Aug 14, 2017

Calculating Compensation for Suspension of Employee| Kayode Omosehin, Esq.

1.     Suspension of employees in a nutshell
An employer’s power to suspend a worker at any time, during probation or after confirmation, is without a doubt, whether or not it is expressly stated in an employment contract. No court of law will deny an employer of this inherent power, if utilized properly. Suspension is a powerful tool to an end and not an end in itself. Suspension puts an employment relationship in limbo as the worker lives in anticipation of either being recalled or laid off. A worker cannot seek another employment in the course of suspension until the suspension is converted to termination of employment or dismissal. It is therefore important for a company to investigate a suspended worker, make its findings and communicate its decision to the worker. A suspended worker needs to know whether his service is still required by his employer or has been (technically) terminated!

A striking difference between suspension and termination of service or dismissal is that suspension is neither terminal nor requires any procedure like dismissal and termination of employment which are both terminal and usually follow an agreed procedure to end a working relationship. Suspension is a prelude to termination/dismissal but not all suspensions result in dismissal or termination of employment. Suspension does not bar the affected worker from his normal employment benefits. Unless a company’s disciplinary procedures have been conducted and the worker has been indicted to his/her knowledge, he stands entitled to his wages and other relevant benefits.

Notwithstanding the impression that Nigerian labour law leans more in favour of the workers, our law recognizes the power of an employer to suspend workers pending investigation of allegations. It is extremely difficult, except in few special cases recognized by law, for a suspended employee to rush to court and succeed on a claim based on his suspension. There are many clear judicial pronouncements to the effect that a worker will be jumping the gun by rushing to court based on suspension from employment without waiting for the conclusion of any investigation by the employer. For instance, there are reported cases against First City Monument Bank Plc and First Bank Plc, in which the courts denied the workers’ claims for compensation on the ground that the workers were rightly suspended (and subsequently dismissed) for gross misconduct. Also, the Court in Shell Petroleum Dev. Co. v. Lawson Track (citation available) held that suspension of employee pending investigation is an acceptable labour practice even if the employee is suspended without fair hearing.

2. Suspension without salary
As already pointed out, suspension does not imply an end to an employment relationship unless it has proceeded for such length of period that it evinces an intention to impliedly terminate the service of a worker. So, naturally, unless otherwise stated in an employment contract, the law implies that a suspended worker should be entitled to all the benefits which he/she would have enjoyed if the service had not been suspended. In other words, unless an employee is indicted under an agreed disciplinary procedure which provides for loss of benefits, all employment benefits ought to be paid as at when due during suspension or, cumulatively, upon the end of suspension.
In all relevant employment cases, there are always questions to be answered by an employer who suspends a worker without pay if the contract of service does not provide for suspension without salary. In most cases, the question is always resolved in favour of the affected worker. Even in cases in which the employment contract provided for power to suspend without pay, such as the one filed against Jemmtek Resources Limited, though this case has its own peculiar twists, the issue was nevertheless resolved in favour of the suspended employee notwithstanding the company’s allegation that the worker had taken up an employment in another company during the period of his suspension. Also, the Court of Appeal held in Olafimihan v. Nova Lay-Tech Nig. Ltd. (citation available) that suspension of a worker without pay with a restriction on the worker from entering the premises of the company was a clear intention of the company to dispense with the services of the worker and, as such, the worker must be paid all his entitlements.

The onus will always be on the company to prove its power to suspend its workers without pay and that the investigation was concluded (indicting the affected worker) to justify its defence against any employment litigation. The issue of proof is a matter of evidence at trial in which the letter of employment, terms and conditions of service or employee’s handbook and disciplinary procedures must all be presented to the court for scrutiny and must be unambiguous as to their contents, as any ambiguity will be resolved in favour of the employee.

3. Indefinite suspension of worker
Indefinite suspension of an employee appears to be a common feature in some organizations, especially in matters bordering on allegations of crime against a worker. Whilst suspension is a veritable tool for effective investigation of any allegation, its length and other ramifications can result in either gain or loss to the company unless the management proceeds with proper guidance of employment law advice. There is a mix of two complex propositions that usually confront a judge in any labour case that is founded on an indefinite suspension of worker.

The first approach is to treat the employment as having been constructively terminated by the employer. This would be consistent with judicial precedent. Popular judicial decisions are to the effect that an indefinite suspension is a constructive or implied (though unlawful) dismissal. That is to say, where an employee is suspended indefinitely without recall or eventual letter of termination, the employee’s service is deemed to have been constructively or impliedly terminated, though wrongfully. It is however not clear and, therefore, arguable on the facts of each employment dispute what length of suspension will be regarded as sufficient to evince an intention of the employer to dispense with the worker’s service. This point is more appreciated if one considers the difficulty an indefinitely suspended worker faces in determining when to initiate a compensation claim against the employer during the period of suspension without jumping the gun.

