INTRODUCTION
Termination of employment contract refers to an act that brings the relationship of employer and employee to an end. Either of the parties to the contract of employment may terminate such a contract without condemnation thereafter provided that she/he observes the requirements of the law on termination. If the party terminating the contract is the employer, must show that he/she has reasons that justify the termination and that the prescribed procedures were complied with. Termination is regarded as fair when is done as per the law or unfair when is done without following what the law calls for.
This document serves as a guideline to employers while handling contracts of their employees to avoid common mistakes relating to termination The laws governing termination of the employment contract are the Employment and Labour Relations Act No. 6 of 2004 as amended from time to time and Employment and Labour Relations (Code of Good Practice) Rules, 2007 (GN No. 42, 2007). Section 37(1), Employment and Labour Relations Act, 2004 describes the grounds (reasons) of termination and procedures to be followed for each ground. The reason(s)/ground(s) of termination by the Employer, dictates the procedures that must be followed.
GROUNDS/REASONS THAT JUST TERMINATION
There are several reasons by which a contract of employment may be terminated. The reasons which may justify termination by the employer are misconduct, incapacity, incompatibility and operational requirement. These are as per Rule 9(4) of the Employment and Labour Relations (Code of Good Practice) Rules, 2007 (GN No. 42, 2007)
MISCONDUCT
Misconduct is doing something which is against the law or which is contrary to the Employer’s policy and codes of conduct. Examples of misconduct include stealing, violence at the workplace, absence from work without permission, negligence, insubordination etc. (Ref. Rule 11(1)&12(3) Employment and Labour Relations (Code of Good Practice) Rules, 2007.
Once an employee commits one of these acts or any other act falling in the purview of the term “misconduct”, the employer has no legal right of outright dismissal. First, the employer must ensure that he has evidence to justify the alleged misconduct and must make sure that the required disciplinary procedures are followed step by step to the conclusion that termination is warranted.
The procedures required to be taken are as follows:
- The Employer must conduct an investigation for the reason of establishing whether a disciplinary hearing is to be conducted or not.
- Once the Employer finds out that a disciplinary hearing is to be conducted, must draw a charge of the offence and submit it to the Employee;
- The employee must be given time eg. 7 days to respond in writing about the charges;
- A hearing date must be ascertained and an employee should be informed to attend by himself together with his co-employee or representative of the Union or his advocate.
- During the hearing, the Employee will be allowed to bring witnesses and also to cross-examine witnesses of the Employer.
- After the hearing, the Hearing (Disciplinary Committee) shall prepare a report and submit it to the employer for decision.
- Where the committee finds the employee guilty of the offence charged, the Employer will write to the Employee informing him/her about the outcome of the hearing and a decision thereof. The employer must also inform the employee about the available remedies such as the right to appeal and the time within which the appeal must be filed.
It is important to note that the hearing committee must be chaired by a person who is neutral/impartial. He might also be someone from outside the office.
POOR WORK PERFORMANCE (Regulation 17 and 18 GN. No.42 of 2007)
According to Regulation 17(1), an employer, arbitrator or judge who determines whether a termination for poor work performance is fair shall consider-
- whether or not the employee failed to meet a performance standard;
- whether the employee was aware, or could reasonably be expected to have been aware, of the required performance standard;
- the reasons why the employee failed to meet the standard; and
- whether the employee was afforded a fair opportunity to meet the performance
Although the employer has the managerial prerogative to set performance standards, the standards should not be unreasonable. Poor performance is a question of fact to be determined on the balance of probabilities against the set standards. If the standards are found to be unreasonable, the employer will miss justification of termination. Once the Employer is found not to have justification, the termination will be unlawful.
However, even if the reasons for termination are valid (justifiable), there are procedures that must be complied with by the Employer before terminating a non-performing employee. These procedures are as follows:
- The employer must investigate the reasons of unsatisfactory performance. This shall reveal the extent of non-performance and the reasons thereof.
