Covid-19 Legal Updates
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Reducing employees’ workload, working hours and pay during the country pandemic/ lockdown without triggering redundancies.
On 8 May 2020, the Minister of Labour and Social Security issued Statutory Instrument No. 48 of 2020, The Employment Code (Exemption) Regulations, 2020 (“SI No. 48 of 2020”) exempting a person, class of persons, trade, industry or undertaking listed in the Schedule thereto from provisions of the Employment Code Act No.3 of 2019(the “Employment Code”) specified in the Schedule. The Minister is empowered under section 2(2) of the Employment Code, by way of statutory instrument, to exempt any person, class of persons, trade, industry or undertaking from provisions of the Act.
In view of the forgoing, provisions of sections 36 and 37 of the Employment Code have been exempted in respect of all employees. The said sections relate to employee’s entitlement to annual leave (with full pay) and computation of leave benefits, respectively. Prior to the exemption aforesaid an employee, except casual or temporal employee, who has worked for a continuous period of 12 months was entitled to annual leave on full pay for a minimum of 24 days in a year, exclusive of public holidays or week rest period. In the event that the employer does not grant the employee annual leave as per requirement, the employee was entitled to ‘automatic commutation’ of the leave days in the form of wages using the formula in Fifth Schedule to the Employment Code or agreement between parties, whichever is favourable to the employee.
SI No. 48 of 2020 has also exempted the application of section 48 of the Employment Code to employers who have been assessed by the labour office to be in financial distress in accordance with the principles set out in guidelines in the Schedule thereto. The said section relate to placing employees on forced leave subject to payment of basic salary throughout the leave period. In essence, an employer who has qualified for the said exemption may validly put employees on forced leave without pay.
The guiding principles for an employer to qualify for the exemption as per Schedule to the SI aforementioned include (i) a review of quarterly returns for purposes of checking reduction in turnover from the last return; (ii) assess documents relating to suspension or reduction of business; (ii) assess cash flow projections; (iii) review past audited financial statements; and (iv) review of staff payroll.
The payment of severance package in form of gratuity or retirement benefits, as case may be, to expatriate employee(s) and employee(s) in management positions who are on fixed term contract of employment has been halted by virtue of the exemption of section 54(1) (b) and (c) of the Employment Code. An employee is regarded to be a member of management if-
- is empowered to make management decisions;
- is entrusted with personnel management and industrial relations functions; or
- reports directly to the Chief executive.
Further, SI No. 48 of 2020 has nullified the requirement to avail a 30 day notice of redundancy to the employee or employee representative and the labour office before effecting the redundancy at a place of work. This, however, is only extended to employers who have been assessed by the labour office to be in financial distress in accordance with the guiding principles aforementioned.
Furthermore, the payment of gratuity to expatriate employee(s) and employee(s) in management positions on long term contracts of employment has been halted by virtue of exemption of 75 of Employment Code.
Outstanding Leave Days and forced paid leave or unpaid leave during the pandemic/lockdown. Deducting quarantine period from annual or sick leave
Outstanding Leave Days:
An employee (except one employed as casual or temporal) who has served the same employer for a continuous period of 12 months is entitled to take annual leave on full pay at the rate of two days per annum. Thus, it is legally possible to compel the employee proceed on annual leave taking into account the outstanding leave days.
Forced Paid/Unpaid Leave:
Employees may proceed on forced leave within the limits of the provision of Employment Code elucidated above which include an entitlement to a basic pay.
Deducting quarantine period from annual or sick leave:
The days taken during the quarantine period may only be deducted from an employee’s annual leave if the ‘time-out’ period was taken as such. However, sick leave falls in a different category with a pre-cursor of there being a medical certificate relating to the employee’s inability to perform normal duties of the employer due to illness or injury. It would, therefore, appear that the same may not be imposed nor days taken during the quarantine period be deducted as such.
The above notwithstanding, an employer who has qualified for exemption relating to the application of section 48 of the Employment Code pursuant to SI No. 48 of 2020 may validly proceed to put employees on forced leave without pay.
