Latest in Employment law: Court of appeal upholds the principle that an employer can terminate an employee’s contract for a reason or no reason at all.

STANBIC BANK (UGANDA) LIMITED VS NASSANGA SAPHINAH KASULE CIVIL APPEAL NO.182 OF 2021. Judgment delivered by Christopher Gashirabake, J.A.

Attention!

Termination of an employment contract under S. 65(1)(a) of the Employment Act 2006 does not always need reasons for termination, provided that the employer has given sufficient notice as the law prescribes.

Background to the case.

This was an appeal against part of an award by the Industrial Court. The facts are that the respondent was employed by the appellant on the l5th of February 2OOl. Clause 18 of her employment contract was to the effect that either party could terminate the Contract upon issuance of the requisite notice or payment in lieu of notice. On l3th December 2012, the Appellant terminated the respondent’s employment and paid her three month’s salary in lieu of notice and all other terminal benefits that she was entitled to. She challenged the termination before the Industrial Court, which held inter alia that the termination was unlawful because no justifiable reason was given to the employee for her termination.

The Court of Appeal on whether termination required a reason to be lawful held interalia as follows:

1. An employer can terminate an employee’s contract for a reason or no reason at all; unless the contract explicitly provides for giving of reason.
2. The requisite notice as enshrined in the law should always be given before termination or in the alternative, payment in lieu of notice.
3. In as much as Article 4 of the Termination of Employment Convention (No. 158 of 1992) is to the effect that a justifiable reason has to be given to an employee before their employment is terminated, the said Article is not incorporated in the Employment Act and is therefore not applicable.

Effect of the judgement  

The Court of Appeal has upheld the position long settled by the Supreme Court that no reason is needed before a termination can be effected.

It further reiterated the Supreme Court position in the case of Barclays Bank of Uganda V Godfrey Mubiru Supreme Court Civil Appeal No. 1 of 1998 to the effect that payment in lieu of notice can suffice for a termination. By stating this, the Court of Appeal departed from its own position in the case of Stanbic Bank(U) Limited V Okou R. Constant; Court of Appeal Civil Appeal No. 60 of 2020(Judgment delivered on 17^th March 2023) wherein it held that payment in lieu of notice is unlawful unless the employer consents to the same. The Court further stated that in the event that the employee does not consent to the payment in lieu of notice, then it ceases to be a termination but is rather a summary dismissal which requires proof of fundamental breach of contractual obligations.

Concluding Observationas

The Court of Appeal decision is a welcome win for employers who for a long time have waddled in a maze of uncertainty regarding terminations and the procedure for effecting the same; owing to the conflicting decisions on whether or not a reason is required before a termination is effected and also whether payment in lieu of notice can suffice.

The fetters of restraint and “forceful retention of employees have been broken off employers who now clearly can terminate an employee with or without reason; as long as the requisite notice or payment in lieu of notice is given. The long awaited dawn is here.

Disclaimer: No information contained in this alert should be construed as legal advice from Namara Musinguzi & Co. Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter

Prepared By:

Ann Namara Musinguzi (Managing Partner)

ann@namaramusinguziadvocates.com

Nambi Dinah Ann ( Legal Associate)