TERMINATION OF EMPLOYMENT: THE NEED FOR REASON AND HEARING UNDER UGANDAN EMPLOYMENT LAW.

Insights from the Landmark Ruling: Stanbic Bank (Uganda) Limited v. Nassanga Saphina Kasule - Civil Appeal No. 182 of 2021

Abstract This article examines the legal requirements for termination of employment under Ugandan law, based on the recent landmark case of Stanbic Bank (Uganda) Limited v. Nassanga Saphina Kasule CIVIL APPEAL NO. I82 OF 2O21, The case involved a dispute between an employer and an employee over the validity of a termination clause that allowed either party to terminate the contract without giving any reason or hearing. The Court of Appeal ruled that such a clause was unlawful and that termination, as defined by the Employment Act, 2006, required justifiable reasons, other than misconduct, and a fair hearing. The article analyzes the reasoning and implications of the court’s decision, The article argues that the court’s decision was consistent with the protection of employees’ rights and interests, and that it contributed to the development and harmonization of employment law in Uganda.

Introduction.

Termination of employment is one of the most contentious and complex issues in employment law, as it involves the balance between the rights and interests of employers and employees, and the regulation and protection of labor relations.

In Uganda, the legal framework for termination of employment is governed under section 65 of the Employment Act, 2006, which is the provision that defines what constitutes termination of employment in Uganda. According to this section, termination of employment means the discharge of an employee for justifiable reasons, other than misconduct, by the employer with or without notice, or by the employee with or without notice as a consequence of unreasonable conduct on the part of the employer towards the employee. This section also specifies the notification and hearing requirements before termination, and the remedies available for unlawful termination

However, the interpretation and application of the Act has been subject to various challenges and controversies, especially in cases where the employer and the employee have agreed on a termination clause that allows either party to terminate the contract without giving any reason or hearing. Such a clause, which is commonly found in fixed-term contracts, raises the question of whether it is valid and enforceable under Ugandan law, and whether it complies with the principles and standards of fair labor practices.

This article addresses this question by analyzing the recent landmark case of Stanbic Bank (Uganda) Limited v. Nassanga Saphina Kasule Civil Appeal No. 182 of 2021, which was decided by the Court of Appeal on 15th  November 2023. The Coram of Justices R. Buteera, DCJ, C. Bamugemereire, & C. Gashirabake, JJA, reaffirmed the principle that an employer is not obligated to provide reasons for the termination of an employment contract under section 65(1)(a) of the Employment Act 2006.

Facts at a glance.

The case involved a dispute between an employer, Stanbic Bank, and an employee, Nassanga Kasule, over the validity of a termination clause in their contract that allowed either party to terminate the contract by giving one month’s notice or payment in lieu of notice, without giving any reason or hearing.. The employee challenged the termination of her contract by the employer on the basis of this clause, and claimed that it was unlawful and unfair.

The Court of Appeal upheld the employee’s claim, and held that the termination clause was contrary to the Employment Act, 2006, and that termination of employment required justifiable reasons, other than misconduct, and a fair hearing. The court also considered the relevant provisions and principles of international labor standards and comparative jurisprudence, and found that they supported the employee’s rights and interests.

Key Points from the Judgment.

1. No Requirement for Reasons.

The court has emphatically stated that, unless otherwise specified in the employment contract, an employer is not obliged to furnish a good or any reason for terminating an employment contract under section 65(1)(a) of the Employment Act 2006.

2. Notice as a Sufficient Ground.

Justice Christopher Gashirabake, JJA, highlighted that the employer's compliance with the notice period, as outlined in section 58 of the Employment Act 2006 or the employment contract, is sufficient grounds for termination. The court emphasized that the famous Article 4 of the Termination of Employment Convention No.158 of 1982 which provides for valid reason for termination employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking establishment or service is not applicable unless incorporated into the Employment Act.

3. Payment in Lieu of Notice.

The court clarified that, in cases where notice is not provided, the payment in lieu of notice is required, as established by law and the terms of the contract. The judgment referenced the concept that payment in lieu of notice can be viewed as the ordinary giving of notice accompanied by a waiver of service by the employer.

