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.

Legal protection from workplace sexual harassment

 

Sexual-Harassment-Retaliation-Lawsuit-SettledThere is legal protection from workplace sexual harassment.  Workplace sexual harassment is commonly defined as unwelcome sexual advances, requests for sexual favours, and other verbal or physical conduct of a sexual nature when:

  • Submission to such conduct is made either explicitly or implicitly, a term or condition of an individual’s employment, or
  • Submission to or rejection of such conduct by an individual is used as a basis for employment decisions affecting such individual, or
  • Such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment.

Workplace sexual harassment can include a one-off incident or a series of incidents. Both male and female colleagues can either be the victim or offender. It is particularly serious when behaviour of this kind is initiated by any official who is in a position to influence the career or employment conditions (including hiring, assignment, contract renewal, performance evaluation, working conditions, or promotion) of the victim. Sexual harassment may also occur outside the workplace and/or outside working hours.

The Nigerian Labour Act and the many HR policies that workers in Nigeria are commonly bound by are silent on the issue of workplace sexual harassment. This has left many victims of this problem in doubt as to their legal options. Workplace sexual harassment results in violation of the fundamental rights of a worker which include dignity of the human person and personal liberty guaranteed under the 1999 Constitution.

A person’s right to protection against sexual harassment and the right to work with dignity are universally recognised human rights by international conventions and instruments. Hence every person has the right to practice any profession or to carry on any lawful occupation, trade or business which includes a right to a safe environment free from sexual harassment.

The National Industrial Court (NIC) amended its civil procedure rules recently to provide the procedure for claims against workplace sexual harassment. Order 14 of the National Industrial Court of Nigeria (Civil Procedure) Rules, 2017 provides that an action in which a worker alleges sexual harassment at the workplace should spell out whether the sexual harassment is any of the following:

  1. Physical conduct of a sexual nature: such as unwanted physical contact, ranging from touching to sexual assault and rape, strip search by or in the presence of the opposite sex, gesture that constitutes the alleged sexual harassment ; and/or
  2. A verbal form of sexual harassment: such as unwelcome innuendoes, suggestions and hints, sexual advances, comments with sexual overtones, sex related jokes or insults, or unwelcome graphic comments about a person’s body, unwelcome and inappropriate enquiries about a person’s sex life and unwelcome whistling at a person or group of persons, any document, material or exhibit in further support of the claim ; and/or
  3. A non-verbal form of sexual harassment which includes unwelcome gestures, indecent exposures, and unwelcome display of sexually explicit pictures and objects ; and/or
  4. Quid pro quo harassment where an owner, employer, supervisor, member of management or co-employee undertakes or attempts to influence or influences the process of employment, promotion, training, discipline, dismissal, salary increments or other benefits of an employee or job applicant in exchange for sexual favours.

To be clear, the said Order 14 of the NIC Rules is not necessarily a codification of the law on workplace sexual harassment; as this workplace vice has always been actionable before the courts. However, the new NIC provision is helpful in at least three major ways. Firstly, it defines what amounts to workplace sexual harassment. Secondly, it explicitly makes it an actionable claim. Thirdly, it provides a guide on how to prove it before the court.

For instance, it is common to assume that only behaviour under paragraph (d) above amounts to workplace sexual harassment, when in fact there is a lot more to it than that. From Order 14 of the new NIC Rules therefore, we are now clear that any of the following qualifies as workplace sexual harassment:

  • asking for sex in exchange for a benefit or a favour
  • repeatedly asking for dates, and not taking “no” for an answer
  • strip search by or in the presence of the opposite sex
  • making unnecessary physical contact, including unwanted touching
  • using rude or insulting language or making comments towards women
    (or men, depending on the circumstances)
  • calling people sex-specific derogatory names
  • making sex-related comments about a person’s physical characteristics
    or actions
  • posting or sharing pornography, sexual pictures or cartoons, sexually
    explicit graffiti, or other sexual images (including online)
  • making sexual jokes

A worker who suffers from any of the above can institute an action at the National Industrial Court for reliefs, which include monetary compensation, damages and injunction.

Protesting against sexual harassment is extremely difficult because it most often results in a hostile work environment, delay in promotion or even loss of job. The daily humiliation is compounded by the forced repeated encounters with the offender who is often a person in power in the office. Harm caused by sexual harassment is often extreme, including humiliation, loss of dignity, psychological (and sometimes physical) injury, damage to professional reputation and career. Inevitably, the victims face a choice between their work and their self-esteem. Sometimes, they face a choice between their jobs and their own safety. While these effects are not seen instantly, they linger on in the mind of the victim long after the abuse has taken place. Employees who become less confident overtime are sometimes the victims of sexual harassment.

