– The Difference Between Termination and Dismissal of Employment Under Nigerian Law and the Consequences

Introduction

I have particularly been inundated with enquiries on issues that border on contract of employment and allied matters under Nigerian laws. Meanwhile, in the course of professional engagements both in and out of the courtroom, I have discovered that most problems associated with employment matters are predominantly connected with failure to appreciate the meaning and efficacy of some common terms and positions of the law in our industrial law. This leads to avoidable and unnecessary litigation which eventually yields no result. Before you start thinking about embarking on a wild goose chase over your employment issues, I advise you to take your time and go through this article. It may be of help to your next action.

There is a lot of misconceptions that I have come to meet over and over again on labour matters. Terms like termination and dismissal; wrongful and unlawful determination; special damages and terminal benefits; reinstatement, specific performance and damages; contract of service and contract for service; and so on are often misconceived, misapplied and wrongly acted upon. All these are interconnected and I deem it easier to treat, and as much as possible disambiguate them under this heading which often time calls for concern in contract of employment under our laws in Nigeria.

What is Contract of Employment?

To start with, there are various laws that regulate labour and industrial-related matters in Nigeria but the principal among them to which I restricted myself in this article is the Labour Act, Cap L 1, LFR 2004, (hereinafter referred to as “the Act”). This Act makes provisions on labour matters from commencement to ending contracts of employment in Nigeria. It defines contract of employment to mean any agreement, whether oral or written, express or implied, whereby one person agrees to employ another as a worker and that other person agrees to serve the employer as a worker.[1] The Act uses the word ‘worker’ to describe an ‘employee’. Suffice it also to say that contract of employment by this definition relates only to contract of service and not contract for service. Thus the engagement of an independent contractor to do a specific service for you, say a plumber, an electrician, or a tailor, etc. is not contract of employment but a contract for service. It is therefore outside the scope of the Act.

It must be noted however that by the definition of “worker”, to wit, an employee under the Act, it is clear that the Act does not apply to the following persons, viz: any person employed otherwise than for the purposes of the employer’s business; persons exercising administrative, executive, technical or professional functions as public officers or otherwise; members of the employer’s family; representatives, agents and commercial travellers in so far as their work is carried on outside the permanent workplace of the employer’s establishment; any person to whom articles or materials are given out to be made up, cleaned, washed, altered, ornamented, finished, repaired or adapted for sale in his own home or on other premises not under the control or management of the person who gave out the articles or the material; any person employed in a vessel or aircraft to which the laws regulating merchant shipping or civil aviation apply. Clearly, there are other specific legislations which regulate most of these areas of industrial law.[2] It follows that any employment or engagement of any person to render services in these areas are not covered by contract of employment properly called.

Contract of Employment: Salient Features Under the Labour Act

1. Contents of a Written Contract of Employment

When parties agree to contract, an employer is required to give the employee a Written Contract of Employment within three months of commencement of the employment and such Written Contract of Employment must contain certain specifics such as the name and address of the employee and the place and date of his engagement; the nature of the employment; the date when the contract expires in case of fixed-term contract; the appropriate period of notice to be given by the party wishing to ‘terminate’ the contract, which must be in compliance with the provision of section 11 of the Act; the rates of wages and method of calculation thereof and the manner and periodicity of payment of wages; any terms and conditions relating to- hours of work, or leave and leave pay, or incapacity for work due to sickness or injury, including any provisions for sick pay; and any special conditions of the contract. Where there is any change in the above after being given to the employee, such change must be communicated to the employee in writing within one month of its occurring.[3]

2. Medical Examination

Except in agricultural undertakings and when the employee’s work is within the vicinity of his home as may be prescribed by Order, every employee who enters into a contract must be medically examined by a registered medical practitioner at the expense of the employer.[4]

3. Notice of Termination

Section 11 of the Act makes provisions for the termination of contract and the statutory notices required for various natures of employment. Either party to the contract can terminate the contract at any time. Where the employee has been employed for a period of three months or less, a minimum of one-day notice is required which may be oral. But written notices are required in the following cases: where the employee has been employed for a period of three months but less than two years, a minimum of one-week notice; for a period of two years but less than five years, a minimum of two-weeks notice; and for a period of five years or more, a minimum of one-month notice. However, either party may waive his right to notice by accepting payment in lieu of the notice and such payment must be made before the expiration of the period of the notice. It follows therefore that the question as to whether an employee that is still under probation is entitled to notice has been answered in affirmative. He would be entitled to notice on the basis of the probationary period he had spent in the employment or as may be provided in the employment contract. 

