07 May 2012Blog

Legal considerations when staffing your Barbados property

by Miss Nicole McKetney, Associate, Clarke Gittens Farmer

Clarke Gittens Farmer logoThis article touches on some of the legal issues an owner residing overseas should keep in mind when managing or staffing his Barbados residential property, including:

  • key terms in the contract between an owner and the agent whom the owner is appointing to manage the property;
  • liability for the acts of the owner’s agent and employees;
  • duties owed to the agent and employees;
  • liability to pay taxes and contributions on behalf of and in respect of employees.

Appointing an agent to manage the property

A non-resident owner of local property may decide to appoint a local agent who will manage the property in the owner’s absence. For the most part, the owner’s relationship with the agent will be governed by a contract by which the owner appoints the agent to act on his behalf and the agent agrees to so act and also carry out certain services in relation to the property. Before entering into the contract, the owner should consider the following matters which will help him to arrive at an arrangement that best suits his needs:

1. In the contract the owner should require that the agent promptly furnish him with evidence of payment of water rates and land taxes for the property.

  • Unpaid water rates and unpaid land taxes are first charges on the property in respect of which they are incurred. This means that the Barbados Water Authority and the Commissioner of Land Tax, the authorities responsible for the collection of water rates and land taxes respectively, can sell the property to recover water rates or land tax arrears.

2. The agent should be required to comply with any restrictions or obligations imposed on the owner or the property by a mortgagee of the property, by Town Planning and health regulations or by any restrictive covenants in the title deeds to the property.

3. The owner should consider requiring the agent to first consult with the owner before carrying out any of the below acts that are likely to incur significant expense or liability to the owner.

  • Common clauses included in a document authorising the agent to act where it is contemplated that the owner’s property will be rented are those authorising the agent to collect rent on the owner’s behalf, negotiate rent reviews, sue to recover rent due or to obtain possession of the property where a tenant refuses to leave, instruct attorneys to act on the owner’s behalf in enforcing the terms of the rental agreement and serve the requisite notices on the tenant terminating the rental agreement. ‘

4. If the agent is to have the power to sign rental agreements where the tenancy is not periodic (e.g. not monthly, yearly, quarterly etc.) or it exceeds one year, the document authorising the agent to do so should be by deed.

  • Such a deed (called a power of attorney) should be recorded at the Land Registry at a cost of $4 BBD per page.
  • Stamp duty of $25 BBD is payable on the deed of power of attorney as well.
  • Parties should bear in mind that powers of attorney are very strictly construed and generally only confer on the agent the authority to carry out the matters specified in the deed or what must be necessarily implied to give effect to the deed.
  • The owner should have his attorney peruse the power of attorney to ensure it contains the necessary clauses to empower the agent to carry out his duties.

5. Where the agent is a company or firm the owner should consider including a clause terminating the agreement when there is a material change in the management or control of the agent.

  • On termination, the agent should be required to return all deeds and documents relating to the property and provide the owner with a statement of accounts.

6. In addition to termination in accordance with the terms of the agreement, some of the ways in which an agent’s authority to act on the owner’s behalf can be terminated include by the death or mental incapacity of the owner or the agent or by the bankruptcy of the owner although not necessarily by the bankruptcy of the agent.

7. You should note that an agent is not necessarily an employee of the owner, although there is nothing to prevent an owner from appointing one of his employees as an agent.

  • If the owner wants an agent who will act exclusively for him and be under the owner’s supervision and control, the agent may be considered an employee and the discussion later in this article on the duties owed to and liabilities incurred in respect of the actions of an employee will apply.

Liability for the acts of the agent

Generally, an owner is responsible for all acts of his agent that are within the agent’s authority. Usually, an act falls within the agent’s authority if:

  • the agent is expressly authorised by the owner to carry out the act or the act is necessary or incidental to the exercise of the express authority;
  • the authority is implied from the conduct of the parties or from the nature of the employment;
  • the act was initially unauthorised but the owner subsequently ratified the act by his conduct;
  • the circumstances necessarily dictate that there must have been some authorisation;
  • it appears as though the owner has given the agent the authority to carry out the act.

This means that an owner may be responsible for any loss or damage suffered by a third party as a result of the agent’s breach of a contractual obligation owed to a third party or the agent’s commission of some other civil wrong.

Liability under the contract with the third party

Generally an owner will be bound by any contract entered into by an agent that falls within the agent’s authority and:

  1.  is in the owner’s name; or
  2. the owner’s existence and identity are disclosed; or
  3. the agent making the contract discloses the existence but not the identity of the owner.

However, if in the contract the agent uses terms that suggest that he is not an agent but is the principal, i.e. is contracting for himself, the true owner is not bound by that contract.