The other approach is to treat the employment relationship as subsisting to ensure a greater compensation for the employee. In this respect, the court deems the worker to still be in the service of the employer in order to entitle him/her to the salaries for the period of suspension. This option would meet the justice of the case of an employee who has fought a long litigation battle to redress his/her grievance, especially where the length of period between the suspension and conclusion of litigation results in fairly huge compensation from the award of all salaries in arrears to the worker. It appears that there is no express provision of law for this approach except to subsume it in the provision of section 254C(1)(h) of the Constitution which grants the National Industrial Courts powers to apply and interpret international best labour practices in any employment litigation brought before them. The courts have held that an indefinite suspension of worker is inconsistent with international best labour practices.

It is instructive to note that Justice F. I. Kola-Olalere of the National Industrial Court held in a case decided on 16th October 2014 that an employee who was suspended without salary for a long period (more than three (3) years in that particular case) would be deemed to still be in the service of his employer till the date of judgement and, therefore, entitled to his monthly salaries from the date of suspension (13th June 2011) till the date of judgement (16th October 2014). In other words, the Court held that the indefinite suspension of the worker for more than three years without pay meant that the termination of his employment was with effect from the date of judgement. The Court took the foregoing position notwithstanding the provision of clause 15 of the staff handbook of the defendant company which permitted the company to suspend workers with or without pay. As already stated above, the decision may appear to be at variance with popular judicial decisions of superior courts on the point but it is one that is consistent with the spirit and letters of the provision of section 254C(1)(h) of the Constitution. In any event, it is my view that such option is not available to a judge in an employment litigation in which the worker has not specifically pleaded and prayed for a declaratory order that his employment contract subsists in the face of an indefinite suspension.

4. Calculation of the entitlement of a worker who has been indefinitely suspended
Lawyers and judges, of course, do some mathematics in a labour case whenever it is necessary. Unless the facts of a case involve complex accounting principles, employment lawyers are at liberty to establish during trial, by simple mathematical calculation of figures in frontloaded witness statement on oath, pay slips and other admissible documents, the total amount payable to a successful employee in labour litigation. In few special cases, the help of an accountant is useful as an expert witness to guide the court and the parties and, when necessary, the onus to call an accountant as an expert witness or obtain and tender an accountant’s opinion, lies on the party who will suffer in the absence of such accounting evidence.

Now, let us do some mathematics on compensation, as the court does in most employment cases, in which an indefinitely suspended worker is successful, to arrive at what the worker would be entitled to as damages. Suffice to say that if the matter is resolved in favour of the company, it will be accordingly dismissed (sometimes with costs against the worker) for lacking in merit.

(a)  Claim for salaries in arrears
In order to found a claim for salaries in arrears, the worker must specifically seek a declaratory relief that his employment still subsists with the employer. Notwithstanding the power of the court under section 254C(1)(h) of the Constitution, a court will not grant a relief that is not sought by the claimant. In addition, the worker must plead and prove his/her monthly salary by credible evidence. Additionally, there must be factual pleadings and proof of the last payment by the employer and the number of months or years which are outstanding. All applicable deductions based on any staff loan, law or any prior agreement must be considered by a court in arriving at what is due to the worker.

For instance, in the decision by Justice Kola-Olalere, mentioned above, the worker’s pay slip for the month of March 2011 was tendered and admitted in evidence showing the worker’s total earning was N280,511.20. His total deduction was N59,127.24, while his net pay was stated as N221,383.96. The facts of the case showed that the employee was suspended by a letter dated 13th June 2011 till the date of judgement, 16th October 2014, which equals to forty (40) months and three (3) days in all! Now to translate the foregoing to monetary figure, the Court multiplied the worker’s net pay, N221,383.96, by 40 months to arrive at N8,855,358.40. For the extra three (3) days in October, the net pay (N221,383.96) was divided by 31 days in the month of October, the result of which (approximately N7,141.42) was multiplied by 3 to arrive at N21,424.25 as the salary for the three (3) days. Consequently, the worker was awarded N8,876,782.65 (i.e. the result of N8,855,358.40 plus N21,424.25) as his salary arrears for the period of suspension! That was a huge but avoidable consequence to the company, a growing company as at 2014!

(b)  Pension contributions
Pension contribution is one of the applicable deductions an employer makes from the earnings of a worker to be credited, in addition to its own statutory contribution, to the pension fund account of its workers. In Essang v. Akwa Ibom State Government & Ors[1] (2015) 55 N.L.L.R. (Pt. 186) 93, the National Industrial Court held that the Pension Reform Act 2004 (as amended in 2014) does not regulate the employment relationship of an employer and employee but only establishes the contributory pension scheme for employees in public and private sectors. The jurisdiction of the National Industrial Court on pension is limited to adjudging what is due and payable as pension contributions in favour of a worker. An employee is entitled to judgement on all outstanding contributions from the employer. However, even in the absence of any express pronouncement in a judgement for a worker, the employer is at liberty, without any additional liability, to remit the contributions to the pension fund administrator of the worker in compliance with the law. Documents showing the company’s remittal of the worker’s pension contributions are admissible at trial to disprove a claim for pension benefit. A worker cannot seek an order of the court to compel the employer to pay to him all his outstanding pension contributions which are due from the employer, as this will be contrary to the provisions of the Pension Reform Act.

