Severance payouts could force businesses into bankruptcy

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By Elesha George

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A number of businesses in Antigua and Barbuda are being threatened with the prospect of bankruptcy, as they come face-to-face with finding a delicate balance between employee rights and existential hardships brought on by Covid-19.

The virus has continued to cause unprecedented carnage all over the world and in Antigua and Barbuda, it has crippled ‘everybody’s business’ – the main industry, tourism.

Employers have relayed their anxieties to unions and the Labour Department over what paying severance owed will mean for the survival of their businesses.

“Within a matter of days, in some instances, severance is due for a number of employees and companies in this country…. if severance is enforced, a lot of businesses are going to go bankrupt within the next couple of days,” Deputy General Secretary of the Antigua and Barbuda Workers’ Union (ABWU) Chester Hughes professed during an interview on state TV.

The ABWU represents hotel workers, as well as workers in the airline industry, handling agents at the airport and some distribution companies.

While addressing issues with job security amid the pandemic, Hughes shared that the union has received a litany of letters from employers who are unsure about the steps they can take regarding retention and retrenchment of workers.

He said, “A number of businesses do not have the capacity at this point in time, based on what they have been explaining to us, to pay severance because they’ve been having a horrid time within the last two years, two seasons and the workers themselves would have understood that but at the same time, the law is the law.”

Labour Commissioner Eltonia Anthony-Rojas said her department has also been inundated with queries, primarily from employers.

“There are several sectors of the economy where severance is about to become due, in some cases it would have been due, and the employers are now faced with the situation of perhaps not being able to pay or to meet their obligations … More than complaints from workers, we’ve been getting the uncertainty from employers for not being able to meet their obligation to pay severance,” she reported.

Rojas said these employers are also unsure about their rights to extend temporary layoffs as well as whether pay-out plans are an option.

Various unions, the Labour Commissioner and the Antigua Tourism and Hotel Association (AHTA) were expected to meet on Tuesday and in the coming days to discuss possible economically-viable options.

Hughes said he strongly believed that, at this time, workers should be given an option to be paid severance if it becomes due and payable. He said it would allow them to meet their financial obligations and to leave the industry if they wish to do so.

Meanwhile, Anthony-Rojas remarked that employers can prolong what seems like the inevitable in some instances, but it will only buy time.

“Sometimes it appears as if the employers are buying time and it’s a very dangerous game to play because if you know that it is quite unlikely that you will be able to pay severance down the line, you would have purchased some time – two, maybe three months – but the employee is entitled to severance at the end of that period if it is that there isn’t work available,” she explained.

According to the Labour Code, the Commissioner said that there are timelines for which an employer must pay their furloughed staff. 

“The code allows a person to be laid off without cashing in their severance for up to almost six months but there would have to be named a date of recall. Now, in the uncertain situation of Covid-19, many persons were laid off without a date of recall and as a result of that at the three-month mark persons become eligible to receive their severance,” she said.

In addition, if an employee has been temporarily laid off for six months or more, they become automatically eligible for severance from the day they receive that letter.

The reality for a lot of businesses here however is that it could be the decision that will close down their establishments.

CAP 41 Part I 4(g) of the Antigua & Barbuda Bankruptcy Act states that one way a person can be declared bankrupt is if he files in the court a declaration of his inability to pay his debts, or presents a bankruptcy petition against himself.

Information reaching Observer suggests that Cabinet may move to suspend a clause in the Labour Code that speaks to severance payment as a measure to save businesses from collapse. It is not yet clear how the change would affect employers or employees but it would have to first be approved by parliament.

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