Recent trends in employment Law and the privatized Nigerian electric power sector

It is the month of May and labour and employment matters come to the fore globally. In Nigeria, the case is the same. Looking back at how the power sector has evolved over the last few years, it is clear that labour and employment related issues were critical during the reforms (and privatization) in the electric power sector. This was so for reasons including the fact that the electricity unions were potentially big risks to the privatization if not catered to. Hence, a substantial part of the funds received from the privatization was purportedly used to attend to matters relating to labour. As things stand in the sector, labour and employment matters have remained germane to the electric power sector as, without expertise and the right people, the sector will not work in spite of best efforts.

Further, during the privatization, there was a transition period of approximately six (6) months during which decisions were made on staff whose contracts of employment were terminated. Until this moment, there are still labour and employment related issues as some of the employees of the previously government owned power utilities are considered corrupt and or grossly indiscipline as many of them are suspected of complicity in electricity theft and there is the chance that with the whistleblowing policy being touted by some of the electricity distribution companies, labour and employment matters could take the front-burner again.

Specifically, the new owners of the electricity generation and distribution companies are likely to terminate the employment of some staff, who may be corrupt or otherwise unable to properly perform their roles. Since the guaranteed period of employment of electricity has come to an end, many successor companies will come to realise that labour issues will increasingly be crucial and unless they understand the current trends in labour and employment law, practice and jurisprudence may face serious difficulty, costs and reversal of some decisions as principles such as ‘terminating employment for any or no reason’ are now frowned by the National Industrial Court (“NIC”) which generally now stands as final arbiter.

The role of the NIC in applying international standards

Under its enabling law, the National Industrial Court Act of 2004, as well as under the Nigerian Constitution (as amended), the NIC is mandated to apply international best practices in labour, and conventions, treaties, recommendations and protocols ratified by Nigeria. Thus, in coming to its decisions, the NIC has increasingly relied on treaties and other instruments emanating from the International Labour Organisation (“ILO”). Thus, in taking employment and labour related decisions in the power sector, it is pertinent that employers comply with the best international standards when dealing with employee issues.

As such, employers must constantly take cognisance of changes that are occurring globally, as international best practices in labour or industrial relations are almost always mirrored in the light of the conduct of the employer. This requirement is complicated as it means that an employer may be held to have acted wrongly once the existence of such practices are pleaded, even though such requirements may not be codified or enacted!

The NIC has used this power to strike down a number of common, but arguably, unfair labour practices, including an employer compelling an employee to bank with a specific bank, an employer dictating to an employee where to invest his/her gratuity benefit, an employer holding the certificates of an employee as security for the employment of the employee, and even a vindictive suspension and/or denial of promotion.

Further, the NIC has held that it is wrong to terminate an employment relationship without adducing any valid reason for such a termination, a departure from the previously understood principle of labour law that an employer may terminate an employee’s employer for any or no reason. The court has also held that there is absolute power to resign and no discretion to refuse to accept; and it is not necessary for the person to whom the notice of resignation is addressed to reply that the resignation is accepted.

These rulings point at the increasing visibility of the NIC in the development of labour law jurisprudence. However, there is a jurisprudential issue, as the NIC is a court, and under the common law there is a maxim against legislative acts being performed by a court.

The right to terminate

Considering that the many successor companies may be considering replacing personnel, it is important we consider current restrictions. Under the common law, an employer had an absolute right to terminate an employee’s contract with or without a reason, but when a reason was provided the employer must defend it if the termination is challenged. These principles form the basis of the decisions of appeal courts in Nigeria prior to the amendment of the Constitution to allow for the NIC to take cognisance of international standards, although the NIC itself was already recognised a restricted right of the employer to terminate the employment of an employer.

As mentioned earlier, a reason must now be given for terminating the employment. Furthermore, although decided specifically within the banking sector, an employer who immediately terminates employment must justify why it does not have to pay more than one month’s pay in lieu of notice. Furthermore, these decisions have led to a more direct ruling which holds that the reason given must be a valid reason, without which the termination could be held to be wrongful.

