Re-appraising the rules guiding Termination of Private Employments in Nigeria
Abimbola Akeredolu, SAN, FCIArb. and Emmanuel Onyeabor
Prior to the enactment of the Constitution of the Federal Republic of Nigeria (Third Alteration) Act 2010 (the “Alteration Act”), the common law rules guiding termination of private employments were applicable in Nigeria. In that regime, employers could validly terminate private employments for good reason, bad reason, or no reason at all – so long as they complied with the termination procedure specified in the employment contract. Constructive dismissal was not recognised as a valid ground for pursuing wrongful dismissal claims. In 2010, the Alteration Act established the National Industrial Court of Nigeria (“NICN”) as a superior court of record on the level of a High Court and vested it with the exclusive jurisdiction to apply international best practices in the determination of employment disputes. The Alteration Act further empowered the NICN to determine civil causes and matters relating to or connected with unfair labour practice. The NICN has, in exercise of these broad constitutional powers, introduced radical changes to the rules guiding the termination of private employments in Nigeria. Employers must now furnish justifiable reason(s) if the termination of a private employment is to be valid. Constructive dismissal is now also recognised by the NICN as a valid ground for pursuing a wrongful dismissal claim. This commentary examines the scope and limits of the new rules guiding termination of private employments in Nigeria. It also provides insight on how unfair labour practice and international best practices in labour relations, may be applied by the NICN. Reference is made to relevant International Labour Organisation (“ILO”) conventions, case law and other applicable international best practices.
Types of employments recognised in Nigerian law
There are two broad species of employments recognised in Nigerian law. These are private and statutory employments.
Statutory employments are employments in which the terms and conditions of service are regulated directly by statute or by subsidiary legislation made pursuant to a statute. Such employments are said to enjoy “statutory flavour” which covers them with legal protection over and above that which is available to private employments. In other words, statutory employees are vested with a legal status that is higher than that which is available to private employees. Employers cannot validly terminate statutory employments without complying strictly with the statute or subsidiary legislation regulating the employment. The remedies available to statutory employees who have been wrongfully dismissed by their employers include reinstatement of their employment and damages representing their salaries during the period of the purported dismissal. This was the decision of the Supreme Court in the celebrated case of Olaniyan v University of Lagos (1985) 2 NWLR (Pt. 9) 599 and a host of other related case law on the point. It is noteworthy that this position is still the applicable law on the termination of statutory employments in Nigeria.
Private employments, on the other hand, are employments in which the terms and conditions of service are regulated by private contracts alone without statutory back-up. This commentary will focus on the appropriate procedure for the valid termination of private employments in Nigeria. In doing this, the commentary will highlight the previous rules guiding termination of private employments in the country, and the radical changes recently introduced thereto by the NICN – in exercise of its broad constitutional powers conferred by the Alteration Act.
The key difference to note between private employments and statutory employments is that while the latter attracts reinstatement upon wrongful termination (in addition to damages representing the employee’s salaries during the period of the wrongful dismissal), the former only attracts damages for wrongful dismissal – as it is generally accepted in Nigerian law that the courts will not force a willing private employee on an unwilling employer. This was effectively the decision of the Supreme Court in the case of Ilodibia v NCC Ltd. (1997) 7 NWLR (Pt. 512) 174.
Radical changes introduced by NICN to the rules guiding termination of private employments in Nigeria
The traditional common law rule in Nigeria had been that an employer needs not give reason for terminating a contract of employment; he only needs to comply with the procedure for termination in the contract of employment. This was the basis of the common law rule that employers could validly terminate private employments for good reason, bad reason, or no reason at all – so long as they complied with the termination procedure specified in the employment contract. This common law rule, for which the locus classicus was the case of Chukwumah v. Shell Petroleum Development Company Nigeria Limited (1993) 4 NWLR (Pt 289) 512, was re-affirmed by the Supreme Court as recently as 2018 in the case of Obanye v Union Bank of Nigeria Plc (2018) LPELR-44702(SC), where the apex court maintained the common law position that employers need not justify the reason for the termination of private employment contracts.
