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This Labour & Employment volume features discussion and analysis of emerging trends and hot topics within key jurisdictions worldwide.
Developments | Industry sectors | Political debates | Restrictive covenants
Cyprus
Nicholas Ktenas is the managing partner of Nicholas Ktenas & Co LLC. He holds an LLB from the University of Sheffield and an LLM in EU Law from the University of Nottingham. He is a member of the Cyprus Bar Association since 1999 and a licensed insolvency practitioner. He started his career in 2000 as in-house legal counsel for one of Cyprus’s largest ship operators and a part-time university lecturer in Business and Corporate law. In 2001, he joined a top-tier Cyprus law firm and was promoted to partnership in 2007. In 2021 he established Nicholas Ktenas & Co LLC. He is also a founder and director of the Cyprus Computer History Museum, operated by the non-profit company Retro Computing & Gaming.
Nicholas advises domestic and international organisations on a wide range of legal matters, including employment law. He authored numerous articles and country chapters in international legal publi- cations and received a string of distinctions and awards throughout his career. He is recognised by Best Lawyers in Corporate Law and Labour and Employment Law and by Who’s Who Legal also in Labour and Employment Law. He was also recognised by The Legal 500 as a ‘Leading Individual’ in EU and competition and employment law.
1. What are the most important new developments in your jurisdiction over the past year in employment law?
The most important developments in Cyprus over the past year in employment law include the following:
- the introduction of a national minimum salary;
- a draft law to regulate remote working;
- the implementation into Cyprus law of the EU Directive on work-life balance;
- the implementation into Cyprus law of the EU Directive ontransparent and predictable working conditions;
- the right to take annual leave from day one; and
- the drafting of new legislation against violence and harassmentat work, to implement the International Labour Organisation’s Violence and Harassment Convention of 2019.
On 2 September 2022, the government passed a ministerial order
for a national minimum (monthly) salary of €940 (€885 for the first six months of employment), effective from 1 January 2023. The national minimum salary is subject to review after 12 months and subsequently every two years, to take into account the conditions and the cost of living.
Before 1 January 2023, the statutory minimum salary was set by ministerial decree since 2012 at €870 for the first six months of employment and increased to €924 thereafter. However, this applied only to employees in certain types of businesses (ie, office workers, nursery workers, salespersons, etc).
The importance of the new national minimum salary is that, in contrast with the previous legal regime, it will apply to all employees, subject to certain limited exceptions (ie, domestic workers, agricultural workers, shipping workers and certain workers in the hotel industry). Overall, the government expected that an additional 80,000 workers would benefit from this reform, some to a greater and some to a lesser extent.
Since 2020, covid-19 restrictions introduced a new work model worldwide, known as remote working. This presented a significant challenge for businesses in Cyprus who had to implement the technical and organisational infrastructure and to adopt the cultural mindset needed to support this type of work model. At the same time, the lack of a regulatory framework governing matters such
as health and safety, working hours, benefits and other aspects of remote working presented a legal challenge to businesses both in the private and in the public sector. As regards remote work, also known as telework, a proposal for a new law to regulate this area is currently before the House of Representatives and is expected to be passed before the end of 2023.
For the purposes of implementing Directive (EU) 2019/1158 of the European Parliament and of the Council of 20 June 2019 on work- life balance for parents and carers, in December 2022 the Law on Leave (Paternity, Parental, Caring, Force Majeure) and Flexible Work Arrangements for Work-Life Balance (Law 216(I)/2022) was passed, which repealed and replaced the Protection of Paternity Law and the Law on Parental Leave and Leave for Reasons of Force Majeure.
This new law introduced important new employee rights and benefits, including:
- paid parental leave (previously unpaid);
- the right to care leave for employees who provide personal care and support either to a relative or to a person living in the same household as them; and
- the right to absence from work for urgent family reasons involving illness or accident.
Also, the law provides for the right of parents of children up to eight years of age who completed continuous employment of six months
Labour & Employment | Cyprus 11 with the same employer and caregivers to request flexible work
arrangements for care reasons.
Requests for flexible working arrangements for care reasons are subject to the employer’s approval, postponement, or rejection, who must inform the employee in writing about his decision within one month of receiving the request. The employer takes into account the needs of the business and the employee, the representations of the employee and informs him in writing of his decision, giving reasons in the case of a postponement or rejection.
