Perspectives on Laws Governing Termination of Employment and Dismissal In Nigeria

INTRODUCTION

At common law, termination of employment and dismissal brings the contract of employment to an end. Therefore, the law on termination and dismissal in Nigeria is built around common law.[1]  It is trite law that the employer-employee relationship is a contractual relationship. Where this relationship is not effectively managed, there is bound to be conflict or dispute which may give rise to final determination of such employment contract[2]. There are various laws governing employment or labour matters in Nigeria, which includes the following:

• The Constitution of the Federal Republic of Nigeria 1999 (as amended).
• The Labour Act, Chapter L4 Laws of the Federation, 2004
• Legislations or statutes enacted by the National Assembly at the Federal level and by the House of Assembly at the State level. These include:

1. The Employees Compensation Act, 2010
2. The Pension Reform Act, 2014
3. Trade Union Act, 2004
4. Factories Act, 2004
5. Trade Dispute Act, 2004
6. National Housing Fund Act, 2004.

• Case laws.
• International Conventions and the International Labour Organization {ILO} Treaties.

It is pertinent to state that the primary and principal legislation that regulates employment or labour matters in Nigeria is the Labour Act, and employment in Nigeria falls into three categories:

• Employment governed by statute;
• Employment by written contract of employment;
• Employment at will or worker holding an office at the pleasure of the employer.

The fulcrum of this paper seeks to address written contract of employment. The paper also seeks to clearly demystify laws governing the determination of contracts of employment, and clarify if there is really any clear distinction as regards termination of employment and dismissal as this has been used interchangeably and misapplied by laymen.

Oluwatobiloba Akinboade
Graduate Intern, HARLEM

CONTRACT OF EMPLOYMENT

A contract of employment is any agreement, whether oral, written, express or implied, whereby one person agrees to serve the employer as a worker.  Flowing from this, the contractual terms includes express and implied terms. A contract of employment can be made orally, however, Section 7 of the Labour Act Chapter L1, Laws of the Federation 2004 (hereinafter referred to as “the Act”) requires an employer to issue a written contract of employment within three months of the commencement of the employee’s employment and such contract must contain the contents specified by the Act.

 The common features and contents of a contract of employment according to the Act includes; in the name of the employer, the name of the employee and his address, terms of employment, nature of employment, employee responsibilities, employee’s benefits, non-disclosure agreement, compensation and means of calculation, grounds or procedure for termination and any other special terms or conditions. [3]

For a contract of employment to be valid, the basic elements of a contract at law must be present. These elements are offer, acceptance, consideration, capacity and intention to create legal relations. An employer may be defined as any person or business that employs one or more people, especially for wages or salary while a worker according to Section 91 [4] is defined as

“a person who has entered into or works under a contract with an employer, whether the contract is manual labour or clerical work or is expressed or implied or oral or written and whether it is a contract of service or contract personally to execute any work or labour.”

  A written contract of employment is generally a contract of service or an employment contract or an agreement between the employer and employee which clearly stipulates the terms and conditions of the employer-employee relationship. The relationship between an employer and employee is generally found in the letter of employment.

It must be stated that for a written contract of employment to have a binding effect, both parties must agree and sign to the terms of the employment contract. The major effect of a written contract of employment is that from the date of the commencement of the contract which is usually stated in the letter of appointment given to the employee, the employee becomes bound by the terms and conditions of service consented to by him. It implies that the moment an employee appends his/her signature on the letter of appointment, it is believed that he has accepted, and consented to, the terms and condition of the contract of employment. This contract of employment can thereafter be determined by termination with notice or payment in lieu of notice, dismissal, lapse of time, retirement, mutual agreement between parties (employer and employee) or redundancy.

The focus of this paper, however, revolves around termination of employment and dismissal, thus, due attention would be given to these concepts below.

TERMINATION OF EMPLOYMENT

Termination according to Oladosu O. in his book titled ´The Nigerian Labor and Employment Law´ is defined as the bringing to an end of the employment relationship.

