Published On: Sun, Aug 30th, 2020

Force Majeure or not?

~ Legal jurisprudence needed whether lockdown is force majeure or not ~

PHILIPSBURG — We asked local accountants to provide us with their Top Three Tips for businesses on St. Maarten to survive this economic crisis due to the COVID-19 pandemic. One local accountant sent us an extensive email on the following issue. In this article, we would like to discuss this highly important topic for many businesses on the island impacted by government lockdown measures.

According to the accountant, SZV is now requesting companies to write out (read: fire) employees because companies have been filing “0” in wage taxes and premiums, awaiting a change in the island’s economic climate.

The accountant writes that SZV believes that a company that files “0” means that the business has not paid wages for the month in question. This assumption is correct. However, companies have not paid wages because the government ordered a lockdown, and the economy shut down. It is not the fault of these companies that they could not make their payroll. Most companies and employees have arranged that their jobs remain intact and that they can resume work as soon as this crisis is over.

SZV is saying no to this informal arrangement. SZV says companies have to write out the employees for the period that the business was closed, and the company was not paying wages. SZV says these companies can then register the employees again once the company resumes its business operations.

“This is ludicrous,” says our local accountant. “Think about the fall out for companies, having to give notice and pay severance; people losing their seniority in companies, and companies forced into an administrative headache. Things are bad already, and this is only going to make it worse. This requirement is now going to cause mass unemployment. Not only that, but it is also going to give companies an excuse to get rid of older employees. The government has to address this issue and how SZV handles it.

According to Peggy-Ann Dros of the Social Affairs and Labor Department in a recent interview on social media, no jurisprudence supports any interpretation of the no-work-no-pay rule during a public health crisis. “Companies had to lock down based on a government’s decision, and then there was no work. It is also unclear whether COVID is a force majeure or an act of God. There is no jurisprudence that a pandemic on the scale of COVID-19 can be classified as such,” Dros said.

Related: Peggy-Ann Dros: “Employers have to pay 100 percent salaries”

However, one thing is crystal clear to Dros: “Employers have to pay 100 percent of salaries until a labor agreement has been formally dissolved. This requirement does not change because of a pandemic. That is extremely clear in the law.”

A pandemic from a natural disaster standpoint is an act of God. From the aspect of government ordering the lockdown, it is a force majeure. Not only that, but the government cannot take away its role and responsibility in this matter. The government has the power to close down the economy. The same government that makes this law cannot state that they will close down the economy, but the employment laws remain in effect.

Since the government changed the playing field, they also have changed the rules of engagement. One such rule of engagement is the ‘no work, no pay’ rule. If an employee does not show up for work because of a decision from government or a minister, a decision that constitutes a force majeure, the employee still has to be paid. “For the same reason, it should apply to employers that if their business is closed down by an act of God or force majeure, they cannot meet their responsibilities, and I would be willing to argue this in a court of law.” states our local accountant.

“The government needs to come out and take a clear stand on this entire issue, and the business community should be lighting a fire under the minister to take a stance on the matter.” he further states.

“Note that you can insure against all kinds of risks, but not one like the one that just happened and is still happening. So no one can argue that you could have foreseen something like this as a businessman. This pandemic situation is unprecedented in the modern history of humankind. Therefore, a clear position is needed by all involved. Else, this issue is going to balloon out of control for many businesses. The matter needs to be taken to court by the business community, and then we will have jurisprudence on the topic. I agree that there is none, but that is understandable because it is unprecedented.” our local accountant concludes his email.

Related article: Editorial: Force Majeure: The Liability Question