4. Leave

Every employee after twelve months of continuous service is entitled to a holiday with full pay of at least six working days (public holidays exempted). An employee is also entitled to twelve days’ sick leave for temporary illness certified by a registered medical practitioner. Where an employee is at work for more than six hours a day, he is entitled to at least one hour of rest interval in that day. And for every period of seven days, an employee is entitled to at least one day of rest which must not be less than twenty-four consecutive hours.[5] Thus, if for example, you work from Monday all through to Saturday, you must have the whole of the next day- Sunday as a mandatory day off.

5. Maternity Leave

A pregnant female employee, upon presentation of a Medical Certificate indicating her Expected Date of Delivery (EDD), is entitled to Maternity Leave of at least six weeks before the EDD and six weeks after the delivery of the child. She is also entitled to 50% of the wages she would have earned if she had not been absent from her employment by reason of her carrying and delivering a child provided she has been in employment for a period of six months or more. Where, however, for medical reasons, she exceeds the period allowed, her employment cannot be terminated during that period and/or for that reason if she produces a Medical Certificate from a registered Medical Practitioner informing the employer of her medical condition. While she nurses her child in employment, she is entitled to half an hour, twice daily for the care of the child.[6]

6. Employer’s Vicarious Liability

An employer is vicariously liable for any injury caused to a third party by the negligent act of his employee done within the scope of his employment. This is the reason why most employers at the initial stage of the contract require that employees provide Guarantors or fill prescribed Forms for indemnity or fidelity bonds to cover unauthorized wrongful or unlawful acts of the employees done outside the scope of employment.

7. Free Transport

It may interest you to note also that where an employee is required to travel sixteen kilometres or more from his normal place of work to another worksite it must be on free transport or he must be given an allowance in the stead.[7]

8. Employees’ Right to Association

The right of employees to form or become a member of any employees’ association or trade union is constitutional. Except as may be provided under the Trade Union Act and in accordance with the Constitution, right to association cannot be restricted or taken away from the employees.[8] No action can lie at the suit of an employer on issue of trade union. It is strictly the employees’ concern.

Types of Contract of Employment

It is important to note that the type of an employment determines its nature, mode of termination and the consequences that follow. Generally, there are three types of employment, viz:

I. Employment with Statutory Flavour

There are certain contracts of employment that emanate from the provisions of some enactments. That is, the employment is made and regulated pursuant to a law or any regulation made pursuant to the law. Such a contract of employment is said to enjoy statutory flavour. The Supreme Court defined this type of contract as where the contract of service is governed by the provisions of a statute or where the Conditions of Service are contained in regulations derived from statutory provisions they invest the employee with a legal status higher than the ordinary one of Master and Servant.[9]

However, the fact that an employer was established and regulated by law does not ipso facto translate all employments with its employees to one with statutory flavour.[10] For employment to be held to have statutory flavour, the employer must be a body set up by statute; and, the establishing statute or regulation made in pursuance thereof must make express provisions regulating the employment of the staff of the category of the employee concerned.[11] Examples that can be cited in this category are those of (i) Public Servants[12] – where their employment is provided for in a statute and/or conditions of service or agreement. (ii) Public Servants[13] – as in the civil service.[14] Thus, if your employment lacks these features, it does not belong to this category and all that shall be discussed below in consequence thereto would not apply to you.

II. Employment by Written Contract

This is a type of contract to which parties’ agreement are stated in writing. It is that of master and servant relationship. As above mentioned, the Act requires that an employer gives to the employee a Written Contract of Employment with specified contents within three months after the employee’s work begins. Where this is the case, the court is empowered to determine the rights and duties of parties to the contract under the written agreement whenever issues arise. Consequently, a wise employer must make salient terms and conditions of employment explicit in the Contract of Employment and as well consult a specialist to prepare Staff Handbooks which contain comprehensive terms and conditions of employment and make them available to employees. If your employment falls into this category, further consequences that follow it are discussed under the respective subheading below.

III. Employment at Will or Servant Holding Office at the Pleasure of Employer

This is employment without written contact, it may therefore be oral or implied, in which case each party could terminate the contract informally. In particular, the employee is at the mercy of the employer. The common saying that “he who has the right to hire has the right to fire” comes to play in fullness in this type of employment. The employment can start and end at any time and anyhow. Unlike employment with statutory flavour and the written contract whose terms and conditions on various matters relating to the employment are stated clearly in statute, regulations, contract, staff handbooks, collective agreement, etc., as the case may be, the employee here continues in the employment at the discretion of the employer.