Renegotiating terms of employment
Terms of employment can be renegotiated, though regard must be had to the fact that the re-negotiated terms must meet the minimum employment benefits as set out in the Employment Code.
Employees who cannot work remotely may be forced to take annual leave as long it meets the minimum requirement set by the law and the contract of employment.
Where an employee is unable to work remotely because of the nature of their job but needs to stay home, the employer may, under this circumstances, opt to place the employees on forced leave upon which they would be entitled to basic pay otherwise the normal terms of employment may continue.
Employment Entitlements and Benefits while working remotely during pandemic/ lockdown
Save where there is an agreement to the contrary (which agreement should include the minimum employment benefits under the Employment code) or where an employee is placed under forced leave or contract of employment is terminated, the employee will be entitled benefits as per prevailing contract of employment.
However, an employer who has qualified for exemption relating to the application of section 48 of the Employment Code pursuant to SI No. 48 of 2020 may validly proceed to put employees on forced leave without pay.
Performing other jobs where core functions are down during pandemic/lockdown
It will depend on whether or not the taking of such other jobs would be considered as a unilateral variation of condition(s) of employment by employer in an adverse manner in which case the consent of the employee to ‘carry on’ would be imperative.
Redundancy/Termination of Employment
Redundancy may be triggered either by the entity ceasing to carry on business or ceasing/diminishing of requirement of work of particular kind of which the employee is engaged or adverse alteration of condition of service without consent of employee. Thus, mere existing of the pandemic may not, in itself, make employees redundant.
Company COVID-19 policy and Company liabilities
At the moment there is no mandatory requirement for a written COVID-19 policy at the work place. However, guidelines have been issued by the government pursuant to SI No. 22 of 2020 relating to regulations for facilitating the management and control of COVID-19. Non-compliance with the said regulations is an offence and thus persons’ responsible can be punished.
Employment insurance policies (government or private) during this period and accessing these policies.
There are statutory schemes such as the Workers Compensation Fund and National Health Insurance Authority. The former was established under an Act of parliament relating to compensation of workers for disabilities suffered or diseases contracted during the course of employment. The later was recently established, also under an Act of parliament, to administer a national health insurance fund. The contributions to the above is a legal requirement and therefore accessible to all.
Current situation in the country
Partial lockdown for 14 days from 26 March 2020 with restrictions on public gatherings and closure of bars, gyms, casinos, among others. The partial lockdown was last extended on 8 May 2020. Gyms and casinos have since been allowed to operate normally.
Travelling to Zambia
There is still entry into Zambia at the moment. However, person arriving the country will be subjected to mandatory screening and quarantine period of not 14 days.
Restrictions or cancellation on visas applications/issuance
There is restriction all foreign travel for Zambian nationals pursuant to regulations under SI No. 22 of 2020, with the public urged to re-schedule avoidable travel.
Expiration of legal status while in Zambia
There appears to be no wholesale restriction on exiting the country especially as it relates to foreign nationals. However, if for some reason related to results of mandatory screening being undertaken pursuant to regulation for the management and control of the spread of COVID-19 and one is required to be quarantined for period outside the visa expiration, the same could be used as a ground for extension of stay in the country.
Expats are allowed to leave the country so long as it is within the confines of the regulations under SI No. 22 of 2020.
Fiscal measures toward countering the economic effects of the pandemic
The Government of the Republic of Zambia (GRZ) has set up an Epidemic Preparedness Fund under the Ministry of Health amounting to ZMW57 million (around USD 3 million). Further, cabinet approved a COVID-19 Contingency and Response Plan with a budget of ZMW659 million (around USD35 million) under the Disaster Management Unit. Furthermore, a sum of ZMW2.5 billion (around USD 132 million) was announced to be released by government for purposes of easing liquidity in the country by applying to payment of arrears owed to domestic suppliers of goods and services, reduction of outstanding arrears to pensioners and retirees, reduce outstanding third party arrears and other employee related commitments and specifically apply ZMW140 million (around USD 7 million) thereof to payment of local contractors in the road sector.