Liability for Torts (civil wrongs arising rather than by breach of contract)

Usually, if the agent is authorised to carry out the wrongful act or an act which will necessarily lead to the wrongful act and a third party suffers damage or loss as a result of the act, the owner, along with the agent, will be liable. If the act is completely unauthorised, the owner will not be responsible.

To protect himself as much as possible, an owner should see and approve contracts entered into on his behalf before they are executed and seek legal advice on the validity and effect of those contracts. An owner should issue his agent with instructions detailing the extent of his authority and any conditions imposed on the agent’s authority. In that way, the agent will be liable to compensate the owner for any loss suffered as a result of the agent’s failure to act strictly in accordance with those instructions. The owner should also obtain third party liability insurance to protect himself in the event that a third party suffers loss or injury due to the agent’s actions.

Duties owed by the owner to the agent

These will generally be governed by the contract between the owner and his agent. Nevertheless even if not specified in the contract, one of the chief obligations an owner has to an agent is to reimburse the agent for all expenses and repay the agent for any liabilities incurred or losses suffered by the agent as were contemplated when the agent was appointed or mentioned in the contract between the agent and the owner. An agent may be entitled to a lien over the owner’s goods in respect of claims for remuneration or expenses or liabilities incurred.

Hiring staff

An owner may also decide to hire his own staff to maintain and upkeep the property or provide services to the owner and guests of the property, for example:

  • Housekeepers;
  • Maids;
  • Gardeners;
  • Butlers;
  • Cooks/Chefs.

The staff may either be employees or independent contractors (i.e. a self-employed person). In either event, the terms and conditions of their service should be documented in a written contract.

Liability for the acts of staff

To determine whether the owner is liable for the acts of a worker whom he or his agent has hired to provide a service in respect of the property, one must first ascertain whether the worker is an employee or an independent contractor. The label given to the worker in the contract of employment is not definitive of his status. Whether a worker is an employee and not an independent contractor will depend on the contract of employment and the way the work is carried out.

In determining whether a worker is an employee, the Courts look at a number of factors (some of which are listed below) that may either support the existence of a relationship of employer/employee or one of employer/independent contractor.

  • The degree of control the employer has over the worker. Specifically, does the owner decide what work must be done, the way in which the work must be carried out, the time for the work’s completion and the means by which the work is done? Does the owner have the right to hire and fire the worker? The higher the degree of control the more likely the relationship is that of employer/employee.
  • Does the owner provide the equipment, tools or staff to facilitate the work being carried out? Independent contractors are likely to provide their own resources to do the work whereas employees tend to rely on the employer’s resources.
  • If the worker cannot select or delegate his work this suggests the worker is an employee.
  • Is the worker free to pick and choose the work to be done? If so, the worker may be considered an independent contractor.
  • Is the owner responsible for paying wages, PAYE (Pay As You Earn) or National Insurance contributions for the worker? If so, this tends toward the existence of an employer/employee relationship.

If the worker is an employee of the owner, the owner will be liable for any unlawful act that he authorised the employee to do. Generally, the employer will also be liable for any damage or loss suffered by a third party as a result of the employee’s negligence or other civil wrong committed by the employee in the course of the employee’s employment.

To diminish the likelihood that a third party will suffer loss or injury as a result of employees’ actions, the owner should ensure that signage is used to alert a third party entering the property about any activities on the property that may be likely to cause injury. The owner should see that workers are properly trained and issued with instructions listing prohibited acts and guidelines for behaviour on the job.

Nevertheless, employers have still been found liable even where an employee acted contrary to the owner’s express orders not to carry out the duties in the particular manner that led to the harm caused to the third party. The owner can always try to obtain compensation from the employee whose actions caused the injury to the third party if the owner can prove that the employee failed to exercise reasonable care and skill during the course of his employment. However, this may not be feasible if the employee does not have the means to compensate the owner.

In light of the above, an owner should consider getting third party liability insurance to protect him in the event that a third party suffers loss as a result of an employee’s actions. With respect to independent contractors, an employer is usually not responsible for their acts provided an employer ensures that he chooses a qualified or competent independent contractor to do the work and that it was reasonable in the circumstances to entrust the work to an independent contractor.

Duties owed by an employer to an employee

One of the most important duties an employer owes his employee is a duty to take reasonable care for the safety of the employee. If this duty is breached and an employee suffers loss or damage as a result, the employer will be liable to compensate the employee for the loss or damage.

