This article, the first in a two-part series on the new draft labour code, examines the topic from the perspective of employers. The next instalment will focus on employees.

Hiring in the Virgin Islands can be a notoriously tricky business.

For business owners, the prospect of a new employee means a variety of risks and responsibilities. In a territory where some 60 percent of the workforce is made up of expatriates, a potential worker has to be vetted against local and foreign candidates. Employees from abroad have to successfully apply for a work permit; and, once in the territory, some seek other jobs or prove unemployable.

Add to that the issues of pensions, gratuities, healthcare plans and safety provisions. Employers say they have their hands full. But a new draft labour code may change that: Some say for the better, others, for the worse.

The bill, which received its first reading at the Dec. 28 House of Assembly session last year, aims to rectify the legislation last updated more than 35 years ago. It creates provisions for the resolution of workplace disputes and discrimination, establishes standards to ensure fair and reasonable minimum working conditions, and updates the territory’s work-permit regime.

And while most employers agree a new code is sorely needed, many fear that the new act will dramatically raise the cost of doing business in the territory. This, they say, puts the territory at odds with the rest of the world, where the sluggish economy has forced governments to push for job creation.

Global troubles

Take the United States, which lost four million jobs last year, the worst year for job losses since the post-World War II years. Eighty-five thousand jobs lost in December 2009 dashed hopes of a turnaround. In the Eurozone, unemployment reached 10 percent in November — the first time unemployment in the region reached double digits since the introduction of a single currency. Currently, 15.7 million unemployed reside in the bloc, the highest since the early 1990s.

In the VI, where unemployment is almost non-existent, the territory’s employers see a domino effect. High labour costs, they say, are unsustainable given the VI’s current economic situation. Businesses are still reeling from a tepid tourism market and weakened financial sector, from 2008-2009. The only recourse, they say, will be fewer staff working fewer hours — a measure which could increase the territory’s unemployed and underemployed.

“In tourism, the cost to existing businesses will be suffocating,” said Charles Tobias, speaking from his Fish Bay home during a recent interview. Mr. Tobias, who formed the popular restaurant and retail chain Pusser’s West Indies Ltd., in 1979, employs more than 200 people in the territory, where around 20-25 percent of his international business is generated.

For the restaurateur, new provisions in the draft code that amend the workday, increase benefits significantly, include mandatory severance as a windfall payment, and force business to underwrite safety and gratuity committees, will undermine businesses’ ability to survive.  

“Enactment of the major parts of this proposed costly legislation will have one of two effects on existing businesses in the BVI: it will drive them out of business, or it will drive up the costs to a point where our tourism sector will be priced out of reach to many of those who currently visit us,” he explained.

Provisions questioned

One such amendment is a new provision in the draft act that defines the workday as eight hours “inclusive of meal and other agreed intervals.” Another is a limit on overtime, which caps total daily work at 12 hours, or 60 hours in a seven-day week.

“In the hospitality business, with its ups and downs caused by short-term seasonal traffic changes, this is impractical,” Mr. Tobias said. “This will force business owners to either hire more staff and to increase prices to cover it, or to reduce service levels and decrease standards.”

Mr. Tobias also worries about a mandatory gratuity committee required under the new legislation. At Pusser’s, waiters who earn a “basic wage” earn a larger percentage of the gratuities, then tip out to bar and kitchen staff based on their hourly wages. Management, he said, distributes 100 percent of all gratuities to the employees.

While the restaurateur agreed protections should be in place to prevent managers from taking from the tip bucket, he argued that an employee-based committee would not work. “More than likely, the personal interests of those on the committee will outweigh those who are not represented,” he said.

Other employers in the territory are grappling with the proposed amendments that would guarantee severance pay or a pension plan for employees over 60, who have worked continuously for ten years with an employer.

The difficulty, employers say, is that the provision is retroactive. Few businesses have accrued the cash to pay their employees a full severance pay, and, owners argue, social security is already deducted from the payroll.

Private employers are not alone in worrying about unfunded pensions. Currently government, the largest employer in the territory, carries about $200 million in unfunded pension liabilities. In 2008, government paid out an estimated $9.6 million in benefits to 488 retirees.

Peter Haycraft, founder of Rite Way Food Markets, supports the new labour code but said it requires some tinkering. One difficulty, he said, is the level of bureaucracy encoded in the new law. Safety committees, regular reports and inspections could leave the door wide open for businesses to be shut down, indefinitely, without recourse, he said.

Under the new code, businesses with 25 or more employees are required to form a committee tasked with creating a written statement regarding safety and health. The committee is entitled to take whatever time it needs to carry out its duties, and to be paid by the employer for time spent.

“No one can disagree that after so many years the Labour Code needs bringing up to date,” Mr. Haycraft said. “But they have to be careful, particularly in a downturn. 2010 for the BVI may be worse than 2009.”

