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Cyprus: Government Assistance During the COVID-19 Pandemic

The global pandemic of COVID-19 has left no country unaffected, with a second wave currently sweeping through Europe. Since its arrival on the island in March 2020, the Cypriot government closely monitored the situation and acted swiftly. Early lockdown measures and widespread testing were effective in flattening out the initial infection curve, providing valuable reaction time to better equip and organise the healthcare system with medical resources and staff. The government’s response subsequently shifted from containment of the virus, which had brought the economy to almost a virtual standstill, to a re-opening of the economy with reinforced protection. To this effect, various measures, plans and schemes were enforced by the government in order to support the economy, its citizens, and workers from the severe impact of the pandemic.

As part of a budgetary policy response in the wake of COVID-19, Cyprus introduced its “Stability Programme 2020–2023”. The aim of the Programme has been to provide emergency relief and support the Cyprus economy under the present exceptional economic crisis that has arisen as a result of the pandemic. One of the measures introduced by the Stability Programme was the suspension of loan instalments for enhancing liquidity, enabling a payment moratorium for nine months to apply to credit-worthy borrowers that have been affected by the restrictive measures imposed by the authorities.

These temporary measures are applicable for a period from 30 March 2020 to 31 December 2020. The moratorium covers capital, interest and compound interest payments, and both physical and legal entities are eligible.

Liquidity Aid Measures

In addition to the above in May 2020, the Cyprus government announced further stimulus measures to “jump-start” the Cypriot economy, impacted by the COVID-19 pandemic, with major input from the European Investment Bank (“EIB”), in the form of loans worth approximately EUR 1.2 billion, along with interest rate subsidies for businesses and housing loans. By utilising the tools provided by the European Union and European financial institutions, the Cyprus government introduced various liquidity aid measures, as follows:

Pan-European Guarantee Fund

By participating in the Pan-European Guarantee Fund (established to tackle the adverse economic consequences of the pandemic), and in return for a contribution of EUR32.5 million, Cyprus expects to be allocated EURO 300-400 million of direct guarantees from the Fund for the needs of businesses. The Fund will guarantee up to 80% of the bank’s indebtedness to small- and medium-sized enterprises employing up to 3,000 people, with the caveat that they must not have laid off staff during the lockdown period. The guarantees are intended to encourage the banks to cover working capital shortfalls for businesses that were viable before the onset of COVID-19.

State Guarantees

The government will provide an additional EUR 500 million of state guarantees to the EIB, which will, in turn, advance loans at more favourable interest rates to businesses in the small- and medium-sized enterprise sector.

The Cyprus Entrepreneurship Fund

The Cyprus Entrepreneurship Fund will be expanded by EURO 800 million. Businesses with a maximum of 250 staff will be eligible to apply for a maximum loan of EURO 1.5 million, repayable over a period of up to 12 years at interest rates currently ranging from 2.55% to 4.5%, depending on the perceived risk of the loan. The Cyprus government will fund 50% of the new money via a loan from the EIB, with local lenders providing matching funding with a 50/50 split of the risk between the parties.

Scheme to Subsidise New Loan Interest Rates

A scheme that will subsidise interest rates for new loans taken out between 1st March 2020 and 12th December 2020 provided that the maximum interest rate for such loans does not exceed 4.25%. The subsidy will run for four years and cover loans taken out between 1st March 2020 and 12th December 2020, provided that the maximum interest rate on them does not exceed 4.25%. All previously viable businesses adversely impacted by the pandemic will be eligible to participate.

The loans may be used for the purpose of investment or, as working capital, but they cannot be used to repay existing indebtedness or for the purposes of restructuring a business.

Tax Measures

Aside from the aforementioned measures, and in order to further aid business liquidity, numerous tax and other measures were implemented, providing temporary suspensions of the duty to pay VAT (without any penalties) for February, March and April 2020, until November 2020, and an extension for the submission of tax returns and the settlement of overdue tax liabilities. Relief from import duties and VAT on imports of goods needed, from the European Commission to combat the effects of COVID-19 for the first seven months of 2020, was introduced as a further measure.

Extensions of two months were provided for the settlement of overdue contributions to social-insurance-related funds.

The increase in special contributions regarding the General healthcare system (GESY) was suspended for the period of three months, applicable from April–June 2020.

Business Suspension of Operations Schemes 

Certain business and other emergency measures were quickly introduced to alleviate hardship in households, to support businesses and to prevent termination of employees’ employment.