While the person who sexually harasses someone else is liable for their behaviour, employers can also be held vicariously liable for acts of sexual harassment by their employees or agents. This would be more so where there is proof that the employer was aware of the sexual harassment but failed to protect the victim or punish the offender. In fact, employers that do not take steps to prevent sexual harassment can face major costs in decreased productivity, low morale, increased absenteeism, health care costs and potential legal expenses.

Some types of sexual harassment may also be offences under criminal law and should be reported to the police. These include behaviours like indecent exposure, stalking, sexual assault and obscene or threatening communications.

Companies that want to manage their risk prudently must act before the problem occurs. Employers should adopt a clear sexual harassment policy, by devoting a section in their employee policy handbook to sexual harassment that outlines the following:

  1. define sexual harassment;
  2. state in clear terms that it will not be tolerated;
  3. set out a clear procedure for filing sexual harassment complaints;
  4. state that retaliation against anyone who complains about sexual harassment would not be tolerated; and
  5. continually monitor the work place for signs of sexual harassment.

It is better to be safe than sorry.

Categories of Benefits Payable under the Contributory Pension Scheme

Pension-Planning-india-Choices

Pension is a retirement plan that requires employers/employees to make contributions into a pool of funds set aside for the workers’ future benefits.  There are two main types of pension plans: defined-benefit plans, and defined-contribution plans. The former provides a specified payment amount in retirement, while the latter allows employees and employers to contribute and invest funds over time to save for retirement. Increasingly, employers are opting for defined contributory plans over defined benefit plans, primarily due to the expense and long-term obligations associated with running a defined benefit plan. The Pension Reform Act 2004 (amended in 2014) introduced the Contributory Pension Scheme (CPS) as a defined-contribution pension plan to replace the old system of defined-benefit that was in operation and mostly for the benefit of only public sector workers. The inadequacies of the erstwhile system of administration of retirement benefits in Nigeria are well documented. Under the CPS administration of retirement benefits is much better structured and organized.

The following categories of benefits are payable under the CPS:

Retirement Benefit – This mode of benefit is paid on attainment of the minimum pensionable age of 50 or 35 years in service. The Act provides that a minimum of 25% to a maximum of 50% of the RSA balance be paid to the retiree as a Lump Sum provided the available balance after payment of the Lump Sum can fund either a Programmed Withdrawal or Annuity Insurance retirement benefit financial option.

Temporary loss of job or early retirement benefit – Section 7 (2) of the Act provides that where an employee voluntarily retires or temporarily loses his job, the employee may, after four months, withdraw an amount of money not exceeding 25% of the total in his Retirement Savings Account (RSA). This benefit is only available once for every contributor, and is not available where the employee secures another employment within four months of the last one. The balance in the RSA would be available upon retirement or attaining the age of 50 years, whichever is later.

En-Bloc Benefit – This benefit is payable to RSA holders who have less than N550,000.00 (Five Hundred And Fifty Thousand Naira) in their RSAs upon retirement, as such an amount is considered too low to structure any type of periodic pension payment arrangement.

Voluntary Contributions – RSA holders who make additional contributions beyond the statutory 8% + 10%, are permitted full access to the amounts so contributed subject to the payment of tax on the income earned on such monies if withdrawn before 5 years from the date of contribution. See sections 4 (3) and 10 (4) of the Act.

Death Benefits – There are two types of death benefits payable under the CPS, namely death in service and death after service. Death in service is direct payment of Group Life Insurance claims to the named next-of-kin and subsequent processing of the RSA balance for payment. Death after service refers to payment of the residual balance standing to the credit of the RSA holder to his/her bona fide beneficiaries.

Equity Contribution for Payment of Residential Mortgage – This is a benefit in kind. Section 89 (2) of the Act provides that a Pension Fund Administrator may, subject to guidelines issued by PenCom, apply a percentage of an RSA balance towards payment of equity contribution for payment of residential mortgage on behalf of the RSA holder. The draft Guidelines issued by PenCom provide that a maximum of 25% of the RSA balance may be used for the equity contribution, and an RSA holder who benefits from this provision may not be entitled to a lump sum payment at retirement.

It is worthy of note that all classes of payments of benefits mentioned above are made via electronic transfers as a result of the robust and comprehensive registration and governance structures within the CPS. Needless to say that the gains so far recorded by the CPS are multiple. The administration of the Scheme since 2004 has addressed the trust deficit in the Nigerian pension industry, provided social security for many more people, created over 3,000 direct jobs, and contributed significantly to economic development in Nigeria.

Potential for growth of Nigeria’s pension industry is very high especially with more registrations expected from State Governments as well as the private and informal sectors into the CPS. According to data released by PenCom, a total of 169,647 CPS contributors from both public and private sectors have already retired and are receiving their monthly pension as and when due, and a total of N384.28 billion has been paid as pension with an average monthly pension of N6.15 billion.

