Digitalisation, automation and the global labour market

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Introduction

Modern information technology and the daily use of the Internet have strongly influenced the world of work in the 21st century. Intelligent algorithms simplify everyday tasks, and it is impossible to imagine how most steps of a procedure could be managed without them. Further, the use of artificial intelligence (AI) and robotics is accelerating. Thus, the question arises as to what the future world of work will look like and how long it will take for this to happen. Mass unemployment, mass poverty and social distortion may be a possible scenario for the new world of work.(1) Even if intelligent systems and algorithms play an increasingly central role in the new world of work, no jobs will be lost abruptly as a consequence of digitalisation. Rather, a gradual transition will take place, which has already commenced and differs from industry to industry and from company to company.(2)

Big data analyses and intelligent algorithms are also increasingly replacing or supporting humans in the service sector. In the industry sector, automation and the use of production robots will lead to considerable savings with regard to the cost of labour and can release workers from hard and dangerous, repetitive and monotonous work. While in the European automotive industry one working hour in production costs more than €40, the costs for using a robot range from €5 to €8 an hour.(3) A production robot is thus only slightly cheaper than a worker in China.(4)

Robots and intelligent algorithms cannot become ill, have children or go on strike, and are not entitled to annual leave; therefore, for many companies it is worthwhile investing in robots and intelligent software. An autonomous system does not depend on external factors and works reliably and constantly; it can also work in danger zones and overnight.(5)

Categories of AI

The following definitions are of use in this area:

  • Deep learning – machine learning based on a set of algorithms that attempt to model high-level abstractions in data.
  • Gig economy – independent contractors looking for individual tasks that companies advertise on an online platform (eg, Amazon Mechanical Turk).
  • Robotisation – production robots replacing employees because of advanced technology (they work more precisely than humans, eg, three-dimensional printers).
  • Autonomous driving – vehicles have the power for self-governance using sensors and navigation without human input. Taxi and truck drivers are no longer necessary. The same applies to stock managers and postal carriers (eg, delivery drones).
  • Dematerialisation – thanks to automatic data recording and data processing, traditional office activities are no longer necessary (eg, accounting or lawyer assistants).

Impact of digitalisation and automation on labour market

Global view
According to recent studies, about 47% of total US employment is at risk,(6) while around 70% of total employment in Thailand or India is at risk.(7) Low-wage countries such as China, India and Bangladesh are still benefiting from their surplus of low-skilled workers, and western companies have outsourced their production and some services to these countries. In most developing countries, the implementation of (partly) autonomous systems is unlikely to be worthwhile at present for economic reasons, since the labour costs are not much higher than the costs for acquisition, development and maintenance of the necessary equipment.(8) On the other hand, companies also located in low-wage countries must invest in relevant IT systems in order to improve their productivity and attractiveness and remain competitive in the long run.

Eventually, however, these companies will decide to produce in their countries of origin using production robots and only a few workers. In this case, the surplus of low-skilled workers will turn into a curse for developing countries. The question is how to integrate the large number of unskilled production workers into a structurally difficult labour market that depends on the demand of foreign countries. Another problem is that there are no comparable social security systems in place in most developing countries. Possible mass unemployment could lead to humanitarian catastrophes and a wave of migration.

Due to the lack of financial investments in many developing countries, digitalisation will initially be strongly focused on developed countries and Southeast Asia. For example, more than 80% of the robots sold each year are used in Japan, South Korea, the United States and Germany.(9)

New job structures
According to a survey by the Pew Research Centre, 65% of Americans expect that a robot or an intelligent algorithm will be doing their job within 50 years.(10) Individual jobs will disappear partly or completely, and new types of job will come into being, especially in the service sector. That the service sector will be affected can particularly be seen in the insurance and financial branches, where intelligent algorithms are replacing human employees by automatically carrying out traditional back-office tasks, answering client questions via chatbots and presenting financial planning or insurance policies.(11)

A typical example of a new type of job created in recent years is crowdworking. Freelancers represent the typical worker of ‘Industry 4.0’ because they work at any time and in any place. Thanks to the Internet, international borders and time differences also no longer play a role. Owing to the digitalisation and internationalisation of the online platforms on which crowdworkers offer their services, the choice of applicable law is usually uncertain. More precisely, the challenges are how to define ‘crowdworking’, how to establish working conditions for compensation and how to determine which tax regime, social security and welfare rules apply.(12)

It is certain that both blue and white collar sectors will be affected to the same extent. In the medium-wage sector, routine jobs will be eliminated. Up to one-third of the jobs that require a bachelor’s degree may be replaced by a machine or intelligent software in the coming years. At the same time, it is expected that new jobs will be created in the service sector, ranging from data analysts to software programmers.

Labour relations
The role of humans within the world of work is changing. Employee organisations have realised that new challenges are in store for employees from all professional and social classes because of robotics and the computerisation of the workplace. Trade unions will pay particular attention that no ‘lost generation’ is left behind and that there are no mass dismissals caused by the introduction of AI. Unions will advocate further training, advanced training and retraining of employees.(13)

Trade unions will remain the main player when it comes to fighting for employees’ rights and they will expand their constituency by also representing the increasing number of freelancers. Finally, legislators will have to introduce new forms of employee representation structures to avoid their slow decline caused by a decrease in trade union memberships and fewer employees in a company, due to which the required thresholds for works councils can no longer be reached.

Outsourcing employment and creating new internal structures
Companies will focus on their core competencies and will outsource other activities in a cost-effective manner.(14) It is a global trend that ‘Work 4.0’ will take place outside traditional employment structures, with a rise in self-employment.(15) Even in European countries, the so-called platform economy is becoming more and more common. And larger companies use external workers instead of hiring new employees. Some highly qualified young employees enjoy their independence and will focus their work on the development of creative solutions for a changing client base. The demand for social security is no longer as high, but freedom with regard to working time, the place of work and the choice of clients is more important to so-called ‘Generation Y’.

Professional connections between companies, clients, competitors and external providers involve some risks with regard to business secrets, especially if companies create open innovation models or use ‘prosumers’ (who consume and produce media) to develop their products. Particularly in big companies, hierarchy levels will be eliminated and smaller organisational units will be necessary. An automatic supply chain connection between the company’s systems and the systems of its external providers will be the basis for success in the digital world.

Distinction between employee and independent contractor
Classic employment can be detrimental to the business owing to the high wage costs in European countries.(16) An employee is primarily characterised by the fact that he or she is subject to the authority of the employer to issue instructions regarding the job assignment. The borders between the employee’s professional life and private life become blurred. If the place of work, in addition to working time, becomes more flexible, and if employees are granted more powers to work independently, it becomes harder to distinguish between an employee and an external freelance worker or a worker provided by a third-party company.(17)

Liability and safety risks
The introduction of intelligent algorithms and more independent production robots will create new risks for employees and employers. At the moment, a spatial separation between robotic and human workers characterises production facilities. In the future world of work, human workers will have to collaborate with robots and intelligent algorithms. Work will be characterised by the use of connected technical wearables (eg, data glasses or fitness trackers). In the production sector, risk analyses will be carried out in advance.

