A Comparative Analysis Of The Termination Of Contract Of Employment And Summary Dismissal Under The Nigerian Legal System.

A Comparative Analysis Of The Termination Of Contract Of Employment And Summary Dismissal Under The Nigerian Legal System.

A Comparative Analysis Of The Termination Of Contract Of Employment And Summary Dismissal Under The Nigerian Legal System.

By F. C.  Robinson. 

ABSTRACT.

Like in every other contractual agreement, disputes arise between parties to a contract of employment most often than not. On some occasions these disputes are resolved, other times it leads to the termination of the contract of employment or summary dismissal.

Summary dismissal and termination of a contract of employment have the same basic effect which is a repudiation of the contract of employment. However, the other effects and implications differ, therein lies the difference between both. These concepts are often misplaced and misconstrued by individuals including employers, employees, and even lawyers because both concepts have the same basic effect (repudiation of the contract of employment). This work would proffer solutions to the misconception about the primary means of repudiation of a contract of employment (termination and summary dismissal) so to say. It would do so by making lucid and understandable the legal effects and consequences of both termination and summary dismissal. This work would achieve the above stated by discussing the following;

  • The Definition of termination of a contract of employment.
  • The Definition of summary dismissal.
  • The similarities between summary dismissal and termination of the contract of employment.
  • The differences between summary dismissal and termination of the contract of employment.

This essay would also give answers to other related relevant questions such as; Must an employee be given a fair hearing before their contracts of employment is terminated or before they are summarily dismissed? Can the employer without reason(s) terminate the contract of employment?

In my conclusion, I advised employers to know what particular means they intend to take to put an end to a contract of employment and its legal consequences and we advise employees alike to seek appropriate remedies where they are wrongfully dismissed. Also, employers can save themselves the hassle of litigations by making express the method or means of termination in the conditions of service or company rule book handed over to the employee upon employment.

Finally, I made recommendations to the court to jettison the old common law rule that an employee’s contract of employment can be terminated with or without reasons, as that rule undermines the basic purpose of Labour laws in Nigeria, which is to protect the welfare and interest of workers. 

 

INTRODUCTION.

A contract of employment like every other species of contract comes to an end. A contract of employment can be brought to an end by summary dismissal and termination.

Employers have a common law right to summarily dismiss an employee for misconduct and for any other fundamental breach (this right is exclusively enjoyed and exercised by employers).

On the other hand, both employers and employees have the common law right to termination of the contract of employment between them, but the such right must be exercised with notice or payment in lieu of notice. This is usually done in accordance with stipulations in the conditions of service or according to the company rule book, where there are no such stipulations the court implies reasonable notice. See the case of KUSAMUTU V WEMABOD ESTATE LTD.(1976)LPELR-SC.240/1975.

 

TERMINATION OF CONTRACT OF EMPLOYMENT.

Termination of contract of employment hereinafter referred to as termination is simply the process of bringing the contract of employment to an end. 

Section 7 of the principal legislation regulating employment law in Nigeria, the Labour Act provides for instances in which a contract of employment shall be terminated. It stated thus “A contract shall be terminated-

a)by the expiry of the period for which it was made.

 b)by the death of the worker before the expiry of the period.

  1. c) by notice following section 11 of this act or in any other way in which a contract is legally terminable or held to be terminated.

Modes of Termination of Contract of Employment.

From the above provision it can be deduced that a contract of employment can be terminated in the following ways;

  • By performance.
  • By Agreement.
  • By Frustration.
  • By Notice or
  • Payment in Lieu of Notice.

By performance: The  Labour Act in section 7(a)  provides that by the expiry of the period for which it was made,  this implies that a contract of employment comes to an end or is terminated after both parties have performed their parts of the contract till the expiration of the period for which the contract was made, at the expiration of this period both parties are discharged from the contract and the contract is terminated. This occurs most times when an employee retires from his apartment or when the contract is for a fixed period and that period has elapsed.

By Agreement: parties to a contract can at any time by mutual agreement, either per the terms of the contract or otherwise, bring the contract to an end. This is true whether the contract is of a definite or indefinite period. By this agreement, the contract is terminated and parties are thus discharged from the contract of employment.