 

 

 

Changing Roles and Obligations in Employer-Employee Relations in Nigeria

labour (1) Since the return of Nigeria in 1999 to democratic governance no area of Nigerian law has witnessed more rapid development than labour and industrial relations. This is hardly surprising considering the central role which labour plays in economic development. Labour is the most important factor of production and is often times referred to as the coordinating factor of production. More and more jobs are being created almost on a daily basis and there is a corresponding upsurge in the issue of labour and industrial relations.

Section 17 (3) of the 1999 Constitution provides for the social fundamental objectives and directive principles of state policy and covers the following labour matters:

  • Opportunity for securing adequate means of livelihood
  • Just and human conditions of work
  • Health, safety and welfare of all persons in employment
  • Equal pay for equal work without discrimination on any ground whatsoever
  • Prohibition of child and aged labour.

While section 6(6) of the Constitution makes section 17 unenforceable the provision provides a labour and industrial relations policy direction for government and other employers of labour. Specific labour legislation and work culture have therefore been tailored towards entrenching these fundamental ideals and in some cases made enforceable.

CHANGING TRENDS

Parental Leave – Parental leave is an employee benefit that provides paid or unpaid time off work to care for a child or make arrangements for the child’s welfare. The term “parental leave” includes maternity, paternity and adoption leave. Often, the minimum benefits are stipulated by law. Section 54 of the Labour Act provides for a minimum of 12 weeks maternity leave with half pay for pregnant women workers. These are minimum requirements under the Act and have been found to fall short of international best labour practices. Sometime in 2009 the Federal Government approved, via a Circular, 16 weeks maternity leave with full pay for all female federal government employees irrespective of their marital status and the number of babies delivered. This is in line with UN Convention 183 (Maternity Protection Convention, 2000) which recommends a minimum of 16 weeks maternity leave for women. This good example has been followed by States like Lagos. While there is no provision under the Labour Act for paternity or adoption leave, some States (like Lagos), have made provisions under their Civil Service Human Resources policy for adoption and paternity leave.

Determination of employment contract – The power to dismiss is a power exercised by the employer without a corresponding power in the employee. The court has held in the case of Calabar Cement Co. Ltd v. Daniel (1991) 4 NWLR (Pt. 188) 750 at 759 that motive which compels an employer to terminate lawfully a contract of employment is not relevant. What this means is that termination cannot be unfair, it could only be wrongful. Once a contract of employment is lawfully determined the reason for the termination is irrelevant. Thus, while dismissal can only be for reasons related to the conduct of an individual employee, termination, however, may be for any reason, including business-related reasons. No compensation is usually payable upon (a valid) dismissal.  The compensation payable upon termination of employment would depend on the employment contract or applicable collective agreement.

Labour disputes adjudication – The enactment in 2010 of the Constitution of the Federal Republic of Nigeria (Third Alteration) Act constitutes a watershed in the history of labour law legislation in Nigeria. The enactment was revolutionary in terms of its far-reaching implications. The law creates the National Industrial Court of Nigeria (NIC) and vests it with exclusive jurisdiction over all labour and industrial disputes in Nigeria, regardless of the parties involved. Thus, if a worker is sacked by his employer or any of his constitutional, employment or labour rights is breached, his recourse for redress must be to the NIC. The organized structures of the court and its power to waive the conventional rules of evidence, when the justice of the case so demands, have ensured that labour and related disputes are settled expeditiously. By section 243 (2) (3) of the Constitution (as amended by the Third Alteration Act) the decision of the Court is final and non-appealable, except where an aggrieved litigant alleges a breach of any of his constitutionally guaranteed fundamental rights, either by his employer before initiating an action in court or by the NIC, itself, in the course of considering and adjudicating the employee’s suit.  This provision ensures that labour disputes are not protracted as it is often the case with other disputes before the regular Courts.

Employee Compensation Act, 2010 – This law is a social security/welfare scheme that provides comprehensive compensation to employees who suffer from occupational diseases or sustain injuries arising from accidents at workplace or in the course of employment. Payment of compensation by the employer to the employee is rooted in the accepted principle that the employer has a duty of care, a duty to protect the health, welfare and safety of employees at work. Where the employee sustains injuries, gets ill or dies in work-related circumstances, the employer is liable to pay compensation to the employee or to his dependents, in the event of death. The law, which repealed the Workmen’s Compensation Act, 1987 represents a major step in the right direction in respect of labour rights and protection in Nigeria. The major strengths of the Act can be seen in the following areas:

A major challenge to the success of the compensation scheme under the Act is the question of public confidence and trust in the capacity of the Board and management of the Nigeria Social Insurance Trust Fund (NSITF) to effectively implement the scheme.