New laws/regulations towards combating the pandemic
Two Statutory Instruments (SIs) pursuant to the Public Health Act were passed on 17 March 2020. These are SI No. 21 of 2020 designating COVID-19 as a notifiable disease and SI No. 22 of 2020 relating to regulations for facilitating the management and control of COVID-19.
Effect of the Pandemic on the country’s economy and any recession risks
The most noticeable effect on the economy since the advent of the pandemic has been the continuous slide in the value of the local currency as against major currencies such the United States Dollars. It is almost impossible to rule out a risk of a recession in the light of reduced economic activity as result of the pandemic.
None at the date of this update
Borrower protections and moratorium on loan repayments
None at the date of this update
Other relevant information or government measures
GRZ in in the process of making applications to multilateral partner organisations such as the IMF and the World Bank in order access additional funds for COVID-19 support.
Tax exemptions/reliefs during this period – either general or related to a particular sector
The Government of the Republic of Zambia has taken the following task relief measures:
- suspended exercise duty on imported ethanol for use in alcohol based sanitizers and other medicine related activities;
- removed VAT on imported spare parts, lubricants and stationery;
- suspended import duties on importation of concentrates in the mining sector; and
- suspended exercise duty on precious metals and crocodile skin
On 20 April 2020, the Minister of Finance announced a waiver of penalties and interests on tax declarations and liabilities resulting from the impact of the COVID-19. The Zambia Revenue Authority (ZRA) has since issued guidelines on the implementation of the pronouncement by the Minister for all individuals and businesses as a way of cushioning taxpayers from the effects of the pandemic.
Grace period for the filing of tax returns
None yet as at the date of this update
Suspending obligations under a contract in light of COVID-19. (Considering Force Majeure)
Parties may suspend their obligation under a contract. However, it depends on the facts of the matter in relation to the ability a party to perform the obligations under contract in the light the COVID-19.For instance, in Zambia there is no complete shutdown to economic activities and therefore it may not be deemed impossible yet to fulfil certain contractual obligations notwithstanding the advent of the pandemic. Further, it may also boil down to what and how force majeure or event of force majeure is described in specific contracts.
Whether or not COVID-19 constitute force majeure is question of facts and/or construction of the relevant clause(s) under contract. Aside from the generic definition, there is no legal definition for force majeure specific to Zambia. Therefore, the threshold will, by and large depend, on the list and extent (scope) of the definition of force majeure in a contract.
Further, under the common law doctrine of frustration a party may recover payment and/or expenses made towards the performance of the contract prior to the occurrence of the ‘frustrating’ event.
COVID-19 as a Material Adverse Change in a contract
It depends on the definition of material adverse effect in the contract and the effect of occurrence thereof. If established that the outbreak in the context a particular agreement does not give rise to a MAC with the effect of discharging a party of obligations under a contract then usual remedies for breach of contract such as damages, specific performance and declaration could be resorted to by the injured party.
Remedies for a party’s failure to perform its obligation under contract
If it is established from the facts of the matter that the COVID-19 situation does not constitute force majeure, the injured party can have recourse to normal remedies for breach of contract such as damages, specific performance and declaration.
Note that civil hearings in court have been suspended for 14 days from the 30th of March 2020. Only urgent matters such as injunction and stay of execution matters will be heard during the suspension.
Requirements to register documents under the Companies Registry
The filing of annual returns ought to be made within 90 days from the end of financial year of a corporation. The Companies Act (the “Act”) provides that failure do so will attract a payment of penalties. The Act, however, does empower the Registrar of Companies to waive such fees as are payable under the Act subject to the rules issued by the Board of the Patents and Companies Registration Agency.
The Government of the republic of Zambia has not issued any extensions of statutory timelines applicable under the Act. A company, in an event of failure to lodge documents within time due to closure of registry as a result of the COVID-19, may apply for waiver of penalties to the Registrar.
Effects of COVID-19 on delays to obtain regulatory approvals
The delay may affect the effectiveness or binding nature of the contract. Further, such delay may amount to a ‘frustrating event’ capable of discharging the parties of further obligations under the contract. There are no extension specific to corporate regulatory compliance a situation which could be attributed to the fact that the country has not been shut down completely by the authorities despite to the COVID-19.