Apr 29, 2016

Contractual Relations between Employer And Employee by Oluyemisi Dansu

The regulation of the relationship between an employer and an employee is derived from 2 primary sources i.e. (i) statutes and (ii) the contract of employment. The contractual terms are either expressly stated in the contract of employment or they may be implied by statute, custom/practice, Staff Handbook and collective agreements.
It is trite law that where parties have entered into a contract or an agreement, they are bound by the provision of that contract or agreement as this is the whole essence of the doctrine of sanctity of contract. Consequently in any dispute as to the rights and obligations of parties arising out of the contract of employment, it is vital that the contractual terms be proved in order for an aggrieved party to be entitled to a relief.

Termination of Employment
In Nigeria, an employer or employee has the right to terminate the employment for any reason or no reason at all. As long as he acts within the terms of his employment, his motive for terminating the employment is not relevant. The rationale behind this is the common law principle that you cannot force an unwilling employee on an employer and vice versa thus the Nigerian Courts will not impose an employee on an employer and vice versa.

For a termination of employment to be lawful, it must be done in accordance with the provisions/ terms of the contract of employment and conditions of service. Where the termination is not in accordance with conditions of contract, the termination is wrongful and a claim for breach of contract becomes tenable.
Generally, contracts of employment are terminated by giving the prescribed notice provided for under the Contract and where notice is not given, the employment can be terminated by payment of salaries the employee would have been entitled to for the period of notice in lieu of the said notice.
Where a contract of employment is wrongly terminated, the remedy available to an aggrieved party is monetary damages for breach of contract (the quantum of damages is what the claimant would have been entitled to if the employment had been rightly terminated) save for contracts of employment with statutory flavour i.e. where an employee is appointed pursuant to the provision of a statute putting it over and above the ordinary master and servant relationship. The courts took an early stand that a remedy of specific performance/ reinstatement would not be decreed in cases of contracts of service.
For contracts with statutory flavour, a claim for reinstatement of employment can be sought however this remedy is not available to an employee whose employment is based on a simple contract of employment. The Supreme Court made this point clear in the case of Ilodibia .v. N.C.C. Ltd. (1997) 7 N.W.L.R (Pt.512)174 where Wali J.S.C stated:

“Where the master has purported to dismiss the servant, even though not in accordance with the laid down procedure in the contract, the servant cannot treat the contract as still subsisting but he must proceed as if he had been wrongfully dismissed. For a wrongful incomplete disregard of the terms of the contract of service is obviously a repudiation by master and the servant’s remedy is an action in damages only”

When does a Notice of Termination/Resignation takes Effect
A notice of resignation/termination of appointment becomes effective the moment it is received by the person or authority to whom it is addressed. This is because, there is absolute power to resign/ terminate an employment and no discretion to refuse to accept notice and it is not necessary for a person to whom the notice of resignation/termination is addressed to reply that the resignation/termination is accepted.

Dismissal From employment
An employer has the right to dismiss an employee without notice for gross misconduct however this right is not to be abused to the detriment of the employee. It cannot be exercised at the whims and caprices of the employer, it must be exercised in accordance with the terms of the contract of employment and conditions of service.
Where an employee challenges his dismissal, the onus is on the employer to justify the basis or grounds of the dismissal by establishing that the employee in fact misconducted himself as contained in the letter of dismissal and where the employer fails to justify the dismissal, the dismissal is wrongful.
Propriety of Dismissal sequel to termination/resignation of employment

The Supreme Court held in the case of Jombo .v. P.E.F.M.B (2005) 14 NWLR (Part 945) Page 457, (where an employee had filed an action for unlawful termination of his employment and thereafter his employer issued him with a dismissal letter in a bid to frustrate his claims for damages and terminal benefits) as follows:

“What then can be the meaning of dismissing an employee from a relationship, which no longer exists arising from the earlier termination? The two Courts below should have seen that the latter dismissal of Plaintiff/Appellant as irrelevant and diversionary following his earlier termination.”
“The behavior of the 1st Defendant/Respondent shows bad faith and bad taste. What is however more worrying is the lame manner in which the Courts below threw up their hands in surrender thus allowing a litigant manipulate to its advantage the adjudicatory process”

In line with the foregoing authority and the position of the law which stipulates that upon receipt by the recipient, a notice of termination or resignation takes effect from the date of termination/resignation stipulated in the notice. It is clear that a subsequent dismissal after the termination date is in-effective as there no longer exists an employment from which the employee can be dismissed from.
The Place of Fair Hearing in Dismissal From Employment

Where allegations of misconduct have been levied against an employee, it is pertinent that the employee be given a fair opportunity to defend himself against the allegations prior to dismissal. In the case of F.M.C .v. Ido Ekiti .v. Alabi(2012) 2 NWLR (Pt. 1285) 411 pp; 447, paras C-E, Abba Aji, JCA held as follows:

“Now in view of the testimony of the respondent, can the respondent be said to have been given fair hearing before his appointment was terminated? I think not. The importance of fair hearing cannot be scuttled away with the administration of justice. The courts insistence on the right of fair hearing is surely not a matter of mere formality nor is it merely for the purpose of meeting procedural requirements. The courts have always insisted on fair hearing because it is the surest safeguard against injustice. In the matter of employee employer relationship, there must be an allegation of misconduct or wrong doing which is disputed and it is for the purpose of ascertaining the truth or otherwise of the alleged misconduct that the courts insist on fair hearing.”

