How should Employers overcome Employment challenges during the Covid-19 pandemic?

The Covid-19 pandemic has devastated almost all Employers. Is there a way for them to deal with an almost impossible situation, without going under?

by GK Ganesan May 5, 2020 1872 Views

[This video is a joint effort between Mr. VK Raj, and Industrial and Employment lawyer and our team]

[a]. The Covid-19 disaster has been particularly savage on Employers

Its assault on Employers is unprecedented in its scope and devastating in its effects.

Employers everywhere are forced to pay an unavailable workforce.

Liabilities continue to mount.

All current work have been deferred.

Bank balances are depleted.

The possibility of new business is remote.

Demand for services are dropping.

Raw materials are scarce.

Creditors clamour for repayments.

[b]. Some countries are set to reopen the economy.

How should Employers deal with their employment and business affairs?

[c]. The tips here cannot be used for all industries, or in all situations

How each business would respond depends on the industry, its workforce, its financial profile, and factors which peculiar to it.

The building construction industry, the manufacturing industry, and transportation businesses need to deal with the issues differently – each according to its peculiar circumstances.

Some businesses cannot operate at all: e.g. the entertainment industry.

So not all of the tips here would help.

Take what you need; drop what you don’t.

Tip-1: Secure the workplace against further coronavirus contagion

A converging workforce creates a higher risk of further Covid-19 contamination.

Sanitising the workplace and introducing easy-to-understand instructions for social distancing are far more important now than money, or clamouring employees.

Tip-2: Liquidate assets to reduce financial incapacity – unless impractical or impossible

The one obvious step is to liquidate assets – that is, assuming two factors exist:

(1) that a business has assets,

(2) these assets can be liquidated: – or that it is practical to do so.

Assets which have so far diminished in value, or where assets are impracticable to be liquidated or right now quite useless as an aid.

Tip-3. Prepare Financial Projection as Proof of Financial Incapacity

Preparing Cash Flow Analysis and developing a Financial Projection for the next three months, six months, nine months, or a year ahead would be crucial.

Why?

First, financial history and supporting statistics and evidence would make it easier to apply for funding: whether Government or commercial lending. Or it would be necessary to attract new investors.

Second, if employees drag an Employer to the Industrial Court, this evidence that he would have collated at this time, would be crucial to his defence.

Tip-4. Prove to Employees your Financial Incapacity

Before an Employer deals with employees, he must first show them that his financial situation ‘necessitates’ remedial measures.

This is a crucial step in strategy before an Employer takes the next step. Once employees are made to understand that their Employer is in deep financial straits, other steps become less difficult.

Tip-5. Negotiate Temporary pay reduction with a Guarantee of future payment

If the Employer is sure of receiving future income, an Employer should use that information to negotiate a lesser salary. When the financial situation of the Employer improves, he should repay all back wages – in stages.

This is one of the best strategies available – but this option would depend on the financial status of the company, and the nature of the industry.

Tip-6. Negotiate a reduction in management wages

Go out of the way to that the Top Management is willing to take a pay cut. This would demonstrate:

(1) current situation of the company,

(2) and its good faith, and

(3) it is also a good psychological and practical step forward

Management wages usually form a substantial portion of wage structures. Reduction of management wages lessens an Employer’s burdens. Second, it sets an example for other employees

Tip-7. Reorganise the workforce

The Employer has to do all things necessary to ensure that his business survives. He will be compelled to re-organise his work force.

Thecourts have consistently ruled that reorganisation is a management prerogative.

But the Reorganisation must be genuine. An Employer should only reorganise for compelling commercial reasons.

If an employee reorganises, and some employees lose their jobs as a result, they will take him to court.

There, if an employee proves that his Employer’s attempt to re-organise had been less than genuine, then the courts might rule the re-organisational exercise – and the loss of employment arising therefrom – as having created ‘dismissals without just cause or excuse’.

Tip-8. Retrenchment exercise: Phase-1

Before resorting to a retrenchment exercise, the Code For Industrial Harmony stipulates that an Employer should go through various preliminary steps.

Although there is now a debate whether the Code has any force of law,¹ I think it is only a matter of time before it does become law: so, it is advisable for an Employer to comply with it.

We list below, in no particular order, what steps an Employer should take: –

(a). Freeze or limit recruitment of new employees.

(b). Restrict overtime work for existing employees.

(c). Reduce work on weekly days of rest: This is a practice usually in the manufacturing and service industries. Employers usually reduce the working hours in a normal week.

(d). Reduce the number of shifts or workdays in a week

This is a practice usually adopted in the manufacturing industry

(e). Reduce the number of working hours in the day

Tip-9. Retrenchment exercise: Phase-2

If none of the steps in Tip-8 are possible, then one has to consider Retrenchment.

An Employer ought to follow the following steps:-

(a). Give early warning

Notify employees early, that they would be made redundant. This would assist the employees mitigate their losses, and allow them to find other means of living.

(b). In the same category of work, terminate the services of foreign workforce before local employees are dealt with

(c). Choose employees for retrenchment according to the ‘Last in First Out’ (‘LIFO’) principle.

Employees can depart from this rule, but only for ‘good reasons’.

(d). When the time comes to re-employ workers, give your retrenched employees the first priority of re-employment.

So, in conclusion…

Times are bad.

Employers are hard-pressed.

When Employers prosper, the workforce benefits, and the economy will take care of itself.

The Government should do all it can to protect both Employers and employees in an organised and fair manner.

Gratitude:

This is Episode-6 of the ‘The Legal Consequences of the Covid-19 Pandemic’.

I gratefully acknowledge

(1). Mr. VK Raj for his advice on Industrial Law,

(2). Miss Nadiyshyaa Vinodhan for her work on this episode, and

(3). Some Dear Friends who are geniuses of their own right – and who refuse to be identified!

Note:

This is not legal advice. You must check with your own lawyers, in your own country, on what the relevant laws are.