The Industrial Relations Division of the High Court in Albert Mupila v. Yu-Wei delivered a landmark judgment which provides clarity on various employment law issues that employees and employers should be aware of in light of the Employment Code Act.
Firstly, the court confirmed that the statutory instruments which were made pursuant to the now repealed Minimum Wages and Conditions of Employment Act, Chapter 282 of the Laws of Zambia remain in force despite the parent Act they were made pursuant to being repealed. Therefore, the General, Shop Workers and Domestic Workers Orders which were enacted to prescribe a minimum wage and give additional protection to a specified group of vulnerable workers such as general workers, office orderlies, drivers, sales persons, receptionists, clerks, shop workers and domestic workers continue to apply despite being made pursuant to an Act that has since been repealed. Therefore, employees who employ any of these specified group of workers is obliged to pay workers the minimum wage and benefits provided for in the respective Orders.
The decision of the Industrial Relations Division confirmed that an employee can be redesignated as a protected employee covered by the statutory instruments brought into force by the Minister of Labour to provide additional protection to a group of specified, vulnerable employees. This is crucial as employees can only longer disguise the true nature of an employee’s job description to evade providing the benefits that the statutory instrument provides for the specified group of employees.
Secondly, the court was clear on the fact that the law provides for a limited set of valid grounds that an employer can invoke when the employer initiates the termination of the contract of employment. These are the conduct or capacity of the employee, the employee’s operational requirements or redundancy.
The Industrial Relations Division went further to distinguish between termination for operational requirements and termination by redundancy. The Court held that:-
The distinction between termination for operational requirements and redundancy is that termination for operational requirements is based on a bona fide commercial reason such as inability to financially sustain an employee or due to a restructuring exercise while redundancy is only triggered when one of the redundancy situation in section 55(1) of the Employment Code Act arises.
The distinction between redundancy and termination for operational requirements in Zambia is thus very important. When a redundancy takes place, the position that the employee held must be abolished or diminished in the entity or their services are no longer required or their termination is due to an adverse, unilateral alteration of the contract.
On the other hand, with termination for operational requirements, the employer has a bona fide, commercial justification. With this form of termination, the role of the employee continues to exist as it has ceased nor diminished, but the employer cannot sustain that employee in its enterprise. In such situations, the employer is justified in terminating the services of the employee based on operational requirements as required by section 52 (2) of the Employment Code Act.
This significant distinction between termination for operational requirements and redundancy gives employers another route to terminating employment in appropriate circumstances, especially where the employer is facing financial problems or wants to reorganise itself. Crucially, it is should be stated that an employer can only terminate for operational requirements if the reason is a bona fide, and has a commercial justification, which must be substantiated. Therefore, an employer will not be permitted to invoke termination for operational requirements as valid reason without providing the basis for, and substantiating the said decision.
Thirdly, the case is significant because the court confirmed that permanent employees are also entitled to severance pay in the form of gratuity. Based on section 3 and 73 of the Employment Code Act, gratuity is limited to those serving on long-term employment as per the definition of gratuity in section 3 of the Employment Code Act.
Notwithstanding the provisions restricting gratuity to those on long-term contracts, the court dissected section 54 (1) (c) of the Employment Code Act which provides that:
An employer shall pay an employee a severance pay, where the employee’s contract of employment is terminated or has expired, in the following manner:
(c) where a contract of employment of a fixed duration has been terminated, severance pay shall be a gratuity at the rate of not less than twenty-five percent of the employee’s basic pay earned during the contract period as at the effective date of termination
The definition of “fixed duration” had not been provided for in the Employment Code, and thus it was unclear if this benefit applied to permanent employees. The court in this case gave the necessary clarity by guiding that a permanent contract which has a pre-determined end date of retirement makes it a contract for a fixed duration and thus permanent employees are entitled to this benefit. However this will not apply when the employee is declared redundant, medically discharged or dies as in these situations, section 54 provides for specific benefits.
The court brilliantly qualified the benefit to severance pay by reminding us that legislation does not apply retrospectively. The Employment Code has transitional provisions which gave employers a one year window within which to comply with the provisions of the Act. As such, an employee’s entitlement to severance only begun to accrue on 9th May 2020, which is one year from the date that the Employment Code was signed into force.
It should be noted that if an employer has a private pension scheme, if an employee’s contract of employment is terminated for any reason other than redundancy, medical discharge or death, an employee serving on a permanent contract will not be entitled to the severance pay in the form of gratuity, but the benefits from the private pension scheme
For the avoidance of any doubt, this decision has important implication for employees, and particularly employers in Zambia who should take note of the following:-
- The statutory instruments brought into force by the Minister of Labour and Security in the form of Ministerial Orders which identify specific group of workers as requiring special protection by providing a minimum wage and basic conditions of employment remain in force as they have not been expressly repealed;
- The court has the power to look at an employee’s job description and duties and re-designate them as a protected employee. In such circumstances, the court will treat them as one of the workers covered by the Ministerial Orders and order the payment of their wages and benefits in terms of the applicable Ministerial Order ;
- Section 85A of the Industrial and Labour Relations Act to grant any remedy which it considers to be just and equitable in the circumstances of the case
- The court will order underpayment of an employee’s salary and benefits where an employer has been praying the employee below what the law prescribes;
- Employers may only initiate the termination of an employee’s contract of employment based on four (4) grounds, namely the employee’s conduct or capacity, or the employer’s operational requirements or redundancy
- An employer cannot invoke the termination of the contract by giving notice without giving on of the valid reasons which must be substantiated;
- Termination for operational requirements differs to termination by redundancy – termination for operational requirements is based on a bona fide, commercial reason that doesn’t involve an employee’s position or services no longer being required whilst a redundancy is triggered by an event that results in an employee’s services no longer being required or due to an adverse, alteration of their contract of employment;
- If a contract of employment does not specify provide a pre-determined end date, it is presumed that the said contract is a permanent contract.
- Permanent employees are also entitled to severance pay in the form of gratuity at the end of the employment relationship. However this benefit only accrues from 9th May 2020 which is one year from the date the Employment Code Act came into effect.
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