- The employer must give appropriate guidance, instruction or training if necessary, to the employee before terminating the employee for poor work performance;
- The employee must be given reasonable time to improve. The reasonable time depends on the nature of the job, the extent of poor performance, the status of the employee, the length of service and the employee’s past performance record.
- When the employee continues to perform unsatisfactorily, the employer must issue a warning to the employee that employment may be terminated if there is no improvement.
- Before the employer makes a final decision to terminate a non-performing employee, must call a meeting with the employee who must be allowed to attend with his fellow employee or trade union representative;
- At that meeting, the employer must outline the reasons for action to be taken and allow the employee and/or the representative to make representation before finalizing a decision.
- The employer must consider any representation made and if does not accept them must explain why;
- The outcome of the meeting must be communicated to the employee in writing with brief reasons.
All these procedures need evidence of record that what is required to be done by the employer was actually done. Records such as job descriptions, performance standards/targets, key performance indicators, performance appraisals, warning letters and records of minutes for various meetings must be available for verification to support the action of the Employer.
INCAPACITY (Regulation. 15, 16, 19)
The employer may also terminate the employee on grounds of incapacity due to ill health, injury or poor work performance.
Incapacity may be defined as a situation where the employee becomes unfit or unable to perform his duties as ordinarily required or expected or be unable to produce expected services and results in the due course of the employment.
The employer who is considering terminating an employee on grounds of incapacity must take into account the following factors to justify the fairness of the reasons:-
- The cause of the incapacity;
- The degree of incapacity;
- The temporally or permanent nature of incapacity;
- The ability to accommodate the incapacity;
- The existence of any compensation or pension
Where the employee is injured at a workplace or is incapacitated by a work-related illness, the employer is required to do all that is possible to accommodate the employee. In so doing, the employer is required to be guided by the opinion of the Registered Medical Practitioner in determining the degree and extent of incapacity.
Where the employee is just temporarily unable to work and is likely to be absent for a time that is unreasonably long in the circumstances, the employer is required to investigate possible ways to accommodate the employee or consider all possible alternatives short of termination. The possible short-term alternatives include:
- Temporally replacement;
- Alternative work;
- Early retirement; or
- Any other acceptable alternative.
Where an employee is permanently incapacitated, the employer is advised to secure alternative employment for the employee or adapting the duties or work circumstances of the employee to accommodate the employee’s disability. Where the causes of incapacity is due to alcoholism or drug abuse, counselling and rehabilitation may be appropriate steps for an employer to consider.
Where it is established that the employee’s disability cannot be accommodated, the employer is required to consider the availability of alternative work.
In all these processes, Rule 21(1) requires the employer to consult the employee. The employee is at liberty to suggest alternatives to the employer. If the employer does not accept the employee’s alternatives, he must give reasons. The employee has a right to be represented by his fellow employee or trade union representative. The outcome of the meeting must be communicated to the employee in writing.
INCOMPATIBILITY (Rule 22 GN No.47 of 2007)
This also constitutes a fair reason for termination. Incompatibility means the unsuitability of the employee to his work due to his character or disposition. Further, it includes incompatibility of the employee in his work environment in that he relates badly with fellow employees, clients, or other persons who are important to the business.
Incompatibility is treated in a similar way to incapacity for poor work performance. The steps required set in Rule 18 of GN No.47 of 2007, are applicable. In particular, the employer is required to do the following:
- Record the incidents of incompatibility that gave rise to concrete problems or disruption;
- Warn and counsel the employee before termination. This should include advising the employee of unacceptable conduct and what remedial action is proposed.
- Before terminating employment on this ground, the employer is required to give the employee a fair opportunity to:
- Consider and reply to the allegation of incompatibility;
- Remove the cause for disharmony; or
- Propose an alternative to termination.
OPERATIONAL REQUIREMENTS (Retrenchment) (Rule 23 GN No. 47 of 2007)
This is a ground for termination arising from the operational requirement of the business. It is commonly based on the economic, technological, structural or similar needs of the employer.
