Labor Law and Industrial Relations in Cyprus

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Table of Contents

John’s Case
David’s Case
References

John’s Case

John is the owner of a large construction company in Nicosia. Due to the lack of projects in the last two months, he wishes to reduce his costs, to be more competitive in the construction market.

John has to know that the law does not support redundancy initiated to reduce costs. It appears that he wants to reduce the number of employees for cost-saving. It can be seen from the way he has outlined his reason for redundancy. The law allows redundancy to be used when there is a reduced volume of work. John should frame his reason based on the reduced number of projects. The reason can be classified under economic conditions.

The burden of proof lies with the employer. John will need to show that the two-month decline in the number of projects is not a cyclical event. A cyclical business downturn is not a legal ground for dismissing employees. Two months is a short period to prove that the quantity of work will remain reduced. The trade unions will require more time to verify that the reduction is not a business cycle.

John must provide statistics that support his redundancy claim. If there were similar reductions in the past that the firm recovered from without reducing employees, it may work against the planned redundancy. If there was a similar reduction in the past, he must show that he acted in a similar manner. The time the firm took to recover from the decline in the quantity of work may function as proof of the need to reduce workers based on redundancy. The current reduction should have an irregular pattern to avoid consideration of a cyclical reduction.

He will need to notify the parties concerned with employment. John will need to notify the trade unions. It should be two months prior to the effective date of the redundancy layoffs. Being a collective redundancy, he will need to notify the Ministry of Labour and Social Insurance at least thirty days before the redundancy becomes effective (Reitz, 2007). A fine of £2000 may be charged for carrying out the redundancy process before a month ends after the notification. John will also need to notify employees, according to the number of years the employees have worked with the firm. He will still need to incur the cost of wages during the notification period. A fine of £500 will be charged for failing to notify the employees on time. In case he wants to start the reduction within a short period, he can exercise payment in lieu of notice. He can make payments to the employees that legally cover the required weeks of notification. He may dismiss them immediately after the other two notification requirements have been met.

The employees will need to have been continuously working for 104 weeks in his firm to qualify for compensation from the Redundancy Fund. The unions may need him to make ex gratia payments to the employees unless he is in a bad financial condition. If he can prove his redundancy claims, he will not be compelled to make any payment. The employees will be paid from the Redundancy Fund (Reitz, 2007).

The first task will be to prove that the reduction meets the redundancy requirement. In Case No. 1/2008, the case of Kyriakoulla Polycarpous versus Frigg Restaurant Ltd. and the Redundancy Fund, the judge did not find any proof of redundancy. The fact that the restaurant had shut down for some time and changed ownership did not prove redundancy (Loizides, Mitsigga, Georgiou, & Associates LLC, 2012). The court held that there were no claims of redundancy at the time the restaurant stopped operating due to economic, technical, or organizational reasons. From the case, John should realize that stating the reason for redundancy should match those provided for in the law. His reason should be that a reduction in the quantity of work qualifies for redundancy. If the firm does not reduce its employees, it will be uneconomical to run the firm. Losses are likely to occur. If he claims that he wants to save costs, he may lose the redundancy claim. In that case, he will need to compensate the employees in a similar manner the Redundancy Fund would have done.

The case of Kyriakoulla Polycarpous versus Frigg Restaurant Ltd. and the Redundancy Fund is relevant to the case because it shows the significance of proofing redundancy in the case. It shows that failing to operate for some period does not directly qualify for redundancy. There should be proof that the firm closed down due to its high operating costs. John needs to prove that the firm cannot operate under the current conditions. Alternatively, he can prove that the reduction in the number of projects has affected the firm’s quantity of work by a significant margin. It necessitates the reduction of workers to remain profitable. He must show that profitability will decline by a large margin, making it unprofitable to continue operating with the same number of employees. The trade unions will want him to prove that dismissing employees is the last alternative that the firm has to implement to keep the firm operating.

