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Law change could save businesses and jobs

Employment law changes that could make the difference between bankruptcy and survival for some firms have been discussed by business leaders and the Government.

Dennis Fagundo, the president of the Bermuda Chamber of Commerce, said the legal requirement for a layoff to become a termination after four months could cause businesses worst hit by the Covid-19 crisis to fold and jobs to be permanently lost.

Dialogue between the chamber and the Government was regular and productive, he said.

The layoff time limit in the Employment Act was of particular concern to businesses in the tourism-dependent and restaurant sectors, which were unlikely to be fully operational for months to come, Mr Fagundo said in an interview.

If circumstances allowed a business to bring back employees only after six months, for example, the four-month deadline created a major issue, he said.

“If you have to pay severance for the majority of your staff, then that has the ability to make a cash-poor business bankrupt — and then nobody has a job,” Mr Fagundo said.

He said the chamber had raised this concern with the Government, while understanding the complexity of solving it.

“It's being worked on, but there's no decision yet,” Mr Fagundo said.

“It's tricky because it ties in with employment contracts and other laws that apply. It's not something that anybody expects to be solved quickly.

“It's a challenge because you have to work out what is the best thing to do to ensure the best outcome for everybody.”

Last month, the Bermuda Hotel Association also proposed that the layoff time limit should be relaxed for the sector, among other suggestions, in a letter sent to the Government.

The chamber and its industry divisions have been in regular talks with the Government, Mr Fagundo said.

“The Government has been very receptive and has shown us that it is concerned about mitigating the effects on the economy,” Mr Fagundo said.

“That is against the backdrop of the health and safety of the public as a whole. We can't just open up for full operation if that's going to create a health crisis.

“Finding the right balance for Bermuda is a challenging thing, but I feel we're working together with the same goal.”

The bottom line was that the Government was not able to “throw money at things” because of its financial situation, while few businesses had the cash reserves to keep paying staff who were not working, he added.

Mr Fagundo said chamber members' outlooks were related directly to where they fit in the Government's risk assessment and he described four different groups.

In the first group are businesses whose employees have been working from home and whose revenue streams remained largely intact.

The second group included businesses shuttered by shelter-in-place rules, but able to work before and since, with some restrictions, such as construction firms.

In the third group were businesses shut down or heavily restricted over the past three months, such as retailers and restaurants and barbers, who, even if allowed to open in a limited way, did not have enough revenue to cover fixed costs.

Restaurants allowed to sell takeout, for example, were making about 10 per cent of normal revenue. Those able to provide alfresco dining were making more, but still not close to breaking even, he said.

“They've had a three to four-month problem and are burning through cash reserves,” he said. “Because there's no fixed timeline, predicting your employment issues is very difficult.”

Even in Phase 4, when in-house dining will be allowed, capacity will be reduced, meaning a longer wait to get back to full-scale operations and staffing. Hence, an extension to the layoff time limit would be helpful.

The fourth group, mainly comprising hotels and other tourism-related businesses, were in “survival mode”, Mr Fagundo said, and facing fundamental questions.

“How do you position a business that's going to lose 12 to 18 months of operation to survive?” he said.

“How do you look after the more than 2,000 staff in that industry? How do you slow down the cash burn for long enough for a revival to begin?”

He added: “The last thing you want is for that whole sector to collapse in a raft of bankruptcies.

“They're in these positions through no fault of their own and it's a question of life and death in terms of the survival of these businesses.”

In general, Mr Fagundo said the more impacted a business was by the crisis, the less optimistic it was about the future.

Adapting to the ever-evolving restrictions to combat the spread of the virus is an ongoing challenge for businesses.

Mr Fagundo said he understood that the fast-moving situation did not allow for a two-week lead time before regulations came into effect. However, it was very challenging for businesses to hear of a rule change in an evening government press conference that would impact their operation the next day.

Phase 2 reopenings have seen dozens of businesses needing to organise themselves rapidly to adjust to rules on physical-distancing and personal protective equipment.

David Burt, the Premier, warned last week that businesses who failed to comply would be ordered to close.

Mr Fagundo said flexibility was needed because some rules required interpretation. However, chamber members had not complained about heavy-handed treatment from the authorities.

“The feedback I'm getting is that enforcement activities are appropriate,” Mr Fagundo said.

“So if the police or the regiment see something that they think is not as it should be, but there is a lack of clarity in the regulations, then there is a conversation and checks are made with the Ministry of Health.

“Have there been teething pains? Of course. Over the first couple of days there were some difficulties, but what I'm hearing is that things have stabilised.”

Also the Government had adjusted regulations when businesses had shown that it would be reasonable to do so, Mr Fagundo said.

“I think, on the whole, it's been moving in the right direction,” he added.

Mr Fagundo said he was seeing a strong desire from chamber members to do right by their employees.

“Employees are an important part of what makes a business what it is,” he said. “Employers feel strongly about that.

“There's a range between what they have to do under the Employment Act, what they'd like to do to take care of people and what they can afford to do as their cash reserves dwindle.

“That's creating a lot of angst and emotional turmoil among employers.”

Mr Fagundo is a member of the Economic Advisory Committee, set up by Curtis Dickinson, the finance minister, to work out ways to help the economy back on its feet.

“Being the representative for local business on the committee is a role I take very seriously,” he said.

Crisis challenges: Dennis Fagundo, the president of the Bermuda Chamber of Commerce (File photograph)

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Published June 01, 2020 at 9:00 am (Updated June 01, 2020 at 1:44 pm)

Law change could save businesses and jobs

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