Nigeria: Procedure For Terminating Contractual Employment On Grounds Of Redundancy In Nigeria

Last Updated: 16 November 2016
Article by Emmanuel Ekpenyong

In order to survive in business in the current economic downturn in Nigeria, Employers may have to terminate the employment of their redundant staff. To avoid trade union disputes, industrial actions and damages for breach of contract employment, it is important for Employers to know the proper legal procedure in terminating the employment of their Employees on grounds of redundancy.

What are the basic legislations regulating employment matters in Nigeria?

The Trade Union Act, CAP T14, Laws of the Federation, 2004 ("the Trade Union Act"), the Labor Act, CAP L1, Laws of the Federation of Nigeria, 2004 ("the Labor Act"), Trade Disputes Act, CAP T8, Laws of the Federation of Nigeria, 2004 ("the Trade Disputes Act"), National Industrial Court Act, No 38. Vol. 93, 2006, Laws of the Federation of Nigeria and the National Industrial Court Rules, 2007.

What is the status of Collective Agreement under Nigerian Law?

Nigerian courts adopt the common law principle that Collective Agreements of Trade Unions are generally unenforceable. This is because there is no privity of contract between the Trade Union who agreed to the Collective Agreement and the Employer. In essence, the Collective Agreement is not a Contract between the Employer and its Employees. This is because the Employer did not participate in the negotiation meeting which resulted in the Collective Agreement.

Nevertheless, where the Minister of Employment, Labor and Productivity promulgates an order for a Collective Agreement to be incorporated into Employees' Contract of Employment; or a Collective Agreement is incorporated by reference into the individual Contract of Employment of Employees; or the Employer makes reference to it in its relationship with the Employees; or adopts the provisions of the Collective Agreement in arguing its case, the Employee may validly claim rights under the Collective Agreement.

Moreover, Section 23 (1) and 23 (2) (d) of the Trade Union Act, provides that;

23 (1)".......nothing in this subsection shall enable any court to entertain any legal proceedings instituted for the purpose of directly enforcing any agreement mentioned in subsection (2) of this section, or of recovering damages for any breach of any agreement so mentioned"

23 (2) (d) "any agreement such that every party thereto is one or other of the following, that is to say, a trade union or the Federation of Trade Unions"

The import of the above provisions is that the Courts would not enforce the provisions of a Collective Agreement on the Employers if the parties to the Agreement are Trade Unions or Federation of Trade Unions only. The Employer would have to adopt the Agreement for it to be binding on it.

What is the status of the Employee's Union's membership of a Federation of Trade Union?

Section 3 of the Trade Union Act provides that at least 50 members of the Union shall apply to register a trade union. Some labor law scholars contend that the right to organize Union activities in Nigeria does not extend to workers of companies of less than 50 persons. 

Therefore the legality of Employees' Union activities and resolutions reached in their meetings is in serious doubt if its members are currently less than 50 members.

What is the notice period for termination of employment on grounds of redundancy?

The Employer would rely on the period of notice stated in the Contract of Employment, Collection Agreement or other rules and regulations incorporated to the Contract of Employment or the Internal Conditions of Service of the Company or pay the salary of the Employees in lieu of notice.

If none of the above documents provides for termination notice, the Employer would have to rely on the provisions of Section 11 (2) of the Labor Act which provides that the Employee will be entitled to;

  1. 1 day notice, where the contract has continued for a period of 3 months or less;
  2. 1 week notice, where the contract has continued for more than 3 months but less than 2 years;
  3. 2 weeks' notice, where the contract has continued for a period of 2 years but less than 5 years; and
  4. 1 month notice, where the contract has continued for 5 years or more.

What are the reasons for termination of the employment of the Employees to be stated on the Termination Notice?

The Nigerian labor law acknowledges that an Employer reserves the right to pay off any Employee whether on the basis of redundancy, idleness etc. or at the end of a project where the Employee is engaged.

Section 20 (1) of the Labor Act provides that the Employer shall inform the trade union or workers' representative concerned reasons for and the extent of the anticipated redundancy. Section 20 (3) of the Labor Act defines "redundancy as an involuntary and permanent loss of employment caused by an excess of manpower"

Though the definition of excess of manpower is not stated in the Labor Act, the Courts have considered the acquisition of a company, restructuring, reduction of production line, shortage of raw materials, economic and technological reasons as valid grounds for declaring redundancy. An Employee has no right not to be declared redundant in line with the terms of his employment or Collective Agreement which is applicable to him.

What are the criteria for computing the severance package upon termination of employment on grounds of redundancy?

Section 20 (1) (c) of the Labor Act provides that the Employer shall use its best endeavors to negotiate redundancy payments to workers who are not covered by the Minister's regulations on the subject matter. Since the Minister has not promulgated these regulations, the Employer would be bound to compute the benefits of the Employees based on the provisions of the individual Contract of Employment of the Employees, the rules and regulations or any Collective Agreement and the provisions of its Internal Conditions of Service ("the relevant documents").

Nevertheless, to show its good faith and best endeavor, the Company may at its sole discretion, meet with representative of the Employees to agree on other customary heads of claims and allowances not mentioned in the relevant documents. The Termination notice must clearly list the severance benefits of the individual Employee. Since each Contract of Employment constitutes a distinct course of action, the Company must give each Employee his Termination notice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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