Employment law overview: Cyprus Jan 11 2008 Christophoros Christophi Cyprus labour law is an amalgam of common law and statute law. Standard contract law principles principally govern employment relationships, statutory rights and obligations supplement them where appropriate. Sources of law Cyprus was a British colony from 1878 until 1960. As a result, the marks of the English legal system, especially the doctrines of common law and equity, are deeply routed in Cyprus' legal tradition. As far as employment law is concerned, a number of legal principles such as the right to work, the right to belong to trade unions, and the prohibition of discrimination on grounds of race or sex stem directly from the constitution. Cyprus has also ratified all the major international conventions of the International Labour Organisation. The harmonisation of Christophoros Christophi Cyprus law with the acquis communautaire brought substantial changes in many areas of labour law. Some important pieces of legislation that were introduced and affected domestic law are: 1. The Preserving and Securing the Rights of Employees during the Transfer of Businesses, Undertakings or Parts of Business Law (Law 104(I)/2000), referred to as the Transfer of Undertakings Law, Law 104(I)/2000. This law harmonised Cyprus law with the provisions of the Transfer of Undertakings Directive 77/187EC. 2. The Collective Dismissals Law (Law 28(I)/2001) which harmonised domestic law with the Collective Dismissals Directive 98/59/EC. 3. The Protection of the Rights of Employees in the event of Insolvency of the Employer Law (Law 25(I)/2001) which harmonised domestic law with Directive 80/987/EC. Employment contracts Employment contracts are concluded freely between employers and employees. Any term agreed is valid provided that it does not contradict any law. Basic employee rights are safeguarded by statute and may be summarised as follows: 1. A working week cannot exceed 48 hours, including overtime. 2. Parents are entitled to maternity and parental leave (20 weeks for maternity leave). 3. Equal pay for equal work is safeguarded. 4. Minimum wage is guaranteed. 5. Dismissal from employment can take place for specific reasons. Termination of employment The Termination of Employment Law (Law 24/1967) is one of the principal employment law statutes in Cyprus as it governs the termination of the employment relationship. It is composed of six parts and four schedules. The first and fourth schedules set the basis of compensation for arbitrary dismissal and redundancy, respectively; the second schedule sets the rules for "computation of period of employment"; and the third schedule deals with "continuity of employment". Part one of the law defines an employee as any person who works under a contract of service. Irrespective of this definition, the court may consider a person to be an employee without a contract if it believes that a relation of employer and employee exists. Part two of the law deals with unfair dismissal situations. The basic rule is that a dismissal is unfair if the employer terminates the employment for any reason other than the exceptions included in section five of the law. To qualify for unfair dismissal compensation an employee must be less than 65 years of age and must have been continuously employed by the employer for not less than 26 weeks, unless there is a written agreement that may extend the qualifying period of continuous employment up to 104 weeks. In cases where a dismissal is declared unfair, the employer must compensate the employee. The compensation is calculated in accordance with the first schedule of the law. This provides compensation of not less than what the employee would have received under the fourth schedule (dealing with redundancy payments) up to a maximum of two years' wages. Factors to be considered in the award are wages, length of service, loss of career prospects, circumstances of the dismissal and the employee's age. The fourth schedule of the Termination of Employment Law determines the level of compensation according to the years of employment which are codified in the table below. Years of Maximum compensation in case the employment dismissal is unfair 1-4 Two weeks for every year Five up to and 2.5 weeks for every year including 10 11 up to and Three weeks for every year including 15 16 up to and 3.5 weeks for every year including 20 21 up to and Four weeks for every year including 25 Section five of part two states the cases where termination of employment does not give rise to compensation. These are: If the employee fails to carry out his work in a reasonably efficient manner. If the employee becomes redundant within the meaning of part four of the law. The termination is due to an act of God or force majeure. The contract is for a fixed term and has expired. The employee renders himself liable to dismissal without notice. When it is clear that the employer-employee relationship cannot reasonably be expected to continue. The employer-employee relationship cannot reasonably be expected to continue when the employee is guilty of gross misconduct; he commits a criminal offence in the course of his duties without the agreement of his employer; he is guilty of immoral behaviour in the course of his duties; or he repeatedly disregards work and other rules. It should also be noted that a lawful termination by the employee, as a result of the conduct of the employer, may be considered as a constructive dismissal or termination by the employer within the meaning of the law. The contracting parties agree the period of notice for termination of an employment contract but it cannot be less than what the law provides. The tables below show the minimum periods of notice that must be given. From the employer to the employee. Weeks of employment Minimum notice in weeks One to less than 52 1 52 to less than 104 2 104 to less than 156 4 156 to less than 208 5 208 to