For the purpose of implementing Directive (EU) 2019/1152 of
the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union, in April 2023 a new law was passed, the Law on Transparent Predictable Working Conditions (Law 25(I)/2023). This law repealed and replaced the previous law on the Information to be Provided to the Employee by the Employer Concerning the Terms Governing the Employment Contract or the Employment Relationship Law of 2000.
Notable amendments introduced by this law include:
- shortening the period within which information must be provided by the employer from one month to seven days;
- requiring Temporary Work Agencies to provide information regarding the identity of the business to which the employee will be assigned; and
- reducing the maximum allowed probationary period from 104 weeks to six months.
Where working hours are not predictable, employers are now required to specify this and provide information on the number of guaranteed paid hours and overtime payments, possible working days and hours and the minimum notice period to be provided to the employee
before the assignment of work as well as the cancellation of such assignment. Furthermore, employers cannot prohibit employees from taking up work for other employers outside the specified working hours unless this is specified in writing at the time of hiring and is justified by objective reasons related to health and safety,
the protection of business confidentiality, the integrity of the public sector and the avoidance of conflict of interest. Where the employer is obliged by law or collective agreement to provide vocational training, such training should be provided free of charge, considered working time and if possible, take place during normal working hours.
Another important development concerned an amendment to the Annual Paid Leave Law (Law 24(I)/ 2023) in April 2023, for the purpose of better harmonisation of the law with article 7 of Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time, by abolishing the condition that employees are entitled to receive annual leave after the completion of 13 weeks of continuous employment. As a result, entitlement to pro rata annual leave is now available to all employees from the first day of their employment.
Finally, a new law, which creates separate offences for violence and harassment at work, is currently being prepared. The new legislation will separate workplace harassment on the basis of gender and victims will now have easy access to legal proceedings, or out-of- court settlements, while being protected from dismissal. Recently, the Commissioner of Legislation, Louiza Christodoulidou-Zanettou, received the go ahead for the implementation of the decision of the Council of Ministers, to draft a bill implementing Convention No. 190 of the International Labor Office of 2019 on violence and harassment at work. It is worth noting that the English terms used are ‘violence and harassment’ and not the terms ‘bullying’ or ‘mobbing’, which are more commonly used. The Commissioner has already convened the first session of the legislative committee and the drafting of the bill has begun and it is expected that the provisions of this new law will supplement and enhance existing laws on equal treatment.
This will be a welcome addition to the existing legal framework under which harassment at work is actionable only to the extent it is relevant to specific legislative provisions on equal treatment and anti-discrimination (ie, sexual harassment).
2. What upcoming legislation or regulation do you anticipate will have a significant impact on employment law in your jurisdiction?
public sector, however, priority has now been given to regulating telework in the private sector first, leaving regulation in the public sector for the end of 2024, so the new draft law on telework currently only concerns the private sector.
The new law will mainly regulate certain employer obligations and employee rights, such the right of employees to information, health and safety, special benefits and working hours. The main underlying legal principles of this law include the voluntary nature of telework, equal treatment, personal data protection and the respect for private life.
The European Union is working on an EU-wide resolution that calls for a directive that defines remote work rules that employers must follow. The discussions at EU level are currently under way, and the draft directive which will have to be approved by the European Parliament and member states will have two years to implement it into national law. The EU Directive will concern both the public and the private sector.
It is therefore a matter of debate that a new law is currently being considered in Cyprus without a final position in the European Union about this matter, with the Minister of Labour and Social Insurance earlier this year stating that any legislative regulation reached at the level of the Republic of Cyprus should be fully compatible with the Directive prepared by the European Commission and which will be legally binding for all the member states of the European Union, including Cyprus.
The Commissioner for Personal Data Protection also intervened before the House of Representatives. She noted that her opinion was not sought on the proposed legislation, as required by the legal framework for data protection, and that it did not include provisions and regulations regarding the protection of personal data.
According to statements made by the Commissioner, the regulation of telework should promote and ensure the legal, legitimate and correct collection, processing and security of personal data with a view to the protection of the privacy of teleworking employees and the use of the appropriate technical, organisational and physical security measures by the employer, in its capacity as controller, to promote and ensure the integrity and confidentiality of personal data.
