COVID-19 AND BUSINESS REDUCTION

Based on the World Health Organization’s declaration that the outbreak of Coronavirus (COVID-19) is a health emergency of international concern, the Republic of Cyprus has taken firm measures to fight the spread of COVID-19 in the country. Consequently, companies’ ability to do business has been affected, leading reduction of business activity and creating some serious concerns for employers who may try to reach for a solution relying on Article 5 of The Termination of Employment Law (N. 24/67).

According to Article 5(b) an employer may terminate the employment of an employee without compensation based on the ground of redundancy. In addition, Article 18(c)(viii) expressly states that reduction in the volume of work or business constitutes a reason for termination of employment.

However, would the above basis justify a termination of employment because of the pandemic effects?

According to the relevant case law, a redundancy is deemed legal when the employer demonstrates that the reasons for the redundancy will not be eliminated in the short term, but they will also extend to the unexpected future. More specifically, in the case of A. Iasonos Ltd v. Charalambou Christou and ors (1994) 1 AAΔ 703 (“Iasonos”), the Supreme Court stated that seasonal or periodic reduction in the volume of work which, when compared with the normal level of business activity, leaves the volume of work unaffected, does not justify termination of employment for redundancy.

In line with the above case-law, termination of employment at this stage, seems to be premature and cannot be justified on the grounds of redundancy considering two main factors. Firstly, the short time that has elapsed from the outbreak of the pandemic in Cyprus and secondly the existence of available alternatives i.e. participation in the Government Business Support Plans for as long as they remain available.

To conclude, it is likely that the reduction of the business activity caused by Coronavirus (COVID-19) will remain ongoing for unforeseeable time in the future. Although, the financial data that the employers currently possess supporting the lawfulness of a termination for redundancy are for a relatively short period and can not contribute to draw safe conclusions at this stage.

The above publication does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on our website are for general informational purposes only. We will be more than happy to provide you with professional legal advice on Employment Law and related matters so please do contact us at N. Mouktaroudes & Associates LLC.

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