By Frustration: The Labour Act in section 7(b) supra made provisions for instances where a contract can be frustrated but limited it to the death of an employee, a contract of employment can be terminated by Frustration. A contract of employment can be brought to an end by frustration as stated supra, where changes in the circumstances of the employment either render further performance of the contract impossible or where obligations undertaken by the parties under the contract have become radically different. Events such as the;

  • death of either party to the contract
  • illness of the employee (where such illness renders the employee incapable of performing his contractual duties, except in this scenario temporary illness doesn’t frustrate and terminate the contract) see the case of CARR V HADRILL
  • imprisonment of an employee see the case of HARE VS MURPHY BROTHERS LTD(1974)3 ALL E.R. 940, where the revered Lord Denning MR held that the contract was frustrated by the imprisonment of the employee
  • an outbreak of war. See the case of JOHNSON VS UAC LTD HC, LAGOS STATE, KAZEEM, J C0/1443/72(25TH MAY 1975) where the court held that the contract was frustrated by war. In this case, the plaintiff traveled to Eastern Nigeria from Lagos and was caught up in the civil war after the war he returned to Lagos and went to the defendant’s company to be paid his salary for the months he was away, but the company refused and he then instituted the above suit, the court in striking out the suit held that the contract was frustrated by the outbreak of war and then consequently terminated.  When any of the frustrating events occur and the contract is finally frustrated, both parties are discharged from their respective duties and the contract is consequently terminated.

By Notice: there’s no doubt whatsoever that either party to a contract of employment has a common law right to bring the contract to an end by giving notice of his intention to the other party. The contract of employment more often than not specifies the length of the period of notice in the conditions of service or staff rules and when there are no such stipulations, the Labour Act in section 11 has provided for the length of the period of notice, which the court will imply into the contract of employment. By section 11 of the Labour Act, the minimum period of notice is as follows;

  • One day, where the contract has continued for a period of three months or less.
  • One week, where the contract has continued for more than three months but less than two years.
  • Two weeks, where the contract has continued for a period of two years but less than five years and
  • One month, where the contract continued for five years or more.

A contract of employment is terminated or comes to an end at the expiration of the notice and both parties are discharged from their duties owed to each other consequent upon the contract of employment but pending the expiration of this period an employee must be paid all wages that have accrued to him during the period of his employment- see section 11(7) of the Labour Act.

Note: It is academic to note that if an employee terminates his contract of employment to which he has the common law right, it is known as resignation. 

The court has in a plethora of cases held that a contract is lawfully terminated on the expiration of the period of notice stipulated by the parties to the contract or implied in the contract and also that the measure of damages for unlawful termination without notice is the wages or salary of the employee for that period. For instance, if the contract provides for one month’s notice, the damage would be one month’s salary or wages. See the case of MRAKPOR& ANOR V PSC( 2016) LPELR- CA/L/8541, 2007, see also the cases of WESTERN NIG. DEVELOPMENT COMPANY V ABIMBOLA ( 1996)1 All NLR PAGE 159 and OBOT V CBN(1993) 9 SCN PAGE 368.

It is also noteworthy to state that an employee’s contract of employment can be terminated by notice on grounds of misconduct instead of summary dismissal and the above is lawful, that is instead of an employee to be summarily dismissed for misconduct whether gross or criminal, his contract of employment can be terminated by Notice. The above was the case in UBA VS EDET (2011) LCN 14484(CA), in this case, they were allegations of irregular foreign exchange against the employee pending his response to the allegations his contract of employment was terminated by notice and the court held that the termination was lawful.

  • Payment in lieu of notice (P.I.O.N): It seems quite settled that a contract of employment may be brought to an immediate end by the payment of wages or salaries In lieu of the requisite notice which would normally be worked out. Where the contract provides for termination either by notice or payment in lieu of notice, there is, of course, no difficulty as termination will be in accordance with contractual terms. Section 11(6) of the Labour Act has given statutory flavour to the above premise. It states thus “Nothing in this section shall present either party to a contract from waiving his right to notice on any occasion, or from accepting payment in lieu of notice. The above premise has also received judicial approval, from the court in OKONGWU VS NNPC(1989) NWLR (PT115) 296, the court held that the termination of the appointment between the appellant and his former employers, Petroleum Teaching Institute (P.T.I.) by the payment of his one month salary in lieu of one month notice as stipulated in the contract was lawful.

SUMMARY DISMISSAL.

