Employee Layoffs Per Nigerian Labor Act1

1. Introduction: Following the COVID 19 pandemic, some employers have struggled to reposition their businesses for profitability. Nigeria is not exempt from this, and several solutions have been proposed by employers to combat these difficult situations. But it is important that whatever is done is done within the ambit of the law and one must not be clever by a half thereby circumventing applicable Labor Laws. In Nigeria, "Employee Layoffs" is an emerging trend where an employer in financial crisis does not outrightly terminate the employee's contract of employment but "lays them off" for a definite or indefinite period, the length of time for such being dependent solely on the discretion of the employer. This Article seeks to provide a glimpse of the applicable Labor Laws in Nigeria for the advisement of employers and employees.

2. Contract of Employment: A contract of Employment documents the relationship between an employee and an employer, reflecting the terms and conditions that regulates their relationship. The Nigerian Law that regulates the engagement and disengagement of Labor is the Nigerian Labor Act2. Section 7 of the Act contains extensive provisions as to what should be contained in a contract of employment in Nigeria. Per the Labor Act, a contract of employment must amongst other things, contain a clause disclosing how and when an Employee can be dismissed, or a contract of employment terminated. Unfortunately, in Nigeria most employers disregard this Law and terminate contracts of employment arbitrarily, this naturally has led to many controversies and litigation. It is important to note that the fact that a contract of employment is unwritten does not mean it is not a valid contract and Labor matters in Nigeria are usually adjudicated by the National Industrial Court of Nigeria.

3. Termination of a Contract of Employment: Section 9(7) of the Labor Act provides that a contract of employment can be terminated either by the expiry of the period for which it was made, or by the death of the worker before the expiry of that period or by notice in accordance with Section 11 of the Labor Act or in any other way in which a Contract is legally terminable or held to be terminated. This clearly shows that except a contract of employment is terminated in any of these ways in Nigeria, it is considered an illegal termination.

4. Is Employee Layoffs known to Nigerian Law: It is perhaps important to first define employee layoffs for a better understanding of the concept. The University of Washington HR defined employee layoffs as the elimination of a position, the reduction in the number of months the position works annually due to a lack of work, a lack of funds and/or because the reduction in of reorganization.3 While employee layoffs is not expressly defined in the Labor Act of Nigeria, there are salient provisions which is instructive for the advisement of both employees and employers in this regard, they are as follows:

  1. Section 7(2), Labor Act: There is a requirement for an employer to inform the employee, within 1 month, if there is a change and what the changes are in the terms of their contract of employment. Section 7(6) of the Act however in an interesting reprieve for an employer, provides that there is no need for a written notification of a change in a term of employment so long as the employee has a written contract of employment which covers the basic requirements of a contract of employment contained in Section 7(1) of the Act. This is a solution that an employer may legally utilize instead of a lay-off depending on the terms of the initial terms of contract.

  2. Section 17(1), Labor Act: Provides that an employer cannot, on the basis of being unable to provide sufficient work for the employee, attempt to layoff the employee. This subsection provides that "Except where a collective agreement provides otherwise, every employer shall, unless a worker has broken his contract, provide work suitable to the worker's capacity on every day (except rest days and public holidays) on which the worker presents himself and is fit for work; and, if the employer fails to provide work as aforesaid, he shall pay to the worker in respect of each day on which he has so failed wages at the same rate as would be payable if the worker had performed a day's work: Provided that- (a) where, owing to a temporary emergency or other circumstances beyond the employer's control (the period of which shall not exceed one week or such longer period as an authorised labour officer may allow in any particular case), the employer is unable to provide work, the worker shall be entitled to those wages only on the first day of the period in question; and (b) this subsection shall not apply where the worker is suspended from work as a punishment for a breach of discipline or any other offence." (emphasis ours) It therefore follows from the above that while an employer in Nigeria may vary the terms of a contract of employment, such variation and indeed a purported layoff cannot be the basis for the employer's inability to provide sufficient work for the employee.

  3. Section 20 of the Labor Act: Perhaps the closest to a layoff under the Labor Act is redundancy which the Act defines as an involuntary and permanent loss of employment caused by an excess of manpower. This has some similarities to the definition of employee layoffs but there is a distinction in that the Act limits its scope of layoff to an occasion of excess manpower but does not include a lack of funds as a basis for redundancy. Furthermore, redundancy under the Act suggests that a payment must be made to the employee being made redundant and as such redundancy is a clear termination of employment and not a mere step aside as being envisaged by the Nigerian context of layoffs.

5. Conclusion:

  1. Redundancy under Nigerian Law must be definite, it must be final and not used to avoid paying an employee for a period while the employer is unable to pay salaries. To act otherwise, would be illegal under Nigerian Law. Redundancy in this instance must be accompanied by a payoff.

  2. Change in the terms of an employment must be clearly communicated to the concerned employee. Such changes should specifically be in respect of changes to the name of the employer(s); the nature of the employment; if the contract is for a fixed term, the date when the contract expires and the appropriate termination notice period; rates and method of calculating wages; terms and conditions relating to work hours of work, holidays and holiday pay and any special conditions of the contract.

  3. Every employer in Nigeria has a duty to provide work to its employee, failure to do so is not sufficient reasons for termination of employment.

Footnotes

1. Kesi Seun-Adedamola is a Partner at Convergence Law Practice and can be reached on kesi@convergencelp.com

2. L1, Laws of the Federal Republic of Nigeria 2004

3. "Layoffs & Reduction" University of Washington HR, https://hr.uw.edu/ops/ending-employment/layoffs/layoff-and-reduction/ accessed on 19th September 2023 at 12.43pm

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.