It's usually not the first thing most of us want to think about when starting a new job, or hiring a new employee, but it's actually one of the most important things to consider to avoid difficulties if, and when, the employment relationship comes to an end. According to the United States Bureau of Labor Statistics, the average American worker holds 10 different jobs before the age of 40; and The Bahamas is not likely to be much different, so it's clearly something we should plan for. Do you know how much you would be owed if your employer decided to dismiss you without just cause? And how much would an employer need to pay if the relationship is not working out?
What if there is no agreed termination clause?
Except for those contracts which last only for a set period of time, most employment contracts run indefinitely. However, those contracts which do not specify how they are to be brought to an end can still be ended at common law by either the employer or employee giving "reasonable notice". (There is no need for either party to give notice if the other party has been guilty of a major breach of contract.) But what is "reasonable notice"? The answer is that it depends on the facts of each case, and ultimately the aim is to figure out how long it should take the employee to find a similar job elsewhere using reasonable efforts.
In 1985, the Court of Appeal in the Royal Bank of Canada v. Cambridge decided the specific factors a court should weigh, including the age of employees, the length of their service with the employer, their responsibilities/job description, experience, status, training, qualifications and their chances of alternate employment. This goes to show why a notice clause is so important - the assessment is subjective, and in many cases it can be very difficult to predict what a court or tribunal would consider to be reasonable, so neither side can be sure whether they are paying or receiving the correct amount.
How does an agreed notice clause avoid this uncertainty?
A notice period agreed between the employer and the employee avoids this difficulty altogether, because in most cases a court or tribunal will simply follow what the parties have previously agreed, rather than try to assess what is "reasonable". Having this knowledge usually prevents disputes because each side can easily predict how much money is at stake and, of course, if there's no dispute then legal costs can be kept to a minimum.
What effect does the Employment Act 2001 have?
The Employment Act contains, among other things, provisions for the ending of employment contracts by the giving of notice, the period of which is calculated based on whether the employee was a manager/supervisor or line staff, and the length of his or her service. The Court of Appeal in 2006 (Deveaux v. Bank of The Bahamas) interpreted the act as setting a minimum standard below which employers cannot go. On that occasion the Court of Appeal also decided that this minimum standard does not prevent the employee from still making a claim for "reasonable notice" if he or she thinks they would do better under the "reasonable notice" requirement of the common law, with the risk of being liable for their own legal costs (and possibly their opponent's too) if they lose.
Recent developments: Betty K. Agencies v. Fraser
A recent case in the Court of Appeal has thrown into doubt whether an employee can still resort to the common law when it comes to a claim for notice and seems to run contrary to the decision of the same court (differently constituted) in Deveaux v. Bank of The Bahamas. In Betty K. Agencies v. Fraser, a case decided in September 2014, it was argued that the Industrial Tribunal had failed to take into account the factors set out by the Court of Appeal in Royal Bank of Canada v. Cambridge in order to determine what notice would have been "reasonable" to terminate Frazer's contract. The court disagreed, and decided that the period of notice for terminating an employee was "statutorily established" by the Employment Act. This suggests that the Court of Appeal is now interpreting the notice provisions contained in the Employment Act as overriding or replacing the common law.
The present state of the law
Although the Betty K. Agencies v. Fraser might seem to have created more certainty in the employment relationship, the existence of two apparently contradictory decisions at the Court of Appeal level has created a situation whereby the courts of first instance (i.e., Magistrates Courts; Industrial Tribunal; Supreme Court) can arguably choose which authority to follow: Betty K. or Deveaux. Litigants cannot be sure which approach the courts will take, unless and until the point is taken to The Bahamas' highest court - the Privy Council. There is therefore still good reason for both employer and employee to agree right from the start how the contract can be terminated.
o This article does not constitute legal advice. If you need advice on the issues raised in this article or otherwise you should consult a qualified attorney. Richard Horton is a partner at the law firm Alexiou, Knowles & Co. and has been practising civil litigation in The Bahamas for 10 years as a registered associate, having been called to the Bar of England & Wales in 2002. Richard represents and advises clients in a wide variety of matters, but has a particular focus on employment/labor matters and admiralty matters.
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