Among these was the payment of unemployment benefits to employees under the plans for the Complete or Partial Suspension of Business operations. This was an extremely useful measure, as business employers were encouraged to retain their employees during the lockdown period between March–May and thereafter, and to participate in these schemes, under which the employees received a percentage of their salary ranging from 60% for partial suspension, to 90% for complete suspension of business operations (in the form of a state benefit). During this period for which Special Unemployment Allowance was paid, the employer’s duty to pay the salaries was waived with regards to employees who received the allowance. A business employer could participate in the Special Complete Suspension Scheme, subject to it not carrying on any business other than the administrative work of the business while the entire business was required to suspend activity, provided by the decrees of the related Ministries and decisions taken by the Council of Ministers and in addition that the business’s nature was not altered. A business employer could participate in the Special Partial Suspension Scheme, provided its operations were partially suspended due to its turnover decreasing by more than 25% in March 2020 until April 2020, in comparison to the previous corresponding period and such decline in turnover was caused solely by COVID-19.

One of the essential conditions to enable participation in the Scheme was the pre-requisite that no employee had been dismissed from 1st March 2020, and once approved to participate in the scheme, no employee could be dismissed for the duration of business participation in the scheme and for an additional period equal to the period of participation – plus an additional month, except for reasons justifying dismissal without notice. Hence, participating businesses were unable to dismiss employees for financial reasons during this period.

Other Measures

Other measures included special sickness benefits, special leave for the care of children, and amendments to the Statutory Tenants Law to suspend eviction of tenants until the end of May 2020.

Conclusion

In summary, the Cypriot government took immediate measures to combat and contain the effects of the pandemic, and has continued to take measures to restart much of the social and economic activity which came to a standstill in the past months, as well as to support the economy through these challenging times. How substantial and effective these measures will be to relieve and reverse the socioeconomic impact of the pandemic, especially in light of the inevitable domino effect of other world economies and how they fare from the crisis, remains to be seen.

COVID-19: managing the risk of contamination in the workplace

While the World Health Organisation has just declared the COVID-19 epidemic a “pandemic”, with the virus had reached nearly 130,000 people since December 2019, managing the risk of the virus spreading in the workplace has become a major issue for every employer. Following the announcement of multiple cases in Luxembourg and the decision of one Luxembourg bank to require employees to take holiday leave in the event of contamination, it seems more important than ever to remind ourselves of the rights and obligations of employers in the current scenario.

What are the employers’ obligations?

According to the Luxembourg Labour Code, employers have a legal obligation to ensure the safety and health of their employees in all work-related aspects. More particularly, as part of their responsibilities, employers shall take all necessary measures for the protection of the safety and health of employees, including actions for prevention of occupational hazards, information and training, as well as the establishment of the necessary organisational means. In general, employers must avoid risks and take precautions against possible risk factors, plan risk prevention and eliminate hazards or, at least, reduce them as much as possible.
In concrete terms, employers must take all the necessary preventive measures to protect employees and prevent the spread of the virus, such as:

  • display pictograms in the premises explaining basic hygiene procedures (e.g. regular hand washing, avoiding physical contact, avoiding travel in high-risk areas, sneeze or cough into a tissue );
  • reinforce hygiene measures (provision of masks, soaps and alcohol-based solutions for hand disinfection, etc.);
  • encourage teleworking where possible;
  • limit employees’ business travel and use alternatives solutions such as video-conference, phone calls, etc.;
  • postpone organized social events;
  • inform employees about the evolution of the situation in Luxembourg;
  • etc.

The means put in place by the employer should thus be aimed at (i) researching the virus’ origins and (ii) containing and delaying its spread.
In any case, employers shall keep themselves informed of the official recommendations published by the Ministry of Health, and liaise with their occupational health service in case of doubt.

Can an employee refuse to work or to carry out an assignment for safety reasons?

The Labour Code provides that in the event of serious, immediate and unavoidable danger, an employee can choose to leave or refuse to go to his/her workplace. There is no specific procedure to follow: it is sufficient for the employee to inform his/her employer orally or, preferably, in writing. In such event, the employee shall not suffer any harm/be subject to any sanction. A dismissal in violation of this prohibition of sanctions would be automatically deemed abusive.
If the employer has not taken the necessary steps to isolate employees exposed to the virus, an employee may, therefore, exercise his/her withdrawal right, either because he/she has been in a risk area or because he/she has been in contact with a colleague who has been in a risk area. Similarly, if the employer does not offer repatriation to an employee working in a risk area, the employee can again exercise his/her right to withdraw by ending the assignment. This right may also be exercised by an employee in the event that his/her employer asks him/her to go to a risk zone for an assignment.
As mentioned above, the employee’s withdrawal right can only be exercised in the event of serious, immediate and unavoidable danger. Consequently, an employee cannot refuse to attend work simply for fear of the COVID-19; similarly, an employee cannot refuse a business trip to an area that is not considered to be at risk. In such circumstances, the employee’s refusal could be subject to disciplinary action up to, and including dismissal.