The NIC has also now acknowledged and applied the concept of constructive dismissal in Nigeria. It has been held that to make an employee resign, rather than terminating the contract of the employee means that the employer is trying to create a constructive discharge. Furthermore, whether termination or dismissal is wrong or not, all earnings of an employee prior to the dismissal must be paid by the employer to such an employee.

An employer who dismisses his employee under the provisions of a collective agreement cannot thereafter claim that the agreement does not contain the terms and conditions of the employee’s service. The NIC also frowns at prolonged suspensions and has ruled against them such that where there are allegations made against an employee of a power company for example and distribution companies in particular, any panel set up to determine the culpability or otherwise of the employee (especially where same is suspended) must act with dispatch. Additionally, whistleblowing is unacceptable as a ground for taking disciplinary action against an employee.

Unions

Considering the size of the work force in the most successor companies, unionisation is an almost inescapable challenge. The National Union of Electricity Employees (NUEE), Senior Staff Association of Electricity and Allied Companies (SSAEAC), and Nigeria Union of Pensioners (NUP), Electricity Sector always seemed opposed to the privatisation process and have in no distant past, issued a petition to the President highlighting alleged anomalies in the privatisation process.

The unions listed some of the outstanding liabilities to include pensioners unsettled liabilities, agreements signed by government/unions, established arrears totalling about N34 billion, and arrears of 33% pension increase for PHCN pensioners since July 2014. The unions have also petitioned the Bureau for Public Enterprises (BPE), demanding 10 per cent of government’s remaining 40 per cent share in the DISCOs, as part of an agreement reached during privatisation.

Employers have no legal right to prohibit their employees from unionization, and no employment contract can prevent workers from joining trade unions. Any contract which makes it a condition of employment that the worker should relinquish membership or prejudices membership is illegal. The NIC has also held that no employer is permitted to meddle in the internal management of a trade union.

Outsourcing

In the place of a proper outsourcing law, the NIC has been called upon to rule on the rights and privileges of outsourced worker. This is an interesting development when one considers that such means of employment challenge many of the basic assumptions of employer/employee relationships.

Several attempts have been made by organised labour to declare outsourcing illegal, with little to no effect. The NIC has acknowledged that the ILO does not view the practice as invalid or unlawful or even an unfair labour practice. The NIC has also stressed that in determining the existence of an employer/employee it would be guided by the facts of what was actually agreed and performed by the parties.

Training Bonds

The electric power sector is one, whereby employers need to provide training and re-training to their employees as the requisite manpower is rare. In such situations it is not uncommon that such employees enter into a training bond. However, disputes may sometimes arise where an employee decides to take up another employment whilst still within the term of the training bond.

The NIC has found that training bonds may be differentiated from contracts in restraint of trade, which are voidable. It has been held that such training bonds are generally enforceable, but become unenforceable when such bonds are proved to be penal in nature.

The current position appears to be that training bonds are prima facie unenforceable, but that should their provisions be reasonable they can be enforced. However, the exact technical position taken in different NIC cases for now appears to be unclear and contradictory.

 

Conclusion

It is clear that in light of recent decisions by the NIC, the landscape of labour and employment jurisprudence and the accompanying law and practice have changed drastically. Hence, it is incumbent on companies particularly those who require technical labour like those in the electric power sector to update the labour and employment practice manual and utilize the services of experienced and knowledgeable consultants (including lawyers) in matters relating to employment and labour.

It is also germane that as new polices such as whistleblowing and such other related matters are promoted, the labour and employment related law and practice are given due consideration and necessary amendments or adjustments are made to same in order to foster a seamless relationship.

 

Ayodele Oni

 

Ayodele Oni (ayodele.oni@bloomfield-law.com), a solicitor and partner in the energy practice group of Bloomfield Law Practice, specializes in international energy (oil, gas, power and renewables) investment law.