March 17, 2020
Coronavirus (COVID-19) is a global pandemic and many economies are in the verge of recession. The impact in Nepal is already seen in tourism and aviation sector.
The Contagious Disease Act 2020 (1963) provides wide powers to the Government to take necessary action to prevent contagious disease. The Act provides wide power to the Government (Federal Government and State Government) and can issue appropriate order for eradicating or preventing the spread of contagious disease. The power also extends to health checks in transportation, restriction on movement of the people and implementation of quarantine. At a global level, countries have taken preventive actions including closure of business, education institutions, restriction of movement of people and closure of transportation system. Government of Nepal is also empowered to take similar action under the Act. While cases have not yet been officially reported in Nepal, it may be matter of time before the Government of Nepal will be forced to take similar preventive action.
The employers may find it challenging to ensure safety of the work place and continue with the normal operation given that the symptoms may take few days to become apparent. The employers will also have to prepare and plan a response to potential financial difficulty.
The employers have general duty to provide safe work place to the employees. The Labor Act 2017 “Labor Act” and Labor Regulations 2018 “Labor Regulation” requires employers to:
The OHS Committee is required to be formed in entitys which employ 20 or more employees. OHS Committee is responsible for (a) providing strategic advice related to health and safety of employees, (b) reviewing the OHS Policy, (c) evaluating the arrangement made on the occupational health and safety and (d) informing Labor Office in the event of non-compliance of OHS.
The entities which have not established the OHS Committee should consider establishing the Committee as the first step and then plan and agree to the safety measures to be taken in the workplace through the Committee. The entities which employ less than 20 employees may also consider forming this Committee.
Specific Obligation Regarding Contagious Disease
The Labor Act has prescribed certain obligations of employers for the prevention of contagious diseases including:
Work from home
One of the safety measures that have been globally employed is the concept of work from home. The employers will be permitted to implement the concept of work from home and given that this is one of the safety measures, it could be implemented through discussions with OHS Committee.
The Labor Act and Labor Regulation also have specific provision dealing with prevention of employees coming to work if such employee is suffering from contagious disease. An employer can restrict any employee from reporting to work if such employee is suffering from contagious disease. The employer can require the unused sick leave to be used during such restriction. If sick leave is not sufficient for the duration of the medical treatment, then employer may require the adjustment towards annual leave. If the duration of the accumulated leave is also not sufficient for medical treatment, then the employer can require the employee to stay on special unpaid leave during the duration of medical treatment. It must be noted that this provision is applicable only in cases where the employee has actually been infected and does not apply in case of self-isolation and where the employee may be actually working remotely.
A care should also be taken in organizational communication while informing the employees if there is any confirmed case of Covid-19 infection. There should be balance between right of privacy of the employee and overall health and safety of other employees and potential for infection.
The work from home concept will mean that the employees will be entitled to their normal pay and special consideration should be given to payment which are event specific, for example travel allowance. The employers should also consider formulating policy for “work from home” as the employee management like physical attendance system is not geared with this concept.
Managing Financial Stress
The concept of “work from home” may be best suited to service sector and will not be suitable in all sectors. Even if the “work from home” can be implemented, there may not be actual business. This may trigger redundancy and retrenchment in entity facing financial distress.
The employers can lay-off the employees on the grounds which includes financial difficulty for the employers or difficult in movement of the employees (if for example there is restriction on movement).
The employer may keep employees in lay-off for a period maximum of fifteen days without any consultation. In case the lay-off period is to exceed 15 days, such extension should be done in consultation with the trade union or labor relation committee. The relevant legislation uses the language “consultation’ and the employers will only need to follow the process of consultation and not the approval of the trade union or labor relation committee. In case, the employees are to be kept in lay-off for more than fifteen days, a consultation with the authorized trade union or Labor Relation Committee is required. The legislation does not impose maximum period for lay-off. The logical approach may be to take this as a short-term measure and up to the time the relevant ground may exist. The employers are still required to make payment of half remuneration during this period and shall mean that it may not provide relief in case of continued financial difficulty.
The employers are required to provide notice of lay-off and such notice should generally contain (a) the reason for lay-off, (b) the time period of lay-off, (c) name, designation, department and job description of employee to be kept in lay-off, (d) the payment of half of the remuneration of employees and (e) other details as deemed necessary by the employer. There is no statutory timeline for prior notice and a reasonable notice should be provided on a case to case basis.
The consultation procedure of the lay-off doesn’t apply in case of employers who have employed up to 10 employees.
The retrenchment is the process where the employers can permanently discontinue the services of the employees and the employment agreement comes to end. The statutory grounds for retrenchments incudes (a) financial difficult and (b) any reasons due to which the entity should be fully or partially closed. If the Government orders full or partial closures of business this may also fall under both the statutory grounds. The key procedural requirements to be followed for retrenchment are:
The legislation also provides priority rule for retrenchment and where employees are in similar situation, employees should be retrenched as per following priority: (a) Foreign nationals, (b) Employees having received more punishments for misconduct, (c) Underperforming employees and (d) Employees hired last from among the workers in the same category of work.
However, employees appointed earlier may be retrenched first by stating the grounds for such retrenchment.
The employees are entitled to terminal benefit of (a) encashment of accumulated annual leave and sick leave, (b) retrenchment payment of at the rate of one-month basic salary for each year of service for employees having completed at least one year of employment and (c) payment of accumulated provident fund and gratuity which is not part of contribution to social security fund. In terms of payment contributed to social security fund, such amount will not be subject to withdrawal.
The retrenched employees must be given preference in case the entity needs to hire employees within two years of retrenchment. The entity is required to issue a notice to such employees for hiring. The entity may hire other persons in case the retrenched employees fail to show their presence in spite of the notice issued.
The procedure of the retrenchment doesn’t apply in case of employers who have employed up to 10 employees. This procedure requirement is also not applicable where any entity has to be fully or partially closed due to order from the Government or the Labor Court. The employers will need to evaluate this provision if the Government orders closure of certain business activity and if such closure may extend for a longer duration.
The affected sectors in Nepal have already requested assistance from the Government in dealing with this difficult and unprecedented disruption. Based on news reporting, various countries have announced relief packages and it is reported that United States has announced “Emergency Coronavirus Bill” on March 14, 2020 which provides two weeks of paid sick leave and up to three months of paid family and medical leave, equal to no less than 2/3rd of their pay. The Australian government have taken a different approach of relief by waving sick allowance wait time and granting sickness allowance that provides up to 0 for singles without children and 10 for couples out of work due to illness. Our Government should also look into providing some guidance and financial relief.
The government and regulators should also provide special attention to employers delivering essential services like banking, telecommunication, water from the perspective of employment management such that these services can be provided with least disruption.
**DISCLAIMER: This document is prepared for general understanding and should not be taken for any legal purpose without consulting legal professionals. ** The copyright of the document is vested with PLA.