Covid-19: Redundancies and Layoffs

This virus has brought the entire world to its knees. The fear over its spread is so deep and so real that we have come to redefine our social norms and rethink our economic realities.

Like many other countries, our paramount importance is to protect life and health. However, unlike many other countries, each step we take towards combating this virus also happens to be a step that stifles our economy.

Silent Halt

Travel bans on key generating markets, airlines suspending flights, countries going into lockdown, tourists counted in hundreds of thousands now just trickling in paint a pretty grim picture. While resorts, guesthouses and tourist facilities are already subject to some restrictions, some are preparing for an imminent shut down.

This sorry state of affairs is having a ripple effect across many other businesses built around the tourism economy. With near empty resorts, deserted airports, a government shutdown, temporary lockdowns, quarantine requirements, self-isolation and social distancing measures, we are seeing the country’s economic engines quietly coming to a silent halt.

Businesses and Employees

At times like these, the most affected are the businesses that create employment. And of course, employees who depend on those businesses for their livelihood. Already, companies, within the industry and outside of it are speaking of letting go of staff, often with immediate effect, and without pay.

This brings us to the law.

The Law

There is no legal provision in our employment law on furloughs, redundancies, layoffs and retrenchment.

Let’s understand what each of these terms means for the purposes of this article.

A redundancy is when you let go of a position (not the person). A retrenchment is when you ask a person to go (not the position). A Layoff is a temporary discharge/suspension from work (with no pay). Furlough is sending staff on leave without pay (there is no termination).

Steps to Follow

As a first step, it may be useful to check whether the employment contract carries a specific provision which allows actions of the sort to be taken.

If there is no direct provision on it, it may be relevant to look for a provision in the employment contract that speaks of incorporating HR policies and management guidelines and practices established in the business, to be part of the employment contract. In those circumstances, it may be equally useful to see if any of those source documents can guide the execution of the decision on redundancies, layoffs or furloughs.

If there are no such provisions, it may be important to seek guidance from the case law and act closely within the tests provided in those court decisions.

Case Law

Although there is no direct provision in our statute laws on any of the above circumstances, there is a significant body of Maldivian case law that has either recognized and accepted these terms and concepts, or have provided rules to test their application in circumstances.

Although, a business may have legitimate reasons to make these tough decisions in these trying times, it may be helpful to act in a responsible manner so that there is no future challenge against any of those decisions.

The Test

On a quick review of the case law, courts have accepted economic/financial hardship faced by a company to be a legitimate basis for resorting to redundancy measures. However, a decision taken for good reason may still turn bad if the execution falls short of substantive and procedural fairness.

After establishing the existence of circumstances warranting redundancy, it must be ascertained whether the affected positions are no longer required for the functioning of the business, and that the positions would not be given to others.

There ought to be an effective communication channel established with the affected staff. They ought to be advised of the process followed in making the selection on who is to go and who is to remain.

They should be told if there is any other position that they can fill within the business or if they could return to employment.

The entire process must be based on a just and fair set of guidelines.


In short, the reason which triggers redundancy must be genuine, and the manner in which redundancy is carried out ought to be fair. A good reason may otherwise yield a bad result.

Note: If you would like to add to this, or if you have a different view, please get in touch. We would like to know.