Legally Speaking: What to do when an employee leaves
Just as when a new recruit is on-boarded, there are a variety of tasks an employer needs to deal with when one of its employees leaves.
Some of these are practical, “housekeeping” matters, whereas others are legal obligations or important steps needed to protect the company’s interests.
This article sets out some of the key issues that employers should bear in mind.
Pay and benefits
If the employee is owed any sums when their employment terminates, Section 18(5) of the Employment Act 2000 requires the employer to make payment within the latter of seven days after termination or the next interval at which the employee would have been paid, i.e. the normal payroll date.
In certain circumstances, an employer is required to continue an employee’s health insurance cover after their employment has terminated. Under the Health Insurance (Cover) Regulations 1971, an employer must provide health insurance cover for up to four weeks after termination for any employee the company was obliged to insure during their employment. This obligation ceases if the employee becomes insurable by another employer within the four-week period.
Employers should therefore ensure that a departing employee’s final payroll is scheduled correctly and should ideally find out if and when the employee will be commencing a new job.
Other legal obligations
Under Section 22 of the Employment Act 2000, employees are entitled to receive on request a “Certificate of Termination”, containing the:
•employer’s name and address;
•nature of the employer’s business;
•duration of the employee’s employment;
•capacity in which the employee was employed;
•wages and other remuneration payable at the date of termination; and
•where the employee so requests, the reason for the termination.
Other obligations apply when the leaver is an expatriate. Under Section 61AB of the Bermuda Immigration Act 1956, the most recent employer of a work permit holder is responsible for the costs of repatriating the employee and their dependants to their place of origin, unless the parties agree otherwise.
Further, employers are required to submit a written “Notice of Termination” to the Department of Immigration when a work permit holder leaves their employment. The Notice must be provided within seven working days of the work permit holder’s last day and must contain the:
•employee’s full name;
•date of termination;
•date on which the employee left or is planning to leave the island, if known; and
•reason for termination.
The employer must also return the original work permit documentation to Immigration. If the original documents cannot be returned, the employer should explain why.
Protecting the company’s interests
There are a number of other steps a prudent employer should take to help protect its company property and proprietary information when an employee leaves.
It is important to ensure the employee is fully aware of any contractual obligations that they continue to owe to the employer after their employment ends. This could include, for example, restrictive covenants that prevent the employee from doing certain things for a period of time after they leave, such as working for a competitor or soliciting business from their former employer’s clients.
Departing employees should be given a written reminder of their obligations. It is also advisable to instruct them to provide a copy of the relevant contractual terms to any prospective new employer, so that the new employer is aware of the employee’s continuing obligations.
The employee should also be required to return any company property (such as a company credit card, laptop or phone) or any company documentation in their possession, to help avoid their misuse.
In relation to the return of documents, the company should remember that employees will likely have access to electronic documentation, not just physical copies. The employee should therefore be required to permanently delete any company documents that they have access to outside of the company’s IT systems, such as documents they may have sent to a personal e-mail account, ideally after providing a copy to the company.
These issues have gained particular significance during the pandemic, as many employees will have taken company equipment and documents home in order to work remotely.
Finally, if the employee also holds a directorship with the company, or another group company, then it is advisable to request that they sign a letter resigning from their directorship on termination. This is because, for individuals who are both employees and directors, a directorship generally will not terminate automatically when the individual’s employment ends.
The requirements of the Companies Act 1981 relating to the removal of directors can be demanding and take some time to satisfy. Relevant provisions of the company’s byelaws will also need to be considered. As such, the simplest way to resolve this matter is to ensure the individual signs a resignation letter.
This article should hopefully serve as a useful reminder for all employers of the important steps they need to take when one of their employees leaves.
Senior associate Bradley Houlston is a member of the Dispute Resolution department at Appleby and leads the firm’s employment and immigration law practice. Questions about the issues addressed in this article can be raised with him at email@example.com. A copy of this column can be obtained on the Appleby website at www.applebyglobal.com.
This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.