Can the employer refuse to approve vacation for an employee who intends to privately go to areas at risk of COVID-19?

Under Luxembourg law, the employer may only refuse to grant leave in limited cases:

  • for operational purposes;
  • because of the justified wishes of other employees;
  • because of the employee’s unjustified absences, when they exceed 10% of the time during which he/she would normally have been required to work.
  • Luxembourg law does not allow the employer to deny leave to an employee for health and safety reasons. In any case, the employer cannot interfere in the private life of its employees.

In accordance with its obligation to ensure safety and health in all work-related aspects, the employer may, at most, recommend to the employee not to travel to the specific place. If the employee nevertheless travels to a high-risk area, the employee may be refused access to the workplace if the health and safety of others employees are seriously at risk, and in order to avoid spreading the virus in the company.

Does the employee have an obligation to inform the employer of possible exposure to the virus?

The Labour Code provides that it is the responsibility of each employee to take care, according to his/her possibilities, of his/her own safety and health and that of other persons affected by his/her acts or omissions at work, in accordance with his/her training and the instructions of the employer. In particular, employees must immediately report to the employer and/or the designated employees and the safety and health representatives, any work situation which they have reasonable cause to believe presents a serious and immediate danger to safety and health, as well as any deficiencies found in the protection system.
In light of the above, and on the basis of the principles of good faith and loyalty inherent in all employment relationships, employees should, therefore, inform their employer of any possible exposure to the virus (e.g. travel to an affected area, contact with a person returning from an affected region, etc.) so that the employer can take all the necessary measures in accordance with its obligation to ensure safety and health at work.

What can the employer do in case an employee is showing symptoms or is coming back from a high-risk area?

First of all, as the employer is responsible for ensuring safety and health in the workplace, and pursuant to the Labour Code, the employer may request employees showing symptoms or coming back from a high-risk area to perform a medical examination in order to ensure that the employee is fit for work. Such medical examination should be carried out by an occupational doctor of the company and at the employer’s expense, and may only be requested if the employer has serious indications of the existence of a risk for safety and health at work.
Where the health and safety of other employees are at stake, the employer may also refuse employee access to the workplace. However, the risk justifying the refusal of access to the workplace must be serious and justified; otherwise, the refusal of the employer could be regarded as discrimination.
Finally, the employer may encourage the implementation of telework for employees whose nature of work allows it, in order to avoid any risk of infection or spread of the virus.
According to the Ministry of Economy, employers could even impose telework in a preventive manner. The employer and the employee would then have to enter into an amendment to the employment contract, allowing the use of telework for reasons objectively motivated by precautionary measures in the context of the fight against COVID-19.
In any case, the employer shall cover the costs directly linked to telework, especially costs in relation to telecommunication. The employer shall also provide their teleworkers with appropriate technical support and is responsible for any cost related to the damage or loss of equipment and data used by the teleworker.
Where the nature of the employee’s job does not allow telework, the employer may exempt the employee from work where there is a risk for health and safety in the workplace.
In any case, the employer shall continue to pay its employees’ salaries. In addition, the employer may, under no circumstances, require the employee to stay at home by taking days off.

How to deal with a sick employee or with an employee stuck abroad due to restriction measures?

In case of sickness or quarantine instructed by a doctor, the employee will receive a medical certificate and the absence will be treated as normal sickness absence (i.e. cost is either borne by the employer or social security depending on whether the 77-day threshold has been reached).
However, if an employee is absent and stuck abroad due to restrictive measures implemented in connection with the prevention of the spread of COVID-19 (e.g. quarantine on a cruise ship, cancellation of flights, etc.), and if the employee is not sick, this absence will not be treated as normal sickness absence.
In such a situation, the employer and the employee may agree that the employee will work remotely, if practically possible. In this case, the employer must continue to pay the salary of the employee.
In any case, absences due to cases of “force majeure” or causes beyond the employee’s control, which have made it impossible for the employee to request prior authorisation, shall not be considered as unjustified absences and shall be assimilated to actual working days. In this respect, the employer shall continue to pay the employee’s salary.
However, if an employee is stuck abroad following his decision to go to a high-risk area despite his employer’s warnings, it could then be considered that there is an impossible performance of the employment contract due to the employee’s gross negligence and that in this case the employer could be justified in not paying the employee’s salary.