less than 259 6 260 to less than 311 7 312 and more 8 From the employee to the employer. Weeks of employment Minimum notice in weeks More than 26 but less than 52 1 More than 52 but less than 260 2 260 or more 3 Employment of foreigners Non-Cypriots employed by local employers It is very difficult for a non-Cypriot to obtain a work permit to work in Cyprus for a local employer. For such a permit to be given it must be shown that, because of qualifications and know-how, no Cypriots are readily available for that particular post. The Ministry of Labour through the local labour office supervises this process. Work permits are usually given for six months and are renewable. A non-Cypriot that works for a local employer will be part of the social security scheme. The employer will, therefore, be obliged to make social security deductions from the employee's salary and remit these deductions, together with an equal amount, being the employer's contribution, to the social security authorities. Non-Cypriots employed by international business companies It is a simple procedure for non-Cypriots that international business companies employ to obtain a work permit for the first 24 months of employment. Renewals are given annually thereafter, provided that the employee and employer comply with the regulations that the Ministry of Interior and the immigration authorities impose. To be eligible to obtain a work and residence permit as a director or employee of a company, the company has to show that it has made a minimum investment in Cyprus of at least €171,000. In addition, the directors have to show that they have available funds for their salary, at least €41,000, i.e., to cover their salary for one year. The main criteria may be summarised as follows: 1. The applicant company must have transparent ownership, i.e., the beneficial shareholders have to be disclosed to the immigration department. 2. The company must maintain offices in Cyprus. As proof of this a lease is required. 3. The company should operate during normal business hours with its own personnel. 4. It should be able to prove that it is economically active and viable. Each year it has to file audited accounts and annual returns. 5. The minimum share capital is €42,700. For the employment of more than two alien directors a bank reference is required from a Cypriot Bank that certifies the ability of the company to pay its employees. A company that fulfils the above criteria can employ foreigners in the position of directors or managers. The maximum number is three unless the Department of Immigration is convinced that a greater number is required. The requirements that each candidate must fulfil are: to be at least 24 years old; to be qualified for the position, i.e., possess the necessary academic qualifications and education; to receive remuneration analogous to his/her position. The minimum accepted salary is €41,000 per year; and to prove that he can support himself and his family for a period of one year. This is usually proven by producing statements of a bank account that show that the candidate has at least an amount of money equal to his salary for one year. Non-Cypriots employed by international business companies are not part of the social security scheme and are exempt from any contributions. Workers safety, health and welfare Legislation safeguards the workers' right to safe and healthy working conditions. The core of the legislation is the Safety and Health at Work Law, which is in line with the provisions of ILO Convention 155 of 1981 on Occupational Safety and Health, as well as with the principles and most of the provisions of EU Directive 89/391/EEC (Framework Directive). Social insurance In October 1980, a new social insurance scheme was put into operation. With some minor exceptions, the scheme covers all employed and self-employed persons on the island. Non-employed persons may, under certain conditions, join the scheme on a voluntary basis. Trade unions After independence in 1960, the Cypriot trade union movement became more organised and substantial. The white- and blue-collar labour forces increased spectacularly due to the development of industry, commerce and services. Apart from the Pancyprian Federation of Labour (PEO) and the Cyprus Workers' Confederation (SEK), many other trade unions and occupational organisations came into being, such as the Pancyprian Public Employees Trade Union (PASYDY), the Cyprus Greek Teachers' Organisation (POED), the Organisation of Secondary School Teachers of Cyprus (OELMEK), the Association of Teachers of Technical Education Cyprus (OLTEK), the Cyprus Union of Bank Employees (ETYK), the Pancyprian Federation of Independent Trade Unions (POAS) and the Democratic Labour Federation of Cyprus (DEOK). Conflict between trade unions in Cyprus is rare. This unity became the principal reason for the successful establishment of joint action among the leadership of the PEO, the SEK and the other occupational organisations. In the spirit of united action, the PEO and the SEK submit joint claims and undertake, with other trade unions, common struggles. Sex discrimination Article 28 of the constitution prohibits all forms of discrimination. A number of laws have also been passed that are aimed at the elimination of sex discrimination. The source of these laws has been certain international conventions, most notably the ILO conventions. In addition, case law has offered some assistance towards the development of the law, albeit of limited impact. • Christophoros Christophi started his own practice in june 2001. He specializes in Company and Commercial Law, Employment Law and Industrial Relations, while he has shown particular interest in European Law, Media Law, Information Technology Law, Internet Law and Intellectual Property Law. This article first appeared on Complinet on www.complinet.com on January 11 2008. 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