Owners' guide to crew contracts

Given the sheer complexity and size of today’s superyachts, sailing without the help of professional crew is not an option. Most owners are not even qualified to command their own yachts – and to do so would lead to insurance cover being withdrawn should there be an accident with the owner at the wheel.
As with any shore-side role, crewmembers’ service is governed both by whatever written or verbal contract of employment has been agreed, and by the wider applicable law. But given the peculiarities of seafarers’ work – and their historical exploitation – the laws which govern such employment differ in many respects from those which prevail on land.

While the law of the yacht’s country of registration – the flag state’s law – regulates employment on board, local port state laws can also have a bearing, especially when an aggrieved crewmember seeks redress.

Present requirements

Many flag states, including all those from the British Red Ensign group, often require ‘crew agreements’. These are an official form of employment contract, setting out certain key terms which must be included.

One document suffices for the whole crew, which is signed by individuals when joining and leaving the yacht.

Crew agreements must be approved by the flag state before use, but the officials are not experts in employment law and this can make seeking approval tiresome.

Only the captain’s terms are a matter of private agreement with his or her employer, which need not be the owner.

Forthcoming changes

The Maritime Labour Convention 2006 (MLC) is a long, detailed document covering the rights and obligations associated with crew welfare, which is likely to come into force at the end of 2011.

It is a sort of seafarers’ Bill of Rights, setting the minimum requirements for accommodation, recreational facilities, catering, working hours, repatriation and healthcare, welfare and social security provisions. It simply won’t be enough to pay crewmembers more in lieu of any shortcomings.

The MLC demands that all crewmembers (including the captain) must be hired on the basis of a Seafarers’ Employment Agreement (SEA). The SEA must have been signed by the crewmember and the owner or manager, or their representative.

Notably, the owner or manager’s signature serves to confirm to the crewmember that the other MLC requirements to do with crew living space and conditions have been complied with.

A Maritime Labour Certificate and Seafarers’ Employment Agreements (SEAs) must contain the following:

The crewmember’s full name, date of birth or age, and birthplace;
The owner or manager’s name and address;
The place where and date when the agreement is entered into;
The capacity in which the crewmember is to be employed;
The amount of the crewmember’s wages or, where applicable, the formula used for calculating them;
The amount of paid annual leave or, where applicable, the formula used for calculating it; and
The terms for terminating the agreement, including:
Where the agreement has been made for an indefinite period, the conditions entitling either party to terminate it, as well as the required notice period, which may be no less for the owner or manager than for the crewmember;
Where the agreement has been made for a definite period, the date of its expiry;
Where the agreement has been made for a voyage, the port of destination and the time which has to expire after arrival before the crewmember can be discharged;
The health and social security protection benefits to be provided; and
The crewmember’s entitlement to repatriation.
Crewmembers must have been given an opportunity to seek advice on the agreement before signing, as well as such other facilities necessary for them to fully understand their rights and responsibilities, such as a translator.

Following termination, a document must also be provided containing a record of their employment, which must not contain any statement as to the quality of their work or their pay. It must contain sufficient information to facilitate finding further work or satisfy the sea-service requirements for skills upgrading or promotion. This document cannot be withheld by an aggrieved owner.

Who’s affected?

The MLC will affect employment contracts, but there is still much confusion as to which crewmembers will be affected.

The convention states it ‘applies to all seafarers’ and a ‘seafarer means any person who is employed or engaged or works in any capacity on board a ship to which this convention applies’.

Yet it goes on to state that it ‘applies to all ships, whether publicly or privately owned, ordinarily engaged in commercial activities’.

While it is clear that all yachts are ‘ships’ in law, most yachts are not chartered. To complicate matters further, some yachts are registered as commercial yachts – as part of a tax avoidance strategy or help retain value – but only used privately.

It remains to be seen exactly how the flag states will apply the MLC. Given that both flag and port state interpretations will be of the essence, it will only take one popular flag or port state to widen the interpretation to produce a de facto version which will raise the bar for all. This seems likely given the widespread ignorance of the number of private yachts presently in use worldwide.

Flag states may choose not to apply the MLC to yachts of less than 200GT, but this only applies to yachts sailing in that country’s home waters, which will be of little comfort to most owners.

Where the convention does not apply, the previous rules will remain in effect.

The MLC will affect all crewmembers, employed or engaged in any capacity on board. While common sense suggests that this should not extend to navigational pilots, surveyors, yard employees and the like, this remains to be seen.

Inspection and enforcement

Yachts over 500GT engaged in international voyages or operating in ports outside the yacht’s flag state will have to carry a Maritime Labour Certificate and Declaration of Maritime Labour Compliance.

The declaration sets out the owner’s plans for ensuring compliance with the applicable national laws and regulations, and must be complied with on an on-going basis. Flag states will have to review these plans and certify that they are in place and being implemented. Captains will be responsible for carrying out the stated plans and keeping proper records as evidence of compliance.

All vessels in port will be liable to inspection under the MLC and detained if necessary. They are already, but crew welfare has always taken second place to safety and security concerns, and there has been neither a broad international framework in place nor a clear route for crew complaints.

Port officials will be looking to see copies of the SEA (in English) and possession by crewmembers of the records of their employment – without statements as to the quality of their previous work or salary. Officials will also be able to interview crewmembers.

What can be done?

It is important to remember that the MLC is not, itself, a statement of law. It is a set of rules which ratifying countries agree to incorporate into their own laws.

The MLC contains both mandatory and suggested elements. Convention States must co-operate with each other in order to facilitate effective implementation and enforcement, but they do have a degree of discretion in implementation.

Owners should ensure that flag states understand their point of view. It is acceptable, under the MLC, for certain provisions to be brought in using regulations which are ‘substantially equivalent’ to the Convention’s. This is what the UK’s Maritime and Coastguard Agency did when writing the Large Yacht Code in order to make SOLAS safety provisions more palatable.

In the long term there are mechanisms for change built into the MLC, but the process is protracted.

Unfortunately, given that the port authorities will not be allowed to treat yachts flagged in non-MLC countries any less favourably, flagging in a non-MLC country will not help, especially given that the convention is politically uncontroversial and is enjoying widespread support and uptake.

Crewmembers will also soon become accustomed to working on compliant yachts, so non-compliance may only make finding and retaining good crew more difficult.

Crewmembers may be employed or taken on as self-employed contractors. The presumption in law will be that they are employees, unless the contract under which they serve makes this clear. However, service contracts must still comply with MLC SEA requirements.

Having to have a written employment agreement may actually prevent time wasting and aggravation for owners. All too often, owners and managers presently dispense with the need for employment contracts (in an atmosphere of goodwill) only for avoidable misunderstandings and disputes to develop later.

Given its impact, the MLC is a subject owners need to start understanding now, even though the precise way in which it will be implemented remains to be seen.

Benjamin Maltby is an English barrister with consultants MatrixLloyd, providing impartial guidance on all aspects of large yacht ownership and operation. He began his career as a lawyer with an International Group P&I Club, before practising with the leading Mediterranean marine and offshore law firm.

Originally published: November 2010. Updated September 2012.