INDUSTRIAL COURT SETS CLEAR RULES FOR EMPLOYMENT REDUNDANCY TERMINATIONS: WHAT THIS MEANS FOR EMPLOYERS AND EMPLOYEES

Imagine you’re called into a virtual “town hall” meeting. Management discusses a restructuring process, but you walk away unsure of its implications. Months later, you receive a letter—notifying you that your job no longer exists. Is this redundancy, or is it something else entirely?

This was the crux of a recent case involving two former employees of Post Bank (U) Ltd.

The claimants challenged their termination on grounds of redundancy, alleging procedural and substantive unfairness. They sought remedies, including severance pay, unpaid bonuses, damages for breach of contract, and costs.

The Industrial Court’s decision provides a valuable lesson on the legal threshold for redundancy terminations.

What were their claims? First Claimant

Employed as a Risk Analyst in 2017 and confirmed in 2018.
Performed roles such as preparing reports and conducting training.
Declared redundant in August 2021 after failing to secure a new position during restructuring.
Alleged improper severance calculation, unauthorized deductions, and unfair termination.

Second Claimant

Employed in 2016, promoted several times, and served in acting capacities.
Declared redundant in May 2021 after failing to secure a permanent position during restructuring.
Alleged unfair dismissal, loss of acting allowances, and insufficient severance.

Respondent’s Position

Claimed the redundancy was due to an institutional review in 2020 involving role realignment and job grading.
Asserted proper communication of restructuring, lawful redundancy, and payment of terminal benefits.

Denied claims of unfairness and breach of rights. Arguments of the Claimants

The claimants argued they were inadequately notified of redundancy and unfairly treated during restructuring. They also cited financial and emotional harm.

Arguments of the Respondent

The respondent’s witnesses claimed restructuring was communicated and redundancies were lawful. However, they admitted to lacking critical evidence such as approval minutes, redundancy notices to the Labour Commissioner, and evaluation records.

Holding

What Is Redundancy?

The Court has reaffirmed that redundancy, as defined in Aporo v Mercy Corps Uganda [2020] UGIC 1, occurs when an employer no longer needs an employee’s services due to economic, technological, or structural changes. While employers have the autonomy to restructure for business efficiency, the Court’s role is to ensure that redundancy processes comply with procedural and substantive fairness under Section 80 of the Employment Act (EA).

Referencing the precedent of Okumu & Others v Shreeji Stationers 2009 Ltd [2024] UGIC 23, the Court emphasized that redundancy is not about fault but about business needs. However, fairness demands transparency, consultation, and adherence to procedural requirements.

The crux of the claimants’ case lay in procedural defects. Section 80(1) EA mandates employers to:

Notify the labor union or Commissioner for Labour at least four weeks before terminations.
Provide written reasons for termination, the number of affected workers, and the timeline.

Post Bank’s reliance on a notification letter dated October 2020 was rejected. The Court found that:

The letter was presented improperly during submissions, violating fair trial principles.
Even if considered, it failed to meet the statutory three-month notification timeline, rendering it procedurally non-compliant.

Additionally, the employer’s use of a “town hall” meeting as a notification method fell short. While Black’s Law Dictionary recognizes “town halls” as public discussion forums, the Court ruled they lack the formal requirements of written redundancy notices as per Section 80(1) EA.

Substantive Fairness Goes Beyond Procedure The Court observed that substantive fairness goes beyond ticking procedural boxes—it addresses the transparency and fairness of the redundancy decision itself. The Court observed:

The claimants were not informed that unsuccessful applications for new roles could lead to redundancy.
The process lacked objective and transparent communication, as required under Williams v Compare Maxam Ltd [1982] IRLR 83.

The Court emphasized that redundancy consultations should be participatory and clear, in line with international standards like Article 13 of the ILO Termination of Employment Convention No. 158.

Issue II Bonus Pay

Claimants' Argument

The 1st Claimant argued entitlement to a UGX 950,000/= bonus for 2020 under Section 90EA (now Section 89EA) and the employer’s HRM policies.

The court ruled that bonus pay is discretionary and not a legal entitlement.

The claim for bonus pay was dismissed.

Issue III Remedies Available to the Parties

Severance Pay
The court clarified that severance pay under Section 86EA is not applicable in cases of unfair or unlawful termination unless expressly agreed upon. No additional severance pay was awarded.
Unlawful Deductions
The 1st Claimant argued UGX 1,641,983/= was unlawfully deducted from the 1st Claimant’s account.
The court found that the deduction was consistent with loan repayments and not proven to be unauthorized.
Acting Allowances
The 2nd Claimant sought UGX 23,400,000/= for acting in a higher position.
The court found that acting allowances were not justified as the appointment was classified as a horizontal movement without additional benefits, as stated in the employer’s HRM.
General Damages
The court considered the claimants’ unfair termination and awarded:
- 1st Claimant: UGX 11,400,000/=
- 2nd Claimant: UGX 32,800,596/=
  Interest at 14% per annum from the date of the judgment until payment in full.
Aggravated Damages
The court declined to award aggravated damages, citing no evidence of callousness or indifference by the employer.
Costs
No costs were awarded due to the employer’s efforts to mitigate the effects of the termination, including payment of severance and terminal benefits.

Key Takeaways

Procedural Requirements Under Section 80 Employment Act
Employers must notify:
- The labor union (if the employees are unionized) or
- The Commissioner for Labour at least four weeks before the termination begins.
- Notifications must include reasons for the redundancy, the number and categories of affected employees, and the period of termination.
Non-Compliance with Procedural Standards
The Court struck out a redundancy notification letter presented during submissions, ruling that it violated procedural rules. Evidence must be presented during trial and tested through cross-examination.
The Court also invalidated redundancy actions exceeding the three-month timeline stipulated under Section 80 Employment Act
Town Hall Meetings Do Not Constitute Proper Notification
The Court observed that while “town halls” may facilitate consultations, they fail to meet the statutory requirement for written notice to employees or unions. The Court observed that proper written records ensure transparency and accountability in redundancy decisions.
Substantive Fairness and Transparency
The Court emphasized the importance of fair and transparent redundancy processes, including:
- Providing employees with prior notice of potential job loss.
- Conducting genuine consultations about restructuring outcomes.
The absence of clear communication about redundancy implications undermines the fairness of termination decisions, as seen in the current case.

Conclusion

The Court found that the Respondent failed to meet procedural and substantive fairness standards, rendering the terminations unlawful.

The Industrial Court’s decision highlights that redundancy is more than a business decision—it’s a legal process requiring scrupulous fairness. Employers, take note: failing to comply with procedural and substantive requirements can turn a lawful restructuring into an expensive litigation battle.

Implications for Employers

Strict Compliance Required
Employers must ensure procedural and substantive fairness during terminations. While discretionary benefits like bonuses and acting allowances may not be legally mandated, compliance with statutory obligations and fair labor practices is essential to mitigate liability.
Transparent Consultation
Engage employees or their representatives in meaningful consultations and document all communications. Read the full case below