Should the employer grant an employee’s request to telework in order to care for children who are temporarily not allowed to attend their school?

An employer has no legal obligation to accept a telework request. Should the child of an employee be infected with COVID-19, placed in quarantine or temporarily unable to attend school, the employee will have to apply for leave.
However, where the child of an employee has potentially been in contact with a person who may be infected with the virus or who has stayed in a risk area, it is in the employer’s interest to permit teleworking as a preventive measure.
draft Grand-Ducal regulation has recently been adopted, providing for the possibility of a right to family leave for parents whose children have been placed in quarantine by the doctor of the Health Directorate, in particular in order to limit the spread of infectious diseases and more specifically of the COVID-19.

How can redundancies be avoided in the event of a decline in the activity of the business due to the propagation of the COVID-19?

In order to protect jobs and prevent redundancies, the Labour Code allows businesses, under certain conditions, to resort to various short-time working schemes depending on the nature of the difficulties encountered.
In this respect, the Labour Code provides that in the event of partial or total interruption of the operation of the undertaking due to losses of a “force majeure” nature occurring independently of the will of the employer and the employees, a subsidy may be granted to the employer who, instead of proceeding to dismissals, undertakes to maintain the employment contracts of its employees and to pay them a compensatory wage allowance.
In the event of an agreement, the Employment Fund (Fonds pour l’emploi) covers 80 % of the salaries normally received by the employees (which is capped at 250 % of the minimum wage for an unskilled worker) during the non-work periods with a maximum of 1.022 hours per employee and per year.
The Luxembourg authorities have recently recognized that this short-time working scheme in cases of “force majeure” may apply in principle to all economic sectors as long as the causes invoked are directly related to COVID-19 (e.g. drop in demand from customers or users, employees absences due to external decisions, the company can no longer operate at normal speed, etc.).

(COVID-19): Legal Aspects to be Considered by Companies

An overview of the events of the last few weeks shows the growing social and economic impact of the coronavirus (COVID-19) on a global scale, including in the business and companies’ fields. To this end, we consider appropriate to give some guidelines that companies should take into account in order to minimize the possible consequences of the health crisis of COVID-19. In this sense, it is recommended that, with the appropriate advice, the companies carry out an individualized study of their relationships with third parties, paying special attention to the following areas:

  • Contracts signed with suppliers or customers.

The concept of force majeure may be the cause and justification for the frustration of a contract, which will imply its future non-fulfilment, thus causing damages that may be compensated in the event that such force majeure is not appreciated. The application of this concept must be evaluated in accordance with the legislation and circumstances applicable to each contract, as it is an undetermined legal concept. However, in order to assess force majeure, the company must, in any case, have exhausted all the means at its disposal to fulfil the obligations entered into.

  • Insurance policies. Review of the scope of coverage contracted.
  • Potential claims for liability of the Public Administration for actions or omissions related to this situation that cause damage that the company does not have a legal duty to bear.
  • Review of the obligations that determine health regulations, mainly with regard to information duties and the adoption of preventive or precautionary measures agreed by the competent authorities.
  • In the case of litigious conflicts, anticipate and avoid own acts that weaken the position of the company resulting from decisions in other areas of the company.
  • To comply with the duty of diligence for the adoption of measures for due direction and control, which could lead to civil and even criminal liability.
  • In the labour environment, companies should pay attention to inter alia to:
    • The need to proceed to articulate measures for the suspension of employment contracts.
    • The consideration as a situation of Temporary Incapacity derived from common illness of the absences of the employees as a consequence of obligatory quarantines imposed by the health authority.
    • Review of the application of regulations on the safety and health of workers.
    • Creation of protocols for remote work of its employees and the use of electronic and computer means made available.
    • Special compliance with data protection regulations in relation to particularly sensitive information, such as employee’s medical and health data.

In addition, the directors and officers of the companies must review their action protocols, good governance practices and compliance processes to determine and confirm their correct monitoring and implementation, the need to adopt, where appropriate, new procedures and protocols and, in short, the adequate and correct fulfilment of due diligence obligations to avoid possible liability for action or omission.