DISPUTE RESOLUTION CLAUSES AND EMPLOYMENT AGREEMENTS
Author: O. M. Atoyebi S.A.N FCIArb. (U.K.)., Contributor: Samuel Afolabi [1]
It is not uncommon to find dispute resolution clauses inserted in employment contracts, owing to the fact that it is a standard clause that prescribes the mode in which disputes arising between parties to the contract are to be resolved.
It is important for any contractual relationship to have an agreed approach to resolving disputes. Dispute resolution clauses in a contract are an important expression of the parties’ intention about how they’re going to work together. Dispute resolution clauses generally provide lower cost and timely approaches to resolving disputes, and may help preserve relationships as they can prevent the parties from resorting to litigation.
There is no single dispute resolution clause that can be used for all employment contracts or agreements, rather there are several dispute resolution mechanisms, ranging from mediation, negotiation, conciliation, arbitration and litigation, and a number of factors that should be considered in identifying which would be best applicable to the employment contract.
The content of the dispute resolution clause(s) should be deliberately and carefully considered and drafted to meet the particular context and needs of the nature of the employment.
This article is aimed at understanding the various dispute resolution mechanisms in employment contracts, and the Jurisdiction of the National Industrial Court in interpreting the clauses in employment contracts.
MEDIATION
Mediation is a mode of dispute resolution, where an amicable decision arises with the help of a third party known as a ‘mediator’ (who only acts as a facilitator and does not interfere in the decision of the dispute) without recourse to the Court of law. It is a voluntary and flexible process; therefore, the parties to the dispute are under no obligation to agree to the settlement. Thus, an agreement taken via mediation shall be binding upon the parties, only as long as they agree to it. There may be instances where parties are advised to adhere to Mediation, however, under such circumstances, the result is up to the parties. Therefore, Mediation is a process where the parties are in total control over their final settlement[1] [2].
CONCILIATION
Conciliation is a method of dispute resolution wherein the parties to a dispute come to a settlement with the help of a conciliator. The conciliator meets with the parties both together and separately to enter into an amicable agreement. Here, the final decision may be taken by reducing tensions, improving communications, and adopting other methods. It is a flexible process, therefore allowing the parties to define the content and purpose of the proceeding. It is risk-free and is not binding upon the parties unless they sign it[2] [3].
ARBITRATION
Arbitration generally regulated by the provisions of the Nigerian Arbitration and Conciliation Act, is a mode of ADR wherein the dispute between the parties goes through a process to achieve an amicable resolution by an impartial third party known as an ‘arbitrator,’ without recourse to litigation. More importantly, it is flexible, time-saving and confidential.
In the case of arbitration, the arbitrator, after reviewing the dispute between the parties comes to a settlement. Such a decision taken by an arbitrator shall be binding on both parties. Unlike other methods of dispute resolution, once the parties have submitted a matter to arbitration, neither can withdraw from the procedure. An arbitral award can only be brought before and set aside by the Court where it can be proven that decision was biased or tainted with illegality.
The arbitration clause must specify the choice of arbitrator, disclosure of information, cost of arbitration, and location for the arbitration proceedings.
Order 24 Rule 1 of the National Industrial Court Civil Procedure Rules 2017 provides “The President of the Court or a Judge of the Court may refer for amicable settlement through conciliation or mediation any matter filed in any of the Registries of the Court to the Alternative Dispute Resolution Centre…”
LITIGATION
This is most often the last resort of parties, it is a proceeding where an aggrieved party, institutes an action in court against the other party with the aim that the issues will be resolved in court, where other amicable settlement mechanisms prove to be abortive in resolving the issue.
THE JURISPRUDENCE OF THE NATIONAL INDUSTRIAL COURT IN INTERPRETING CLAUSES IN EMPLOYMENT CONTRACTS
Section 254C of the Constitution of the Federal Republic of Nigeria (CFRN) 1999 as amended vests the National Industrial Court with exclusive jurisdiction in entertaining all disputes relating to employment relations, labour disputes etcetera.
In this light, we will be examining the general jurisprudence of the National Industrial Court in light of the following:
DISMISSAL/TERMINATION OF EMPLOYMENT CONTRACT
An employee may be terminated from a job of their own free will or following a decision made by the employer. Employers who execute a termination of employment being that have the right to hire and to fire with or without reason. However, an employer cannot fire an employee without following the due process laid down in the employment contract or as provided by law. Accordingly, an employment may be terminated in the following manner:
- BY FRUSTRATION: A contract of employment may be terminated by frustration when they accept, certain circumstances as terminating the contract, irrespective of the intention of the parties. The doctrine of frustration within the context of employment contracts, deals with situations where a supervening external event, not produced by the fault of either the employer or employee, destroys the ability of either the employer to continue to employ, or the employee continues to work under the contract. The legal effect of frustration is that it releases the parties from further obligations under the frustrated contract of employment. A contract of employment may be frustrated by subsequent events such as death, prolonged illness, incapacity, illegal, war or other circumstances which may have the performance of the contract impossible – MARSHALL V. HARLAND & WOLF LTD.
