Restructuring The Workforce During This Covid-19 Pandemic

By J. Emeka Onuoha

1. PREAMBLE

The surprise emergence of Coronavirus (Covid-19), towards the end of year 2019, has left the entire world in a horror of unimaginable proportion – the world is now a shadow of itself. Covid-19 is destroying human lives in every ramification; countless numbers of people are dying every day, economies of nations are in disarray, businesses are shut down completely, and every form of human activity has been adversely affected. Words like ‘quarantine, total lock down, face mask, sanitizer, virtual meeting, social distance, etc, are now common on the lips of everyone. Beyond all the above, the fact that no ascertainable cure has been found yet for the virus and therefore no time line for the ailment to be curtailed has not helped the corporate and business world to take proper and appropriate decisions towards normally of activities.

This discussion however, will focus on the challenges being faced by employers of labour in restructuring its workforce during this period of the pandemic especially where the business operations of the organization has grounded to a halt or even in cases where there are some level of operation, the inflow is inadequate to sustain the overhead. The guidance of the company secretary, governance practitioner or corporate administrator is now vital in helping the organization make right choices.

This presentation will take it for granted that, under normal circumstances; a company can dismiss, terminate or discipline any of its erring staff. But the emphasis here is in situations where the Company does not want to layoff any of its staff per se; the staff has not done anything to deserve termination of his/her employment but the pandemic is forcing the hand of the company to take certain decisions in order to remain alive by cutting cost in the area of salary, especially since the employees are not being utilized or fully engaged as a result of little or no job occasioned by the lockdown as a result of the Covid-19 pandemic. And even if there is job to do, the fear of contracting the virus has forced on people to maintain social/physical distance, and this is affecting resumption of full work activities.

2. SOME EFFECTS OF COVID-19 PANDEMIC

In Nigeria, since February, 2020, beginning from Lagos and literally dovetailing to all the other states and the FCT, lockdown or total lockdown have been enforced in order to curtail the spread of the Coronavirus. This presupposes that movements are restricted (people are forced to stay at home), and so nothing is functioning – companies are shut down, businesses, markets, schools, religious houses, etc, have been closed. Irrespective of the service a company renders, it must be affected by the total lockdown one way or another. Take, for example, a company that is into manufacturing; your staff cannot come to work, no opportunity to sell your products, no opportunity to buy raw materials, etc. if you have a work force of 100 staff who live in different parts of the town – with total lockdown they cannot come to work. It is impossible, in the circumstance, for the company to operate maximally. This situation applies to every organization except those in essential services like in the health sector, power sector, security agencies, etc. Even the border closures amongst the States of the federation are not helping matters.

Without any operation, the company’s inflow is nothing and yet salary and other maintenance cost are recurrent. What then will the company do in order to cut cost especially with their workforces who are no longer being utilized at all or adequately? The company could slash, withhold or stop payment of salaries and all sorts of measures pending when normally returns. Here comes in handy the expertise of the Legal and the Human Resources personnel who are expected to guide the company on the options available to it in restructuring or rationalizing its workforce.

3. OPTIONS AVAILABLE IN RESTRUCTURING THE WORKFORCE.

a. Termination of Employment.

By the provisions of the Labour Act , either party to a contract of employment may terminate the contract by notice given to the other party of his intention to do so. The notice must be in line with the contract and there may be situation of payment of salary in lieu of notice. The termination of contract of employment is a normal occurrence, but that is not the dimension of this discussion. This discussion is focusing on where the company, ordinarily, does not want to terminate the employment of its staff at all. The company wants to continue with its staff after the pandemic but it cannot sustain the payment of their salary. Albeit, the staff are good at work, experienced and handy. Again, if the company accepts the option to terminate the staff’s employment, it will be forced to pay terminal benefits which it may not be ready to pay in this period of uncertainty; it may also find it difficult to replace such staff after the pandemic. Therefore, in view of the above, it is not in the best interest of the company to choose the option of terminating the contracts of its employees due to the Covid-19 pandemic. There must be a way out that will create a win-win situation.

b. Redundancy.

Redundancy is defined as an involuntary and permanent loss of employment caused by an excess of manpower. It is provided for in the labour statutes and in the terms and conditions of service (TACOS) of several organizations. As clearly stated in its definition, redundancy applies when there is an excess of manpower and there is the need to reduce the number. The Act stated the procedure to be followed in redundancy, including the principle of “last in, first out” in order to downsize the workforce. Under redundancy, just like in termination, (terminal/redundancy) payment must be made to the affected staff. Finally, redundancy can be undertaken under normal circumstances of the company operations but usually due to excess of manpower. However, in the situation under discussion, redundancy will not be an option for the companies because they have adequate number of manpower and do not intend to downsize. It is the uncertainty and the problems created by the Covid-19 pandemic that is forcing the hand of the company to resort to interim measures with respect to cost-cutting until normally returns – when? no one can say. Based on the above, one can safely conclude that redundancy is not the appropriate measure to be adopted by the company in this period of Covid-19 pandemic, and the Company must consider other viable options.

c Leave of Absence without pay.