In addition, software faults can come into consideration as potential safety hazards relating to autonomous systems and assistant robots. Recently, the European Parliament voted for a resolution concerning the introduction of legal standards for robots and intelligent algorithms (eg, electronic person) and compulsory insurance to compensate for damages caused by the systems.(18)

Self-employed contractors are not released from liability. If an independent contractor destroys the principal’s property while working for the principal, he or she must pay full damages, whereas the employee’s liability is limited in most cases.

Working time
In the future, employees and employers will agree on the flexible management of working hours. The breakdown of the boundaries for working hours also makes it possible to implement working life time models that are beneficial to the ‘work-life balance’. In most European countries, the maximum working hours or rest periods are exceeded in everyday practice. National and European lawmakers should create frameworks offering more flexibility and less strict regulations to avoid this legal uncertainty (eg, daily rest periods).

Some (older) alternative working-time models will become common, especially for the younger generation. Examples are home office, job sharing, on-call work, zero-hour contracts, employee-sharing, sabbaticals or reduced working time models for older employees. However, there are individual legal risks concerning the contractual design of every alternative working time model. In most cases, negotiations with employee representatives will be necessary.

Remuneration
The breakdown of boundaries in terms of the place of work and working hours makes it difficult for employers to check how many hours employees have actually worked. There is no factor linking the time/wage system, which makes this system unattractive for employees and employers alike since, in general, employees’ motivation is enhanced by more performance-related payments. In the future, elements of performance-linked payment – or alternatives such as stock options, annual bonuses or company pensions – will thus be used increasingly with regard to non-executive employees.

The central issue regarding performance-related remuneration structures is not the type of agreement, but how to define ‘performance-related’. A combination of an individual team target (turnover or a ‘soft’ target) and the turnover achieved by the company or group is possible.

Data privacy and big data
For big data analyses, data is anonymised and exists in an unstructured form. Thus, in most countries big data analyses do not violate applicable law. For companies, data is not only an asset worth protecting, but at the same time it is merchandise, and has been called the “oil of the future”.(19)Nevertheless, the EU General Data Protection Regulation (applicable as of May 2018) prohibits collecting personal data without a permissive rule in all European countries. US data privacy protection laws are not based on the general assumption that data is confidential, but provide for data confidentiality in individual cases (eg, with regard to health insurance and the protection of minors). In addition, at least in the European Union, the introduction of many technical aids (eg, production robots, wearables, intelligent algorithms and employees’ own devices) is not possible without the consent of employee representatives.

Comment

One certainty is that both blue and white collar sectors will be affected to the same degree.(20) A high level of unemployment in some sectors will be unavoidable, even if the major share of jobs will shift to a different area of work – mainly to the service sector, where new service models will be created. Finally, AI will result in growth and prosperity: employees will also benefit from flexible solutions concerning working time and the place of work caused by the introduction of AI.

The digitalisation (and automation) of services is a global phenomenon affecting a far-reaching and diversified field of advisory services in general, and labour and employment law in particular. Ideally, future laws should take the technological developments and the increased need for flexibility into account. AI is creating a gap between existing legislation and the new laws necessary for an emerging workplace reality.(21)

For further information on this topic please contact Gerlind Wisskirchen or Jan Schwindling at CMS Hasche Sigle by telephone (+49 40 37 63 00) or email (gerlind.wisskirchen@cms-hs.com or jan.schwindling@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

Endnotes

(1) www.spiegel.de/wirtschaft/soziales/arbeitsmarkt-der-zukunft-die-jobfresser-kommen-a-1105032.html.

(2) Brzeski/Burk, “Die Roboter kommen, Folgen der Automatisierung für den deutschen Arbeitsmarkt“, 2015.

(3) www.bcgperspectives.com/content/articles/lean-manufacturing-innovation-robots-redefine-competitiveness/.

(4) “Kollege Roboter,” Fokus No 38/2015 of October 19 2015, p69.

(5) www.faz.net/aktuell/wirtschaft/fuehrung-und-digitalisierung-mein-chef-der-roboter-14165244.html.

(6) Frey/Osborne, The Future of Employment: How Susceptible Are Jobs to Computerisation,” 2013, p1.

(7) “Automat trifft Armut”, Handelsblatt News am Abend, July 15; No 135, p6.

(8) www.bcgperspectives.com/content/articles/lean-manufacturing-innovation-robots-redefine-competitiveness/.

(9) www.bcgperspectives.com/content/articles/lean-manufacturing-innovation-robots-redefine-competitiveness/.

(10) www.pewinternet.org/2016/03/10/public-predictions-for-the-future-of-workforce-automation/ p3.

(11) www3.asiainsurancereview.com/News/View-NewsLetter-Article/id/38286/Type/eDaily/South-Korea-Insurers-to-evolve-into-integrated-service-providers-integrated-service-providers.

(12) “The On-Demand Economy and the impact on employment law”, International Bar Association Employment & Industrial Relations Law, September 2016, p31.

(13) https://innovation-gute-arbeit.verdi.de/++file++540998f5ba949b358400004e/download/138.1411_digit_arbeit_RZ3_web.pdf S.25.

(14) “Understanding the Future of Work“, International Organisation of Employers Brief, July 6 2016, p7.

(15) “Automation and Independent Work in a Digital Economy”, OECD Policy Brief on the Future of Work, May 2016, p3.

(16) “The On-Demand Economy and the impact on employment law”, International Bar Association Employment & Industrial Relations Law, September 2016, p27.

(17) “The On-Demand Economy and the impact on employment law”, International Bar Association Employment & Industrial Relations Law, September 2016, p26.

(18) www.spiegel.de/netzwelt/netzpolitik/kuenstliche-intelligenz-eu-parlament-fordert-regeln-fuer-roboter-technologie-a-1134949.html.

(19) www.faz.net/aktuell/wirtschaft/netzwirtschaft/was-taugt-die-eu-datenschutz-verordnung-13972055.htm.

(20) www.pewinternet.org/2016/03/10/public-predictions-for-the-future-of-workforce-automation/ p5.

Source: International Law Office

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Perspectives on Probation, Confirmation and Promotion in Employment Contracts

By Kayode Omosehin 

Probation is simply an agreed trial period for a worker to prove his worth on a job to his employer and assess the worth of the job to himself. Promotion is an elevation of a worker in status within a company based on performance or other considerations as may be agreed in an employment contract or determined by the employer. Confirmation is the intermediate act of endorsement of a new worker’s performance by a company sometimes between the periods of probation and promotion; it is a testament that an employer is satisfied with the performance of a new employee.

Probation and promotion of a worker are, generally, matters which are based on each worker’s contract. As such, an employment lawyer needs to review the employment contract before an opinion can be formed on the ramifications of an employee’s probation or promotion. Where the terms of employment are contained in various documents, it is important to read all the various documents together to decipher the intention of the parties regarding probation or promotion. From experience, the offer letter of employment, the appointment letter (if it is different from the offer letter), the terms and conditions of employment, staff hand book, policy on review of rank/grade level, disciplinary procedures rules as well as official circulars and notices circulated internally are all relevant in determining the respective rights and powers of workers and employers on probation and promotion.

