Lower oil prices have had a considerable impact on Kuwait. Therefore it is no surprise that Kuwaiti oil companies are trying to reduce their spending budgets, cutting costs left and right. This is also true for other sectors in Kuwait, where cuts are directly affecting employees and their families. Some employees have faced layoffs and redundancies. Others may see their benefits cut or taken away entirely. This has raised many legal questions and I hope my answers help our readers to better know their rights.
Bankruptcy and termination
Question: My boss recently came to us and told us that because of bankruptcy/restructuring, a few hundred of us will be terminated on the spot without any notice . I do not know what that means. Can we be laid off because the company is losing money? And if so, so we still get our termination indemnity and other benefits?
Fajer: Although private companies have the right to terminate because of bankruptcy, bankruptcy should be a final verdict issued by the Kuwaiti counts as stated in Article 50 (a) of Kuwaiti labor law 6/2010:
“Article (50) The employment contract shall be deemed terminated in the following events:
a- If a final verdict was issued declaring bankruptcy of the employer;
b- If the establishment was permanently closed.
In the event where the establishment is sold, merged with another establishment or transferred by inheritance, donation or other legal action, the work contract shall remain valid under the same conditions and the obligations and rights of the original employer towards the workers shall be transferred to the employer who has taken his place.”
Now it is important to state that for those that have a contract with a fixed term (and not renewable, or only renewable with written approval), then a contract could end with the end of its term easily, with no consequences for either party. If the contract has a specified term, then the employer may terminate the employer but must pay him/her three months’ salary or have him/her work for another three months.
Rehired by contractor
Question: My boss said that he is going to lay us off and then we shall be rehired by a contractor and therefore lose our benefits. Is this legal?
Fajer: This is a very tough question to be honest with you and I think lawyers (depending on which side they are representing) have different thoughts on the issue. Some (and I personally believe so) say that you are still technically working for the same employer and therefore this seems deceiving to the law, that aims to protect the employee.
Employers are towards this way because they cannot legally reduce an employee’s salary as stated in Article 28 of Kuwait Labor Law 5/2010, “Regardless of whether the work contract is for a specific of indefinite term, the remuneration of the worker may not be reduced during the contract validity period. Any agreement to the contrary, whether made before or after the effective date of the contract, shall be deemed null and void because this matter is related to the general order.”
Employers also cannot take away an employee’s benefits that are either agreed upon in the employment contract or are constantly given to the employee. I will give an example. If you have been receiving every year a ticket, then a ticket is obligatory. If you have been receiving a bonus only on the years that the company is profiting, than your bonus is not obligatory.
Other lawyers say that if both parties have agreed to the termination and ‘rehiring’ by the contractor, and there was consent from both parties then it is legal. I have my doubts on whether the above argument will hold up in court, but to be completely honest with my readers, I do not have experience with a situation that is similar.
Regardless, the employee should be paid ALL of his/her benefits, rights, and termination indemnity when the contract is ended and before the employee is “rehired” by the contractor!
I also plead to employers to think about the consequences of such behavior and to be compassionate towards their employees, to treat them as humans and not as just another number. I know that companies are commercial entities and that in order to survive, the economy cuts have to be made, but let them be done with compassion, with thought. Let them be done with a thank you.
I apologize to my readers that some of my information is being repeated, but I find it vital, in these times to repeat to my readers their rights.
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By Attorney Fajer Ahmed