Employer’s or Employee’s remedies on wrongful termination of contract of employment

Introduction

Generally, a contract of employment is between an employer who hires, and an employee who is hired to perform a particular or a range of duties whether for a fixed period or for an uncertain duration. It states the employment terms that may include rights, duties, responsibilities and obligations of either party to the contract.

Section 7 of the Labour Act, 1971 (the “Act”), requires every employer to issue a written contract to the employee within 3 months of the commencement of the employment relationship. Section 22 of the Act states that the written contract does not apply to employment between family members – we note that family-owned-registered-entities are not employment between family members.

A contract of employment like every other contract is founded on the principles of freedom and sanctity of contract, that is, terms agreed to by the parties subject to regulatory or legislative frameworks that now include domesticated or not-domesticated international conventions. Business prudence requires an employee to examine and understand terms of employment contract before acceptance.

Employers may engage lawyers to document employment contracts, employees should form similar habits. Where certain terms are not specifically agreed upon by the parties, it may be governed by the applicable legislation such as Labour Act; Employee’s Compensation Act; Factories Act and (domesticated or not-domesticated) international conventions which the National Industrial Court of Nigeria is authorized to enforce.

Termination of employment contract

A contract of employment is not a permanent contract. Parties generally agree on how it is to be terminated, where this is not in the agreement, applicable legal principles fill in the gaps. Instances where a contract of employment would come to an end include:

1. death of the employee or employer;
2. termination of the contract by the employer or employee subject to statutory or contracted notice period;
3. dismissal by the employer;
4. by agreement of the parties;
5. where the employer is being wound-up in the case of a company;

The saying that he who hires, has the right to fire, presupposes that the employer is the one entitled to terminate the employment. Employer can terminate an employment without stating any specific reason so long as all the agreed procedures are followed in terminating the employment. In Mobil Oil (Nig.) Ltd & anor v. ST Assan (2003) 6NWLR (pt816) the court held that the employee has no redress when a contract is duly terminated. The Court in Savannah Bank Plc. V. Fakokun (2002) 1NWLR (pt. 749) 544 held that the court cannot force a willing employee on an unwilling employer – except for employment that enjoys a statutory flavour.

The right to bring an employment to an end is mutual between the parties, this is consistent with the Court of Appeal’s decision in 7up Bottling Company Plc. V. Augustus (2012) LPELR- 20873). An employee, subject to agreed notice period or applicable legal provisions, has the corresponding right to terminate the contract of employment between him and his employer – if validly terminated no remedy is available to the employer in law.

Remedies available to parties to employment contract

The only situation where a party to a contract of employment can successfully seek remedy in a court of law is when the terms of employment are breached. It therefore follows that any termination of employment contract outside the agreed terms of employment or provision of the law amounts to a wrongful termination and the defaulting party would be liable to the other in contract or law.

What are the remedies available to the aggrieved party? Firstly, recourse would be had to any agreement between the employer and the employee to see the applicable remedies under the agreement, where no such provision exists, recourse would be had to the statutory provisions and judicial authorities. The remedies could include:

1. General damages – in Western Development Corporation v. Jimoh Abimbola (1972) ANLR, pt. 2433 it was held that the measure of damages for wrongful dismissal is prima facie the amount the plaintiff would have earned had he continued with the employment up till the period of judgment.
2. Reinstatement: this is applicable where the employment has statutory flavour, that is, the employment is provided by an extant legislation such as public servants.
3. Payment of outstanding salaries and other allowances: upon termination of employment by an employer, the employee would be entitled to outstanding salaries, payment in lieu of notice, if applicable and, other allowances; an employer may deduct unpaid salaries or allowances to cover employee’s wrongful termination – that is where no notice or payment in-lieu of notice of termination was validly issued. Either party may be entitled to a quantum of damages that compensates actual losses or specific damages, where applicable.

Where an employee is indebted to an employer by virtue of loan facilities advanced to the employee by the employer during the course of the employment, the employer may, where outstanding allowances do not fully defray indebtedness, recover such debt by commencing an action against the employee in court. The Supreme Court in Lewis v. UBA (2016) LPELR-40661 stated that mere hardship, inconvenience or other unexpected turn of events which have created difficulties though not contemplated cannot constitute frustration to release an employee from his obligation to repay the loan advanced to him by his employer. The Court emphasized that not even the death of the employee would alter the course of events of the repayment as his estate would bear the liability.

Conclusion

The right of termination of employment as has been articulated above can be exercised by either or both parties to the contract of employment provided it is done in accordance with the terms freely agreed upon by the parties and the relevant provisions of law.

It is important for both employers and employees to have a written contract of employment not only because it is a legal requirement but it is important to have the terms and conditions of the employment clearly spelt out for both parties, and in the event of wrongful termination or any other dispute arising from the employment, it would be easier to rely upon the written contract.