The rights of a worker under probation

A person does not cease to be an employee of a company merely because he is on probation. As such, in my view, a worker on probation is entitled to all express benefits in an employment contract or those implied by the labour law. Interestingly, however, Justice J. D. Peters of the National Industrial Court held in Ogbonna v. Neptune Software Limited [2016] 64 N.L.L.R. (Pt. 228) 511 that an employer is not under any obligation to give notice of termination of the service of an employee who is on probation until the employment is confirmed. In other words, according to Honourable Justice J. D. Peters, the employment relationship between a worker and a company in that Ogbonna case was inchoate and that the need to give a notice for termination for one calendar month stated in the claimant’s letter of employment would only arise after the confirmation of his employment.

It is difficult to agree with the reasoning of the judge in the foregoing case given that an employment relationship is founded on contract following offer and acceptance, with consideration taking the form of the employee’s resumption and performance of a designated job. There are many judicial decisions of a superior court to the effect that a contract of employment comes into existence when a clear offer made by a company is unequivocally accepted by a job applicant provided that there is no outstanding condition precedent to assumption of work which must be fulfilled by the applicant. In fact, and law, if such outstanding conditions are in the form of medical clearance, provision of referees, verification of credentials etc. (as they usually are), the employer can neither unilaterally revoke the offer after the applicant’s acceptance of same before the deadline for fulfilling the other outstanding conditions, nor prevent the applicant from fulfilling the rest of the conditions. So, upon fulfilling the conditions for acceptance of an employment offer and resumption of duty with a company, it will be inconsistent with judicial precedent to hold that the employment contract between the worker and the company, in the circumstances, is inchoate, as Justice J. D. Peters did in the Ogbonna’s case, merely because the employment relationship commenced with probation. Employment contracts are not sui generis as they are governed by common law rules on general contract making which entail offer, acceptance and consideration, including part-performance. See Federal Government of Nigeria v. Zebra Energy (2002) 18 NWLR (Pt. 798) 162.

In my view, a worker on probation is entitled to all the benefits stated in a contract of employment which are enjoyable on probation and those implied by law in deserving circumstances. A worker on probation is entitled to be paid the agreed salaries for the probationary period. He is also entitled to pension contribution from the employer. An employer of a worker on probation cannot deny liability for remitting personal income tax of the employee on the ground that the worker’s employment was probationary. If probation lasts longer than a year, in my view, the worker is entitled to an annual leave. Both the employer and employee are entitled to terminate the working relationship during probation as agreed in the employment contract. It is necessary to repeat here, only for emphasis, that in addition to the foregoing benefits, a worker on probation is entitled to all other benefits or rights provided in his contract of employment which are enjoyable during probation.

The effect of confirmation of employment

Confirmation is an attestation of an employer that a worker’s performance is satisfactory in a period of probation for the purpose of extending the employment in accordance with agreement. The length of probation before confirmation is a matter of agreement. Most employment contracts provide for power of the employer to extend a period of probation if the worker’s performance is unsatisfactory. Whenever confirmation is due, it is advised to be in writing (in a letter or memo of confirmation) with all necessary incidental terms clearly spelt out to avoid the incidence of legal presumptions. Upon confirmation, a worker stands to enjoy all the benefits which are attached to his employment.

Confirmation of employment may be express such that an employer writes a letter or memo to the employee or circulates same within the company to confirm a worker’s employment at the end of probation. However, where probationary period has ended but the employer neither expressly extends it nor terminates the employment, the law presumes that the employment has been confirmed impliedly. Under Nigerian employment law, at least from the various cases reviewed in the course of this work, there is no implied extension of probation by the employer and no such presumption is made in favour of an employer where such employer fails to expressly extends a probationary period or terminates an unsatisfactory service of a worker which extended after the expiration of an agreed probation.

In line with international best practice and labour standard, a Nigerian court held in a case that the continuation of services after expiry of the probation period without a new contract being drawn up means that the employment has been impliedly confirmed and that a contract of indeterminate duration has taken effect from the date when the offer for probationary service began. In the said case, the claimant was engaged for a probationary period of two (2) years but he was made to work for six (6) years without confirmation. The employment was eventually terminated without notice or salary in lieu of notice. The argument advanced by the employer was that the employment was never confirmed. The court rejected the argument of the company and upheld the claims of the employee in part. According to Honourable Justice P. O. Lifu (JP), such termination amounted to unfair labour practice contrary to section254C (1) (f) of the Constitution as same was incompatible with international best labour practice.

There is no specific legislation regulating confirmation of employment in Nigeria. However, whenever there is any employment dispute regarding probationary service, the employment contract is usually the proper guide to understanding the rights of a worker under probation and after confirmation. The employer must follow whatever procedure that is agreed in the employment contract. Where confirmation of employment is subject to satisfactory performance by the worker, a performance appraisal is essential, in my opinion, to evidence a transparent process by which an employer arrives at a decision not to confirm an employee’s service after probation.

Promotion as a right or privilege

Promotion of staff is a most controversial aspect of employment relationship largely because of its perception or misconception as a right or privilege. Promotion or lack of it can turn out to be ugly, leaving an unsavoury feeling in a work environment, depending on the procedures adopted by a company to arrive at a decision to promote or not to promote. Generally, under Nigerian employment law, promotion is not a right but a privilege; it is usually expected to be earned. Though the foregoing principle of law has its exceptions. In a case decided by Honourable Justice Shogbola of the National Industrial Court on 9th April 2014, the court found for a claimant who has been unlawfully terminated from employment as a police officer but refused to grant the reliefs on promotion on the ground that promotion of staff is not a right. Interestingly, however, about a year after, Honourable Justice J. D. Peters of the same court, in another case, held on 5th March 2015 that where promotion is based on agreed conditions which the employee has fulfilled, it would be a breach of agreement if the employer fails to approve his promotion.

What is clear from a review of cases on promotion is that where a company’s staff handbook or terms and conditions of employment provide for clear procedure for promotion, failure of an employer to comply with the procedures may give rise to liability for breach of contract in an action against the company by an aggrieved staff. There is no laid down rule or guide for determining a right or wrong promotion decision. Every employment contract will have its own peculiarities on which, upon a proper review, an employment lawyer can provide independent advice regarding the rights of either party. Perhaps I should add that it is an onerous task for an aggrieved employee to successfully challenge his employer’s decision on promotion, however unfavourable. There is a presumption that every employee understands the terms of his or her engagement at the time of accepting an offer of employment; and the onus to prove any allegation of fraud or inducement rests on him. Malice and discrimination are not enough in themselves to impute liability to a company unless there is a clear evidence to support such allegations. Where a decision on promotion has been wrongfully exercised, the court has power to entertain the complaints of an aggrieved employee who has been affected by such decision.