Summary dismissal is the immediate and instant layoff of an employee’s contract of employment without notice or payment in lieu of notice on the grounds of gross misconduct and breach of fundamental terms of the contract. 

Summary dismissal brings the contract of employment to an immediate end and no benefits whatsoever accrue to the summarily dismissed employee, unlike an employee whose contract was terminated. The court of appeal per Ogbunya J.C.A. held that “Dismissal on the hand is punitive and depending on the contract of employment very often entails a loss of terminal benefits”.

It is trite that an employer under common law has the right to dismiss (fire) an employee. The Nigerian court of Appeal in CADBURY NIG.PLC V 0NI (2012) LPELR-CA/ 347/2011 expressed the following view per SAULAWA, JCA “indeed, it is a settled common law principle, that an employer has liberty or right to dismiss thereof summarily, for gross misconduct”. It’s obvious that from the above decision of the court an employer can dismiss an employee for misconduct, the above right is hinged on the common law principle that  “a willing servant cannot be forced on an unwillingly master”. Also, the question of whether or not an employer must give reasons for the dismissal of an employee would be answered subsequently. More often than not employees are dismissed for gross misconduct. 

What Constitutes Misconduct that Would Warrant Summary Dismissal? 

We have two types of misconduct that can warrant summary dismissal viz;

  • Ordinary misconduct and;
  • Criminal misconduct.

Ordinary misconduct: These are those misconducts that are usually not tainted with criminality but are a breach of fundamental terms of the contract. Such as willful disobedience, breach of fidelity, and so on.

Criminal misconduct: There are those misconducts tainted with crimes or elements of crimes. Such as falsification of documents, theft, and criminal misappropriation to mention a few.

The court in answering this question and corroborating the above in the case of AHMED V ABU& ANOR( 2016) JELR 34225(CA), the court stated thus “An act of gross misconduct has been defined as a conduct that is of the grave and weighty character as to undermine the confidence which should exist between an employee and an employer”.

A breach of fundamental terms of the contract can also be a justifiable reason for summary dismissal.

What constitutes gross misconduct is usually a circumstance of each case but the court has held some conduct to be gross misconduct, some of such conduct include;

  • Willful disobedience to lawful and reasonable orders of an employee.
  • Incompetence.
  • Falsification of documents.
  • Absenteeism without reasonable cause.
  • Conversion and destruction of employer’s property.
  • Reporting to work under the influence of dangerous drugs or intoxicating liquors or being in possession of the same while on office premises.
  • Involvement in any act unbecoming of an employee or that puts the office to disrepute.
  • Dishonesty and fraudulent acts to mention a few and other conduct that the employer alleges to be misconduct.

SIMILARITIES BETWEEN TERMINATION AND DISMISSAL.

Termination and dismissal are the two known means of bringing a contract of employment to an end, these two methods though not strictly the same, share some similarities and those similarities include;

  • Termination and dismissal repudiate the contract of employment and the parties are returned to their pre-contract state: The court in corroborating the above in the case of ALHAJI M.K V FIRST BANK NIGERIA PLC&ANOR(2011) LPELR- CA/K/150/ 2009 stated thus “Termination or dismissal” of an employee by the employer translates into bringing the employment to an end. The above decision has made lucid and buttressed the above point sufficiently.
  • Termination and dismissal discharge both parties from their contractual duties: Termination and dismissal functions to bring the contract to an end as stated supra and thereby discharges both parties from their contractual duties, duties such as; duty to pay wages or salaries, duty to provide work, duty to ensure the safety of employees while they carry out duties attached to the employment (duties of the employer), the duty to work, duty to faithful service, duty to obey lawful and reasonable orders of  (duties of the employee) to mention a few, are all extinguished.
  • The compensation for wrongful termination and dismissal which is damages are the same and are measured in the same manner: The court buttressed the above postulation in the case of UBN v NWACHUKWU( 2000) LPELR- CA/PH/179/96 stated thus ” it is well settled in a long line of decided cases that the remedy of an employee wrongly terminated and dismissed (emphasis supplied) is to sue for damages and the measure of damages is always the salaries for the length of time which notice would have been given in accordance to the terms of the contract of employment”.
  • The court is often reluctant and even lacks the power to order the reinstatement of employees whose contracts were terminated or who were summarily dismissed, save in contracts of employment with statutory flavour: The above hinges on the old common law principle that “A willing servant cannot be foisted on an unwillingly master. The court in ODIBO V FIRST BANK(2018) LPELR- CA/L/240/2011, expressed the following view in consonance with the point above, “In law, employment founded on master-servant relationship for personal service without any statutory flavour does not enjoy the relief of reinstatement. The courts are thus reluctant and lack the competence to force a willing servant upon an unwillingly master in a contract of employment for personal service”. It’s clear from the case above that another obvious similarity between termination and dismissal is that except for a contract with statutory flavour, the court cannot order reinstatement of employees but rather award damages for wrongful termination and dismissal respectively.