The Commissioner’s Office made some important basic additions and comments on the text of the bill, including, inter alia, the mandatory performance of a Data Protection Impact Assessment and prior consultation with the Supervisory Authority, as well as prohibitions on the use by the employer of intrusive measures of continuous monitoring of employees.
Finally, the decision regarding the total number of years of contributions required for the abolishment of the 12 per cent actuarial deduction imposed by law on old age pension payable on early retirement (63), is also expected to have an impact on the total number of workers considering early retirement. The matter is discussed further in question 6 below.
3. How has the #MeToo movement impacted the investigation or settlement of harassment or discrimination claims in your jurisdiction?
Under Cyprus Law (Law 205(I)/2002, as amended), sexual harassment is defined as:
any behaviour of a sexual nature, unwanted by its recipient, expressed in words or actions and having as its purpose or result the insult of a person’s dignity, especially when it creates an intimidating, hostile, humiliating environment, during employment or vocational education or training or when accessing employment or vocational education or training.
Employers have an obligation to protect employees from any act by their supervisor or colleague that constitutes discrimination based on gender and in particular from harassment or sexual harassment. As soon as an employee becomes the recipient of sexual harassment, employers must, as it becomes known to them, take all appropriate measures to stop it and to ensure that it is not repeated and eliminate its consequences. Otherwise, they are jointly responsible with the perpetrator.
In 2019, the employers’ and the employees’ representatives agreed on a Code of Practice for the Prevention and Treatment of Sexual Harassment Cases, as a tool for contributing to the practical guidance of employers and employees and ascertaining the necessary procedures for dealing effectively with the prevention and repression of sexual harassment at work. This code advises employers to implement a policy; lays down specific obligations that employers and employees should observe; and suggests certain measures to be taken.
The #MeToo movement has increased awareness in Cyprus, especially after several complaints were made against some very well-known faces in showbusiness and sports in Greece last year. However, Cyprus is a small country and, although awareness may be increasing, many incidents of sexual harassment at work are not reported due to increased concerns regarding retribution and publicity.
In 2021, the Ombudsman’s Office, responsible for matters concerning the application of equal treatment legislation in Cyprus, led an information campaign called ‘Break the Silence’ to combat sexual harassment at work.
According to the Ombudsman’s Office, complaints about sexual harassment are quite common, although they are not always substantiated. In the past three years, 61 complaints of harassment or sexual harassment (or both) were submitted. Of these complaints, 28 were considered valid and were further investigated or other appropriate actions were taken by the Ombudsman’s Office, such
as mediation interventions and filing of reports. Overall, of the total complaints, 68 per cent involved harassment at work because of gender and the remaining 32 per cent concerned sexual harassment. Eight per cent of the total complaints of sexual harassment at work were submitted by women and 20 per cent by men. The public sector accounted for 90 per cent. Private businesses accounted for only
10 per cent amid fears of unfavourable repercussions at work and concern that the complaint will be made public.
Furthermore, the Ombudsman’s Office reported receiving an increasing number of calls from potential victims requesting specific guidance on how to deal with instances concerning them.
Upon receiving a complaint, the Ombudsman takes measures to ensure the protection of the employee and to prevent repetition
of the behaviour. Such measures may include the transfer of the complainant to another place or change of duties to interrupt the cooperation or closeness between the victim and the perpetrator. At the same time, the employer is required to investigate the incident – which is its obligation under the law – and to inform the Ombudsman in detail.
The investigation carried out and the measures taken are evaluated and if it is determined that: (1) the investigation was not sufficient or was not done in good faith, (2) the sexual harassment or its consequences continue, or (3) the procedures for holding the perpetrator accountable were not followed, then the Ombudsman’s Office can conduct its own investigation, gather evidence and issue a relevant finding with recommendations, which are binding on the employer. This conclusion can also be presented by the employee in the context of relevant court proceedings.
The Ombudsman’s Office emphasised the need for amendments to the law, given that the harassment may be from a third party and not someone who qualifies as an employee, also urging quick action on a bill to criminalise harassment and stalking. As regards the private sector, employers’ associations and trade unions must step up efforts to address this issue.
4. What are the key factors for companies to consider regarding the enforcement of restrictive covenants against departing employees?