At common law, either the employer or employee may terminate a contract of employment subject to the terms of the written contract of employment. Generally, where a contract of employment is terminated by the employee, it is generally regarded as a voluntary Resignation. However, one of the numerous powers of an employer is the power to hire and fire, which empowers the employer to terminate the contract of employment, in compliance with the terms of the written contract of

employment, otherwise the employer will be liable for wrongful termination. This was established in the case of Akinfe v. UBA Plc [5]where the court of appeal stated that;

 “He who hires can fire; nevertheless, an employer must observe and adhere to the conditions under which an employee is hired before such an employee can be fired, otherwise the employer can ipso facto be held liable for wrongful termination of the services of employee”

It is worthy to note that neither the employer nor the employee is obligated to provide any reason for the termination of an employment contract subject to the compliance of the terms of the employment contract. This implies that the employer or employee can terminate a contract of employment for any reason or no reason at all subject to the terms of the contract of employment as held in Osianya v. Afribank Nigeria Plc.[6]  Therefore, the motive of termination is immaterial provided it is in compliance with the terms of employment contract. Where a contract of employment contains a provision that either party may terminate or determine the contract by notice or payment of a sum of money in lieu of notice, such notice or payment must be strictly complied with subject to the terms of contract.

As stated earlier, the principal and main legislation governing employment or labor matters is the Labour Act. The employment contract in many cases would specify procedures or steps in terminating an employment contract, it is important to note that where there is no written contract or terms of contract of an employment as to termination of the employment contract, reference is to be made to the Act. In accordance with Section 9(7) of the Act, termination of employment contract may be in 3 ways which are;

• By the expiry of the employment period;
• By the death of the employee before the expiry of such period;
• By notice in accordance with Section 11 of the Labour Act.

 Section 11 of the Act in terms of termination of contract of employment provides for a compulsory issuance of notice or payment in lieu of notice by each party. The following are the provisions of Act;

• Either party to a contract of employment may terminate the contract on the expiration of notice given to him to the other party of his intention to do so;
• The notice to be given for the purposes of subsection (1) of this section shall be:

1. One day, where the contract has continued for a period of three months or less;
2. One week, where the contract has continued for more than three months but less than two years
3. Two weeks, where the contract has continued for a period of two years but less than five years and
4. One month, where the contract has continued for five years or more.

Section 11 (7) & (8) of the Act further provides that “all wages that are payable in money shall be paid on or before the expiration of the date of notice and in calculating a payment is lieu of notice only the part of wages a worker or employee receives exclusive of outcome and other allowances shall be taken in account.” The Labour Act places emphasis on a notice of termination or payment in lieu of such notice on or before the expiration of such notice.  According to Section 11(6) of the Act, it provides that “the right to notice may be waived by either party to the contract of employment by a payment in lieu of notice” that is the party’s right to notice is waived once there is acceptance of payment in lieu of notice. The employer may however reject such notice or payment in situations where:

• The employee is under suspension.
• The employee has a case pending before a disciplinary committee or tribunal responsible for disciplinary matters within the organization.
• The employee is suspected to be involved in an incident involving the police.[7]

It is pertinent to add that one of the basic requirements a notice of termination is that, it must be clear and unambiguous as seen in the case of Honica Samwill Nigeria Ltd v. Hoff [8] where the Court of Appeal held that the termination of an employee’s employment must be expressed in clear terms or be capable of being inferred from the conduct of the employer. Also, the notice of termination is required to be in writing as provided by Section 11 (3) of the Act and the notice must also be reasonable as seen in Ogunsanmi v. V.C.F Furniture [9] as the court considered the following factors that determine what reasonable notice is, the nature of the employment service with the employee service and the fact of monthly payment wages. Termination of employment however, entitles an employee to all the benefits of exiting service including pension, gratuity and other entitlements where the employee deems eligible.

DISMISSAL

According to Webster’s Universal Dictionary and Thesaurus, Dismissal can be defined as the act of removing a person or employee from office. Under Nigerian law, dismissal typically refers to the determination of a contract of employment due to the employee’s misconduct, and this is usually done summarily without notice and without payment in lieu of notice. Its commonly adopted by employers against any erring employee in cases of gross misconduct which can be considered to be grave and weighty. Some employers go to the extent of creating a clause or statement in the employment contract or employees manual as to misconducts that would attract dismissal summarily.

 It must however be noted that in cases where the contract of employment provides for acts or misconduct that will amount to summarily dismissal, such dismissal will take effect instantly. In other cases, where the acts amounting to misconduct are not clearly spelt out by the employment contract then the disciplinary procedure provided by the employer will be complied with before the employer dismisses the employee. Unlike termination of employment, dismissal is the sole right enjoyed by an employer. Dismissal applies to cases where an employee is relieved of his employment as a result of breach of a term of the contract and dismissal is the maximum punishment that can be given to any erring employee.

