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It’s just not fair

The captain gets a call. Sorry, guys, the crew are all being laid off. Tell them to pack their stuff and go home.

This has happened to several yachts – not as brutally, but the consequences are the same as if they have been fired. 

This uncertainty in the time of the Coronavirus has led some owners to make hasty decisions regarding the short term management of their yachts. And who can blame them, given the high running costs, the canceled charters and the difficulties in getting the yacht serviced? But when these decisions involve a summary dismissal of the crew, a legal threshold is crossed. The owner and his managers may face claims of breach of employment contract and claims for unfair dismissal.

It might seem short term expediency for an owner to unilaterally lay off staff when the yacht is hemorrhaging money. But even if much of the legal infrastructure of the industry has been mothballed and working from home, it will be back in full swing when the Beast is slain, or at least pacified. Expect a slew of expensive judgments for decisions made in haste. Of course, we know, the majority of owners are sensible people and will take heed of their yacht managers and legal advice. Most of them anyway. But just in case… 

The UK courts are often used to settle legal claims even when the flag state and country where the grievance is not in the UK. In many build contracts, the UK is the country of jurisdiction for any claims or disputes. Seafarers Employment Agreements are subject to the MLC and allow for the UK to be the legal forum if all parties agree. Some SEAs allow the shipowner to suspend work for ‘force majeure’ or unforeseen circumstances without pay, depending on which national laws the SEA is governed by.

The UK’s Common Law, as well as its long-established Maritime Law, is often used not just for convenience but also because High Court writs are often enforceable internationally

Nautilus has a good break-down of various serious issues a crew might face during this COVID crisis.

The yacht laying off staff for the duration of the outbreak, without pay. Unless force majeure is invoked in the contract, this cannot be done unilaterally without there being a breach of contract. Managers and owners should negotiate their way to reach a sensible solution that does not involve breaches of contract and, more seriously, a failure to look after the well being of the crew, which renders them liable for prosecution and punitive fines. Suspending employment without pay is in the same legal area. Not a good idea. A virus does not in most SEAs remove the legal responsibilities of an owner in regards to good employment practices.

In the jurisdiction of the UK, redundancy can not be applied when three procedural steps are taken. There has to be a demonstrable reason for this based on financial criteria, not a whim. There has to be consultation with the staff. Evidence must be shown that that staff are selected for redundancy on the grounds that their roles are redundant, not the individual. And there has to be some attempt to find employment in another part of the company for those selected for redundancy, if possible. Given that most yachts are wrapped in SPVs or trusts, the last is unlikely.

Most redundancy claims are either won or lost on the basis of procedure. It is surprising how many companies make elementary errors in applying for redundancy and lose on a matter of procedure. There is a big downer here, though. You have to be in continuous employment for over two years.

What happens if a yacht simply transfers its holding to a new trust, shutting down the existing one? An SEA must show the name, address and telephone number of the shipowners which is hardly ever the owner. Pursuing this through the courts can be a challenge as well as expensive. And if you are successful, getting paid is another mountain to climb if the owner really does not want to cough up. And seizing the ship is not a clever idea – you become liable for the upkeep, marina fees and crew wages.

Yes, it’s not fair. Who said life was fair?

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