However, from as far back as 2015, the NICN had moved away from the traditional common law rule and now holds that international best practice dictates that every employer must give valid and justifiable reason(s) for the termination of private employments; and that, globally, it is no longer fashionable in labour relations law and practice to terminate private employment contracts without adducing a valid reason therefor. See Ebere Aloysius v Diamond Bank Plc (2015) 58 NLLR (Pt. 199); PENGASSAN v Schlumberger Anadril Nigeria Ltd. (2008) 11 NLLR (Pt. 29) 164. In support of this modern rule, the NICN has relied on the provisions of section 254C(1)(f) and (h) of the Constitution of the Federal Republic of Nigeria 1999 (as amended by the Alteration Act) (the “Constitution”) and section 7(6) of the National Industrial Court of Nigeria Act 2006 (the “NICN Act”), which enjoin the NICN to have due regard to fair labour practices, and to good or international best practices in labour, employment, and industrial relations; when exercising its exclusive jurisdiction over labour and employment matters. In James Adekunle Owulade v Nigerian Agip Oil Company Limited (unreported judgment delivered on July 12, 2016 in Suit No. NICN/LA/41/2012), the NICN held that the provisions of section 254C(1)(f) of the Constitution and section 7(6) of the NIC Act operate to set international best practices and standards in labour relations as the benchmark against which labour and industrial relations in Nigeria are to be measured.
Accordingly, the current law on termination of private employments in Nigeria is that, in order to validly terminate a private employment, an employer must: (i) strictly comply with the termination procedure provided in the contract of employment (including notice period); and (ii) provide a valid and justifiable reason for the termination. Breach of the contractual procedure for termination amounts to wrongful dismissal. On the other hand, failure to provide a valid and justifiable reason for termination amounts to unfair dismissal. Both infractions expose employers to liability in damages to private employees. However, unfair dismissal generally attracts a higher degree of liability in damages. This development in international best practice has been adopted by the NICN pursuant to section 254C(1)(f) of the Constitution. In applying this constitutional provision, the NICN has adopted the principles enshrined in article 4 of the ILO Convention No. 158 of 1982 (which came into force on November 3, 1985 and replaced ILO Recommendation 119 of 1963, dealing with termination of employment at the initiative of the employer) (the “ILO Convention”) as the applicable international best practice on the point. It provides as follows: “The employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment, or service.”
These provisions of the ILO Convention suggest that the traditional rule whereby an employer could terminate a private employment without providing a justifiable reason therefor is incompatible with international best practice and fair labour practice. Indeed, the NICN relied on the provisions of article 4 of the ILO Convention, together with those of section 254C(1)(f) of the Constitution, to hold in the case of Bello Ibrahim v EcoBank Plc (unreported judgment delivered in Suit No. NICN/ABJ/144/2018), that an employer is bound to give reasons for terminating the employment of an employee; and that in the absence of such reasons, the termination will be rendered ineffectual and declared wrongful. See also the similar decisions of the NICN in the cases of Duru v Skye Bank Plc (2015) 59 NLLR (Pt. 207) 680 and Aloysius v Diamond Bank Plc (2015) 58 NLLR 92.
Accordingly, employers must now furnish valid and justifiable reasons for terminating private employments in Nigeria; otherwise the termination would be wrongful. Going by the provisions of the ILO Convention, which are applicable as international best practice in Nigeria by the NICN pursuant to section 254C(1)(f) of the Constitution, the reason(s) furnished by an employer for the termination of a private employment is only valid and justifiable if it is connected with the capacity or conduct of the employee, or the operational requirements of the undertaking, establishment, or service. This invariably means that the only recognised valid and justifiable reasons for the termination of employment in international best practice (as recognised in Nigerian employment law by the NICN) are: (i) poor performance; (ii) gross misconduct; and (iii) redundancy.