Where the dismissal is for a cause such as for misconduct or as some criminal elements or allegation of wrongs, the employer must have offered the employee the opportunity to defend himself/herself. The principle of fair hearing and natural justice must be upheld in this situation. it is important that the employer informs the employee in question of his alleged wrong and give the employee the opportunity to defend himself or herself. In the case of Yaroe v. Nigeria Stock Exchange,[10] the court emphasized the need for an employer to properly observe the rules of natural justice in the event that the employer wishes to dismiss an employee. Dismissal comes into place where the employee’s conduct is of some grave and weighty character that it undermines the relationship of confidence between the employer and employee, this was established in the case of UBN Ltd v. Ogoh,[11] Ajayi v. Texaco Nigeria Ltd [12]

There is no legal list as to what constitute the degree of misconduct which will justify the dismissal of an employee.  It is the employer’s responsibility to make rules which should be properly communicated to all employees, including a clear statement or clause that an incident of gross misconduct will lead to a summary dismissal. The list is non-exhaustive and it includes the following;

• Gross neglect of duty
• Dishonesty
• Theft
• Fraud
• Sexual immorality
• Assault
• Conversion of company’s property
• Sleeping at work
• Falsification of records
• Working under the influence of illegal drugs, to mention but a few.

IS THERE ANY DISTINCTION BETWEEN TERMINATION OF EMPLOYMENT AND DISMISSAL?

Both termination of employment and dismissal are built around common law and have been used interchangeably, misconceived and misapplied by people. Questions may arise if this is just an issue of mere nomenclature. To answer this, it calls for a need to draw a clear distinction between them, if any. Attempt has been made in discussing the terms (termination of employment and dismissal) to a great extent. An attempt will be made further to juxtapose both termination of employment and dismissal. To answer the above question as whether there is any distinction between termination of employment and dismissal; Yes, there are distinctions between termination of employment and dismissal. Below are the following distinctions:

1. Termination of employment is a right enjoyed by both the employer and employee while Dismissal is the right enjoyed only by the employer.

2. In termination of employment, notice or payment in lieu of notice is of essence while in dismissal, notice or payment is not required.

3. Upon termination of employment, certain benefits may be accrued to an employee such as allowances, benefits and so on while upon dismissal, no benefits or entitlement to be accrued to the dismissed employer.

4. In termination of employment, motive or reason for such termination is irrelevant whether good or bad while dismissal, it arises due to breach of the term of the employment contract or conducts in the employee’s manual or handbook.

5. Termination of employment is done within a specified period provided in the employment contract while dismissal is often done swiftly or in accordance with the laid down disciplinary procedure of the employer

6. Termination of employment could only be wrongful for failure to give proper notice or payment in lieu of notice while dismissal could be wrongful on account of breach of procedures.

CONCLUSION

In cases where dispute arises between employer and employee, it is recommended that such disputes are settled by reference to Alternative Dispute Resolution mechanisms such as mediation, negotiation or arbitration. However, where the aggrieved parties are not satisfied by the outcome, they may resort to the National Industrial Court of Nigeria (NICN) which has exclusive jurisdiction to entertain employment/labour matters or dispute by virtue of Section 254 paragraph C of the 1999 Constitution of the Federal Republic of Nigeria (as amended). Remedies available to an employee whose contract of employment was wrongfully terminated or who was wrongfully dismissed include damages, compensation or reinstatement among others.

Oluwatobiloba Akinboade is a Second Class Upper Graduate of Osun State University, Ifetedo Campus.

FOOTNOTES:

[1] Obidimma et al; “Unfair dismissal in Nigeria: imperative for departure from the common law” NAUJILJ, Vol 7 (2016) at p.134

[2] http://resolutionlawng.com/wrongful-termination-of-employment-in-nigeria/ accessed 11^th October, 2019 at 11:59am

[3] Section 7 of the Labour Act, Chapter L1, Laws of the Federation, 2004.

[4] Labour Act, Laws of the Federation of Nigeria, 2004

[5] (2007) 10 NWLR (pt.1031) 565 (SC).

[6] (2007) 6 NWLR (pt. 1031) 565 (SC).

[7] “Differences-between-termination-of-employment-summary-dismissal-under-the-Nigerian-legal-system-pdf” accessed Monday, 23^rd September, 2019 at 8:57:22am

[8] 1992) 4 NWLR 238, 673

[9] (1961) ALL NLR 862

[10] (2014) 46 NLLR (pt. 147)

[11] (1995) 2 NWLR 380, 647 at 653

[12] (1987) 3 NWLR 62