Termination and Dismissal

A contract of employment can be discharged generally in three ways depending on the type and nature of the employment. The contract may be discharged by operation of law, by notice or by dismissal. The first two ways are classified as termination under the Act.

A. Termination

Termination of contract of employment can occur in two ways. It is either by operation of law or by notice. Where a contract of employment is provided or agreed to be for a specific period, the contract stands terminated at the expiration of that period, or where the death of the employee occurs before the expiration of that period, a contract of employment is said to have been terminated by operation of law.[15]

Another means of termination of contract of employment is by notice in accordance with section 11 of this Act or in any other way in which a contract is legally terminable or held to be terminated. We have listed earlier the statutory periods of notice as each particular case of the contract may be in the absence of such provision in the contract of employment.

It must be noted that the type of contract that specifically ends by termination is the Written Contract since a written contract always contains terms and conditions including the mode of termination by parties thereto. Thus, either party may determine a written contract. However, where the requirement as to the issuance of notice or payment in lieu is not complied with, such termination is adjudged to be wrongful. It is worthy of note that while issuing the notice, a party is at liberty to state or not to state any reason for the termination.

When controversy ensues, it is the court that has the power to determine the rights and duties of parties based on the terms and conditions of the contract. Terms and conditions of contract of employment are the bedrock of any case when the issue of wrongful termination of employment calls for determination and should, therefore, be pleaded by the employee who is aggrieved.[16] A claimant who seeks a declaration that the termination of his appointment was wrongful among other claims must prove the following material facts namely: (i) That he is an employee of the defendant. (ii) The terms and conditions of his employment (iii) The way and manner, and by whom it can be determined. It is not in principle for the employer who is a defendant to an action brought by the employee to prove any of these. Again, such a claimant must be ready to attend to the matter in court, especially during trial. The claim of an employee against his employer is a personal one. The employee cannot prove his claim by proxy. Employment issues are personal issues that can only be proved by the parties i.e. employee or Employer. [17]  

B. Dismissal

Contract of employment with statutory flavour invests the employee with a legal status higher than the ordinary one of Master and Servant.[18] In employments governed by statute, procedures for employment and discipline (including dismissal) of an employee are clearly spelt out.[19] The status of employment with statutory flavour, in its own rights, guarantees an employee’s right to fair hearing before the determination of his employment.[20] The employer can dismiss the employee only after exhausting the laid down procedure for dismissal failing which such dismissal would be declared as unlawful because it is not done in accordance with the procedure laid down by law.

The duty to construe an appointment with statutory flavour is the exclusive preserve of the Courts.[21] However, the question of whether a contract of employment is governed by statute or has statutory flavour depends on the construction of the contract itself and the relevant statute. The mere fact an employer is a creature of a statute or that it is a statutory corporation, or that the government has shares in it does not elevate its employment status into one with statutory flavour. Rather, there has to be a linkage or nexus between the employee’s appointment with the statute creating the employer or corporation.[22] Thus, for an allegation of unlawful dismissal to succeed, the Supreme Court again enumerated the conditions capable of giving an employment statutory flavour, which are: (a) The statutory enforcement or at any rate be regarded as mandatory. (b) Be directly applicable to the employee or persons of his cadre. (c) Be seen to be intended for the protection of that employment. (d) Have been breached in the course of determining the employment.[23]

Sometimes, a contract of employment may be a hybrid of one with statutory flavour and a written contract. In that case, the court would look at the agreement of parties in the contract of employment and where such contract captures the whole intentions of parties without reference to statute or any regulation, such employment is not one that enjoys statutory flavour. It would be treated as written contract of master and servant. What thus follows is a determination of wrongful termination and not unlawful dismissal.[24]

Before a letter of dismissal is issued, the laid down procedure must be religiously followed. For every word of the statute is intended and crucial. An offhand arrangement may therefore have grave repercussions. Where, for example, Regulation prescribes that the case of an erring employee be determined by Senior Staff Disciplinary Committee, it was held that an Ad Hoc Committee set up and which conducted the proceedings and dismissed the employee acted unlawfully and in vain. The dismissal was declared null and void. See Nasarawa State University & Ors vs Samuel Betere Nekere (supra).

