introduction
The government has taken exceptional measures to combat the spread of COVID-19 in Lebanon. On March 15, 2020, she announced a general state of mobilization, (1) under the:
- The majority of public and private sector organizations have been banned completely.
- the airport has suspended commercial flights (with certain exceptions);
- public gatherings were restricted; and
- Many institutions and companies had to close.
Certain institutions and companies, especially those that provide essential goods (e.g. supermarkets, bakeries, and gas stations), including the health sector, were exempt from the lockdown. As for the banking sector, business activity has been kept to a minimum. Nevertheless, these institutions must comply with all security measures imposed by the government. As such, they must take appropriate measures to create a safe work environment and prevent the transmission of COVID-19 in the workplace. (2)
The exceptional measures taken have had an unprecedented impact on employers and employees who have adapted to the rapidly changing situation sparked by the pandemic and the national economic crisis. Given the increasing economic impact of both crises, entrepreneurs have had to change the way they work appropriately. For this reason, some companies have considered remote working, working time and salary cuts, and temporary workers (e.g. paid or unpaid leave). Others have been forced to consider permanent downsizing or the complete cessation of operations.
While measures and regulations to mitigate the effects of the pandemic continue to be considered, few measures have been taken by the government to assist employers. The government has not enacted regulations specifically regulating remote working while taking precautions or the options employers have to mitigate the risks.
Therefore, the measures taken by employers are primarily subject to labor law. (3) This law regulates the relationship between employers and employees and defines their respective rights and obligations. In addition, employment issues are regulated by government ordinances and decisions of the Ministry of Labor.
Effects on employers and employees
Employers and companies face major challenges in the face of the country’s worst economic crisis. The spread of COVID-19 has exacerbated such problems. To mitigate the risks, employers take various measures that have had a significant impact on employees.
Remote work
Many companies have embraced remote working to maintain productivity and ensure business continuity. However, the move to remote working also poses challenges that can impact efficiency. The government has not put in place any guidelines or regulations to facilitate remote working and establish mechanisms for its administration.
In addition, no regulations have been issued on the rights and obligations of employers and employees. Employees are therefore expected to retain the rights and obligations from their current employment contract, unless otherwise agreed, as well as the mandatory statutory provisions.
Annual leave with payment
Employers can require their employees to take their annual paid leave during periods of low activity. In general, and unless otherwise contractually agreed, full-time employees are entitled to 15 days of annual leave and minors to 21 days of annual leave with full pay, provided they have been employed for at least one year. (4) The labor law provisions on annual leave are binding and any agreement to the contrary is void, unless it is more favorable for the employee. (5) As such, an employee can benefit from more favorable terms contained in his employment contract, collective agreements, work schedules or internal labor regulations.
Annual leave is usually granted at the request of the employee. However, an employer may, at its own discretion, institute annual leave for an employee. The Labor Code provides that an employer can determine the time of annual leave based on job requirements, but does not specify the procedure for doing so. (6) Lebanese doctrine provides that employers have the right to determine the time of annual leave based on job requirements and provided that this right is not abused.
Unpaid vacation
Unpaid leave is not regulated by law. As explained above, the Labor Code provides for annual leave of at least 15 days with full pay. An employer and an employee can agree on additional leave with reduced or no pay. In general, such measures are regulated in the employment contract, in the work plans or in the internal work regulations. As a rule, however, written consent is obtained from the employee, particularly as evidence of the agreement. Case law on this issue is scarce and the matter is largely at the discretion of the courts and will be assessed on a case-by-case basis.
Reduction of working hours and salaries
The Labor Code does not explicitly give employers the right to reduce working hours (7) and salaries (8) if, for example, economic difficulties arise or business activities cease (e.g. the effects of COVID-19 on business operations) . Business hours and the associated salary are usually specified in the employment contract or in the work schedules of the employees and in the internal labor regulations in accordance with the Labor Code.
