THERE is a common misunderstanding that employers are not permitted to lay off employees for more than 120 days and that employees are automatically entitled to redundancy pay if they do. That 120-day period is akin to a shield for businesses rather than a Damoclean sword hanging over the employer’s head.

Guarding Against the Blow

The iron of the shield was forged in the Employment (Termination and Redundancy Payments) Act (ETRPA). When a business suffers an unexpected blow, such as a major fire or crippling damage from a natural disaster, it may need to temporarily suspend operations. It could not, however, suspend the employees’ contracts without consequences, in the absence of a law to that effect. In particular, the business could be faced with the significant cost of redundancy payments to all staff at a time when cash flow is already severely constrained. This double blow could lead to the business defaulting on its obligations, insolvency, and permanent job losses. If there are secured creditors the business may be left with insufficient funds to make severance payments to anyone.

It is for that reason that ETRPA was designed with a buffer for employers facing unexpected crises. The law states that if an employee is laid off without pay, where the circumstances of his employment are changed so that for some period of time he receives no pay pending a decision by his employer to reinstitute previous or similar employment, then that employee can elect to be treated as if they had been made redundant — but only after 120 days have passed.

This shield is grounded in the policy objective of giving employers the necessary breathing room to consolidate their affairs in the face of significant, unexpected disruptions. Whether it be fire, flood, pandemic or recession, the intent behind this provision in the law is to allow businesses time to recover without the immediate pressure of redundancy costs, while preserving the employee’s rights as much as possible.

The Sword of Damocles

One of the most misunderstood aspects of the law is the notion that after 120 days have elapsed a massive redundancy bill will fall on the business like the Sword of Damocles. In fact, once the 120 days have passed the law requires the employee to give the business an ultimatum: either return them to work or pay them their redundancy.

The ultimatum is in the form of written notice to the employer giving at least 14 days, but no more than 60 days, to bring them back to work within that time or they will be deemed to be dismissed by reason of redundancy. That notice period is meant to provide the employer with sufficient opportunity to determine whether they can re-engage the employee, whether on the same terms or otherwise. The issuing of this notice is a critical step as without it the employee is not entitled to receive a redundancy payment, regardless of how long they have been laid off.

Regrettably, although the ETRPA came into law 50 years ago, the regulations which ought to have included the form of notice have not yet been drafted, let alone passed. A template for the notice is available on the Resource Page of the Myers, Fletcher & Gordon website.

The Double-Edged Sword

Businesses which have been forced to lay off employees may view the requirement to give notice as a double-edged sword. The employer is afforded breathing room by delaying redundancy payments but for as long as the employee remains laid off, their years of service will continue to accrue and the redundancy payment that may eventually be due to them will increase. Therefore, while the employer might benefit from not having to immediately pay redundancy, they could also have a growing contingent liability of employees who remain “on the books”.

Even worse, there are court cases that state that a layoff without pay for an indefinite period could be a breach of the employment contract, which could give rise to a claim for wrongful dismissal or unjustifiable dismissal. The compensation that the business could be ordered to pay in such a claim could potentially dwarf the redundancy payment.

Shielding both parties against misunderstandings

The layoff provision is a strategic shield that balances the interests of both employers and employees. It allows businesses to navigate operational disruptions without the immediate burden of redundancy costs while also preserving employees’ continuity of service and related rights. However, redundancy is not automatic after 120 days — the employee must issue an ultimatum detailing the consequences of failing to do so. Misunderstanding the shield could result in employees losing entitlements or employers incurring unintended liabilities. By understanding its true purpose and operational mechanics, employers and employees alike can shield themselves from the complexities of layoffs and redundancy scenarios.

Adalia Nembhard is an associate at Myers, Fletcher and Gordon and a member of the firm’s litigation department. She may be contacted at adalia.nembhard@mfg.com.jm or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.