How to determine “satisfactory performance” of worker in matters of promotion

In the discussion of promotion in employment law, the requirement of “satisfactory performance” is the most subjective condition a worker is required to meet. This is because the management of company determines what amounts to satisfactory performance of a worker. Hence, the court usually adopts a strict rule of interpretation of any promotion policy and will readily resolve any ambiguity in the policy in favour of a worker. In a case decided against Zenith Bank Plc, the employment contract stated that the claimant would be promoted upon confirmation and subject to an above average performance rating (minimum of B+).

The claimant’s employment was confirmed at the end of probation but he was not promoted despite his “A” performance rating. The court, relying on the last performance appraisal, found for the claimant on the ground that his performance was satisfactory to merit promotion. Consequently, the court awarded damages in the sum of money representing the difference in salaries of the claimant as the time of the suit and those which he would have earned in (as well as bonuses and benefits accruable to) the higher office to which he ought to have been promoted.

Review of Promotion procedures

The management of a company reserves the right to review the terms and conditions of an employment contract, including those pertaining to promotion of staff. However, when such review takes place, every affected staff ought to be promptly informed about the details of the new promotion policy. It is advisable to ensure that such management decision is not perverse as such that will give the impression that an employee is obviously prejudiced or denied of an entitlement which has become due. Where promotion is due to a worker, any unilateral decision by a company to review a promotion policy to prejudice or deny the worker may be deemed as a breach of agreement. Such affected worker may be entitled to compensation in damages in any action challenging the company’s decision during or after his resignation from the employment. It only needs to be added that when a prejudicial decision is taken on promotion, a right of action is deemed have accrued to an affected staff and he or she is entitled to resign immediately and seek redress against the company.

 

Legal Treatment of Contracts for Service and of Service in Employment Relationships

 

Employment-Law

Introduction

Contracts of service and contracts for service both connote an employment relationship between the parties. However, they differ in their nature and the legal consequences.  Understanding the difference between both contracts is important for two main reasons, namely, the nature of each party’s respective obligations, and which court has jurisdiction in the event of dispute between the parties.

Delineation

A contract of service is an agreement between an employer and an employee. In a contract for service, an independent contractor, such as a self-employed person or vendor, is engaged for a fee to carry out an assignment or project.

The line of demarcation between an independent contractor and an employee is very thin and the two concepts sometimes overlap. In such a situation, the question about the relationship of employer and employee needs to be determined with reference to the facts and circumstances of each case as to who are the parties to the contract, who pays the wages, who has the power to dismiss, what is the nature of the job, and the place of executing the job, all have to be kept in mind.

 The Supreme Court, in Shena Security Co. Ltd v. Afropak (Nig.) Ltd & 2 Others [2008] 18 NWLR (Pt. 1118) 77 SC; [2008] 4 – 5 SC (Pt. II) 117 laid down the following factors that should guide courts in determining which kind of contract the parties entered into –

  • If payments are made by way of “wages” or salaries” this is indicative that the contract is one of service. If it is a contract for service, the independent contractor gets his payment by way of fees”. In like manner, where payment is by way of commission only or on the completion of the job, that indicates that the contract is for service.
  • Where the employer supplies the tools and other capital equipment there is a strong likelihood that the contract is that of employment or of service. But where the person engaged has to invest and provide capital for the work to progress that indicates that it is a contract for service.
  • In a contract of service/employment, it is inconsistent for an employer to delegate his duties under the contract. Thus, where a contract allows a person to delegate his duties there under, it becomes a contract for services.
  • Where the hours of work are not fixed it is not a contract of employment/of service. See Milway (Southern) Ltd v. Willshire [1978] 1 RLR 322.
  • It is not fatal to the existence of a contract of employment/of service that the work is not carried out on the emjployer’s premises. However, a contract which allows the work to be carried on outside the employer’s premises is more likely to be a contract for service.
  • Where an office accommodation and a secretary are provided by the employer, it is a contract of service/of employment.

 Dispute resolution in contracts of service and for service

Jurisdiction is the all important factor that the courts will consider in any case that is brought before them. It is tempting to assume that all employment or work related disputes are to be settled by the National Industrial Court (NIC) by virtue of the Constitution of the Federal Republic of Nigeria (Third Alteration) Act 2010. However, this is not always the case.

Section 254 C (i) (a) of the Act provides that “the National Industrial Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters (a) relating to or connected with any labour, employment, trade unions, industrial relations and matters arising from workplace, the conditions of service, including health, safety, welfare of labour, employee, worker and matters incidental thereto or connected therewith”.

The above provision notwithstanding, the NIC has held in many cases that its jurisdiction covers only disputes relating to contracts of service, and not contracts for service. This means that only strictly employment contracts may be litigated before the NIC. Cases of an independent contractor, such as a self-employed person or vendor, engaged for a fee to carry out an assignment or project, are not justiciable before the NIC. Such cases may therefore be more appropriately brought before the regular courts (i.e High courts or magistrates courts, depending on the circumstances). In other words, breach of contract for service is regarded as any other breach of contract and treated as such.

In a recent case of The Registered Trustees of Three Wheeler Beneficiaries Operators Association, Lagos State v. Road Transport Employers Association of Nigeria (unreported Suit No. NICN/LA/407/2013), the ruling of which was delivered on 10th May 2017, the NIC held thus:

“This Court does not have jurisdiction over every workplace issue. For instance, as against contracts of service, this Court does not assume jurisdiction over contracts for service, and yet contracts for service are workplace issues strictly so called. See Mr. Henry Adoh v. EMC Communications Infrastructure Limited [2015] 55 NLLR (Pt. 189) 546 NIC, Ozafe Nigeria Limited v. Access Bank of Nigeria Plc unreported Suit No. NICN/LA/179/2014 the ruling of which was delivered on 16th March 2016 and Engr. Jude Ononiwu (Trading under the name of Judeson Chemical and Engineering Co. Ltd) v. National Directorate of Employment & Another unreported Appeal No. CA/OW/32/2015 the ruling of which was delivered on 22nd May 2015”.

In the case of Lawrence Igwegbe v. Standard Alliance Life Assurance Limited (unreported Suit No. NICN/LA/465/2013), the judgment of which was delivered on 11 July 2017, the NIC had to determine on the facts before it, if the relationship between the Claimant and the Defendant was one of an employment relationship (contract of service) or one in which the claimant was an independent contractor (contract for service). The court held that the fact that the Claimant was on commission and not on salary was very suggestive that the relationship was one of a contract for service. The court relied on the Supreme Court decision in Shena Security Co. Ltd and held that salary is a component part of the employment relationship strictly speaking (contract of service).

The facts of the case are that the Claimant was employed as Agency Manager by the Defendant, who is an insurance company. While the Claimant argued before the court that his relationship with the Defendant was an employment relationship, his evidence before the court showed that he was on commission and not on a salary. This meant that he was an independent contractor to the Defendant, and not necessarily its staff. The court in this case took judicial notice of the fact that insurance agents are in the main not salaried employees, but are paid commission based on the volume of insurance business they bring in. The court declined jurisdiction, since it was a case of contract for service as against contract of service.