4. Precedent on Notice Requirements.

The judgment referred to the precedent set by the Supreme Court in the case of Barclays Bank of Uganda vs. Godfrey Mubiru S.C.C.A No. 1 of 1998. It was emphasized that compensation in lieu of notice suffices as notice, and the right of the employer to terminate the contract is not fettered by the courts unless the period of service is fixed without provision for giving notice.

5. Termination without Reasons.

The court highlighted previous decisions, including Stanbic Bank Uganda Limited vs. Deogratius Asiimwe Civil Appeal No. 18 of 2018, reiterating the position decided by Tuhaise JSC that an employer can terminate an employment contract for a reason or no reason at all. The employer's right to terminate without providing reasons was underscored.

Does termination of an employee require a reason to be lawful?

As earlier stated, Section 2 of the Employment Act, 2006 defines Termination of employment as provided for under Section 58 of the Act. Section 58 provides that termination shall be deemed to take place in the following instances—

(a)where the contract of service is ended by the employer  with notice;

(b)where the contract of service, being a contract for a fixed term or task, ends with the expiry of the specified term or the completion of the specified task and is not renewed within a period of one week from the date of expiry on the same terms or terms not less favorable to the employee;

(c)where the contract of service is ended by the employee with or without notice, as a consequence of unreasonable conduct on the part of the employer towards the employee; and

(d)where the contract of service is ended by the employee, in circumstances where the employee has received notice of termination of the contract of service from the employer, but before the expiry of the notice.

The Lawfulness of Termination without Hearing under Section 65(1)(a) of the Employment Act, 2006.

One of the issues that arises in employment law is whether an employer is required to accord a hearing to an employee before terminating their contract under section 65(1)(a) of the Employment Act, 2006. This section provides that termination of employment means the discharge of an employee for justifiable reasons, other than misconduct, by the employer with or without notice, or by the employee with or without notice as a consequence of unreasonable conduct on the part of the employer towards the employee, in the Stanbic Bank (Uganda) Limited v. Nassanga Saphina Kasule, Civil Appeal No. 182 of 2021, held that termination under this section does not require a hearing, unless the contract expressly provides otherwise .

The court distinguished section 65(1)(a) from section 66 of the Employment Act, 2006, which provides that an employee is entitled to a hearing before he or she is dismissed on grounds of misconduct or poor performance.

The court reasoned that section 66 applies only when the dismissal is based on allegations of misconduct or poor performance, which need to be verified and substantiated by the employer. However, if the termination is not based on any of these grounds, there is no need for a hearing, as the employer can exercise their contractual right to terminate the contract by giving notice or payment in lieu of notice, without giving any reason.

Legal Implication of the Ruling.

This decision has important legal implications for all employers regarding the lawfulness of termination of employment in Uganda. It confirms that the employer has the contractual right to terminate the employee without a reason or hearing, if the termination is done with notice or payment in lieu of notice, and if the contract does not require a reason or hearing.

However, it also clarifies that the employer has the legal duty to give the employee a reason and a fair hearing, if the dismissal is done on grounds of misconduct or poor performance, and if the employee is entitled to a fair hearing under the Act. Therefore, the decision reminds the employers to respect the rights and interests of the employees, and to follow the principles and standards of fair labor practices that are also internationally recognized.

Conclusion

In summary, the recent ruling by the Court of Appeal reinforces the principle that, unless stated otherwise in the employment contract, an employer is not required to provide reasons for termination under section 65(1)(a) of the Employment Act 2006. The court emphasized the significance of compliance with notice periods and clarified the role of payment in lieu of notice. This judgment provides clarity on the termination of employment contracts in Uganda, aligning with previous legal interpretations on this matter.

By Cleopatra Abiikira (PGDLP Candidate) email: abikiiracpatra@gmail.com Find this full decision also on our telegram channel https://t.co/bcYpWuNHWy

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Disclaimer Thank you for reading this Paper. I hope you found it useful and informative. Please note that this legal paper is a summary of key points from the judgment, the opinions of the author and does not constitute legal advice. If you have any questions or comments, please feel free to contact the author.