- BY EFFLUXION OF TIME: A contract of employment may be terminated by effluxion of time. A contract of employment may be made for a definite period for instance, for 1 year or 6 months. In such a case at the end of the expiration of the agreed period, the contract comes to an end. The same would apply where the contract of employment is for a particular venture only. The employment contract would end at the end of the particular venture.
- BY MUTUAL AGREEMENT: A contract of employment like any other contract may be terminated by mutual agreement between the parties, such as contractually stipulated causes or by subsequent agreement.
- BY NOTICE: A contract of employment may terminate the contract on the expiration of notice given by the other party, of his intention to terminate the contract of employment. In DUPE OLATUNBOSUN V. NISER. The Supreme Court held that where a contract of employment has been properly terminated, the intention and motive for the termination become irrelevant. However, where an employer gives reasons for the termination, he may have to justify the reason if the termination is contested. It needs to be emphasised that where parties have previously agreed on a mode or length of notice or the proper person to terminate, only termination that complies strictly with the agreement would be valid as in the case of ADEYEMO V. OYO STATE PUBLIC SERVANT COMMISSION. Where the contract provided for a notice of one month to terminate, the Court held that the employer could not terminate the contract on a 30days notice.
There are two broad species of employment recognised in Nigerian law. These are private and statutory employment.
Statutory employments are employments in which the terms and conditions of service are regulated directly by statute or by subsidiary legislation made pursuant to a statute. Such employments are said to enjoy “statutory flavour” which covers them with legal protection over and above that which is available to private employment. In other words, statutory employees are vested with a legal status that is higher than that which is available to private employees. Employers cannot validly terminate statutory employment without complying strictly with the statute or subsidiary legislation regulating the employment. The remedies available to statutory employees who have been wrongfully dismissed by their employers include reinstatement of their employment and damages representing their salaries during the period of the purported dismissal. This was the decision of the Supreme Court in the celebrated case of Olaniyan v University of Lagos (1985) 2 NWLR (Pt. 9) 599 and a host of other related case laws on the point. It is noteworthy that this position is still the applicable law on the termination of statutory employment in Nigeria[3] [3] .
Private employments, on the other hand, are employments in which the terms and conditions of service are regulated by private contracts alone without statutory back-up. This commentary will focus on the appropriate procedure for the valid termination of private employment in Nigeria. In doing this, the commentary will highlight the previous rules guiding the termination of private employment in the country, and the radical changes recently introduced thereto by the NICN – in the exercise of its broad constitutional powers conferred by the Alteration Act.
The key difference to note between private employment and statutory employment is that while the latter attracts reinstatement upon wrongful termination (in addition to damages representing the employee’s salaries during the period of the wrongful dismissal), the former only attracts damages for wrongful dismissal – as it is generally accepted in Nigerian law that the courts will not force a willing private employee on an unwilling employer. This was effectively the decision of the Supreme Court in the case of Ilodibia v NCC Ltd. (1997) 7 NWLR (Pt. 512) 174.
However, from as far back as 2015, the NICN had moved away from the traditional common law rule and now holds that international best practice dictates that every employer must give valid and justifiable reason(s) for the termination of private employment; and that, globally, it is no longer fashionable in labour relations law and practice to terminate private employment contracts without adducing a valid reason. Therefore, in support of this modern rule, the NICN has relied on the provisions of section 254C(1)(f) and (h) of the Constitution of the Federal Republic of Nigeria 1999 (as amended by the Alteration Act) (the “Constitution”) and section 7(6) of the National Industrial Court of Nigeria Act 2006 (the “NICN Act”), which enjoin the NICN to have due regard to fair labour practices, and to good or international best practices in labour, employment, and industrial relations; when exercising its exclusive jurisdiction over labour and employment matters.
CONCLUSION
In Nigeria, a thorough understanding of the various implied duties of both the employer and the employee under a contract of employment would be incomplete, unless it is stated in passing that they have corresponding obligations imprinted on them by virtue of their respective duties. To avoid or minimize this dreadful situation, it is generally recommended that the terms and conditions of any employment contract be reduced to writing in order to protect the employer from arbitrarily terminating and dismissing the employee, and that individual labour relations be concluded in a fair legal framework that respects the principle of employee rights protection.
[1] https://www.mondaq.com/arbitration-dispute-resolution/777618/comparative-analysis-of-adr-methods-with-focus-on-their-advantages-and-disadvantages?type=popular&login=true [4] accessed 3 January 2022
[2] Ibid 1
[3] < https://www.banwo-ighodalo.com/resources/re-appraising-the-rules-guiding-termination-of-private-employments-in-nigeria [5]> accessed 3 January 2022