In the case of Engr. Jude Ononiwu (Trading under the name of Judeson Chemical and Engineering Co. Ltd) v. National Directorate of Employment & Another, the claimant had entered into a contract as a trainer with the 1st defendant under the 1st defendant’s National Open Apprenticeship Scheme of Skill Acquisition Programme. As a result, the 1st defendant sent trainees to the claimant for training. Between 1996 and 2000, the claimant trained for the 1st defendant a total number of 2204 trainees at the training cost of N6,000.00 per trainee bringing the total debt owed the claimant to N13,776,000.00 only. When the 1st defendant refused to pay this sum after repeated demands, the claimant accordingly sued for it at the Federal High Court. The Federal High Court transferred the matter to the Owerri Division of the NIC on the ground that the issue is a labour issue in respect of which it had no jurisdiction given the provision of section 254C(1) of the 1999 Constitution, as amended.

The NIC, not certain as to whether it had jurisdiction either, decided to refer the case to the Court of Appeal to determine if the NIC has jurisdiction over contracts for service. In determining this issue, the Court of Appeal held that the court with jurisdiction, considering the facts of the case, was the State High Court, and not the Federal High Court nor the NIC. The Court of Appeal based its decision on the fact that the case arose from a simple contract between the claimant and the 1st defendant/respondent; and that the relationship between the parties was contractual, the contract being one of contract for service as opposed to a contract of service. The Court of Appeal then considered section 254C (1) in terms of the jurisdiction of the NIC, section 251(1) in terms of the jurisdiction of the Federal High Court and section 272(1), (2) and (3) in terms of the jurisdiction of the State High Court, and then concluded that the claims of the claimant in the case do not relate to the sections dealing with the jurisdiction of the NIC and the Federal High Court. Relying on Onuorah v. Kaduna refining and Petrochemical Co. Ltd [2005] LPELR 2707 (SC) and Integrated Timber & Plywood Products Ltd v. Union Bank of Nig. Plc [2006] 5 SCNJ 289, the Court of Appeal held that neither the NIC nor the Federal High Court had jurisdiction over the matter.

Employer tax obligations in contracts of service and contracts for service

 Employees under contract of service are deemed to have employment contract with the organisation that they work for, which entitle them to employment benefits such as wages and salary, pension, medical insurance and other similar employment benefits. In a contract for service, however, an independent, self-employed, individual is contracted to provide a specific service for the organisation in return for a fee. There is no employer-employee relationship between the organisation and the employees of the independent contractor.

Section 81 of the Personal Income Tax Act Cap P8, LFN 2004, as amended to date (PITA) provides that for employees – under a contract of service, it is the responsibility of their employers to deduct and remit income taxes from the emoluments paid to such employees. Section 82 of PITA provides further that the employer is answerable to the tax authorities for taxes deducted from the employees. The employer is required to file annual returns in respect of emoluments paid to their employees and account for the taxes withheld and remitted to the relevant tax authorities.

Section 81(2) of PITA requires the employer to file annual returns not later than 31 January of every year in respect of all emoluments paid to its employees in the preceding year. Failure to comply attracts a penalty, upon conviction. Whenever the tax authorities intend to conduct tax audit enquiries in respect of employees’ personal income taxes, the employer is usually held answerable.

In cases of contracts for service, however, the independent contractor or self-employed individual is personally responsible for his own taxes. Such individuals are expected to file personal income tax returns under the self-assessment regime. However, the company to whom the services are rendered has the responsibility for deducting and remitting withholding taxes on the fees payable under the contract at applicable rate. In the same vein, a self-employed individual has an obligation to register for value added tax (VAT) and charge VAT on invoices issued for services rendered, unless such service is specifically exempt from VAT.

The Value Added Tax Act Cap V1 LFN 2004 as amended (VATA) defines a taxable person as an individual or body of individuals, family, corporations sole, trustee or executor or a person who carries out in a place an economic activity, a person exploiting tangible or intangible property for the purpose of obtaining income therefrom by way of trade or business or a person or agency of government acting in that capacity. For the purpose of VATA, an individuals under a contract for service falls under this category.

In addition to the need to account for tax, the Pension Reform Act, 2104 mandates employers with five or more employees to make contributions on behalf of their employees into an approved pension fund. As explained earlier, individuals with contracts of service are employees. Hence, pension contributions are mandated for them but not for individuals with a contract for service. Individual with a contract for service could make voluntary pension contributions into their Retirement Savings Account (RSA) if they so desire.

Conclusion

In the world of work, it is not always easy to distinguish a contract of service from a contract for service. Sometimes, the nature of the relationship between the parties is deliberately made nebulous in order to hide its true identity (and thereby deny one party of certain rights). The International Labour Organisation (ILO), well aware of this fact, has provided guidance on how Courts should approach the issue, if it arises. In the ILO Report titled, The Scope of the Employment Relationship (ILO Office: Geneva), 2003 at pages 23 – 25, it is stated thus:

The determination of the existence of an employment relationship should be guided by the facts of what was actually agreed and performed by the parties, and not by the name they have given the contract. That is why the existence of an employment relationship depends on certain objective conditions being met (the form in which the worker and the employer have established their respective positions, rights and obligations, and the actual services to be provided), and not on how either or both of the parties, describe the relationship. This is known in law as the principle of the primacy of facts, which is explicitly enshrined in some national systems. This principle might also be applied by judges in the absence of an express rule.

The ILO concluded by advising that the Judge in a labour dispute must normally decide on the basis of the facts, irrespective of how the parties construe or describe a given contractual relationship.

Sexual Assault: When is an Employer Vicariously Liable?

Employment-Law

IVIC V. LAKOVIC, 2017 ONCA 446 (Hoy A.C.J.O., Blair and Hourigan JJ.A.), June 2, 2017

Is a taxi company vicariously liable for an assault committed by one of its drivers? In this decision, the Court of Appeal considered this question.

Tanja Ivic alleged that she was sexually assaulted by a cab driver who drove her home from a party. In addition to suing the driver personally, she brought a claim against the taxi company, pleading that it was vicariously liable for the acts of the driver, that it was negligent, and that it breached its fiduciary duty to her.

On a motion for summary judgment, the motion judge dismissed Ivic’s claim against the taxi company.

Ivic did not challenge the motion judge’s conclusion that her claim in negligence failed on the ground that she led no evidence with respect to the applicable standard of care in the circumstances nor regarding any breach on the part of the taxi company. She also did not challenge the motion judge’s conclusion that she did not establish any basis for the existence of a fiduciary duty. Her appeal turned on whether the taxi company should be held liable for the assault, in the absence of any fault on its part.

The Court of Appeal agreed with the motion judge that the taxi company was not vicariously liable.

Hoy A.C.J.O. emphasized that in order for there to be a finding of vicarious liability, there must be a strong connection between what the employer was asking the employee to do and the wrongful act. She concluded that there was no such connection in this case.

