Tsunami destroyed hotels could bypass heavy compensation laws if they opt to layoff staff

Local hotels completely destroyed in the tsunami could plead a ‘frustrated contract’, to bypass heavy compensation laws and negotiate a settlement with workers. Local hotels completely destroyed in the tsunami could plead a ‘frustrated contract’, to bypass heavy compensation laws and negotiate a settlement with workers. The legal concept of frustration covers an external catastrophe, out of anyone’s control, completely destroying a business.

“Frustration of Contracts is a contractual concept that is well recognised. This is where a contract cannot be performed due to a supervening circumstance that is out of the control of both parties,” Deputy Director General of the Employers Federation of Ceylon, Ravi Pieris explained.

“This can be argued where there is total destruction and impossibility of running a business or no hope of running a business. Then the Termination Act does not come into play,” Pieris said.

That means, if upheld, termination laws don’t apply and would allow hotels to bypass a hefty compensation formula that allows up to 48 months of salary as compensation for an employee working 25 to 30 years.

Hotels then could negotiate a