Pay cuts, unpaid leave: what the law says
While businesses anticipated to go through operational changes as a result of the economic hit brought about by the pandemic, a vast majority of people weren’t expecting that their jobs would be on the line so soon.
By Elizabeth Koki
Following the COVID-19 attack on the world, there has been an unparalleled multilayered impact on companies across different industries globally.
According to a study by the International Labour Organization (ILO), COVID-19 and the World of Work expressed COVID-19 as the “worst global crisis since the World War II”.
The study estimates that 1.25 billion workers are at risk of being paid off or face reductions in wages and working hours. Many are in low-paid, low-skilled jobs, where a sudden loss of income is devastating.
Looked at regionally, the proportion of at risk workers varies from 43 per cent in the Americas to 26 per cent in Africa.
As companies continue grapple with the adverse effects of supply chain and value chain disruptions, reduced manufacturing and lengthened cash flow cycles for a majority, the question has been how can they reduce costs to a bare minimum to ensure business survival beyond COVID-19.
A major re-current cost for a lot of companies other than stock/ direct cost of sales is generally human resource.
With the priority being to flatten the curve, a majority of governments have called for people to stay home except for those providing essential services and in instances absolute necessity e.g. emergencies.
As a result, many companies have sent their employees home with a number operating with a skeletal staff and where possible adopting online working as the new norm taking advantage of the free tools being offered by startups such as Slack and Zoom and established giants including Google and Microsoft; and expanded bandwidth services provided by internet service providers.
However, not all operations can be taken online for instance accommodation and food services, manufacturing, retail, and business and administrative activities. This has had a significant reduction in working hours with the International Labour Organization (ILO) predicting that at least 6.7 per cent of working hours globally will be wiped out in the second quarter of 2020 – equivalent to 195 million fulltime workers.
Where operations are ongoing with a minimal number of staff, a lot of companies are realizing that they are potentially bloated and are beginning to relook at their organograms to potentially restructure.
On the other hand, for those that have managed to seamlessly take a majority of their operations online, the question is, “Do staff need to come in to the office every day or can an alternative remote work schedules/ plans be adopted?”.
This would help reduce operation costs such as rent. However, as these questions arise, for most instances companies’ concerns have been related to how to put contingency plans in place that would ensure business continuity after the pandemic comes to an end.
Unfortunately, for a quite a number, a large component of mitigating measures being put in place or explored involve changing or varying employment terms.
Some of the proposals under consideration have included:
- Pay cuts / half pay;
- Pay for piece work;
- Withdrawal of benefits;
- Sending staff on unpaid leave;
- Change of working hours;
- Transfers and relocation.
Whereas change in business operations was expected due to the vast impact that the pandemic is having economically, a lot of the changes in employment terms was not for a vast majority of people as they are not provided for in employment contracts or in company policy.
It is understood that safeguarding business sustainability is paramount and as such difficult decisions need to be made but as employers continue with put measures in place, they must be cognizant of the legal framework and ensure that they are acting within the law.
In Kenya the supreme legal framework is the Constitution (2010) which in Article 41 provides for the rights of both employees and employers (albeit limited).
The substantive law on employment in the country is the Employment Act (2007) which outlines the employment practices to be adhered to.
With regards to changes/ variations in contractual terms e.g. pay cuts/ half pay, there must be mutual agreement between the employer and employee (or if their representatives where there is organized labour) otherwise it would be deemed unlawful and amounts to breach of contract.
This means that both parties must consent to the changes and which consent should be express but can also be implied.
An example of implied consent is where you continue to work/ perform without raising protest after the changes have been effected.
In order to avoid breach of terms, an employer should communicate to the employee(s) (in writing) the changes being effected and in consultation with the employee(s) revise the contract.
Notably, an employee’s consent should not be derived by duress, misrepresentation, undue influence or illegality. What happens if staff do not consent to the proposed change of terms?
Without mutual agreement, neither party can lawfully vary the terms of employment. The employer must consider other alternatives. (*With exception to variations made in compliance with the law and government directives).
Notably, an employer cannot withhold salaries of employee(s) who have refused to consent and are deemed to be acting contrary to the law.
Where parties do agree to a variation, it should be made clear on how long the measures are to be effected and it is expected that normalcy would resume once business operations rebound.
However, where the change is permanent, upon consent a new employment contract should be drawn up and signed by the parties outlining the new terms.
What options do employees have when an employer tries to impose a unilateral variation of employment contract terms?
Depending on the nature of the proposed change, employees have the following choices;
- Agree to the variation (either expressly or by continuing to work without protest).
- Resign and complain for an unfair constructive dismissal.
- Refuse to work under the new terms and force the employer to take such steps as it thinks appropriate.
- To stand and sue, i.e. Continue working under protest and seek damages.
Fact remains, we will get out of the COVID-19 quagmire but as we do so, we need to remember that history will judge us by the decisions that we make today.
A balancing act is needed between capitalism and socialism to ensure that as we put business sustainability measures in place we do not do so at the extent of human lives.
Moving forward large-scale, integrated, policy measures are needed, focusing on four pillars: supporting enterprises, employment and incomes; stimulating the economy and jobs; protecting workers in the workplace; and, using social dialogue between government, workers and employers to find solutions.
Elizabeth Koki is the Managing Partner at Koki & Associates Law Consultants