The Supreme Court of Canada outlined the test for assessing vicarious liability in Bazley v. Curry, [1999] 2 S.C.R. 534. When considering whether an employer is liable for unauthorized, intentional wrongdoing on the part of one of its employees, courts must consider:

  1. the opportunity that the enterprise afforded the employee to abuse his or her power;
  2. the extent to which the wrongful act may have furthered the employer’s objectives;
  3. the extent to which the wrongful act was related to friction, confrontation or intimacy inherent in the employer’s enterprise;
  4. the extent of power conferred on the employee in relation to the victim; and
  5. the vulnerability of potential victims to wrongful exercise of the employee’s power.

While acknowledging that the opportunity for a taxi driver to assault a passenger was not negligible, Hoy A.C.J.O. found that the driver’s opportunity for misconduct was not intimately connected to his functions. She distinguished the circumstances of this case from those in Bazley , where a non-profit organization that operated residential care facilities for the treatment of emotionally troubled children was held vicariously liable for an employee’s sexual abuse. In Hoy A.C.J.O.’s view, the taxi driver’s opportunity for misconduct did not rise to the level of what existed in Bazley.

Hoy A.C.J.O. disposed of the second, third and fourth factors noting that the alleged assault did not further the taxi company’s aims in any respect and was not related to friction, confrontation or intimacy inherent in the employer’s aims. Unlike the employee in Bazley , taxi drivers do not have physical contact with their customers in the course of carrying out their duties. In fact, the taxi company’s Rules and Regulations sought to prevent such contact, explicitly providing: “Do not touch any customer if possible”. Hoy A.C.J.O. noted that in dispatching the driver to pick up the appellant, the taxi company did not confer any power on him. “What power the driver had, he arrogated to himself through his own decisions”, the court held.

Turning to the issue of the vulnerability of potential victims to the wrongful exercise of the employee’s power, Hoy A.C.J.O. acknowledged that a lone, intoxicated woman out late at night is vulnerable. However, she is “prey” not only to taxi drivers. Any power wrongfully exercised by this driver was not predicated on his employment. Hoy A.C.J.O. agreed with the motion judge that the requisite strong connection between what the taxi company was asking the driver to do and the alleged sexual assault was not present. The company did not materially increase the risk of the appellant being sexually assaulted by permitting the driver to drive the taxi and dispatching him. The alleged assault was only “coincidentally linked” to its activities.

Hoy A.C.J.O. also noted that the appellant failed to demonstrate that the imposition of vicarious liability in this case would further the broader policy rationales of fair compensation and deterrence.

The appeal was dismissed.

 

Constructive Dismissal under Nigerian Labour Law by A. I. Iortyaver

Termination of employment

Dismissal (referred to informally as firing or sacking) is the termination of employment by an employer against the will of the employee. Though such a decision can be made by an employer for a variety of reasons, ranging from an economic downturn like the economic recession currently being experienced in Nigeria to performance-related problems. On the part of the employee, being fired has a strong stigma in many cultures and organizations.

To be dismissed, as opposed to quitting voluntarily (or being laid off), is often perceived as being the employee’s fault or under performance. Finding new employment may often be difficult after being fired, particularly if there is a history of being fired from previous jobs, if the reason for firing is for some serious infraction, or the employee did not hold the job very long. Job seekers will often not mention jobs that they were fired from on their resumes; accordingly, unexplained gaps in employment are often regarded as a red flag in a resume by most employers.

An employee whose employment is terminated in ad variance with the terms of his/her employment is entitled to damages against his/her employer. The supreme court  Per KARIBI-WHYTE, J.S.C . (Pp. 21-22, para. G held in Imoloame v. W.A.E.C. (1992) NWLR (Pt. 265)303 thus”It is well settled that in cases of wrongful dismissal “the measure of damages is prima facie the amount the plaintiff would have earned had the employment continued according to contract subject to a deduction in respect of any amount accruing from any other employment which the plaintiff, in minimizing damages, either had obtained or should reasonably have obtained

Often times due to the fear of being liable to an employee for damages or other remedies either provided by the law or in the terms of employment, some employers create an unbearable working environment to force the employee to resign in order to exonerate themselves against any liability by an employee. This action by the employer creating a hostile working environment to force an employee to resign out of his/her volition is called constructive dismissal.

By way of definition, constructive dismissal simply means a Situation where an employer creates such working conditions (or so changes the terms of employment) that the affected employee has little or no choice but to resign. In such cases, the employee retains the right to seek legal compensation as having being dismissed constructively.
Also, Constructive dismissal occurs where an employee terminates his employment in response to his employer’s treatment of Him. Although there has been no actual dismissal, the treatment is sufficiently bad that the employee is entitled to regard himself having been dismissed. Examples of constructive dismissal include:

  1. reduction in pay or not being paid at all.
  2. being demoted without good reason.
  3. allegation of poor performance which are unfounded.
  4. disciplinary proceedings which are manifestly unreasonable.
  5. a complete change in the nature of your job.
  6. harassing or bullying.
  7. been forced to work in breach of health and safety law.

In order for an employee claiming constructive dismissal to succeed he/she must prove as enumerated by Lord Denning in Western Excavating v. Sharp [1978] 1 All ER 713.

  1. A repudiatory breach on the part of the employer. This may be an actual or anticipatory breach, but must be sufficiently serious to justify the employee resigning.
  2. An election by the employee to accept the breach and treat the contract as at an end.
  3. The employee must resign in response to the breach
  4. The employee must not delay too long in accepting the breach, as it is always open to an innocent party to waive the breach and treat the contract as continuing (subject to any damages claim that they may have)

A Court handling a matter of constructive dismissal will also need to satisfy itself that the employee did not delay too long in resigning. Western Excavating v. Sharp [1978] 1 All ER 713. The facts of the case are thus: An employee (Mr. Sharp) worked for the company and one of his terms of contract was that if he worked extra time he could have time off in lieu. He then went on to take an afternoon off work to partake in a card game which led to his dismissal. He appealed the dismissal and was reinstated but with a 5 day pay suspension in its place. Without these 5 days pay he was in financial difficulty and attempted to get his employers to pay his accrued holiday pay in advance and when they refused that he asked for a loan of £40. The welfare officer explained they couldn’t loan that amount but suggested that Mr. Sharp should see him again to discuss the details. Mr. Sharp was not happy with this and so resigned. He then claimed for constructive unfair dismissal at the tribunal.

When it reached the court of appeal however Lord Denning took a different approach to the matter and the Court reversed the decision of the tribunal and held that Mr. Sharp had not been constructively dismissed at all. Lord Denning went on to state,

If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer’s conduct”

While this principle has been enshrined in the labour enactments of other jurisdictions and thus has a statutory backing, the principal enactment governing labour related matters in Nigeria i.e labour Act (CAP L 1 LFN 2004) does not have any statutory backing regarding constructive dismissal in the Nigerian labour law. However all hopes are not lost with the creation of the National Industrial Court under Section 254 A (1)  third Alteration of the 1999 Constitution of the Federal Republic Of  Nigeria (2011 as amended) Which creates the national industrial Court and vest it with jurisdiction under section 254 C (1) to entertain labour related matters.

Section 7 of the National Industrial Court Act 2006 provides that Court shall have and exercise exclusive jurisdiction in civil cases and matters-

(a)     relating to….

