Key Decision in Employment Law in Uganda
Industrial Court decries unequal bargaining in the employee-employer relationship with regards to notice and grounds for termination of employment and considers the date an employee is set to resign as the effective date of lawful termination of an employment relationship.
In order to keep you abreast with the key developments in employment law in early 2020,this alert focuses on the decision of the Industrial Court in Cairo International Bank Ltd. v Victoria Kawooya, Labour Dispute Appeal No 4/2019.
The Appellant Bank had employed the Respondent, Victoria Kawooya, for 22 years in various capacities and, as at the time of the dispute, was employed as Executive Director at the Bank. On 23/01/2018, the Respondent wrote to the chairman of the Board of Directors of the Appellant Bank informing him of her intention to retire with effect from 26/01/2018. In a letter dated 30/01/2018, the Respondent was advised by the Chairman of the Board that she was procedurally required to give the Bank three months' notice of her intention to retire to enable a smooth transition to her successor. On 30/01/2018, the Respondent wrote to the Chairman of the Board communicating her intention to retire, giving the three months' notice of her intended retirement. On 05/03/2018, the Managing Director of the Appellant Bank wrote to the Respondent requiring her to stop work immediately and hand over all bank property to the Head of Human Resources. On 15/03/2018, the Respondent wrote to the Managing Director claiming she had been terminated unfairly and that she was entitled to, among others, notice pay, gratuity and severance pay. Thereafter, the Respondent filed a complaint with the Labour Office with that list of claims and, additionally, penalty fine, compensatory sums, certificate of services and costs of the claim. The Appellant Bank paid to the Respondent a sum of UGX 134,026,599/= being her gratuity. On that basis, the Respondent dropped the claim for the gratuity and continued to pursue the rest of the claims in her complaint.
The Labour Officer awarded to the Respondent severance allowance of UGX 421,226,454/=; payment in lieu of hearing of UGX 19,146,465/=, and three months’ wages in lieu of notice of UGX 57,439,97=, and additional compensation of UGX 76,586,628/=.
The Appellant Bank appealed to the Industrial Court arguing that the Labour Officer erred in law and fact when he failed to properly evaluate the evidence on record thereby aiming at the erroneous finding that the Respondent was unlawfully dismissed from employment.
The Appellant Bank contended that the Respondent had resigned on her own accord as of the 26/01/2018 and that the extension of the notice period did not resurrect the contract. The Respondent, on the other hand, argued that the resignation was withdrawn and replaced by the three months’ notice.
In a judgement dated 13/12/2019, the Industrial Court held that:
(a) An employee remains an employee until the effective date of the resignation notice—the “termination date".
(b) The law does not require an employee to give any reason for his or her resignation from the job (unless specifically provided for in the contract of service).
(c) In the event of an employee freely resigning, the presupposition is that he or she is set to leave the job and only a mutual agreement between the employer and the employee that has the effect of withdrawing the resignation can resurrect the employment relationship.
(d) The effective date of a lawful termination of the employment relationship is the date the employee is set to resign.
(e) Once an employee, on his or her own free will, decides to resign or retire prematurely, an employer is entitled to begin the process of replacing the employee and therefore the notice period must be seen in light of affording the employer time to get a replacement.
(f) The effect of the Appellant’s letter dated 05/03/2018 was only to accept a lesser period within which to find a replacement and not to terminate the employment that had already been terminated by the Respondent.
(g) The reasons given in the letter asking the Respondent to stop working were inconsequential and therefore the Respondent is entitled to her retirement benefits.
The appeal was allowed and the award of the Labour Officer was set aside.
The implications of the decision ofthe Industrial Court can be summed as follows:
1. Where an employee hands in a notice of resignation or retirement allowing less than the statutory or contractual notice period, the effective date of termination shall be the date stipulated by the employee.
2. When an employee opts to effect his/her resignation without complying with the statutory or contractual notice period, the employer is at liberty to require such an employee to comply with the proper notice period.
3. The employer can, after requiring the employee to comply with the proper notice period, discontinue the employee’s service prior to the effluxion of that notice period, thereby accepting the effective date of resignation stipulated in the employee’s notice.
4. In such circumstances, the employee, having originally issued insufficient notice, is estopped from enforcing the notice period set by the employer.
5. The decision also waters down section 58 of the Employment Act 2006 which requires both employers and employees to comply with the stipulated notice periods. The timelines in the section were intended to be mandatory and can only be offset by way of payment in lieu of the requisite notice (section 58 (5) of the Act). In other words, the Respondent would legally have been entitled to payment in lieu of the incomplete notice period.
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