In 2021, the Court of Appeal of Uganda made a landmark decision in the above-captioned case that has begun to reshape labour relations and employment practice in Uganda.
In light of the new decision, this article is an update and follow-up on the first article I published on employment matters “Covid-19: The Dilemma of Employment of Employment in the Private Sector.”
The review will be limited to discussing the law on termination pre-2021 and the implication of the decision on termination and dismissal in Uganda’s employment law.
Minimal attention is given to the other legal principles like judicial activism, legitimate expectation, severance pay, and costs that were discussed at length by the Court.
In 2010, Bank of Uganda, the Appellant sent a memo to all staff announcing the decision of the board to restructure and to provide for among other developments, new terms of early retirement.
The Respondents were consequently sent early retirement letters, given payment in lieu of notice (3 months), and their services terminated with immediate effect.
They sued the Bank at the Industrial Court and judgment was awarded in their favour. The Industrial Court found that;
It is illegal to terminate an employee’s services whether by “notice” or with “payment in lieu of notice” without giving a justifiable reason for the termination.
The termination of the Respondents from employment was wrongful and illegal.
The Bank was dissatisfied with the decision of the Industrial Court and appealed to the Court of Appeal and several grounds were raised for determination.
Issues for determination by the Court of Appeal
- Whether the separation of the Respondents from the Appellant was early retirement or termination by notice?
- Whether the separation was lawful?
- Whether a reason was necessary before separation/ whether there was a need for a fair hearing before termination.
Judgment of the Court of Appeal
The Court found that;
The separation was a forced and involuntary early retirement. When the contents of the termination letter were examined as per the Bank’s policies, it was found that early retirement had to be initiated by the employee and not the employer. Consequently, the termination was unlawful.
As a general rule, before termination, an employee is entitled to notice or payment in lieu of notice. This rule does not apply to contracts ending as a result of retirement or summary dismissal.
S.65 (1) (a) of the Employment Act 2006 which provides for termination of employment on notice does not impose a duty on the employer to give a reason for termination. Reference was made to the Supreme Court’s decision in Hilda Musinguzi V Stanbic Bank SCCA 05/2016 where it was held that;
“The starting point is that normally, an employer cannot be forced to keep an employee against his will and S.65 (1) (a) provides that termination shall be deemed to take place where the contract of service is ended by the employer with notice.”
Where an employer makes communication to their employees which has a bearing on the terms of their employment to create legitimate expectations for the employees from the employer, the employer may be held to be contractually bound.
Difference between Termination and Dismissal
S.2 of the Employment Act defines “Dismissal from employment” as the discharge of an employee from employment at the initiative of his or her employer when the said employee has committed verifiable misconduct.
S.2 of the Employment Act defines “Termination of employment” as the discharge of an employee from an employment at the initiative of the employer for justifiable reasons other than misconduct, such as expiry of contract, attainment of retirement age, etc.
Termination, also, as per the Employment Act has the meaning given by S.65 of the Act.
Under s.65, termination includes scenarios;
- Where the contract of service is ended by the employer with notice.
- Where the contract of service expires and is not renewed.
- Where the contract of service is ended by the employee with or without notice as a result of unreasonable conduct on the part of the employer towards the employee
- Where the contract of service is ended by the employee after receiving a notice of termination from the employer.
Interpretation by the Court of Appeal
As per the decision of the Court of Appeal, it is clear that the only instances when reasons are necessary for the end of employment are in the event that;
An employee is being dismissed for misconduct be it with notice or summarily. S. 66, 68 of the Employment Act.
This is notwithstanding the fact that S.68 employs the wording “termination”.
An employee is being dismissed for poor performance. An employer is behaving unreasonably towards an employee and the employee decides to quit. S.65 (1)(c) of the Employment Act.
This one was not mentioned by the Court of Appeal but also requires reasons- S.81 of the Employement Act on collective terminations that imposes a duty on the employer to give reasons before termination.
The result of this interpretation by the Court of Appeal has led to the displacement of the application of the Industrial Court’s long held position on termination and dismissal.
Industrial Court’s long held position
For the longest time since 2012, the Industrial court has pronounced itself in employment matters using the principles mentioned below.