C. Summary Dismissal

Usually, contracts of employment contain clauses that empower the employer to dismiss an employee summarily without notice when such an employee is found to have committed an act which amounts to gross misconduct. In addition, employers of contract with statutory flavour may dismiss an employee summarily on this ground.[25] Examples of such conduct include stealing, fraud, bribery, falsification of records, forgery, insubordination, dereliction of duty, fighting, verbal or physical violence, and so on.

The prosecution of an employee before the law Court is no longer a sine qua non to the exercise of the power of summary dismissal by an employer for gross misconduct or allegation of crime. Nonetheless, it would all depend on the circumstances of each case. Courts have therefore drawn a distinction between “not too serious offences labelled as crimes”, and “outright commission of an offence contrary to the Criminal/Penal Code”.

With respect to the former, the employer is duty-bound to fulfil the constitutional requirement of fair hearing by setting up a domestic tribunal or Panel to establish the guilt of the accused employee. Where the employee admits the guilt, disciplinary action such as dismissal may follow. Admission of the employee may be inferred from his conduct or from evidence e.g. his reply to a query. However, where the erring employee admits guilt but the employer still goes ahead to set up a tribunal for his case, failure to comply strictly with the rules laid down in case of employment with statutory flavour would render the dismissal resulting therefrom a nullity. See Nasarawa State University & Ors vs Samuel Betere Nekere (2018) LPELR-44550

In case of the latter class of offences or where the employee denies the allegation before the domestic tribunal aforesaid, the employee cannot be disciplined until he has been tried before a regular court. An administrative tribunal is not permitted to usurp the power of the court in determining the guilt of a person alleged to have committed a crime. Generally, where there has been admission the need for proof before a regular criminal court no longer arises.[26] The employer is therefore at liberty to discipline, perhaps, dismiss the employee summarily.

It is worth noting also that where an employee foresaw a dismissal after committing act(s) of misconduct but with the aim of circumventing the effect of such on his career, outwitted his employer by tendering a notice and successfully terminated his employment, the employer can no longer afterwards issue him a letter of dismissal.[27] To end with, when misconduct or series of misconducts however grave is discovered, prior legal advice is recommended to be obtained before a letter of dismissal is issued and delivered to the employee.

Remedies Available to the Injured Party on Determination of Contract

Generally, the remedies that follow the successful proof of breach of a contract are award of damages, order for specific performance and injunction.[28] In particular, however, the consequences that follow the wrongful or unlawful determination of employment depend on the type of employment cum the prescribed mode of determination thereof.

I. Damages

Where a written contract of master and servant is held to be wrongfully terminated, to wit, statutory notice or salary in lieu was not given, the damages that the injured party is entitled to is the amount of salary in lieu of the notice. But since claim for wrongful termination is often at the suit of the employee, it is settled law that the remedies available to an employee whose contract of employment has been breached are his salary and other legal entitlements (terminal benefits) due to him in the course of the employment and nothing more.[29] For the avoidance of doubt, it has been held in a plethora of cases that the only remedy awardable to an employee whose employment was wrongfully terminated is the award of salary for the period of notice, and other legitimate entitlements due to the employee at the time the employment was brought to an end. In other words, such an employee is neither entitled to an award of general damages nor a decree of reinstatement. The rationale for this is that the employee cannot be imposed by the court on an unwilling employer.[30] The court in awarding damages will certainly not include compensation for injured feelings or the loss that may have been sustained from the fact that the employee having been dismissed makes it more difficult for him to obtain a fresh appointment. This is so because the Claimant employee has a duty to minimize the damages he sustains by the wrongful dismissal.[31]

On a final note, where a party received his terminal benefits after his employment was brought to an end, he cannot be heard to complain later that his contract of employment was not properly determined. The acceptance of payment renders the determination mutual and estoppel by conduct operated to disqualify the party from claiming or obtaining any benefits based on improper determination of his employment.[32]

II. Specific Performance or Reinstatement

In the case of employment with statutory flavour, the law is settled that the remedy for unlawful dismissal is reinstatement.[33] The idea is that where an employee whose employment enjoys statutory flavour is removed from office in disregard to the laid procedure for his removal or dismissal, the court would declare such act of removal as unjustified or ultra vires null and void and of no effect whatsoever as the case may be. By this declaration, the removal is taken as though it never occurred and the employee would have to be reinstated to his office and thus entitled to all his salaries and other entitlements throughout the period of his removal. Suffice it to say that an employee under a written contract is not entitled to specific performance or reinstatement.

