Termination of Employment in Nigeria: An Overview of the Labour Law

INTRODUCTION

The Nigerian Labour Law Cap L1 LFN 2004 is the law that generally guides the system of employment in Nigeria. Although, there are other laws that regulate employment such as:

  • Employees’ Compensation Act 2010.
  • Factories Act, Chapter F1, LFN 2004.
  • Finance Act, 2021.
  • Industrial Training Fund, Chapter 19, LFN 2004 (as amended).
  • National Health Insurance Scheme Act, Chapter N42, LFN 2004 etc.

The Nigerian Labour Law distinguishes between workers and non-workers. It defines workers as “Those who are generally employees who perform manual labour or clerical work” and defines non-workers as “Employees who perform administrative, executive, technical or professional functions”.[1]

What is Termination of employment?

Termination of employment refers to the end of an employee’s work with a company. This may be voluntary or following a decision made by the employer. Employers who execute a termination of employment may do so for a number of reasons, including downsizing, poor job performance, or redundancies.[2]

An employee who is not actively working because of an illness or leave of absence is still considered employed, if the relationship with the employer has not been terminated formally with a notice of termination.

However, this is different from “dismissal”. Dismissal is the right of an employer to terminate the contract of service of an employee with neither notice nor payment, in lieu of notice on account of gross misconduct on the part of the employee, which strikes at the root of the employment contract. This act must be one that offends the essential provisions of the employment contract.

MAJOR DIFFERENCES BETWEEN TERMINATION AND DISMISSAL

S/N TERMINATION DISMISSAL
1. This is a right enjoyed by both employer and employee. This is the sole right of an employer.
2. This is done within the period specified in the employment contract. This is done instantly or in compliance with the laid down disciplinary procedure of the employer.
3. Upon termination, certain benefits may accrue to an employee such as gratuity. This terminates the employment and may leave no room for entitlement to benefits.
4. Where termination is without notice, the employee is entitled to his salary in lieu of such notice. Upon dismissal, there is no requirement for such notice or salary in lieu.

During the first quarter of 2020, the outbreak of the COVID-19 pandemic wreaked havoc on individuals, businesses, organizations and many countries globally. Resources were stretched to their limits, social habits were turned upside down, and businesses around the world were counting their losses.

Then came the lockdown, put in place by virtue of the COVID-19 Regulations 2020. As a result, all businesses with the exception of those that qualify as essential services were forced to shut down all business operations.

Despite the “Work from Home” policies put together by some organizations to ensure some level of productivity, a large percentage of the Nigerian workforce which is mostly engaged in the informal sector or by small businesses, was badly hit by the compulsory lockdown measures put in place by the Regulations. Businesses had to deal with issues of non-performance of obligations in employment contracts, and situations that their employment contracts may not have adequately addressed. THIS LED TO MASSIVE TERMINATION OF EMPLOYMENT IN MANY ORGANIZATIONS IN THE COUNTRY.

QUESTIONS

  1. Do employers have the right to terminate the employment of their employees due to “Frustration?
  2. Can employers terminate the employment of women on maternity?
  3. What remedies are available to employees for unjust termination of appointment?
  4. What is the legal procedure for dismissal or termination of employment in Nigeria?

Do employers have the right to terminate the employment of their employees due to “FRUSTRATION?”

The legal doctrine of frustration makes provision for the discharge of a contract where, subsequent to its formation, a change of circumstances occurs without default of either party as to make it legally, physically, or commercially impossible to fulfil the contract.

The Supreme Court of Nigeria has over the years, reiterated the common law principle that in private employment contracts, an employer has the right to hire and fire an employee, and need not give any reason whatsoever to justify such termination. However, in recent times, the National Industrial Court has changed this trajectory, upholding the principles of international labour standards and international best practices. An employer must now give a justifiable reason that is connected with the performance of the employee’s work before termination of employment. EBERE ONYEKACHI ALOYSIUS V DIAMOND BANK PLC.[3]

