editorial@juralmedia.net
The legal framework regulating the employer–employee relations continues to evolve with courts of law continuously advising on how various processes should be conducted. These processes are critical to human resource practitioners as they impact how employee contracts are managed to avoid termination-related costs. The Court of Appeal has in the recent past modified a procedure which has for a long time been an airdrop for many employers while terminating employee contracts.
It has been a practice that an employer can offer an employee payment in lie notice and terminate the contract without the inconvenience of keeping him or her on duty for the entire notice period. This old principle seems to have outlived its usefulness when the Court of Appeal held that termination of an employment contract without giving the mandatory notice of termination as required under sections 58 (1) & (2) of the Employment Act, renders the termination wrongful.
Their lordships Christopher Madrama, Irene Mulyagonja and Monica Mugenyi seem to have shifted the tide when they held that the practice of terminating employees through the process of payment instead of notice was an acceptable position under the repealed Employment Act. However under the current employment law, unless the employee consents to payment instead of notice, any contract clauses including provisions in the Human Resources Manual which provide for payment in lieu of notice cannot be enforced without the consent of the employee since they modify the law by doing away with the mandatory notice requirement.
In a unanimous decision delivered on 17th March 2023, the Court of Appeal emphasized that termination of an employment contract without giving the mandatory notice of termination amounts to summary termination under section 69 of the Employment Act. The Court of Appeal decision was a result of an appeal filed by Stanbic Bank (U) Limited challenging the decision of the Industrial Court in favour of its former staff 0kou R. Constant. Stanbic Bank argued that the termination of Constant’s employment was lawful since the employment contract provided for termination and three months’ notice or payment in lieu, which payment was made.
In the same judgment, the Justices of Appeal emphasized that where the terminated employee had a running loan facility secured by the salary, failure of the employee to service the loan would be a foreseeable and necessary consequence of the unlawful termination of his or her employment. The employee would therefore be entitled to relief from the loan which was the subject of repayment through the salary.
The above judgment ushers in a new era where employers will no longer exercise the discretion to pay employees to avoid keeping them on duty during the notice period. Where keeping an employee on duty is not a feasible option, the employer must seek the consent of the employer to accept the payment instead.
