any ability to reduce awards. This means that injustice is likely to arise where employers commit technical failings in their procedures while being overwhelmingly in the right so far as the merits of a particular case go.
Awards in Guernsey, Jersey and the Cayman Islands are to a large extent fixed. In Guernsey, unfair dismissal will result in an award of six months’ basic pay (with a discretion for the tribunal to reduce awards in certain circumstances). In Jersey and, practically speaking, the Cayman Islands, there is a sliding scale of compensation for unfair dismissal based on length of service and, in the case of Jersey, no discretion to reduce.
Given that the maximum award in both Jersey and Guernsey is six months’ basic salary (a point reached after five years of continuous employment), and in the Cayman Islands it is 12 weeks’wages (which is basic salary and benefits), the approach to risk when considering disciplinary and/or performance-related issues must be tailored accordingly.
In addition, caremust be taken to ensure that the operation of procedures is correct – cutting corners and/or failing to ensure that hearings and appeals are not compromised is likely to result in a fixed award by the tribunal, particularly in Jersey. The extension of the unfair dismissal regime in Guernsey means that procedural propriety is also more important than ever from an HR point of view.
It should be born in mind that, notwithstanding the apparent similarity of Guernsey and Jersey to the UK, they are very different legal environments. The contract law of the two Channel Islands’ jurisdictions is largely based on Norman customary law, although in practice the courts often adopt English law principles. This means that assumptions cannot readily bemade about the easy transposition of English procedures and documentation. The Cayman Islands are closer to the UK when it comes to contract law and much underlying law. Assumptions are easier to make, butmust be tempered with local common law decisions.
In the final analysis, it is inevitable that organisations will need to manage HR functions across several jurisdictions, particularly where the organisation operates in a number of relatively small offshore locations. The scarcity of HR expertise and the necessity to gain cost savings from centralising functions demand this. However, it should never be simply assumed that procedures and practice can be standardised to an absolute extent. The value of local knowledge of the law, culture, and standard practice in each location cannot be overstated.
The legal risks of getting it wrong are well known; the commercial risk and cost of failing to recruit and retain staff due to poor and/or insensitive HR and management practice, is less obvious. But it is likely to be far greater than the limited legal penalties which might arise.