Any change in conditions that affect an employee’s working hours and salary, be it temporary or permanent, usually requires the consent of the parties to the employment contract. Any agreement between an employee and an employer, regardless of whether it was concluded before the start of work or during the duration of the employment relationship, which reduces the minimum rights granted to the employee by law (e.g. the maximum working hours and the minimum wage), becomes effective as be considered null. (9)
There is a risk that workers could take legal action against their employer before the Arbitration Labor Council for unilaterally changing the terms of their employment contract or making changes intended to limit their rights. (10) However, the temporary restriction of work hours and salaries are taking place, with revised agreements being made and corresponding dismissal letters being signed by the employee concerned. However, this approach and the validity of such dismissal letters are not risk-free. Careful drafting should be considered when an employer pursues this option.
In addition, on March 23, 2020, the Central Bank of Lebanon issued Circular 547, which allows banks to extend exceptional loans to their business customers with an interest rate of 0% to help them settle the salaries of their employees and their essential operating or production costs cover up . The Minister of Labor has reportedly endorsed such a decision and encouraged employers to pay their workers’ salaries regardless of the actual working hours imposed during the COVID-19 outbreak. It remains to be seen whether the government or the Department of Labor will implement additional regulations that will allow further clarification of this matter.
Temporary cessation of business
Certain companies may consider temporarily ceasing their operations. Employers can refer to contractual provisions, in particular with regard to force majeure. Lebanese case law considers that the temporary suspension of employment contracts due to force majeure releases the employer from his obligation to pay salaries during this period in certain circumstances, unless otherwise enacted. The courts refer to the general provision in Article 624 of the Code of Obligations and Contracts and to the suspensive effect of events of force majeure on the performance of the contract. In this context, Article 624 of the Code defines “remuneration for work or service” as “a contract under which one of the contractors undertakes to work as a subordinate of the other party and under his direction against the remuneration promised by that party”. Only a few court decisions have examined the extent to which an employer can make use of this provision. It is understood that this would require a case-by-case review and the passing of a suspension period, as opposed to a reduction in working hours or salaries.
Permanent contract termination and suspension of companies
In the face of the economic crisis and the COVID-19 pandemic, many companies struggled to stay afloat and were therefore forced to jointly terminate employment contracts or cease operations. In this context, the Labor Code contains provisions aimed at preventing the arbitrary closure of companies and the arbitrary dismissal of workers.
According to Article 50 of the Act, employers can terminate some or all employment contracts in the event of force majeure or compelling economic or technical circumstances, provided that they notify the Ministry of Labor 30 days prior to such termination. In practice, this route has been used as a lever to get employees on board with a revised work agreement that avoids closing the company or terminating a contract for economic reasons. This approach is not without risks and requires careful thought.
Furthermore, the parties can agree to mutually terminate an employment contract in exchange for compensation agreed by the employee. In this case, after receiving the agreed remuneration, the employee should sign a letter of dismissal in favor of the employer.
Endnotes
(1) With Decree 6198 of March 15, 2020, a general state of mobilization was announced, which initially extends from March 15, 2020 to March 29, 2020. The general mobilization, however, has been extended repeatedly, most recently until May 24, 2020 by Decree 6329 of May 5, 2020.
(2) Health and safety measures by the Ministry of Labor; Circular 26/1 from 2020 on health and safety at work in industrial companies.
(3) The Labor Law of 1946 and its amendments.
(4) Id, Articles 23 and 39.
(5) Id, Article 43.
(6) Id, Article 39.
(7) Id, Article 32. This article grants the Minister of Labor the right to reduce the statutory maximum working time for exhaustive or unhealthy work. The law does not explicitly regulate the reduction of normal working hours. Instead, it regulates the maximum working hours of employees, including weekly and daily hours.
(8) Id, Article 44. This article provides that the employee’s salary is at least sufficient to cover the basic needs of the employee and his family and must also take into account the nature of the work. In addition, the salary must not be below the statutory minimum wage and must include the statutory transport allowance of LBP 8,000 per day of attendance at the workplace. In these circumstances, employers may be able to deduct the transportation allowance from the wages of workers who are not physically at work, unless the parties have agreed otherwise.
(9) Id, Article 59.
(10) The Arbitration Labor Council is empowered and competent to resolve disputes arising from employment contracts and the application of labor law.
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