Claims for Salaries, Allowances and Terminal Benefits
Claims for salaries, allowances, terminal benefits etc. must be specifically pleaded and strictly proved and evidence on how a claimant arrives at the sums claimed must be adduced before the Court. Bare assertions and testimony without more is not sufficient. The claim must be specifically proved by adducing concrete evidence in support of it.
An employee cannot proceed on the basis that his contract of employment is still subsisting and claim for loss of salaries and other perquisites of his employment after his employment has been terminated or dismissed from employment even if the termination or dismissal is wrongful.
An employee who was validly/lawfully dismissed from employment is generally not entitled to terminal benefits such as gratuities etc. save as to contributory pension which is mandated by law and to be paid into the employee’s account with his Pension Fund Managers.
Enforceability of Conditions of Service Contained in Employee Handbook 

It is now settled law that an employee handbook shall only govern the contract of employment if it is expressly incorporated into the employee’s contract of employment. The implication of this is that if the Handbook is not specifically incorporated into the contract of employment, it is a mere gentleman agreement and if there is a breach of same, it is not enforceable in court.

Enforceability of the Collective Agreement
The general position of the law is that a Collective agreement cannot be enforced by an employee (even if same was made for his benefit) if he is not a direct party or signatory to the Collective Agreement. This position of the Law is based on the doctrine of privity of contract which stipulates that the proper parties to sue for enforcement or breach of a contract are parties or signatories thereto.

The law however recognises the right of an employee to sue for the enforceability of a collective agreement where the collective agreement has been expressly or impliedly incorporated in the contract of employment/conditions of service of employment or subsequently adopted by an employer as part of the Conditions of service.
Where a collective agreement is not expressly incorporated into a Contract of employment, a crucial determinant of the fact that same has been adopted by an employer is where salaries have been paid based on the salary structure contained in the Collective Agreement.
The Nigerian courts in determining if a collective agreement has been incorporated into a Contract of employment will consider a number of factors such as their incorporation into the contract of service if one exists, the state of the pleadings, the evidence before the court, and the conduct of the parties.
Redundancy Claims

A claim for redundancy entitlement is a claim for special damages which must be specifically pleaded and strictly proved. Such a claim will not be granted unless redundancy provisions or terms are provided for in an employee’s contract of employment or conditions of service. The contract of employment will provide what redundancy means and where no definition is provided, resort will be made to the Labour Act for what constitutes redundancy.

Section 20 (3) of the Labour Act defines redundancy as follows:
“In this section “redundancy” means an involuntary and permanent loss of employment caused by an excess of manpower.”
Our courts have expounded the meaning of redundancy as defined by the Labour Act as follows:

“There can be no redundancy unless the loss of employment is caused by an excess of manpower. This does not mean that every man whose employment is terminated may regard himself as made redundant. To ascertain what it means I turn to the English Redundancy Payments Act, 1965, to which counsel for the plaintiff referred me. The notion of redundancy payments in Nigeria is clearly derived from English legislation and it is therefore appropriate to refer to the Act to discover what it means. The plaintiff will only be entitled to regard himself as redundant if, in the words of section 1 (2) of the English Redundancy Payments Act, 1965, "the dismissal is attributable wholly or mainly to:--

(a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish."

In other words there must be a change in the circumstances of the business in which the employee is or has been employed and this change must result in a state of affairs where the employers find themselves with too many employees or too many employees in a particular place or for work of a particular kind. This is what excess of manpower means and it must be shown to exist before a claim to have been made redundant may properly succeed.”

Jurisdiction & Limitation Period in Employment Matters
By virtue of the Third Alteration to the Nigerian Constitution, the National Industrial Court is the sole Court vested with exclusive jurisdiction in civil matters causes and matters relating or connected with employment and matters incidental or connected therewith.

An action for enforcement or breach of a contract of employment must be commenced at the National Industrial Court within 6 years from the date cause of action accrued otherwise the action will be statute barred i.e. an aggrieved party will no longer have a right of enforcement in Court if he doesn’t initiate an action within 6 years.
Ed's Note: - This article was originally posted by the author on 29th June, 2016 at https://www.linkedin.com/pulse/contractual-relations-between-employer-employee-oluyemisi-dansu (Last Accessed on 29th June, 2016) 


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