Financial sector

Uncertainty is bad for business. And for many employers, the greatest difficulty with the new labour code does not lie with the document itself, but how it might be utilised.

A new tribunal established to resolve disputes can make non-appealable decisions, for unlimited damages, “for reasons the tribunal considers appropriate,” according to the law. Exemptions on the seven-year limit for work permits can be granted to “key employees” or “qualified investors.” These known unknowns worry some in the business community who say the tourism and financial industries have thrived in the VI because of light-touch regulation.

“So much has to do with how it is implemented,” said Richard Peters, a managing partner at Harney Westwood and Reigels. The lawyer, who has worked at the local firm for more than 30 years, said the law could work well or not at all, depending on how it is interpreted.

“It is one thing to have all these extra laws, but if you don’t enforce them at all, then they are observed in the breach,” he said.

Others in the financial sector are concerned about their ability to attract highly specialised labour with limitations on the number of years employees can remain in the territory.

Cayman Islands Premier McKeeva Bush has attracted praise and criticism for his plans to revamp the sister territory’s labour laws, in a bid to keep the territory’s financial services industry from fleeing.

Measures being considered include expedited work permit applications, three- to five-year work permits for accredited investors in the financial services industry, exemptions from standard term limits for the work-permits of senior employees, and guarantees to not increase work-permit fees for a period of four years.

Barbados, which has been grappling with immigration problems stemming in part from its commitments to the Caribbean Community, called for a “readily available pool of highly qualified and skilled human resources on which businesses can draw,” in an October 2009 Immigration Green Paper.

“Government’s policy, therefore, must enable it to attract and retain the requisite numbers of highly qualified and skilled immigrants in enough time to make a critical difference to the country,” the report states. “It must be borne in mind that the country is competing with developed countries for this limited pool of resources, especially in the area of information and newly emerging technologies.”

Yachting sector

For The Moorings, which currently employs more than 250 staff in the territory, the new labour code could price them out of the local charter market. “The BVI is an expensive destination with high cost holidays for our customers. It leaves us with little elasticity in our pricing. It will make it difficult to  operate in the BVI, because either we, or the customer would have to absorb that cost,” said Peter Budd, head of human resources at TUI Marine, which manages The Moorings and Sunsail.

“We have invested an awful amount of money, including building new facilities. We’ve done that and we want to continue to do that, and it makes it extremely difficult to operate moving forward under the current draft,” Mr. Budd said.  

Like other businesses here, the charter operator is concerned about its ability to attract and keep specialised staff. “It potentially causes a real difficulty around how long we can approve staff or have staff on the island,” said Peter Cochran, vice president of stategic develpment at TUI Marine .

With sailing destinations opening up in Mexico, the Dominican Republic and Cuba, the territory is also facing competition from abroad. “The BVI cannot afford to out-price itself. It’s a very attractive territory. We love being a partner there, but don’t underestimate what the other destinations are offering,” Mr. Cochran said, adding, “You can’t price yourself out of the market.”

Looking ahead

The future of the draft labour code lies with legislators. At a ministerial press conference on Monday, Premier Ralph O’Neal said he was unsure what position the House of Assembly would take.

“I cannot predict, I cannot say when it will be debated. The HOA … might decide to set up a committee to examine it. They might decide not to have a second reading. It all depends on what mood the HOA is in,” Mr. O’Neal said.

The premier also complained that the public did not weigh in during a series of meetings held last year. About 30 people gathered for a public meeting on the topic at the H. Lavity Stoutt Community College in May, but the conversation soon turned heated, as attendees voiced concerns from everything from work permit renewals to maternity leave.

Today, about eight months later, many employers have yet to read the new labour code. Even so, most would agree that the old law needs modernisation: the problem is that few can agree how.

For Merritt Herbert, owner of ZBVI and the Bargain Centre, a new work permit system should focus on making the system fair to employees. Pension, he argued, should be available to employees wherever they go. Mr. Herbert also supported the proposed tribunal. “Some employers, they don’t deal with employees honestly and correctly. They make them do work that isn’t according to the code,” he said.

As for the proposed term limit on work permits, Mr. Herbert said employers would have to decide whether it would be good or bad. “If you have someone on the job, they know what they are doing. It will be very difficult to uproot them. Especially if you have an engineer, or someone technical. Technical people, you cannot just put your hands on them overnight,” he said.

Rosewood Little Dix Bay Managing Director Martein van Wagenberg hadn’t seen the latest draft of the labour code when he spoke with this reporter this month. But for the hotelier, who manages over 300 staff, the most important facet is clarity.

“I hope that the labour code is fair enough about what is being expected from everyone and interpretation is kept to a minimum, or different kinds of interpretation are kept to a minimum, so everyone understands what you have to do,” he said.

For a territory like the VI, a labour code like that just might work.