Conclusion

In brief, from the foregoing, the following conclusions can be drawn:

• Contract of employment is a contract of service and not contract for service which is a contact of engagement of an independent contractor for service(s).
• Contract of employment of master and servant is governed by terms and conditions of the contract while that with statutory flavour is governed by statute or regulation made pursuant to a statute.
• Contract of employment of master and servant is terminable by notice while that with statutory flavour is by following laid down procedure thereon.
• Termination of a contract of employment is at the instance of either party thereto while dismissal is at the instance of the employer.
• What follows a declaration of wrongful termination is damages calculated based on the amount of salary for the period of requisite notice and other accrued terminal benefits, no general damages are awardable. For a contract with statutory flavour, it is reinstatement and damages for all salaries and entitlements for the period of unlawful dismissal.

************

If you find this Article helpful, you can share it to help others, too.

Note that this content is just a general guide on the subject matter treated. If you would like to find out more about a consultation with Our Team regarding your specific need on this topic or any legal issue you may be confronted with, click here to contact us.

[1] S. 91, Labour Act (supra) See also Shena Security Company LTD V. Afropak (Nigeria) LTD & ORS. (2008) LPELR-3052(SC)

[2] See for example the Nigerian Maritime Administration and Safety Agency Act, No. 17, 2007; Factory Act, Cap F1 LFN 2004; etc

[3] S. 7 of the Act

[4] S. 8 Ibid.

[5] Ss. 13 and 18 Ibid

[6] See S. 54 Ibid

[7] S. 14 Ibid.

[8] See Governing Council of NTI, Kaduna & Anor vs NASU (2018) LPELR- 44557(AC); s. 12, Trade Union Act, Cap T14 LFN, 2014.; s. 9(6), Labour Act.

[9] Imoloame v. WA.E.C. (1992) 11/12 SCNJ 121 at 135; (1992) 9 NWLR (Pt. 265) 303

[10] A. F. Amos & Ors v. University of Ibadan (2002) LPELR-12157(CA)

[11] FMC Ido Ekiti & Ors V. Olajide (2011) LPELR-4150(CA)

[12] See Olaniyan v. University of Lagos (1985) 2 NWLR (Pt. 9) 599.

[13] See Shitta Bey v. Federal Public Service Commission (1981) 12 NSCC 28; (1981) 1 SC 40

[14] See generally Per GALADIMA, J.C.A.(Pp.16-17, paras.G-F) in Ujam V. Institute Of Management & Technology & Ors. (2006) PELR-7688(CA)

[15] See s. 9 (7) of the Act

[16] NITEL Plc vs. Akwa (2006) 2 NWLR Pt 964 pg.391

[17] Anifowoshe v. Wema Bank Plc (2015) LPELR-24811(CA)

[18] NEPA. v. Edegbero & Ors. (2000) LPELR-6884(CA)

[19] FMC Ido Ekiti & Ors V. Olajide (supra)

[20] Olaniyan v. University of Lagos (1985) 2 NWLR (Pt. 9) 599

[21] Ojabor v. Hon. Minister of Communications & Ors (2018) LPELR-44257(CA)

[22] Ibid.

[23] Idoniboye-Obu v. NNPC (2003) 2 NWLR (Pt. 805) page 589

[24] A. F. Amos & Ors v. University of Ibadan (supra)

[25] Arinze v. F.B.N. Ltd. (2004) 12 NWLR (Pt. 888) pg. 663

[26] See generally A.G Kwara State & Ors. v. Ojulari (2006) LPELR-6151(CA)

[27] See Olayato vs Equity Bank of Nig. Plc & Anor (Unreported) Suit No. FHC/L/CS/163/2003

[28] I. E. Sagay, Nigerian Law of Contract, 2d Ed. (2005) p. 618

[29] Chukwumah V. Shell Petroleum Co. Ltd (1993) 4 NWLR (Pt 285) 512

[30] See Ativite V. Kabel Metal Ltd [2008] 10 NWLR (Pt. 1095) 399 at 415; Salami v. Union Bank of Nigeria Plc (2010) LPELR-8975(CA)

[31] Salami v. Union Bank of Nigeria Plc (supra)

[32] Julius Berger v. Nwegwu (2005) 12 NWLR (995) 518

[33] Per KEKERE-EKUN, J.C.A (P. 32, paras. C-D) in Yemisi v. FIRS (2012) LPELR-7964(CA)