Pension Reform Act – Reforms in pension funds administration was midwifed by the Pension Reform Act, which was enacted in 2004.  The law repealed the Pension Act of 1979 and introduced the Contributory Pension Scheme for payment of retirement benefits of employees of the Public and Private Sectors. The Act became necessary to ensure that uniform regulations and standards apply to the administration of retirement benefits for the Private sector and the Public sector as well as to ensure that individuals save towards catering for their old age.

After 10 years into its operation it became necessary to amend the law and introduce some valuable changes to its operation. Hence in 2014 a new Pension Reform Act was enacted to replace the 2004 law. Highlights of the Pension Reform Act 2014 include enhancement of the powers of the Pension Commission in its regulatory and enforcement activities as well as enhancement of the protection of pension fund assets. There is also a review of the sanctions regime to reflect current realities; and to provide for the participation of the Informal Sector. The law creates new offences and provides for stiffer penalties that will serve as a deterrent against mismanagement or diversion of pension fund asset under any guise, as well as other infractions of the Act.

The new law also reviewed upwards, the minimum rate of Pension Contribution from 15% to 18% of monthly emolument, where 8% would be contributed by employee and 10% by the employer. This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement. The fear previously expressed in some quarters was that an increase in savings is likely to translate into lower disposable income for investment, especially if the savings are not productively invested to more than offset the impact of the lower disposable income. It was feared that this would be counter-productive for a developing country like Nigeria, where pension asset is estimated to be about N4.61 trillion, with 6.12 million workers registered under the scheme. In order to address this concern, the new pension law makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.

Child Labour: Before the enactment in 2003 of the Child’s Rights Act, the issue of child labour was governed chiefly by the Labour Act, a law enacted in 1971. The provisions of the law on child labour have long been found to be inadequate and ineffective in protecting the Nigerian child against forced and exploitative labour. What the Labour Act sought to do is limit or control child labour rather than eliminate it. More so, sections 59 – 65 of the Act, which place some restrictions on the employment of young persons (i.e persons between the ages of 14 – 16 years of age) place undue emphasis on employment of young persons in industrial undertakings, to the neglect of other more common areas, which are equally damaging to the health and wellbeing of children. In fact, section 65 of the Act simply leaves the issue of regulation of employment of young persons as domestic servants at the discretion of the Minister of Labour.

Development in this area of labour law can be seen in the provisions of the Child’s Right Act, 2003 (which have been adopted by some States, with little or no variations). In line with the Convention on the Rights of the Child, the Child’s Rights Act defines a child as a person who has not attained the age of 18. Unlike the Labour Act which seeks to merely regulate child labour, section 25 of the Child’s Rights Law of Lagos State 2007 expressly prohibits the use of children as domestic servants and imposes a punishment of 14 years on offenders, without an option of a fine. This and other provisions of the Child’s Rights laws are more modern and realistic.

THE CHALLENGES

1. Obsolete statutory provisions. The major labour law legislation, the Labour Act was enacted in 1971. Some provisions in the law are no more realistic and need to be reviewed.

2. Glaring non effectiveness of the Regulator for this sector which is the Ministry of Labour and its field administrative officers.

3. Insufficient and ridiculous penalties for breaches of the provisions of the Labour Laws by employers. For instance, section 64 of the Labour Act prescribes a penalty of a fine, upon conviction, not exceeding N100 for contravention of the provisions of the Act (sections 59 – 62) on child labour.

4. Non-uniformity in the application of the provisions of Labour Laws to employees in the public and private sectors. There is also the issue of over protection of employees in the public service by the Civil Service Rules. This does not enshrine competitiveness and merits in the public service. Till date, some State Governments are yet to fully adopt the Contributory Pension Scheme introduced over a decade ago by the Pension Reform Act.

5. Casualization of workers. Casualization is a big challenge for unions in their bid to protect and advance workers’ rights and foster decent work. Casual workers are subject to lower pay, barred from their right to join a union, and denied medical and other benefits. Companies will often hire several part-time workers instead of one or two full-time workers to avoid their obligation to provide benefits, to divide the workforce, and to dissuade unionizing efforts. The casual workers perform the same tasks as permanent workers, but without any job security, are under never-ending probation, and frequently laid off, particularly just before they would become entitled to permanent contracts. The casual workers are not union members and they receive lower wages and fewer benefits. Closely related to casualization is outsourcing, which is also constantly abused by employers of labour in Nigeria.

In conclusion, a lot of progress is being made in the development of labour law and industrial relations in Nigeria. This deserves commendable to all the stakeholders.