In the case of Kyriakoulla Polycarpous versus Frigg Restaurant Ltd. and the Redundancy Fund, the judge ruled in favor of unlawful dismissal. The restaurant had shut down and changed management. The main weakness of the defense was that the new management continued with the same business. Continuing with the same business tended to show that the business was still profitable. Polycarpous’ Case relates to the ability to continue operating profitably with the same number of employees. It may weaken John’s redundancy claim. Two months is a very short period to prove that the profitability of the firm has been affected, considering that profits are calculated in quarterly and annual periods. Considering that it is a large firm, John may lack sufficient statistical evidence. In the case of a small firm, monthly data may prove more helpful. A large firm has the ability to absorb variations in the short-term period into its annual profits.

John may need to prove that the firm’s operation may cease if the cost of production remains unchanged. It would be the most direct way of proofing the redundancy condition. Without it, he may need to show a greater decline in profitability. Once he has found proof for redundancy, he needs to give notification to the Ministry of Labour and Social Insurance, the two trade unions, and the employees. Workers are not entitled to compensation from the employer in the event of redundancy (Termination of employment in Cyprus, 2009). He may not be compelled to incur any cost in the form of employee compensation, unless out of a free will.

David’s Case

David signed an agreement with Gordison Trading Ltd (hereafter “Gordison’’) to work for them. Their agreement was signed on the 16th of March 2009. On 1^st November 2011, Mr. Koumar informed David for the first time that his employment would be terminated because his performance was not the expected one.

Whether his relationship with Gordison is an employment one

David is considered an employee, provided that he has received a salary from Gordison. According to the Termination of Employment Law, the employer-employee relationship is established when the employer offers a salary, or a commission (Christoforou & Co. LLC, n.d.b). David was entitled to a payment of €40,000 annually. David and Gordison signed an agreement. It is strong evidence that an employer-employee relationship exists. The law requires the employer to provide the employee with the terms of service at the beginning of the employment. Gordison provided the terms of service. According to Tsirides (2012), a written agreement is not necessary in determining that employment exists. Oral evidence may be used as proof that David is employed. The details confirm that an employer-employee relationship exists between Gordison and David.

David qualifies to be classified as a full-time employee. According to the Organization of Working Time Law No. 63(1) / 2002, the maximum weekly working time should not exceed 48 hours, inclusive of overtime hours (Christoforou & Co. LLC, n.d.a). Tsirides (2012) suggests that an employee completes normal working hours when he works for 40 hours every week. David worked for 45 hours per week. He qualifies to identify his employment as full-time work. Part time job should have less time than the normal working hours of a full-time job. He was not allowed to engage in any other form of employment. It also shows that he was employed on a full-time basis.

Taking for granted that the relationship is an employment one, whether he is entitled to any kind of compensation, and calculations

David had worked for 32 months with the firm. According to the Fixed-term Work Law No. 98(1)/ 2003, when the agreement is on a fixed-term work, the employment contract is considered to be that of indefinite duration after working 30 months with the same employer (Christoforou & Co. LLC, n.d.a). The employer has no right to terminate the employment when the contract expires without lawful reasons for termination. An employee working on a trial period is entitled to notification when he has worked for a period that covers 2 years. David’s employment period exceeds 104 weeks (Termination of employment in Cyprus, 2009). Temporary employment should not exceed 24 months (Tsirides, 2009). David’s duration exceeds the period allocated for temporary employment. In case Gordison claims he was temporarily employed, David is still entitled to compensation under all conditions for temporary employment.

David is entitled to compensation for unlawful dismissal, if Gordison fails to prove that his work was inefficient. Inefficiency and misconduct in the workplace are the only lawful reasons for dismissal in David’s employment. Gordison did not describe the level of performance when they entered into an agreement. Provided that David has worked for 45 hours per week, he should not be dismissed. If his work performance is inefficient, Gordison has to prove that there was a reasonably lower level of efficiency than was expected.

Gordison may fail to win the case because they did not issue a warning before giving a notice of termination (Christoforou & Co. LLC, n.d.b). David had worked for 32 months. If his performance had changed, he deserved to be given a warning. If his performance was low from the day he started work, it could not have taken Gordison 32 months to discover his low performance.

David may win the claim only under the unfair dismissal part. Having worked for 32 months, David had exceeded the probationary period and the temporary employment period. He is entitled to the unfair dismissal claim. If his claim for unfair dismissal is dismissed by the industrial court, he should not file another suit to seek compensation from the redundancy fund. He has worked for about 128 weeks, which require 4 weeks of notification (Termination of employment in Cyprus, 2009). He may file for compensation for inadequate notification, if Gordison fails to wait for 4 weeks to dismiss him.