However, employees are entitled to a fair-hearing in international best practice before they can validly be terminated for reasons connected with poor performance or gross misconduct at work. The principle of fair-hearing before dismissal or termination of employment is enshrined in article 7 of the ILO Convention, which provides thus: “The employment of a worker shall not be terminated for reasons related to the worker’s conduct or performance before he is provided with an opportunity to defend himself against the allegation made, unless the employer cannot be reasonably expected to provide this opportunity.”
These ILO Convention rules providing international best practice for valid termination of private employments have been adopted and applied by the NICN in the Nigerian employment law space. Hence termination of private employments for no reason or reasons unconnected with poor performance, gross misconduct, or redundancy, have been declared wrongful by the NICN. In Mrs. Folarin Oreka Maiya v The Incorporated Trustees of Clinton Health Access Initiative, Nigeria & 2 ors. (2012) 27 NLLR (Pt. 76) 110, the NICN held that termination of employment on grounds of pregnancy is wrongful and will attract the award of heavy punitive damages against the employer – as pregnancy is not a valid reason for the termination of employment, and in fact, termination of employment on grounds of pregnancy amounts to discrimination on grounds of sex – which is unconstitutional. A similar decision was reached by the NICN in the case of Mrs. Amaechi Lauretta Onyekachi v Stanqueen Investment Ltd. (unreported judgment delivered on December 4, 2015 by Hon. Justice B. B. Kanyip in Suit No. NICN/LA/271/2014).
Constructive dismissal in Nigerian employment law
Constructive dismissal occurs where an employer, by words or conduct, procures or attempts to procure the compulsory resignation or early retirement of an employee from his employment with the employer. It is a situation where an employer’s conduct towards an employee becomes so unreasonable that the employee is forced to leave their employment with the employer. The element of involuntariness in the employee’s actual termination, or contemplated termination, of his employment with the employer, at the employer’s instance, grounds the cause of action for a claim in constructive dismissal against the employer. See Miss Ebere Ukoji v Standard Alliance Life Assurance Co. Ltd. (unreported judgment delivered on March 26, 2014 by Hon. Justice B. B. Kanyip in Suit No. NICN/LA/48/2012).
Constructive dismissal also occurs where an employer uses a means, other than outright dismissal of the employee, to effectively dismiss the employee from his service with the employer. For example, an employer’s indefinite suspension of an employee without pay amounts to constructive dismissal of the employee and grounds an enforceable cause of action against the employer in favour of the employee. See Mr. Adelabu Patrick Olasumbo v Ecobank Nigeria Ltd. (unreported ruling delivered on May 10, 2017 by Hon. Justice B. B. Kanyip in Suit No. NICN/LA/257/2016). In Miss Ebere Ukoji v Standard Alliance Life Assurance Co. Ltd. (supra), the NICN explained the application of the doctrine of ‘constructive dismissal’ in Nigeria 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 behaviour 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.”
In Mr. Patrick Obiora Modilim v United Bank for Africa Plc (unreported judgment delivered on June 19, 2014 by Hon. Justice B. B. Kanyip in Suit No. NICN/LA/353/2012), the defendant forced the claimant to resign his employment with the bank by demanding his resignation, after refusing to pay him the agreed salary increase upon confirmation of his appointment – which led to a dispute between the parties. The claimant brought the action in the NICN claiming several reliefs against the defendant for constructive dismissal. The NICN held that the fact of non-voluntariness in the claimant’s resignation from the defendant’s employment shows that the claimant had made out a case for constructive dismissal against the defendant. In reaching this decision, the NICN relied on the provisions of section 7(6) of the NICN Act and section 254C(1)(f), (h) and (2) of the Constitution, to hold that the NICN is generally permitted to apply international best practices in labour relations, when adjudicating employment disputes brought before it. The NICN also specifically held that, although the exact legal consequences of constructive dismissal differ from country to country, it generally leads to the employee’s obligations ending and the employee acquiring the right to seek legal compensation against the employer.