 

DIFFERENCES BETWEEN TERMINATION AND SUMMARY DISMISSAL.

The differences between the termination of a contract of employment and summary dismissal of an employee are that:

  • Summary dismissal is instant and immediate and done in compliance with procedures:  Summary dismissal is immediate and is done in compliance with procedures stated in the conditions of service if stated, and in compliance with statutes if the contract is regulated by statute. While termination must be done with notice except in instances of payment in lieu of Notice.
  • Termination of employment is a mutual right enjoyed by both the employee and the employer while dismissal is the sole right of the employer, exercised and enjoyed by the employer: The court stated thus in 7UP BOTTLING COMPANY PLC V AUGUSTUS(2012) LPELR- CA/OW/210/2010. “… The right to terminate or bring employment to an end is mutual in that either party may exercise it. From the decision above it is clear that either party to the contract can terminate it but only an employer has the right to dismissal.
  • Upon termination, certain benefits may accrue to an employee known as terminal benefits such as gratuity or in some instances pension while upon summary dismissal the contract of employment comes to an abrupt end and no benefit(s) whatsoever accrues to the employer: The court deciding on the above in AHLAJI M.K VS FIRST BANK NIGERIA PLC, Supra, stated thus “termination or dismissal of an employee by the employer translates into bringing the contract to an end. Under termination of appointment, the employee receives terminal benefits under the contract of employment. The right to terminate or bring employment to an end is mutual in that either party may exercise it.” Dismissal on the other hand is punitive and depending on the contract of employment often entails a loss of benefits.
  • Summary dismissal is punitive in nature while termination more often than not is not punitive in nature: Summary dismissal is punitive in nature in that it is the highest sanction meted out to an employee and as stated supra, more often than not leads to loss of terminal benefits see the case of 7UP BOTTLING COMPANY PLC VS AUGUSTUS(2012) Supra where the court held thus “Dismissal, on the other hand, is punitive…” While, termination more often than not is not punitive in nature, save in instances where an employee opts to terminate a contract of employment on the grounds of misconduct by notice or payment in lieu of notice, rather than summarily dismiss the erring employee as was the case in UBN VS EDET, supra.
  • Termination of employees can be with or without reason(s) but summary dismissal of an employee must be with a reason(s): See the case  GEORGE ABOMELI V NIGERIAN RAILWAY CORPORATION(1995) 1 NWLR(Pt.372) 457, where the court held thus ” it is settled that an employer is not bound to give any reason for lawfully terminating a contract of service, he must give reasons for summarily dismissing an employee.

Must an Employee be Given Fair Hearing before Termination or Dismissal?

The answer to the question is in the affirmative (yes), an employee who has allegations of gross or criminal misconduct made against him should be given a fair hearing, that is an opportunity to defend himself against such an allegation. The court in deciding on this expressed the following view in YUSUF VS UBN LTD.(1996) 6 SCNJ 203 AT PAGES 214-215 held thus “To satisfy the principle of natural justice and fair hearing a person likely to be affected directly by the disciplinary proceedings must be given adequate notice of the allegations against him to enable him to make a representation in his defense” per Wali JSC, as he then was.

At this point, it is very cardinal and imperative to our discussion to state that despite the fact an employer has the right to a fair hearing, it does not imply 

that before his contract of employment is terminated or before he is summarily dismissed on grounds of gross or criminal misconduct, he must first be convicted by the court. The SC per WALI JSC, as he then was put the above matter to bed when he stated thus in YUSUF V UBN (1996), Supra “It is not necessary, nor is it a requirement under section 33 of the 1979 constitution that before an employer summarily dismisses an employee from his service under the common law, the employee must be tried before a court of law where the accusation against the is for gross misconduct involving dishonesty bothering on criminality…”. Buttressing the above point further the Nigerian court of Appeal in EFUWAPE V UBA PLC(2007)VOL. 37  WRN 179 at 195-196, LINES 25-25,P.195 LINES 40-5 (CA), following the precedent of the Supreme court in YUSUF VS UBN, supra stated thus “… it appears to me that the prosecution and conviction of an employee before the law court is not a sine qua non to the exercise of power summary dismissal by an employer. The principle strongly harped upon on behalf of the appellant is not an immutable one. It is not like the laws of the Persians and Medes”.  It is safe to say that the above positions of the court put to an end any debate as to the above question.

