Covid-19 Furloughs

As Covid-19 continues to expand its footprint across the globe, the world economy is sinking in unimaginable ways with businesses across the globe (both large and small) shuttering their doors and fighting for their survival.

Just like “zoom” has become a household name in recent weeks for its (profound) usefulness and (bad) reputation, “furlough” has come to gain its own space in the media both at home and abroad.

Furlough: its meaning

As a technical term, furlough may have slightly different legal definitions and contexts in various legal systems. A functional definition shall suffice to move forward with this post.

The word refers to the suspension of an employee from employment, unrelated to any disciplinary measure. When an employee is furloughed, he/she is not expected to do any work and would not get any salary or pay. The intervention is largely a cost cutting measure that is temporary in nature and aimed solely at keeping the business afloat. It is often used as a substitute to layoff, redundancy or termination.

Civil service leave

The closest cousin to furlough in the Maldives is what exists by the name of “no pay leave” granted to civil servants under chapter 19 of the Maldives Civil Service Regulations.

For civil servants, the no pay leave is initiated by the civil servant (and not the employer).  During “no pay” (as is often referred both to the fact and period of leave) his/her service is suspended, period of leave is not computed within the period of service, the employee is temporarily relieved from service, and is able to return the same job unless it is not made redundant during his / her absence. No pay leave is often granted for medical treatment, relocation of residence, or academic studies associated with self, spouse or close family.

Furlough and law

The bare fact is that the Maldives legal system neither recognizes nor regulates furloughs – as is understood in other countries.

Despite what the law may say (or not say), furlough is happening in the corporate Maldives across businesses, professions and industries induced purely by circumstances related to Covid-19.

For the employer who is under pressure to seek legal advice to take the furlough route, there is not much legal help that can be offered – simply for the reason that there is no legal basis for that action under Maldives law. The creature is not known to the Maldives legal system. Adding to the misery of the Maldives employers, there is little public sympathy for furloughs, and a great deal of public sentiment against it.

Contract and law

Except for a very few specific instances where an employer can act unilaterally under the employment contract, the law is largely on the side of the employee to lock in the employment contract once it is signed. There is little that an employer can do unilaterally that could alter the terms of the contract.

Since a furlough would put the entire employment contract into suspension affecting terms of contract including pay and benefits, this is where the law will bite a reckless employer.

Any reduction, deferment or suspension of pay (without the approval of the employee) is an act of the employer that alters the monthly payment obligation otherwise placed on the employer under the contract, and therefore the law.

Common sense

That said, for the employer who is placed between a rock and a hard place (breaking the law or shutting down the business), there may be a few extralegal factors that the employer may consider in taking the furlough route: be mindful of the sensitivities around it; make it not a unilateral decision imposed on the employees; engage with the employees; communicate with them; talk to them; explain to them; empathize with their situation; see it from their point of view as well; and exhaust (emphasis added) all avenues to get their agreement.

In conclusion, when law is silent, legal support is absent, exercise common sense and good judgment.