In Mrs. Amaechi Lauretta Onyekachi v Stanqueen Investment Ltd. (unreported judgment in Suit No. NICN/LA/271/2014, delivered on December 4, 2015 by Hon. Justice B. B. Kanyip), the claimant was advised to resign her employment by the employer, because she had sought maternity leave on account of her pregnancy. When the claimant refused to resign her employment as advised by the employer, the employer issued her a notice of redundancy and proceeded to terminate her employment on that ground. The claimant brought the action in the NICN claiming several monetary reliefs against the defendant for constructive dismissal. The NICN took jurisdiction to hear and determine the suit and proceeded to find in favour of the claimant.
Why are the views of the NICN very critical to the development of Nigerian employment law?
In practice, appeals at the Court of Appeal are usually time-consuming, and may take as long as three (3) to five (5) years on the average, depending on the nature of the appeal, the workload of the Court of Appeal in comparison to the staff strength of the court, and the general bureaucratic nature of the Nigerian judicial system.
In addition, no subsequent and further appeal can lie from the decision of the Court of Appeal to the Supreme Court, in respect of appeals originating from the NICN. By virtue of section 243(2) of the Constitution, appeals lie from the decision of the NICN as of right to the Court of Appeal on questions of fundamental rights as contained in Chapter IV of the Constitution as it relates to matters over which the NICN has jurisdiction. By a combined reading of the provisions of sections 240 and 243(3) of the Constitution and the Supreme Court decision in the celebrated case of Skye Bank v Iwu (2017) 16 NWLR (Pt. 1590) 24, all decisions of the NICN are appealable to the Court of Appeal (with leave of the Court of Appeal) where the grounds of appeal do not relate to questions of fundamental rights as contained in Chapter IV of the Constitution. By section 243(4) of the Constitution, the decision of the Court of Appeal in respect of any appeal arising from any civil jurisdiction of the NICN shall be final. In practice, obtaining leave of the Court of Appeal to appeal against a decision of the NICN on grounds of appeal that do not relate to questions of fundamental rights as contained in Chapter IV of the Constitution, is not a walk in the park.
Accordingly, the views of the NICN are very critical to the development of Nigerian employment law; and should be taken seriously as the applicable law on relevant employment issues – by employers and employees alike.
In the past, the law in Nigeria had been that an employer needs not give a good reason or any reason at all for terminating a private employment. An employer only needed to comply with the terms and conditions specified in the employment contract. Hence, the motive for termination was irrelevant; provided that the employer complied with the termination procedure specified in the employment contract. Employers were therefore at liberty to terminate private employments for good reason, bad reason, or no reason at all. This traditional common law rule is however fast-changing.
The new rules guiding termination of employment evolved by the NICN require employers to ensure that they: (i) strictly comply with the termination procedure in private contracts of employment (including notice period); and (ii) provide valid and justifiable reason(s) for the termination of private employments, so as not to expose themselves to possible liability in damages to employees. The reasons furnished for the termination of a private employment are only valid and justifiable if they relate to poor performance, gross misconduct, or redundancy. Constructive dismissal is also now recognised as a valid ground for pursuing a wrongful dismissal claim against an employer in the NICN. Given that the NICN is effectively a policy-making court for Nigerian employment law, it is in the best interest of employers to take critical note of the radical changes introduced by NICN in various aspects of Nigerian employment law with a view to making the necessary internal adjustments in their respective organisations.
Abimbola Akeredolu, SAN, FCIArb. is a Partner in the litigation, arbitration, tax controversy, and commercial disputes resolution practices of Banwo & Ighodalo, a top-tier full-service commercial law firm in Nigeria. She is a Senior Advocate of Nigeria and a Fellow of the Chartered Institute of Arbitrators, UK. She is also a former Attorney-General and Commissioner for Justice of Ogun State, Nigeria. Emmanuel Onyeabor is an Associate in the tax and commercial disputes resolution practices of Banwo & Ighodalo.