The duty comprises the obligations to provide:

  • competent staff (this includes hiring workers who have sufficient experience and training for the job. If the owner is aware of potentially of an employee’s reckless or otherwise dangerous behaviour, he should take steps to prevent the recurrence of such behaviour);
  • adequate equipment (this includes taking reasonable steps to maintain the equipment used by the employee and to provide any safety equipment necessary for the job);
  • a safe system of work with effective supervision (this may include issuing warnings, notices or instructions on how to use equipment); and
  • a safe place of work.

Other duties of an employer include the requirement that he insure against liability for injury to employees. He is obligated to pay his employees’ wages, to only make deductions from the employee’s salary which the employee agrees to or that are required by legislation (e.g. deductions of national insurance (‘NIS’) contributions and PAYE (discussed below) and not to breach mutual trust and confidence. A breach of mutual trust and confidence may arise where the owner failed to investigate a genuine safety complaint of an employee or where an employee is falsely accused of a crime on flimsy evidence.

With respect to persons employed to perform household duties at the property, the Domestic Employees (Hours of Duty) Act, Chapter 344 of the Laws of Barbados and the Domestic Employees (Rate of Pay and Hours of Duty) Order, 1982 require that such persons be paid no less than $1.50 BBD per hour and generally should not be employed for more than 44 hours in a week unless the employee agrees and is paid overtime. The employer is required to keep a record of the hours of overtime worked by the domestic employee. The employee is entitled to an hour break in every work day. This break is not included in determining the number of hours of work done by the employee. The employee is also to be granted two rest periods, each of not less than 24 hours consecutive rest, in every month.

Liability to pay NIS

The provisions of the National Insurance Act Chapter 47 of the Laws of Barbados (‘the National Insurance Act’) impose several obligations on an employer, chief of which is to pay NIS contributions in respect of employees to the National Insurance Fund.

The Act defines an employer as,

any person employing one or more persons under a contract of service, whether expressed or implied, oral or in writing and includes any agent, manager or representative of such person, who is responsible directly or indirectly for the payment in whole or in part of remuneration of an employed person.

In determining the existence of a contract of service, the factors for identifying whether a person is an employee or an independent contractor, mentioned earlier in this article, apply. If a worker is an employee, he is employed under a contract of service. However, if he is an independent contractor he is employed under a contract for service and the Act will not apply. If an owner is uncertain about whether a worker is an employee for the purposes of the Act, the owner should contact the National Insurance Office.

Payment of NIS Contributions

Generally, an employer must pay NIS contributions in respect of each employee. NIS contributions should be paid to the National Insurance Office within 15 days after the end of each month and the employer should furnish the employee with evidence that the contribution has been paid. If an employer fails to pay the contributions on time, he will incur interest at the rate of 1% per month.

If an employer fails to pay the contributions altogether and the employer is an individual, he can be fined $2,500 BBD or be imprisoned for 6 months or both. If the employer is a company, the fine is $5,000 BBD. Unpaid NIS contributions are also a charge on the employer’s property. This means that your property can be sold to recover outstanding contributions. If an employer has failed to pay contributions and as a result of the non-payment the employee has lost the maternity or sickness benefit to which the employee would otherwise have been entitled, the employee can sue the employer to recover the amount of the benefit lost.

Income Tax Obligations (PAYE)

Every employer who has employees earning more than BDS$481.00 per week or BDS$2083.00 per month is required to register as an employer with the Commissioner of Inland Revenue. The employer will then be issued with a number of forms to facilitate the deduction of income tax from the employee’s salary. An employer should consult the Inland Revenue Department, a local accountant or attorney-at-law specialising in income tax issues if he has any queries about the procedure.

The employer is obligated to pay all sums deducted to the Commissioner on or before the 15th of the month following the month in which the sums were deducted. The employer is also obligated to deliver personally or by post to his employee a certificate setting out, among other things, the total amount of income tax deducted in the preceding year.

Failure to pay the income tax deduction will result in the employer being liable to pay a fine of no less than BDS$10.00 but no more than $10,000 BBD. The employer must also pay:

  • a penalty of 10% of the amount that was not deducted or paid or $10 BBD whichever is greater;
  • interest at the rate of 0.5% per month for each month that the amount due was not paid;
  • and as a penalty an amount equal to the tax that should have been deducted.

Conclusion

When engaging an agent or staffing his property an owner should seek the advice of an Attorney-at-law who specialises in agency and employment law as well as an accountant and/or a tax professional to ensure that his interest are protected.

Clarke Gittens Farmer is a commercial law firm, providing legal services for both domestic and international corporate and private clients. The firm has a reputation for high quality work in property, banking, corporate, commercial and business law areas. The firm is the Barbados member of Lex Mundi, the world’s leading association of independent law firms.
The information provided in this article is not comprehensive and is not intended to constitute professional legal advice.
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