(c)   Terminal benefit, gratuity or severance package
Terminal benefit, gratuity or severance package is a common feature contract of service in Nigeria. The contract of employment must specifically provide for these benefits before a claim can be founded on any of them. Any of these benefits is grantable if it is provided in the employment contract and specifically prayed, pleaded and proved in an employment litigation.

(d)  Annual leave, maternity, transport, telephone and other allowances
The award of an allowance will depend on the facts and evidence in each case. Annual leave is a right guaranteed by law and, as such, will be due to worker in any employment. However, leave allowance must be contained in an employment contract before it can be claimed. In most employment contracts, leave allowance is payable to an employee who has worked for a year as part of his/her annual package. Although annual leave or maternity leave is a right derived from law, it is nonetheless arguable whether an annual or maternity leave allowance is grantable to an indefinitely suspended worker even if the contract provides for allowance but without any express exclusion of staff on suspension. Transport or telephone allowance appears to be payable to working staff as part of working expenses. Transport or telephone allowance will not be appropriate in a judgement for an indefinitely suspended worker unless otherwise proven by evidence. It is my view that an employment contract must clearly provide for an allowance before a claim can be founded on same.

(e)  Claim for unlawful interference with the worker’s employment
Suspension is, no doubt, an interference in a worker’s service, particularly if it denies him/her the opportunity to make earnings, exercise his/her professionalism and grow in his/her career. Whether suspension is a justifiable or unjustifiable interference in a worker’s employment is a question of facts or mixed question of facts and law. In my view, it is plausible for an employee to contend that his/her suspension has negatively affected his/her chance of promotion and career growth, particularly if his/her previous performance appraisals have been favourable. Of course, I am aware of a decided case of an indefinitely suspended worker whose claim for an alternative relief of N50,000,000 as damages for unlawful interference with his employment was refused because the court had awarded to him all his salaries in arrears. It is however not clear whether the court would have granted a relief for exemplary damages to the worker (if specifically prayed, as compared to seeking it as an alternative relief) if same had been sought on the basis that his suspension interfered with his employment and impaired his chance of promotion or career growth. In my opinion, having strongly condemned the act of the employer in suspending the worker indefinitely, the court, in that case, might have been inclined to grant exemplary damages to punish the company on the ground of either being sufficiently outrageous to merit punishment or being in flagrant disregard of the parties’ contract and the law on best international labour practice.

(f)    Cost of litigation
Cost of litigation is not a straightforward relief that can be sought and granted, as a matter of course, to a worker who is successful in an employment dispute. Generally, the courts have held that it is unethical to attempt to pass on the burden of counsel’s fees to the opposing party. However, there are provisions of the National Industrial Act and the Rules of the Court that grant discretion to the judge to award costs in employment litigation. Nevertheless, cost of action is one which, if ever recoverable, lies in special damages which must be specifically pleaded, strictly proven by cogent and compelling evidence and, of course, prayed as a distinct relief. So, if supported by pleadings and evidence, costs of litigation are grantable relief at the discretion of the court.

(g)   Pre-judgement and post-judgement interests
The National Industrial Court appears not to have power to grant pre-judgement interest in accordance with the provision of Order 47 Rule 7 of the 2017 Rules of the Court except post-judgement interest. Order 47 Rule 7 of the 2017 Rules of the Court permits the court to order interest a rate not less than 10% per annum upon any judgement sum. What is clear is that 10% is the minimum rate a worker can claim as interest on a judgement sum whilst the maximum is at the discretion of the judge which, from experience, is usually not exceeding 20% per annum.

5. Conclusion
From the above, it goes without saying that suspension of a worker, however simplistic it appears given that it has no procedure to follow, deserves to be taken seriously, nevertheless, particularly if one considers the possible sum of the monetary awards that are grantable against a company in favour of a worker under the sub-headings above, namely: (a) arrears of salaries, (b) pension contributions, (c) terminal, gratuity or severance package, (d) annual leave, maternity leave, transportation, telephone and other allowances, (e) unlawful interference in the worker’s employment, (f) cost of litigation, and (g) interest on judgement sum.

Therefore, suspension should be followed by immediate investigation. Investigation should be thorough and concluded timely, one way or the other. Report should always result from all investigations, informing the affected worker as to whether he is indicted or not indicted, and may contain recommendations for improvements to all the parties concerned. After the report, the company should take a definite position with regard to a suspended worker. All of these should be well documented. None of these should be done by persons in the company who do not have a thorough understanding of the company’s disciplinary procedures and the guidance of legal advice.

 Associate at Udo Udoma & Belo-Osagie

[1] Delivered Obaseki-Osaghae J. NIC, Calabar, 1st December 2014. 

Ed's Note - This article was first published here

Photo Credit -