Employment Act Amendments – Commentary

As promised, here are the first notes concerning the amendments to the Vanuatu Employment Act passed last Thursday in Parliament.

I’ll be writing more comprehensively about this issue in Saturday’s Weekender, but there’s a lot of meat on this issue, and I thought I’d package up the wonkery first….

Severance

There does seem to be real cause for concern regarding the changes to severance payments. First, increasing the liability for employers by 300% make a big difference. I spoke with someone yesterday about the potential impact and he related the story of one of his senior staff. This person makes a decent salary in a competitive sector. After nearly 7 years of service, he’d be due roughly 1.7 million vatu (about USD $17,000). But – again, under the current rules – he’d only be eligible for severance if:

1. He stayed at least another 3 years; or
2. His boss was foolish enough to let him go.

Neither is likely to happen.

Under the new rules, this person’s boss would be liable for nearly 7 million vatu. To make matters worse, there’s no longer a requirement that an employee serve a designated amount of time before becoming eligible for severance, should s/he resign.

7 million vatu is more than enough to buy a nice parcel of land, build a house on it, and live at leisure for some time. To say nothing of how happy one’s family would be to share in such a windfall. I can assure you that the temptation to take the money and run is extreme. Especially in competitive sectors where finding further employment is not as challenging as unskilled or semi-skilled work in construction, retail or hospitality.

Maternity Leave

I confess to a little confusion here. The Daily Post[*] recently ran an editorial stating that maternity leave has been doubled. But when I reviewed the amendments, I found that:

1. Additional protections have been put in place to ensure that a women returning from maternity leave is given the same or equal status in terms of work, remuneration and benefits;
2. her time allocated to breast-feeding is doubled to (although the number of times she can breast feed has not been changed);
3. women are granted up to 12 weeks maternity leave, starting 6 weeks before delivery and lasting 6 weeks after.

I’ll be the first to grant that this conclusion is based on what I remain convinced is an ambiguous and redundant insertion (noted in blue in the preceding post). That said, the only quibble I can find with that breast feeding a child only twice between 7:30 a.m. and about 5:00 p.m. would be problematical for some children. Having twice as much time (1 hour instead of 30 minutes) in each interval is useful, but ultimately of questionable value without some flexibility over how that 2 hour total is apportioned.

[*] Full disclosure: I write a weekly column for the Daily Post. Evidently, that doesn’t mean I can’t disagree with some of their editorial stances.

Misc

The remaining changes are mostly neutral or of moderate effect:

• allowing an employer to deduct from severance if an employee hasn’t given adequate notice;
• increasing the rate at which annual leave is accrued;
• reducing the eligibility time for annual leave.

It seems businesses are well within their rights to grouse over this, especially given that Vanuatu workers currently enjoy more public holidays than just about anyone else. But in my opinion there’s no cause for crisis.

And where in all of this is the previously announced decision by Minister of Internal Affairs Patrick Crowby to increase the minimum wage? To be fair, the issue isn’t dealt with in the Employment Act, but it strikes me that an increase there would be of greater import to the average ni-Vanuatu worker than improved severance and maternity benefits.

Work-arounds

The problems created by this 400% increase in severance and related changes are real, and require remedy. Certain of the larger institutions in this country would face insolvency if their staff were to avail themselves of the windfall awarded them by these amendments.

The law was passed unanimously by Parliament (about which more later) The law was passed, apparently, with only two or three abstentions and no votes against; it remains only for the President to sign it and for it to be gazetted before it has legal effect. As much as one might be inclined to encourage His Excellency to sign off on some of the other Acts awaiting his pen (most notably the Family Protection Act), there’s really nothing to be done but accept that a bad law has been passed, to put it into place and then (quickly!) to take measures to mitigate the worst effects of the legislation.

The Employment Act stipulates that the Minister has broad rights of exemption where employment issues are concerned. About the only thing he can’t do is legalise forced labour. He could, at his sole discretion, exempt everyone from the severance provisions of the Act with the promulgation of a single letter. This might buy enough time to either repeal the relevant amendments, or better yet, to perform a decent consultation and enact some more sensible further amendments in a later Parliamentary session.

[Update: The consensus among the experts I’ve spoken with is that a blanket exemption from the most contentious amendments would be an exceptional, but entirely legal, course of action.]

If this doesn’t transpire, there does seem to be another loophole. In cases where there’s been a seamless transition between employers (e.g. a change of ownership following the death of a principle, the re-shaping of a partnership, or the transfer of ownership of a company), the Act has the following to say:

(6) An employer who is liable to pay severance allowance under subsection (5) shall –

(a) be entitled to deduct any period and to make any deduction which any previous employer would have been entitled to deduct or to make had the previous employer become liable to pay severance allowance; and

(b) be exempt from any liability to pay the allowance in respect of any period for which any previous employer was exempt from such liability.

(Emphasis mine.)

Now, that says to me that with a little corporate sleight of hand, a company owner could maintain continuity in the workplace, avoid having to terminate all his staff and pay out their existing severance immediately, and remove ‘any’ liability prior to the enactment of these amendments.To my feeble faculties, ‘any’ sounds like it includes pre-existing severance rates which existed ‘any’ time in the past.

(CAVEAT: I’ll re-visit this last point once I’ve had a chance to pass it by some lawyers. I may well be am talking through my hat.)

And here’s the update: I’ve spoken with a couple of lawyers, and they agree that, although the Act seems somewhat contradictory in this section, to construe it as I have done would be “a tortuous interpretation” in the words of one. He continues:

“The general rule is that a piece of legislation should be read as making sense. A common sensical interpretation, for me, would be that the exemption from liability did not relate directly to the original liability, but to extraneous exemptions[.]”