The Law of Redundancy
About Safia Gardener
Safia is an associate with MJM Limited where she primarily works in the Dispute Resolution team under the mentorship of Director, Fozeia Rana-Fahy on high-value, complex trust, and litigation matters.
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By: Safia Gardener and Allan Doughty
In the case of CI2 Aviation v. Bradshaw, decided on 7 April 2022, the Supreme Court of Bermuda was asked to determine the correct meaning of the term “employer” in the context of Bermuda’s Employment Act, 2000 and what that term meant for the purpose of redundancy payments.
The dispute in question involved a management company, named CI2 Bermuda Limited, which had previously acted as a contractor on behalf of the Bermuda Airport Authority (“BAA”). Prior to 31 March 2022, CI2 was contracted by the BAA to operate airport services on its behalf. During the currency of its contract, CI2 directly employed 29 employees to assist with airport operations. Prior to the expiration of the contract, the BAA informed CI2 that its contract would not be renewed and that the BAA would assume direct control of all airport operations. As part of that move, the BAA also pledged to continue to employ all 29 of CI2’s airport operations staff.
After the contract expired, and the BAA assumed the role of “employer” for the 29 workers, the Bermuda Public Services Union (“BPSU”), filed a claim for severance pay against CI2 on behalf of 14 of the 29 airport workers, who belonged to that union. The basis of the claim for severance pay, was that the Employment Act, 2000, required an “employer” to pay a severance allowance when an employee is terminated for redundancy. During first instance hearing of that claim, the workers argued that as their employment with CI2 had been terminated, their “employer” had no choice but to pay their severance allowance as required by Section 23(4)(a) of the Employment Act. The panel agreed, finding that CI2 was indeed the employer and ordered that the redundancy allowance be paid.
CI2 sought judicial review of the panel’s ruling from the Supreme Court of Bermuda. During its application, Counsel for CI2 argued that decision of the arbitration panel was irrational as the 29 Employees kept their jobs and received a 2% increase in pay. Counsel for CI2 also argued that if the 29 Employees were granted redundancy pay that would amount to a “windfall” which the legislature never intended to grant to redundant workers.
The Court rejected CI2’s arguments and instead held that there was no dispute that the 29 airport workers were terminated by CI2 for redundancy. For that reason, the Employment Act unequivocally required that the workers receive their redundancy pay. As the BAA was a different entity, it was a different employer and that was the end of the matter. The Court also held that it saw no evidence before it to suggest that the Legislature never intended this type of scenario to take place and that CI2 had failed to meet its burden to establish otherwise.
In making its ruling, the Court also held while the Employment Act allows an employer to escape paying a redundancy allowance by offering reasonable alternative employment to a worker facing redundancy, that offer needs to be made and accepted prior to the termination. In this case, however, CI2 did not offer the 29 employees further employment within CI2 and instead allowed the BAA, as a separate entity, to take over the employment contracts of all 29 employees, meaning that all 29 contracts were terminated for redundancy.
A key “take away” from this ruling is that an employer’s obligations to its employees concerning redundancy pay will not disappear merely because ownership of a business is being transferred from one entity to another. For that reason, any employer considering the sale of a business should ensure that the transfer of employment agreements is finalised prior to termination or consider negotiating an indemnity with the purchaser to ensure that it is not exposed to such liability.