It’s also imperative at this point to distinguish the above positions of the court from the cases of DENLOYE VS MDPDC(1968) LCN/1578(SC) and SOFEKUN V AKINYEMI(1981) 1 NCLR. In both cases, the court quashed the judgment of the tribunals and also the dismissal of both Denloye and Akinyemi on the grounds that they were not given a fair hearing before they were dismissed on grounds of misconduct that has an ingredient of a crime as against a regulation that stated that before an employee can be dismissed for any misconduct that constitutes a crime or has ingredients of a crime, such an employee must first be tried and convicted of such an offense before his dismissal.

The fundamental difference between both cases and the current position cited was the regulation that made provisions for a trial before a court and ultimately conviction before dismissal for any misconduct that is a crime or has an ingredient of a crime, without such regulation then the position in the case of YUSUF V CBN, supra applies. 

Can the Employer without Reasons Terminate the Contract of Employment of an Employee?

 The answer to the above question is yes. The Supreme court and the court of Appeal are the highest courts in our legal system in a plethora of cases held that an employer under common law can terminate the contract of an employee with or without any reason whatsoever. The supreme court in BABATUNDE AJAYI V TEXACO NIGERIA LTD& ORS(1987) ALL N.L.R.471 held inter alia that in an ordinary case of master and servant relationship, a master can terminate the contract with the servant at any time with or without reasons. The court of Appeal in DAODU V UBA PLC( 2003) LPELR- CA/1/202/01 held inter-alia …” it is now settled that an employer may with or without any reason given terminate the employment of its staff. From the above cases, it is evident that employers wield an unregulated and unrestrained power or right, as the case may be to hire and fire employees or staff without any reason(s) the above put employees under undue subordination and at a very huge disadvantage, as employees can be ripped off entitlements and benefits consequent upon this archaic and outlandish common law principle. 

Conclusion.

Having discussed extensively summary dismissal and termination of a contract of employment and its similarities and differences. I, advise employers, to know what particular means they intend to take to put an end to a contract of employment and its legal consequences and in the same vein, we advise employees alike to seek appropriate remedies where they are wrongfully dismissed. Also, employers can save themselves the hassle of litigations by making express the method or means of termination in the conditions of service or employee rule book handed over to the employee upon employment.

Recommendations.

 The writer suggests that Nigerian courts especially the Court of Appeal (The final appellate court on matters relating to Labour and employment law) should not strictly follow the old common law principle that an employer can terminate the contract of employment of the employee without any reason(s)  whatsoever. As the above rule is archaic and outlandish and tends to undermine the basic reasons of labour laws in Nigeria and across the globe which is the protection of the employees against the whims and caprices of powerful employers. The Nigerian court must try to keep in touch with the trends and development of Labour and employment law around the world as many jurisdictions have jettisoned this rule for being myopic and no longer fashionable or appealing in today’s world. We wish to see the courts toeing this path soon by jettisoning this “Old common law rule”.

 

ABOUT THE AUTHOR.

FC Robinson is a 300 level law student of Abia state university Uturu.

He is passionate about legal writing and has special interests in labour and employment law.

For questions, suggestions and comments, you can reach the author via mail on robinsonfreedom37@gmail.com

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One Response

  1. I commend the writer. However, the position taken presuming that there is yet to be a shift in the labour jurisprudence from what it hitherto was, is erroneous. Rather than concentrating on recent decisions of the NICN since 2010 when the 3rd alteration Act amended the 1999 constitution, this writer merely verbously re wrote what other writers felt about the topic prior the NICN’s emergence as a court of superior record – Reliance on so many old case laws has given such impression. Indeed, there are so many case laws by the court (NICN) many of which would have given this young writer direction on how to deal with the topic. A good trial but one still requiring more ingredients.

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