Employer Rights: Termination Of An Employee Upon Notice And Without Providing Reasons

Whether or not an employer is required to provide reasons before terminating an employee's contract of employment upon notice has been ambiguous for some time. Courts have had different approaches to this issue, compounding the confusion, to the detriment of employers and employment law practitioners. We have addressed this confusion on a previous occasion, read more here.

The question has finally been settled by the Court of Appeal in Stanbic Bank v Nassanga Saphinah Kasule ("Nassanga"), reaffirming an earlier position of the Supreme Court in Hilda Musinguzi v Stanbic Bank and the Court of Appeal's own decision in Bank of Uganda v Joseph Kibuuka, clarifying that notice is sufficient to end a contract of employment.

The case

In the case of Stanbic Bank v Nassanga Saphinah Kasule, a former employee sued Stanbic Bank challenging the termination of her employment upon notice as being unlawful. Clause 18 of the employment contract provided that either party could terminate the contract upon issuance of notice or payment in lieu of notice.

The Bank paid her three months' salary in lieu of notice and terminated the employment contract. The former employee contended that she was not afforded a fair hearing and that no reason was given before the termination.

The Industrial Court ruled in her favour. On appeal, the Court of Appeal held that an employer can terminate an employee's contract of employment for a reason or no reason at all. It suffices that the requisite notice or payment in lieu of notice provided for under the law has been given.

The Court rejected an argument premised on Article 4 of the International Labour Organisation (ILO) Termination of Employment Convention (No. 58 of 1982) (which requires a reason before termination) holding that this article could only be relied on if the convention had been domesticated in Uganda.

Analysis

Of particular importance in this decision is the clarification provided on the terms "dismissal" and "termination." These terms are used interchangeably in the Employment Act and consequently in judgments, contributing to confusion on whether reasons are required only for the dismissal of an employee or also for termination upon notice.

Dismissal is associated with misconduct or poor performance, which necessitates a formal hearing, implying that there is always a reason to trigger the process. Termination, on the other hand, is where the employment relationship is ended without fault on the part of the employee.

The differences in burden and procedural intricacies between dismissal and termination are quite apparent. While the dismissal process demands extensive steps including investigations (usually preceded by a suspension), a notice of invitation to a disciplinary hearing, giving the employee time to prepare a defence, disciplinary hearing and eventually issuance of a dismissal letter, termination is notably simpler. A mere issuance of the requisite notice or payment in lieu suffices. Dismissals are also prone to contest in court as the employer bears the burden to substantiate the reasons for dismissal and demonstrate adherence to due process.

Given the above considerations, there is a possibility that the existing legal position could be abused as many employers may opt for the considerably simpler termination process, even in cases warranting dismissal. There could be an inclination towards termination, due to its reduced risk and liability, which could disadvantage employees significantly. There is no incentive for an employer to undergo an extensive dismissal process if they can simply end the contract with notice.

While seemingly straightforward, termination on notice can pose fairness concerns for employees. It is self-evident that no employer simply terminates an employee without cause. Behind every termination, there lies an underlying reason or set of circumstances that prompt such a decision. When termination on notice is utilised without affording the employee the opportunity to know or challenge the underlying reason, it may result in unfairness and deprive the employee of the right to due process.

Moreover, there is still uncertainty created by the statutory entitlement to a certificate of service upon termination, which introduces the possibility of an employee requesting disclosure and/or clarification on the reasons for termination.

The court's refusal to apply Article 4 of the Termination of Employment Convention on the grounds of non-domestication in Uganda is regressive. This holding also appears defeatist considering that in the past, Courts have applied principles from international conventions that are not domesticated. An example is the famous case of Attorney General v Suzan Kigula where the Supreme Court relied on several international human rights instruments in determining whether the death penalty is constitutional. While Uganda ratified most of the international human rights instruments relied on in this case, these instruments have never been domesticated.

The absence of a requirement for reasons in termination is also retrogressive, especially when juxtaposed with provisions from other jurisdictions such as Kenya and Rwanda whose law expressly requires justifiable reasons before termination of an employment contract.

Being a Court of Appeal decision, the Nassanga judgment is not subject to further appeals because the Court of Appeal is the final appellate court in Labour matters. This is the precedent set by the Supreme Court in the case of DFCU Bank v Donna Kamuli. With the door to appeal firmly shut, employees can only hope for a future departure from this rigid position by the courts or the incorporation of Article 4 of the Convention into Ugandan law.

Conclusion

With the latest decision, employers in Uganda are at liberty to terminate contracts of employment provided appropriate notice is given. Although disputes arising from employee terminations are prevalent, employers now stand a better chance of defending such suits if they have adhered to the prescribed termination process.

It remains to be seen whether lawmakers will heed the court's call to incorporate Article 4 of the Convention into our laws, a move that could further bolster employee protection and promote fairness in the workplace.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Phillip Karugaba
ENS
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