(i)        labour, including trade unions and industrial relations; and

(ii)       Environment and conditions of work, health, safety and welfare of labour, and matters incidental thereto….

Subsection 6 provides thus:

 The Court shall, in exercising its jurisdiction or any of the powers conferred upon it by this Act or any other enactment or law, have due regard to good or international best practice in labour or industrial relations and what amounts to good or international best practice in labour or industrial relations shall be a question of fact.

This provision is a great relief and of wide scope to enable the court in the exercise of its duty to apply best international labour practices in its administration of justice. The court in the case of Miss Ebere Ukoji  V Standard Alliance Life Assurance Co. Ltd  (Suit No: NICN/LA/48/2012) held thus:

 Globally, and in labour/employment law, constructive dismissal, also referred to as constructive discharge, occurs when an employee resigns because his/her employer’s behavior has become intolerable or heinous or made life difficult that the employee has no choice but to resign. Given that the resignation was not truly voluntary, it is in effect a termination. In an alternative sense, constructive dismissal or constructive discharge is a situation where an employer creates such working conditions (or so changes the terms of employment) that the affected employee has little or no choice but to resign. Thus where an employer makes life extremely difficult for an employee, to attempt to have the employee resign, rather than outright firing the employee, the employer is trying to create a constructive discharge. The exact legal consequences differ from country to country, but generally a constructive dismissal leads to the employee’s obligations ending and the employee acquiring the right to seek legal compensation against the employer. The employee may resign over a single serious incident or over a pattern of incidents. Generally, the employee must have resigned soon after the incident. The court held the conduct of the respondent as amounting to a constructive dismissal.

At times, an employer may behave badly but his conduct will not amount to him making your position untenable. For instance, non-payment of salaries maybe as a result of an ailing economy which, will not suffice as a good ground at that time. Each case is however decided based on the facts and circumstances surrounding it.

Conclusively, the doctrine of constructive dismissal by virtue of the powers conferred on the National Industrial Court Act can effectively be applied under the Nigerian legal system, even though not enshrined in any statute, as was done by the Court in Ebere’s case (supra).This is a welcome development in the Nigerian Labour Law jurisprudence.

Source: The Nigeria Lawyer

How to prove that the termination of your employment was wrongful

termination

When is termination/dismissal said to be wrongful? 

You may sue and demand to enforce your rights if your employment contract is wrongfully terminated. Wrongful termination is when any of the following occurs:

  1. Your former employer did not follow the terms of the contract in terminating it or dismissing you. For instance, if the contract specified that either party can only terminate by giving the other 30 days’ notice or one month’s salary in lieu of notice, it would be wrongful to terminate the contract forthwith and not pay you anything in lieu. Also, if your employment contract provides for a disciplinary procedure to be followed before you can be dismissed (say for gross misconduct) and the procedure was not followed or your act/omission was wrongly categorized, your dismissal would be wrongful.
  2. Your appointment was terminated ‘in accordance’ with the terms of contract but the reason for the termination is unlawful or unjustifiable. For instance, where termination is based on discrimination or sexual harassment, it will qualify as wrongful termination. It does not matter that your employer (like most companies in Nigeria) does not have a policy against workplace discrimination or sexual harassment. These are matters of law and public policy that are implied into every employment contract.
  3. You actually did resign ‘voluntarily’ but under conditions that left you with no other choice. For instance, your former employer frustrated you and deliberately made it practically impossible for you to continue with the job. The technical term for this is “constructive dismissal”, and it also qualifies as wrongful termination.
  4. Your position had been rendered redundant but your former employer played smart and clothed it as simple termination (like merely said your ‘services no longer required’) in order to save itself the cost of paying you redundancy or other benefits.

While it is true that no employer should feel compelled to retain an employee whose services are no longer required or who is no longer fit to remain in the job, if your appointment must be terminated, it should be with the dignity and respect deserving of your person as an employee, and all your entitlements fully paid.

When to sue

If you are aggrieved about the manner that your appointment has been terminated, you need to move fast in getting a redress. Sue as soon as it is reasonably clear to you that your grievance cannot be amicably resolved. By law, you must sue within 6 years of the termination otherwise your claim will become stale and unenforceable. The courts are strict with this timeframe and would hardly entertain any excuse for delay in suing; not even where the delay was because you were trying to settle amicably with your former employer.

If you were working in the civil or public service, the need to act fast is even more urgent. This is because the timeframe allowed to sue public officers/offices is just 3 months! Although, there are legal arguments (and authorities) that this principle does not apply to breaches of contract, or claims for work and labour done, why delay and get your case entangled in any such legal haggles!

Where to sue

The National Industrial Court is your go-to court for labour disputes. The court only handles labour disputes hence the Judges are more able to quickly settle the cases before them. Let me quickly add that you should always first consider settling your case amicably (out of court) before suing. At any rate, Alternative Dispute Resolution (ADR) options are preferred to litigation in the resolution of disputes such as employment disputes. ADR options include arbitration, mediation, conciliation, etc. These options better protect confidences, they are cheaper (well, arguably) and faster too.

What facts to establish

It is not enough to say your employment is wrongly terminated. You have to explain how you came about that conclusion. It is helpful if you tell your story in a logical and compelling manner. You will therefore want to capture the following facts:

  1. That you were employed by the defendant (your former employer) – state date and the designation in which you were employed;
  2. The terms and conditions of the appointment including duration and termination – emphasize the procedure for termination;
  3. State who had the power, under your employment contract, to terminate or dismiss you;
  4. State any special circumstances that are needed to prove your case – for instance, if you are basing your claim for wrongful termination on workplace sexual harassment, discrimination or redundancy, state clearly the circumstances that led you to believe the facts;
  5. State the circumstances under which your appointment was in fact terminated – for instance, that you had not been given any notice (or payment in lieu), fair hearing etc
  6. State the pain and trouble that you have suffered on account of the wrongful termination – while this is not very necessary sometimes such sentiments prove helpful to your cause.
  7. Itemize your demands in an orderly manner and with explanations where necessary.

Help the court to help you; explain yourself!

What documents to rely on 

More often than not, your employment ‘contract’ is not just the ‘Offer Letter’. Other terms of the contract are contained in documents like the ‘Staff Handbook’, collective agreements (common in unionized industries like Maritime or Aviation), etc. It’s important to place before the court all documents necessary to paint the full picture. These include the following:

  1. Letter of Offer/Contract of Employment
  2. Letters of promotion
  3. Letters of commendation or awards
  4. Employee Handbook/Expatriate Policy,
  5. The letter of termination or dismissal,
  6. relevant Collective Agreements,
  7. Circulars, internal memos, notices, and
  8. other workplace documents, like official e-mails, etc that are necessary to establish your case.

These documents, together with your oral testimony (and that of any other witness) are what the court will use in deciding your fate.