As a general rule, the circumstances that might legitimately form the basis of termination of an employee based on operational requirements are:
- Economic needs that relate to the financial management of the enterprises;
- Technological needs refer to the introduction of new technology which affects work relationships either by making existing jobs redundant or by requiring employees to adapt to the new technology or a consequential restructuring of the workplace
- Structural needs that arise from the restructuring of the business as a result of a number of business-related causes such as the merger of businesses, a change in the nature of the business, more effective ways of working, a transfer of the business or part of the business.
Procedures for Termination based on Operational Requirement
The obligations placed on an employer are both procedural and substantive. The requirement of Section 38(1) of the employment and Labour Relations Act No.6 of 2004, provides that in any termination for operational requirements, the employer must comply with the following principles:
- Give notice of intention to retrench as soon as it is contemplated;
- Disclose all relevant information on the intended retrenchment for purpose of proper consultation;
- Consult prior to retrenchment or redundancy on:-
- The reasons for intended retrenchment;
- Any measures to avoid or minimize the intended retrenchment;
- The method of selection of employees to be retrenched;
- The timing of retrenchment; and severance pay in respect of retrenchment.
The purpose of the consultation is to permit the parties, in the form of a joint problem-solving exercise to reach an agreement on:-
- The reasons for intended retrenchment;
- Any measures to avoid or minimize the intended retrenchment;
- Criteria for selecting employees for termination;
- The time for retrenchment;
- Severance pay and other conditions on which termination takes place; and
- Steps to avoid the adverse effects of the terminations such as time off to seek work.
Where there is not agreement reached between the employer and employees must be referred the matter CMA for mediation
PROVISIONS OF THE CONTRACT OF EMPLOYMENT RELATING TO TERMINATION
Where a written agreement stipulates the procedure of its termination, the employer and the employee must comply with those provisions. Any termination which contravenes the provisions of the contract of employment on termination is rendered unfair and hence illegal.
But if the contract of employment contains no provisions relating to termination of employment, the employer has to read and act according to legal provisions on termination provided under section 41 of the Employment and Labour Relations Act.
Notice of Termination
The employment may be terminated on notice, but the period of notice should not be less than seven days if notice is given in the first month of employment. If the notice is given after the first month of employment then the notice should not be less than four days if the employee is employed on a daily weekly basis; or 28 days if the employee is employed on a monthly basis. The employer and the employee may agree for a notice period provided the agreed period is of equal duration for both the employer and the employee.
Further, the notice must be in writing stating the reasons for termination and the date on which the notice is given. But such notice should not be given during any period of leave or to run concurrently with any such period of leave.
The law allows the employer to pay the employee the remuneration that the employee would have received if the employee had worked during the notice period instead of giving an employee notice of termination.
However, if the employee refuses to work during the notice period, then the employer may deduct, from any money due to that employee on termination.
OTHER FORMS OF TERMINATION
Section 36 of the Employment and Labour Relations Act, provides other forms of termination. These include:
- Termination under common law;
- Constructive termination. This is termination by employee because the employer made continued employment intolerable for the employee;
- Failure to renew a fixed term contract on the same or similar terms if there was a reasonable expectation of renewal;
- Failure to allow an employee to resume work after taking maternity leave;
- Failure to reemploy employee if the employer has terminated the employment of a number of employees for the same or similar reasons and has offered to re-employ one or more of them.
PAYMENT ON TERMINATION AND CERTIFICATE OF EMPLOYMENT (S.44)
On termination of employment for whichever reason, the employer is required to pay an employee the following:
- Any remuneration for work done before termination;
- Any annual leave pay due to an employee for that leave the employee has not taken;
- Any notice due if termination is by notice;
- Any severance is due. Severance pay means an amount at least equal to 7 days’ basic wage for each year of continuous service up to a maximum of 10 years. However, severance pay does not apply if termination is due to the misconduct of an employee.
- Transport allowance to the place of recruitment.
On top of payment, the employer is required to issue an employee with a prescribed Certificate of Service.
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