An employer cannot unreasonably and without justification terminate the contract of an employee just because there is a clause in the employment contract that allows for payment in lieu of notice. (Mary Pamela Sozi v PPDA C.S No. 63/2012).
In terminating the employment of an employee, there must be circumstances that are justifiable but which have no bearing on the fault or misconduct of the employee. In employing the employee, the employer had reason to so employ him/her. In the same way, in terminating the employee, there ought to be reason for the decision. (Florence Mafumba v Uganda Development Bank- Labour Claim 138/2014).
The right of an employer to terminate a contract cannot be fettered by the court so long as the procedure for termination is followed to ensure that no employee’s contract is terminated at the whims of an employer and if it were to happen, the employee would be entitled to compensation. (Hilda Musinguzi v Stanbic Bank SCCA 05/2016).
The provisions of the International Labour Organisation (I.L.O) Convention No.158- Termination of Employment Convention to which Uganda is a signatory and ratified states categorically that an employee can only be terminated with a reason connected with such employee’s conduct or capacity related to the operational requirements of his job.
It is no longer tenable that an employer will wake up one morning and pay in lieu of notice or give notice to an employee and end the employment without legal consequences even if that was in accordance with the contract of service. (Okou. R. Constanv v Stanbic Bank, LDC 171/2014).
The decision was received with mixed reactions. In my opinion, below are some of the implications of the Court of Appeal’s decision.
Erosion of Job security and bargaining power of the employee: The decision has reinforced the principle that an employer can end the service of an employee at will as long as he/she gives notice or payment in liue thereof. This leaves the employee uncertain as to their employment. In addition, it also weakens the bargaining power of the employee since for the fear of being terminated with notice, the employee might resist the “urge” to ask for better terms.
Increased number of labour claims due to the illusion of Immunity: Some employers may use this decision to hire and fire without restraint. In turn, the number of cases at the labour office will rise since, S. 71 of the Employment Act allows an employee who has been in employment for at least 13 to complain to a labour officer that he/she has been unfairly terminated.
Treading with caution: Blurred line between wrongful termination and unfair termination.
Unfair termination is not the same as Wrongful termination and so an employer still has to be cautious while applying this decision to their employees. Prior to the enactment of the Employment Act, employment matters were brought under the cause of action of “wrongful termination”. Its principles were drawn from common law and handled based on the contractual obligations of both parties.
Unfair termination on the other hand is a statutory cause of action and unlike wrongful termination, a lot of protection is given to the employee such that it is tricky for an employer to terminate the services of his/her employee just by notice and at will.
In fact, when an employer decides to terminate an employee whether with notice or without, with reason or without reason, if the employee feels that the termination was unfair, he/she has the right to complain that he/she was unfairly terminated.
When this happens, the employer is required to show that he/she was justified in terminating the employment of the said employee.
Particularly S.73 of the Employment Act gives the criteria for unfair termination and the employer, amongst other aspects is required to prove that in terminating the services of the employee, the employer acted in accordance with justice and equity. Covering up of bad decisions can be unveiled by the court under this cause of action.
In the Court of Appeal case of Uganda Development Bank v Florence Mufumba Civil Appeal 241/2015, Justice Madrama held that dressing up of facts will not be entertained. He found that the Industrial Court was right to inquire into the facts leading up to the termination and that in his opinion, the termination was clearly a dressing up of facts with the letter of termination attempting to conceal what had happened before.
Similarly, in this decision of Bank of Uganda v Joseph Kibuuka & Ors, and this may be persuasive, Justice Mulyagonja did not hesitate to examine the circumstances preceding the termination.
On page 24 of her judgment she stated,
“However, in this case, the circumstances that preceded the separation of the Respondents from the Bank and what transpired after they were separated are peculiar”.
Additionally, under the Employment (Sexual Harassment) Regulations 2012, there are express provisions against termination as a retaliatory measure against an employee who participates in a sexual harassment complaint. Again, an employer who tries to dress up facts risks being uncovered by the long arm of the law.
The decision is going to have a deep impact on the relations between employers and employees. The safest decision for an employer intending to terminate the services of an employee is to seek legal advice, as always. If the employer is unwilling to seek legal advice, to be on the safe side, he/she must give a reason for termination of employment.
* This discussion provides general information and is not intended to provide advice concerning any specific set of facts, nor is it intended to be relied on as legal advice.