What to ask for

This is the interesting part. Nearly all claims in court about wrongful termination are about money! You are most likely simply asking that you should be paid some money as terminal benefits. Two quick clarifications:

  1. payment of terminal benefits is not automatic and the payment (trust me) is not a windfall. What you will be paid will depend, largely, on what was previously agreed upon between you and your employer. Sometimes, Lawyers get overzealous and make bold baseless assurances to clients on what they can obtain in court. But the court is not Santa Claus and would not award you damages just for asking. You will have to earn it. Admitted, sometimes you would rather err on the side of caution and ask for more rather than less, but why pad your claims and end up appearing like a gold digger before the Judge? It is best to be clear-headed about your claims and save everybody’s time. In some cases, (like terminations based on workplace discrimination, sexual harassment, redundancy, etc) the Judge would likely award heavy penalty against your former employer as a deterrent to other employers and as compensation deserving of the manner of your termination. What is “heavy penalty” (Lawyers call it “punitive damages”) will ultimately depend on the facts of each case, but our Judges here are rather conservative on these things, so don’t get your hopes too high.
  2. Suing for wrongful termination is not (and should not) always be about money. There are cases (like a dismissal) in which it is more important for the aggrieved employee to ‘clear his name’ and set the records straight (or just to prove a point). Even where you are really pressed for the money, you should not overlook this aspect of your case. Interestingly, until you convince the Judge that indeed your dismissal/termination was wrongful, you are likely not getting paid any damages. Don’t allow money get in the way.

How do you determine your rightful entitlements?  Look at your contract and see for yourself what it says you will be paid in case you are asked to leave. For instance, are there provisions in the contract that you will be paid a salary in lieu of notice? Also check the Staff Handbook which may contain provisions on payment of gratuity, redundancy, etc. In summary, your list of claims could run like this:

  1. payment in lieu of notice
  2. outstanding salaries (if you were owed any prior to the termination)
  3. gratuity
  4. redundancy (if your case is deserving of it)
  5. other accrued benefits (like leave allowances, etc) that are outstanding.

It is important to be sure that you are entitled to these benefits before you make your claim for them. Don’t get greedy and start making up claims from the blues. Also ensure that what you are claiming is actually outstanding. Do not embarrass your Lawyer by making him/her claim for money that is already paid to you. Finally, check to ensure that your pension, tax, NSITF, etc. deductions are also fully remitted or paid. Your lawyer will help you in computing the claims if your termination is based on special circumstances and you would like punitive damages awarded in your favour against your former employer.

What not to ask for

Keep your case tidy. Don’t spoil it with spurious demands. Some demands are not to be made because they are simply not practicable. Let’s briefly highlight some:

  1. Don’t ask for money for ‘injured feelings and loss of reputation’. Don’t get your claim for wrongful termination mixed up with claims about defamation. You can actually claim for both but not in one breathe (and also not in the same court).
  2. Don’t ask to be reinstated – unless your employer is a government agency, nobody has legal powers to foist you on your unwilling employer. Termination of ordinary employment contracts is never “null and void, unlawful or unconstitutional”. The termination, at best, can only be wrongful but not invalid. Either party is free to terminate at any time and for any or no reason. All that is required is fairness – that the terms of the contract are followed and within the bounds of the law.
  3. Don’t ask for pre-judgment interest on the monies that you are claiming – unless it had already been agreed upon between you and your former employer. Interest, if any, on any award that the court will grant you, will start to run from the date of the judgment, and not from the date that the money became due.

PS: The language of this article is deliberately simple and devoid of legal niceties because it is intended for non-lawyers. It is however, not intended to be a substitute for legal advice. You will certainly need a Lawyer to, among other things, plead your case in court. Finally, going to court should be a last option. Employment disputes are best resolved amicably; unless of course you are left with no other option than to sue.

The Right of the Employer to Reject a Resignation

tumblr_onkbqiRgvE1vdur62o1_1280An employer has no right to reject the resignation of its employee, for whatever reason. The law is that a notice of resignation of an appointment becomes effective and valid the moment it is received by the person or authority to whom it is addressed. This is because there is absolute power to resign and no discretion to refuse to accept; and it is not necessary for the person to whom the notice of resignation is addressed to reply that the resignation is accepted.

In the cases of Taduggoronno v. Gotom [2002] 4 NWLR (Pt. 757) 453 and Yesufu v. Gov. Edo State [2001] 13 NWLR (Pt. 731) 517, the courts held that it is not open to the employer for whatsoever reason to refuse to accept the resignation of the employee, for the employee has an absolute power to resign and the employer has no discretion to refuse to accept the resignation. See also the case of Adefemi v. Abegunde [2004] 15 NWLR (Pt. 895) 1.

It is not uncommon for Employee Handbooks to contain a clause that confers on the employer the right not to accept the resignation of an employee on grounds such as ‘on-going investigation’ and where the employee seeking to resign is under a contractual bond, the terms of which he is yet to finish serving. The courts have held such provisions to be unlawful and unenforceable. An employee has the right to resign with immediate effect, and to reject his rejection is tantamount to forced labour, and also against the time-honour labour law principle that an employer cannot force himself on an unwilling employee.

It is also common to find in the termination clause of some employment contracts that only the employer may make a payment in lieu of notice, while the employee is mandatorily required to give notice. The remedy available to the employer, where the employee, in such a case, resigns without notice would likely be damages and certainly not specific performance. In other words, such resignation would be treated as wrongful but not null and void.

In WAEC v. Oshionebo [2006] 12 NWLR (Pt. 994) 258, it was held that a notice of resignation is effective not from the date of the letter, or from the date of any purported acceptance, but from the date on which the letter was received by the employer or his agent; and that tendering of a letter of resignation by an employee carries with it the right to leave the service automatically without any benefit subject to the employee paying any of his indebtedness to his employer.

Thus, once an employee tenders his resignation, he ceases henceforth to be an employee, regardless of a rejection of the resignation by the employer. The employee’s resignation would have immediate effect even where he continues to come to work after his resignation is tendered.

Rejection of retirement

The distinction is however, made in cases of retirement. A letter of retirement does not necessarily take effect from the date that it is received by the employer. The case of WAEC v. Oshionebo [2006] 12 NWLR (Pt. 994) 258  made a distinction between “resignation” and “retirement” with different legal consequences. Resignation carries with it the right to leave service immediately and automatically without any benefit subject to the employee paying any of indebtedness to his employer. Retirement, on the other hand does not confer such a right to leave service immediately and automatically. A further legal consequence of retirement is provided for in OSHC v. Shittu [1994] 1 NWLR (Pt. 321) 476, the court held that where an employee gives notice of his voluntary retirement to his employer, and the employer refuses to accept the notice, the position is that the employee is still in the employer’s service. However, it is only the employee who can rely on that notice in his favour and not the employer who rejected the notice. This would be particularly relevant for the computation of terminal benefits. This is because it has to be adjudged not only a deviation from “natural equity” but also contrary to law for an employer who is guilty of the irregularity of refusing a notice of voluntary retirement to turn around and benefit from that irregularity.

See also Osu v. PAN Ltd [2001] 13 NWLR (Pt. 731) 627, where the court held that the notice of retirement will appropriately expire at the stipulated periods regardless of directives from the employer that the employee should stop work before the date stipulated; as such an employee remains a staff of the employer up to and including the last day when the notice would have properly expired.