RE: Legal Opinion on employment contracts of different employees of Company 1.
We refer to your letter dated 9 November 2006 on the above subject.
You have provided us with the following specimens of employment contracts:
1. Agreement for third party employees.
2. Letter of appointment of Distribution Managers.
3. Letter of appointment of Distribution Officer.
4. Letter of appointment of Management Trainee/Contractual employees (store officer).
5. Letter of appointment of unionised staff.
You have also provided a copy of the agreement between Company 1 and Company 1’s Union (“CBA”).
You require our legal opinion regarding whether there would be any legal complications in transferring the employees of COMPANY 1 to ZHP during the first phase of the due diligence.
On perusal of the specimen employment contracts it appears that COMPANY 1 has three types of employees: third party employees, non-workers and workers.
Third Party Employees:
In relation to the third party employees, the legal relationship between a third party employee and COMPANY 1 is based solely upon the contractual terms contained in the agreement between COMPANY 1 and the Firm providing the manpower. From perusal of the specimen Agreement for third party employees, it appears that COMPANY 1 may terminate the agreement by giving a written notice of 90 days to the Firm providing manpower. Under clause 6 of the agreement the Firm providing the manpower bears all responsibilities of the rights and obligations of the supplied manpower under the labour law, COMPANY 1 bears no such responsibility.
So our legal opinion is that COMPANY 1 should give the Firm providing the manpower a written notice of 90 days of the termination of the agreement for third party employees. After 90 days when the termination is effective, ZHP may if they desire hire third party employees from the same Firm or from another firm.
In relation to the non-workers, the legal relationship between a non-worker and the employer is based solely on the contractual terms between the two. On perusal of the specimen employment contracts of Distribution Manager, Distribution Officer and Management Trainee/Contractual employees (store officer) it appears that there are termination clauses in the said employment contracts, which allows COMPANY 1 to terminate the employment without assigning any reason for the termination. In case of Distribution Manager and Distribution Officer, COMPANY 1 will have to give one month’s written notice. In case of Management Trainee/Contractual employees (store officer), COMPANY 1 will have to give 15 days notice or pay in lieu thereof.
After the employment of the non-workers with COMPANY 1 has been terminated, ZHP can issue them letters of appointment with the same terms.
With regard to workers, the contractual terms of the employment must comply with the various Bangladesh labour laws.
From perusal of the specimen letter of appointment of a worker, it is appears that according to clause 4 of the letter of appointment, the employment of the worker can only be terminated in accordance with the provisions of the Employment of Labour (Standing Orders) Act 1965. But this statute has been repealed and replaced by the Bangladesh Labour Act 2006. So termination of a worker’s employment will now have to comply with this new law.
So if COMPANY 1 wants to terminate the employment of a worker, they will in effect be retrenching the worker and as such COMPANY 1 will have to following the conditions in Section 20 of the Bangladesh Labour Act 2006. Accordingly, firstly, COMPANY 1 will have to give the worker (worker means a worker who has been in service for not less than one year under COMPANY 1) one (1) month’s written notice indicating the reasons for retrenchment or pay wages in lieu of notice; secondly, COMPANY 1 has to send that notice to the Chief Inspector or any other officer authorised by him; and thirdly, the worker has to be paid at the time of retrenchment compensation which shall be equivalent to thirty days wages for every completed year of service or for any part thereof in excess of six months, or gratuity, if any, whichever is higher.
So it appears that terminating the employment contracts of workers will not be economically feasible for COMPANY 1. As such it is our legal advice that COMPANY 1 should hire out the workers to ZHP. From inspection of the specimen letter of appointment of the worker and the labour laws of Bangladesh, we could not find any legal rule or regulation that prohibits COMPANY 1 from hiring out their unionised worker. But with a view to promoting good labour management relations, the trade union must be consulted before the process of hiring out is started. In accordance with section 210 of the Bangladesh Labour Act 2006, COMPANY 1 should communicate in writing with the collective bargaining agent of the trade union about the hiring out. COMPANY 1 should ask the collective bargaining agent to arrange a meeting within fifteen (15) of such communication. In that meeting COMPANY 1 should reach a settlement on the issue of hiring out with the trade union and a memorandum of settlement should be recorded in writing and signed by both the parties and a copy there of shall have to be forwarded to the Government, Labour Director and conciliator or any other authorities required by law.
If you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”