In a different case, on 22 June 2001, Christodoulos Meliniotis filed a suit asking for compensation from the Municipal Council, or the Redundancy Fund (European Court of Human Rights, 2010). On 7 March 2000, the Municipal Council notified Meliniotis that his post in the council had been abolished. At first, the Industrial Disputes Tribunal refused to hear the case citing lack of jurisdiction on Public Law. However, on the Redundancy Fund, it declared that Meliniotis was not entitled to the compensation from the Redundancy Fund because his dismissal was not based on redundancy (European Court of Human Rights, 2010).

His claims of an unfair dismissal were also dismissed by the Supreme Court because he was fired based on inefficiency. Meliniotis had worked for the Municipal Council from September 1970 to March 2000 (European Court of Human Rights, 2010). He had not reached the retirement age. He sought redress from the European Court of Human Rights based on the complaint that the ruling by the IDT and the Supreme Court favored the arm of government. The case is relevant in this case because it shows that there is no compensation from the employer or the Redundancy Fund when the dismissal is based on efficiency.

From Meliniotis’ case, it is clear that David can only gain compensation for unlawful dismissal. If he loses the case, based on the inefficiency of his performance, he is unlikely to win a suit asking to be compensated by the Redundancy Fund. Giordison has not filed for redundancy, which disqualifies him from redundancy claims. His valid claim is that he was unlawful dismissed. He has worked for about 3 years. Gordison cannot win the case without a valid reason indicating that his performance is below standard. In case of efficiency, David does not need to perform at a very high level of efficiency. An average standard is acceptable (Christoforou & Co. LLC, n.d.b). It may be difficult for Gordison to prove that David’s performance is reasonably inefficient.

In the case of unlawful dismissal, David is entitled to a similar amount that would have been issued from the Redundancy Fund. In addition, he should be compensated for other considerations, such as interruption of career prospects (Tsirides, 2012). The maximum amount he can receive amounts to two-year wages, which is € 80,000. The minimum compensation amount is equal to the amount that he would have been paid from the Redundancy Fund (Tsirides, 2012).

For an employment duration that lasted about 3 years, the calculation of redundancy compensation is 2 weeks for every year (Christophi, 2006). David worked for about 2 years and 9 months. The calculations for minimum compensation are shown below.

Considering 52 weeks in a year, David was paid €44,000/ 52 = 846.15 per week
For the 2 years, compensation = 2 weeks * 846.15 per week * 2 years = € 3,384.60
For the 9 months, compensation = 2 weeks * 846.15 per week * 9/12 = €1,269.23
In total, 2 years and 9 months amounts to a compensation of €4,653.83.
The calculations show that David should be paid between €4,653.83 and €88,000 as compensation.

Time bar for bringing an action before the Labour Court

David has up to 12 months to bring up his complaint before the Labour Court. In case of unlawful dismissal, an employee has to file a complaint within 12 months from the day of dismissal (Termination of employment in Cyprus, 2009). In case the employee had filed for compensation from the Redundancy Fund, he can file for unlawful dismissal within 9 months from the time he received a reply from the Redundancy Fund.

References

Christoforou, S., & Co. LLC. (n.d.a). Harmonization of the Cyprus legislation with social & labor acquis. Retrieved from www.snclaw.eu

Christoforou, S., & Co. LLC. (n.d.b). Termination of employment law No.24/ 1967 – 2003.

Christophi, C. (2006). Termination of employment relationships: the legal situation in Cyprus. Web.

European Court of Human Rights. (2010). First section decision as to the admissibility of application no. 35194/06 by Christodoulos Meliniotis against Cyprus. Web.

Loizides, E., Mitsigga, A., Georgiou, G., & Associates LLC. (2012) Cyprus: Transfer of undertakings. Web.

Reitz, A. (2007). Labor and employment law in the new EU member and candidate states. Chicago: American Bar Association.

Termination of employment in Cyprus. (2009). Web.

Tsirides, A. (2012). Employment law in Cyprus. Web.

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