Non-competition clauses aimed at preventing an individual from undertaking any work after the termination of an employment relationship are considered ‘in restraint of trade’ and are void under section 27(1) of the Contract Law (Cap 149, as amended), which provides that ‘any agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.’ Section 27(2) includes three exceptions that concern restrictions imposed in relation to the sale of the goodwill of a business and between partners, after the dissolution and during continuance of the partnership. These exceptions do not cover employment relationships or departing employees.
The Supreme Court of Cyprus has acknowledged that, under the Cyprus Contract Law, agreements in restraint of trade are void and that there are three specific exceptions under the Cyprus Contract Law. Cyprus law is thus a substantial departure from the English common law, under which an agreement in restraint of trade is valid if it is reasonable and not injurious to the public.
Employers in Cyprus should, therefore, keep in mind that they may not be able to rely on restrictive covenants against departing employees.
However, where it can be shown on the evidence that an employee made preparations for setting up a competing business while he or she was still employed by the employer, courts in Cyprus may be willing to acknowledge that the employee violated their duty of fidelity towards the employer, regardless of the existence of non-compete provisions.
Under Cyprus law, employees owe a duty of fidelity to their employers while they are in their service. It stems from the duty of trust and good faith that must exist in every employment relationship and requires the employee not to act in a manner directly and substantially prejudicial to his or her employer’s interests or generally in a manner that is capable of causing real or substantial harm to the employer’s interests.
First instance courts in Cyprus have held that during his or her employment, an employee owes, among other things, a duty of loyalty to the employer. This includes the duty of not competing with their employer. However, it is not prohibited for the employee to make preparatory actions for the future activities they intend to undertake when their employment is terminated. However, in the case of directors or senior staff, such preparatory action is more likely to constitute a breach of fiduciary duties.
Therefore, as an alternative to relying on non-compete provisions that are likely to be considered void and unenforceable by Cyprus courts, employers in Cyprus may be able to rely on a breach of the duty of fidelity to take preventive measures or obtain compensation from a departing employee, depending on the circumstances.
5. In which industry sectors has employment law been a hot topic recently? Why?
The right to disconnect is a topic that has attracted substantial debate between social partners in Cyprus during the discussions on the new bill for telework in the private sector, since it is intertwined with the right of employees to have their private life respected on the one part and the legitimate expectations of employers on the other part. This topic is relevant to employees of all sectors, although due to its nature it is more relevant to employees engaged in the provision of services.
The right to disconnect consists of the employee’s right, after the end of their working hours, but also during their lawful holidays, to abstain completely from any activity related to their work and in particular not to respond to any email or other communication from their employer.
Also, the cost of the necessary equipment for telework, which has been agreed that will be covered by the employer unless it is agreed that employees will use their own equipment, in which case they will be reimbursed for certain reasonable costs, subject to agreement before the commencement of the telework which ensures its voluntary character.
Furthermore, in unionised sectors such as the public sector and parts of the private sector such as the construction industry, the hotel industry and certain other businesses where Collective Agreements are in place, the adjustment of the Cost-of-Living Allowance, also referred to in Cyprus as the Automatic Price Adjustment (APA), has been a hot topic recently. In May 2023 an agreement was reached between the Social Partners, with effect from 1 June 2023 to 30 June 2025, affecting the companies and organisations where the APA system is applied according to the terms of employment. The new agreement provides for the payment of two-thirds of the variation
in the Consumer Price Index (excluding consumption taxes) from 1 June 2023, which for the year 2022, recorded an increase of 8.71 per cent, and therefore APA has already been paid at 50 per cent from 1 January 2023 (ie, 4.36 per cent).
Consequently, and based on the new agreement, from 1 June 2023 an additional rate of 1.45 per cent has to be paid (ie, the total index for 2023 has risen to 5.81 per cent of total wages).
6. What are the key political debates about employment currently playing out in your jurisdiction? What effects are they having?
The key political debates about employment in Cyprus currently include issues such as the viability and the need for reform of the social insurance scheme, early retirement benefits and the national minimum salary.
Old age pension currently received by workers who retire at 63 is substantially less than for workers who retire at 65, due to a 3 to 12 per cent proportionate deduction imposed by law. This is contested by private sector workers who otherwise qualify for a full pension at 65 but have chosen to receive a pension at 63, as opposed to the public sector where anyone who completes 400 months of work is entitled to retire and receive all their benefits, including a full pension. While the government acknowledges the issue, it claims that the current social insurance system would become unviable if this was to change, although there is currently an open discussion at social partners level concerning a comprehensive revision of the social insurance laws.