Where the termination is for business-related reasons, such termination may be treated as redundancy. The Labour Act defines the term “redundancy” as “an involuntary and permanent loss of employment caused by an excess of manpower”. This is much likened to the situation the country encountered during the period of COVID-19. Typically, in the event of a redundancy, a Worker is entitled to the following payments at the termination of his/her employment:

  • Agreed redundancy or severance payment.
  • Salary in lieu of contractual notice (if the company elects not to give the contractual notice).
  • Accrued salary up until the effective termination date.
  • Monetary value of any accrued but unutilized annual leave entitlement as at the effective termination date.
  • Any accrued but unpaid incentives awards or bonuses (if applicable).
  • Any other payments due to any of the employees, under any of the company’s employment and operational policies such as redundancy or gratuity payments; and
  • Reimbursement of any out-of-pocket expense incurred by any employee in connection with the performance of any of his/her duties prior to the effective termination date.

However, there is no corresponding statutory obligation for Non-Workers in relation to the computation of redundancy payments, and whether they would be entitled to receive any redundancy payments is subject to the terms of their respective contracts of employment. Non-Workers are, however, entitled to the payments listed in the 1st and 7th bullet points above.

This, therefore, means that an employer may at any time during redundancy, terminate the employment of an employee, provided the process is done according to law or subject to the employment contract.

Can employers terminate the employment of women on maternity?

A pregnant female employee, upon presentation of a Medical Certificate indicating her Expected date of Delivery (EDD), is entitled to maternity leave of at least six weeks before the EDD and six weeks after the delivery of the child. She is also entitled to 50% of the wages she would have earned, if she had not been absent from the employment by reason of her carrying and delivering a child, provided she has been in employment for a period of six months or more.

Section 54(4) provides that where, however, for medical reasons, she exceeds the period allowed, her employment cannot be terminated during that period and/or for that reason, if she produces a medical certificate from a registered medical practitioner informing the employer of her medical condition. While she nurses her child in employment, she is entitled to half an hour, twice daily for the care of her child.

What remedies are available to employees for unjust termination of appointment?

If an employer terminates an employee’s contract of employment without following the procedure laid out in the contract, the employee could institute an action for wrongful termination at the National Industrial Court (NICN). If the employee is successful, the (NICN) has been known to award significant damages to such an employee, and in some cases has ordered the employer to reinstate the appointment of the affected employee.

What is the legal procedure for dismissal or termination of employment in Nigeria?

If the dismissal is not for cause, it would be termed a termination and an employer is required to comply with the terms of the contract including the notice requirements under the contract.

Where the dismissal is for a cause such as misconduct, then prior to dismissing the employee, the employer must have offered the employee an opportunity to defend himself/herself. If a disciplinary tribunal is constituted, the tribunal must be independent and impartial, and must comply with the rules of natural justice and the principles of fair hearing.

Where the allegations are of a criminal nature, the same burden of proof applies as in criminal cases (i.e., the allegation must be proved beyond a reasonable doubt).

CONCLUSION

The tides, as it relates to the principle that he who hires can fire seem to be changing rapidly, and The National Industrial Court (NICN) is at the forefront of the movement. This is as a result of the Court being insistent on upholding the principles of good or international best practice in labour and industrial provisions. Therefore, the termination of employees’ appointment without any reason or bad reason, may now warrant the sanction of the Court in Nigeria, in line with recent decisions of practices, unless some of these recent decisions of the NICN are upturned on appeal by the higher Court, specifically, the Court of Appeal, which is now the Court of final arbiter in respect of labour and employment matters in Nigeria.[4]

REFERENCE

  1. Lambo, Agumuo, ‘Employment and Labour Laws and Regulations 2022’ (2022) < https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/nigeria> accessed 10 September 2022
  2. Kagan, Rasure, ‘Termination of Employment’ (2021) < https://www.investopedia.com/terms/t/termination-employment.asp> accessed 10 September 2022
  3. (2012) 58 NLLR 92
  4. Olusola John Jegede, ‘Overview Of Labour Law On Termination Of Employment In Nigeria’ (2021) < https://www.mondaq.com/nigeria/contract-of-employment/1075070/overview-of-labour-law-on-termination-of-employment-in-nigeria> accessed 10 September 2022

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