Leave of absence means the extended absence for which someone, often an employee, has authorization . It also means a worker’s temporary absence from duty or employment with the intention to return. Whereas the Labour Act makes provision only for sick leave for a worker, but usually the TACOS between the employer and employee have elaborate provisions for leave including maternity leave, annual leave, terminal leave and leave of absence with or without pay. Usually, but subject to each TACOS, the leave period covers the time when the employer will be lawfully absent from duty either to rest and refresh himself or forced on him on health ground. Incidentally, not many TACOS captured what will happen in period of pandemic such as the world is experiencing at the moment.

It is apposite here to state that for employment contracts, the Covid-19 pandemic cannot be equated to force majeure as in ordinary contract. Black’s Law Dictionary defines force-majeure as “an event or effect that can be neither anticipated nor controlled, especially an unexpected event that prevents someone from doing or completing something that he or she has agreed to. The term includes both acts of nature, e.g. floods and hurricane, and acts of people – riots, strikes or war”.
Subject to the force–majeure clause in the company’s TACOS, it is submitted that force-majeure cannot apply in employment contracts as that will imply that the contract of all employees including that of the Managing Director and other stakeholders would be affected too. That actually takes force-majeure or even the doctrine of frustration out of consideration in this discussion.

The implication of leave of absence without pay, if it is in the TACOS of the employment contract, is that the affected employee’s contract remains in existence during the period of absence and he will be available to resume his work on the stipulated date. And until such employment is formally terminated, all the benefits associated with the employment, except the salary, are running even during the period of the leave. Again, subject to the terms of engagement, either party to the employment contract may exercise the right to demand for a leave whether with or without pay. Finally, on this, leave of absence may be asked or demanded for both in good times and bad times – not necessarily because of a pandemic.

d. Furlough

According to Dictionary.com , a furlough is a temporary lay-off from work; people who get furloughed usually get to return to that job after a furlough. Normally, people often encounter the word; ’furlough’ during government shutdown, in which non-essential public employees are told not to go to work. Private companies, however, also furlough employees. This discussion is not focusing on furloughing in government institutions but rather in corporate and private institutions – more so because government actions are guided by statutes, laws, policies and regulations officially pronounced rather than mere agreement of parties.

In general, employees are not paid during furloughs but they do keep their employment benefit, such as health insurance. Furloughs are mandatory at the instance of the employer unlike leave of absence that can also be orchestrated by the employee.

According to Wikipedia , a furlough is a temporary leave of employees due to special needs of a Company or employer, which may be due economic condition of a specific employer or in society as a whole. These involuntary furloughs may be short or long term, and many of those affected may seek other temporary employment during that time.

Writing in the street.com, Eric Reed defined an employee furlough as a mandatory suspension from work without pay. It can be as brief or as long as the employer wants. It can be take place both in public and private institutions.
He stated that while some people are able to work from home during the Coronavirus pandemic, other people simply don’t have jobs that allow for that. Although, many people are in industries that are still working, however, the economic impact of the pandemic have wreaked havoc on many of their industries who are being forced into temporality closing in order to better contain the spread of coronavirus.

According to him, furlough has already begun in particularly vulnerable industries such as in the airline industry where for example, Virgin Atlantic has required employees to take 8 weeks of unpaid furlough. Many hotel chains closed in order to help contain the spread of coronavirus.

As stated above, an organization will furlough employees as a cost-saving measure when it doesn’t want to lay off staff but lacks the resources to continue paying them. A private business may furlough its employees during a short-time or cyclical downtime. Seasonal businesses, for example, may furlough their employees during their slow months. Or a shop owner may do so in between orders, choosing to furlough employees he can’t afford while trying to secure a new business. More recently in the UK, General Motors’ furloughed thousands of employees amid a United Auto Workers strike.

However, furloughed employees are absolutely banned from doing any work on behalf of their employee whatsoever (otherwise they must be paid for that). He can’t do as much as make a call or answer e-mail. This is a zero tolerance rule.
Furloughed employees have the right to seek new employment. For an employer, one of the main risks of this process is that top talent will get jobs elsewhere. Many employees consider taking temporary jobs during a furloughed (unlike in government institution where furlough employees cannot).

Different between Furlough and Termination/Redundancy
a) Furloughed employees still retain their employment and expect to return to work at a specified date.
b) Furloughed employees retain their benefits except salary.
c) A furlough is relatively seamless. Termination requires a significant process, as does hiring new staff which can be time consuming and expensive.

While the practice of furlough in UK and other western countries are well developed and rampant both for government, public and private sector, in Nigeria this practice is practically non-existent at the moment. It is high time the company secretaries/governance professionals advise the companies on the need for a furlough clause in the terms and condition of service of employment and make it adaptable to their peculiar circumstances.

4. Conclusion

As the world struggles to find a lasting solution to the Covid-19 pandemic, corporate administrators are also grappling with options to keep their companies afloat. Adopting some interim cut-cutting measures have become inevitable. A proper knowledge of what is best for the company will certainly enhance the value of the Company Secretary, hence presentations like this. Amongst the options treated above, furlough and leave without pay seems must appropriate in the circumstance. The most important objective is to keep the company afloat and still retain the quality staff. An employer typically will use a furlough to retain staff that they can’t afford but don’t want to layoff. However, it seems very few companies have furlough clause in their TACOS. This signifies that the time has come for the review of the organization’s TACOS to accommodate a furlough clause/agreement.

Thank you.

J. Emeka Onuoha, Esq. (ACIS)
Chairman, ICSAN, Rivers State Chapter,
Managing Solicitor, pacta sunt servanda
Email: emekasjoa@gmail.com