The government is aiming to reduce (possibly abolish) the 12 per cent penalty targeted at workers who have completed many years of employment and paid contributions to the Social Insurance Fund (the Fund). There is talk of 40 years, but the number has not yet been discussed officially. In this way, the government considers that the injustice is removed and at the same time the sustainability of the Fund is ensured without requiring an increase in the contributions of employers and employees. According to the relevant actuarial study, any horizontal abolition of the penalty will lead to mass resignations or workers, which will undoubtedly cause multiple challenges
for the Fund.
The employers’ organisations are against the abolition of the penalty while the trade unions are in favour, especially for heavy and unhealthy occupations. The government is not discussing a complete and horizontal abolition of the penalty but, according to the Minister of Labor, Yiannis Panagiotou, the aim is to correct the distortions presented by the existing system. The government is also not adopting the proposal to retrospectively refund workers who chose to retire at age 63. The 12 per cent penalty was introduced at the suggestion of the Troika and was intended to make early retirement financially neutral for the Social Insurance Fund. The intention of the government is to complete the social dialogue as soon as possible so that the bill will be passed into law by the House of Representatives before the end of 2023.
As regards a national minimum salary, all sides agreed that this was a much needed and long overdue reform.
The opposition questioned whether the final result constitutes an improvement on the existing legal framework, criticising the levels fixed after lengthy discussions and negotiations between the social partners as being particularly low, considering the negligible increase after 11 years and questioning whether it will be of any real benefit to those concerned, taking into account the increase in the cost of living.
On the other hand, the government claimed that 80,000 employees will benefit from this reform, seeing their monthly income increase, while half of those low-paid workers would benefit from raises that could be close to 20 to 25 per cent in some cases. According to the government, out of the 22 member states of the European Union that have a national minimum salary (including Cyprus), Cyprus ranks among the highest nine.
It is worth noting that the Commission prepared a study (based on the EUROMOD model), which showed that a monthly minimum wage of €1,000 is expected to significantly reduce the risk of poverty for the benefit of young and female workers.
The Inside Track
What are the particular skills that clients are looking for in an effective labour and employment lawyer?
An effective labour and employment lawyer is one who is always up to date with his or her subject, is readily available and has the knowledge and experience required to assist a client at any given time. Business acumen, communication skills, foresight as well as hindsight are also very important qualities for such a lawyer to possess.
This is an area of law where human relations play a crucial role and taking a decision is not always easy either for employers or for employees. Clients are looking for lawyers with basic knowl- edge and understanding of their relevant business sector, who should be able to assess a particular situation correctly; listen to their concerns; and provide sound legal and practical advice to help them to make informed decisions.
What are the key considerations for clients and their lawyers when handling employment disputes?
When handling employment disputes, one of the key considera- tions for clients and their lawyers is the importance of being able to deal as effectively and proactively as possible with any situa- tion that may arise in the workplace. Employers and employees should always be advised, as far as practicable, to explore the possibility of reaching an amicable settlement in any employment dispute, and only to pursue litigation as a last resort.
Even though the Labour Disputes Court in Cyprus offers a simpler and more expedient mechanism for resolving disputes than other civil courts, litigation proceedings can nonetheless be unpredictable and prove to be lengthy and costly for the parties. Litigation proceedings can also attract negative publicity, which the parties will normally prefer to avoid.
Furthermore, potential employee complaints against their employers for employment law violations can also carry penal law implications, which employers would be best advised to try to avoid or mitigate as far as possible.
What are the most interesting and challenging cases you have dealt with in the past year?
In the past year, we assisted a business engaged in the provision of corporate administration services by preparing an extensive Employee Handbook and advising on the formulation of a number of internal policies including on the novel matter of flexible working arrangements and working from home.
We also reviewed the contracts of a leading recruitment firm in Cyprus, Malta and the Middle East and advised, inter alia, on the new requirements applicable under the new legislation on transparent and predictable working conditions.
We also carried out an extensive review of the employment agreements and the consultancy agreements of an international shipping organisation with a worldwide presence, including Cyprus. This organisation has 40 years of experience in ship management and the provision of maritime services. We advised them on various employment law matters such as the employer– employee relationship and non-compete clauses, etc.
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