Arik Air Redundancy Negotiations: Legal Considerations for the Parties

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On 4th December 2020, Arik Air passengers on the first flights out of Murtala Mohammed Airport, Lagos reported that they were denied entry into the airport, on identifying themselves as Arik passengers. Following this, Arik Air informed the general public, via a press release, that it had let go of 300 workers. In its statement, Arik said,

“Arising from the devastating impact of the COVID-19 pandemic, leading to the constrained ability of the airline to complete heavy maintenance activities and return its planes to operations, stunted revenues against increasing operational costs, the management of Arik Air (in receivership) has declared 300 staff members redundant to its current level of operations”.

In the statement signed by Adebanji Ola, Manager, PR & Communications, Arik Air, it was further revealed that, “over 50 per cent of Arik Air’s workforce of over 1,600 staff have been on furlough in the past six months on a base allowance.” It added that the leadership of the affected union has been contacted to negotiate a redundancy package for affected staff.

In a statement issued by the National Union of Air Transport Employees (NUATE), Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and the National Association of Aircraft Pilots and Engineers (NAAPE),  “All ground handling services, security clearance for Arik Air ticket holders, marshalling, aviation fuel supply, air traffic controls, safety inspection, will be completely withdrawn,” said the unions.”

State Secretary, NUATE, Ijeh Anthony said, “The contentious issue is the signing of the Conditions of Service which we have been negotiating for the past three years. But the only aspect remaining in the Conditions of Service is the issue of the severance package.

Innocent Atasie, ATSSSAN Chairman, Arik Air branch, reportedly told NAN, that the unions on Nov. 10, had a joint meeting with NCAA, Ministry of Aviation, Ministry of Labour and stakeholders to find a lasting solution to the lingering crisis between the unions and Arik management and that it was agreed at the meeting that Arik management would pay a package of basic salary, housing and transportation, as part of workers’ terminal benefits. According to Atasie, the payment should be made within three weeks to workers earnings above N330,000, while those earning less than N330,000 should be paid within four weeks.

Similarly, he said both parties also mutually agreed, in the presence of all concerned authorities, on the payments for workers retiring, who had attained either 60 years of age or worked for 35 years.

“ATSSSAN accepted the offer and moved on, only for the management of Arik to call for a meeting on Nov. 19, at which it said it will only pay 58 per cent on terminal benefits to workers against the 100 per cent agreed earlier.

Against this backdrop, highlighted below are some considerations for the parties as they negotiate towards common ground.

 Was the redundancy legal?

On the face of it, redundancy is a function of fact; as businesses shrink, roles become redundant. Given the effects of Covid-19 on the business environment this year, Arik which has been in receivership since 2017 would have had more to contend with in terms of business viability. However, where such event arises, section 20 of the Labour Act requires that the employer (Arik), inform the trade unions of the reasons for and the extent of the redundancy; utilize the principle of “last in, first out” for particular category of workers affected subjects to all factors of relative merit; follow any regulations by the Minister of Labour providing for the compulsory payment of redundancy allowances, and negotiate redundancy payments for workers not covered by special regulations.

Thus, while redundancy is typically a question of fact, any missteps in following these provisions may create technical loopholes in the process which may provide the Trade Unions an edge in the negotiations.

Workers, Employees & Other Stratas of Differentiation

Section 91 of the Labour Act defines a worker as any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour… excluding persons exercising administrative, executive, technical or professional functions, amongst others. This definition creates a demarcation between “workers” and “employees” in an organization. The parties during the talks should be mindful of the provisions covering each category of workers and the legal responsibilities to them under the Act as well as other relevant laws. Similarly, where there is an employee handbook which specifies company policy and/or the rights and expectations of company staff, such provisions must be duly considered.

To CBA or Not to CBA

The role of union during a redundancy is to negotiate severance pay and try to reduce the number of people affected. Where there is a Collective Bargaining Agreement (CBA) in place, trade unions should aim to enforce its terms. Where there isn’t one, the individual contracts of employment of all staff become the basis for discussions and where there are no specified terms in the contract, customs in the sector will be explored.

“Historically, trade unions have fared well in redundancy negotiations. Even when there is a CBA in which the parties typically agree on one-month salary, the unions often negotiate to get more than was agreed, something extra for their members” said Ose Okpeku, Partner, The Law Cress LP and Chairman Nigerian Bar Association, Section on Business Law, Employment Labour and Industrial Relations Committee (NBA-SBL-ELIR), “of all the redundancies we have handled this year, there was only one case where the unions did not negotiate beyond the CBA. However, the idea of having a CPA is for the employer to budget for it and for any affected employees to have a clear expectation, so renegotiating after the execution of a CBA defeats the purpose.”

According to Ijeh Anthony, State Secretary, NUATE, the severance package under a CBA was yet to be agreed by the parties before the current redundancy. Thus, parties will be coming to the table with fresh requests and may be able to obtain more for their members, above the earlier desired terms of the CBA.

The Effect of Receivership on Negotiations

Finally, if Arik is in full receivership during the course of negotiations, this may affect the outcome, as the unions could be negotiating with a receiver-manager who could alter the trajectory of earlier conversations with the company management. In full receivership, secured and unsecured debtors will be paid first, after which other debts including salary arears will be addressed; employee pensions remain unaffected.

 

 

 

 

 

 

 

 

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