Nigeria: The Guidelines For The Release Of Staff In The Nigerian Oil And Gas Industry 2019 And Its Applicability To Employment Relationships

INTRODUCTION

On 17th October 2019, the Department of Petroleum Resources ('DPR') issued the Guidelines for the Release of Staff in the Nigerian Oil and Gas Industry 2019 ('the Guidelines'). The Guidelines were issued according to the provisions of the Petroleum (Drilling and Production) Regulations 1969 (as amended),¹ which are made pursuant to the Petroleum Act ('the Act').² The Guidelines establish the procedure for obtaining the prior approval of the Minister of Petroleum Resources ('the Minister') through the DPR, before the release of any worker employed by the holder of an oil mining lease, licence or permit under the Act or under Regulations made thereunder or any person registered to provide any services in relation thereto. Thus, the implication of the Guidelines is that it applies to virtually all sectors, insofar as the members of the sector have the requisite permit³ to provide services in the Oil and Gas industry.

APPLICABILITY OF THE GUIDELINES FOR THE RELEASE OF STAFF IN THE NIGERIAN OIL AND GAS INDUSTRY 2019 TO EMPLOYMENT RELATIONSHIPS

The Guidelines regulate contracts of employment and require employers under an oil mining lease, licence or permit or any person registered to provide any services in relation thereto, to obtain the approval of the Minister before determining the contract of employment of an employee where the anticipated exit constitutes a staff release.⁴ The Guidelines⁵ further require an employer to notify the Minister where an employee voluntarily retires, resigns, dies or abandons his/her duty post. However, these provisions negate the basic principle of employment and labour law.

In Michael Smith Atoe v Petrofac Energy Services Nigeria Limited ('Atoe v Petrofac'),⁶ judgment delivered on 6 June 2019, the National Industrial Court of Nigeria ('the NICN') had occasion to refuse to read the repealed 2015 Guidelines into a disengaged worker's terms of employment. In that case, the Complainant was employed by the Defendant for a fixed term of six (6) months as its Nigerian content manager, subject to renewal by the agreement of the parties.

The contract of employment provided that the relationship between the parties may be terminated by a month's notice or payment in lieu of notice. The Defendant issued a termination letter to the Complainant before the expiration of the fixed term of employment and without obtaining the approval of the Minister as required by the Guidelines. The Complainant filed an action at the NICN claiming that the termination was illegal and contrary to the provisions of the Guidelines and stated further that the provisions of the Guidelines were terms implied by law in the contract of employment in issue. The Court held that the Guidelines can't be imported into the parties' contract by the Court as the Guidelines didn't form part of the terms of the contract the parties voluntarily agreed to and therefore can't form the basis for declaring a termination illegal or unlawful. This position is consistent with the decision of the Supreme Court in SPDCN Ltd v Nwaka.⁷

Furthermore, an employer has the right to terminate the employment of an employee as long as reason is given for the termination of the employment as held in the case of Aloysius v Diamond Bank.⁸ Hence, subjecting the termination of an employment to the approval of the Minister curtails the employer's right to terminate an employee's employment and also negates the principles of contract law.

However, it appears that the essence of the mandate of the Guidelines on an employer is to prevent the employer from impeding the local content policy⁹ which is a vital instrument aimed at facilitating and indigenising the oil and gas industry. Nonetheless, the Act doesn't vest the Minister with the power to legislate on contracts of employment. This is a matter reserved for the National Assembly. Therefore, the Guidelines arguably usurp the powers of the National Assembly and thus breach the principle of separation of powers as entrenched in the Constitution of the Federal Republic of Nigeria 1999 (as amended). Therefore, by the Constitution,¹⁰ the Guidelines ought to be rendered null and void and liable to be struck down. Illustrative of this is the recent decision of the NICN in Petroleum and Natural Gas Senior Staff Association of Nigeria & 3 Ors v Chevron Nigeria Limited ('PENGASSAN v Chevron').¹¹

VALIDITY OF THE GUIDELINES FOR THE RELEASE OF STAFF IN THE NIGERIAN OIL AND GAS INDUSTRY 2019: THE CASE OF PENGASSAN V CHEVRON

Although the question of the validity of the Guidelines was canvassed by the parties in Atoe v Petrofac, the Court in its decision did not pronounce on it. It wasn't until the recent decision in PENGASSAN v Chevron that the position of the Court was established and the issue, that is, whether the DPR can validly sanction an employer for failing to acquire its consent when the NICN has held that an employer can validly terminate the employment contract without the DPR's consent, was resolved.

In that case, the defendant embarked on a project geared towards reducing its workforce due to the negative impact of the COVID-19 pandemic. Notice was issued to the members of the 1st Claimant at a meeting held between the parties in September 2020. However, the Claimants alleged that 25% of the Defendant's workforce were issued termination letters in October 2020 without any notice whatsoever. The Claimants challenged the redundancy exercise on the ground that the written approval of the Minister was not first attained. The claimants approached the NICN with a sole issue for determination:

The Claimants asserted that their employment was regulated by the Guidelines while the Defendant argued that it was not bound by the Guidelines. In arriving at its judgment, the Court considered jointly the provisions of the Guidelines, Regulation 15A of the Petroleum (Drilling and Production) Regulations 1969 (as amended) and Section 9 of the Petroleum Act. The Court also relied on the judgment in Nigerian National Petroleum Corporation & Anor v Famfa Oil Limited¹² where the Supreme Court held that a subsidiary legislation must conform to the principal law and if any provision of the former is inconsistent with the latter, the provision of the former shall be void to the extent of its inconsistency. Therefore, it was the finding of the NICN that none of the above legislations gives the Minister or the Director on his behalf, the power to regulate private contracts of employment and by extension, make the provisions contained in the Guidelines. As such, the Court held that the Guidelines can't operate to obligate the Defendant to obtain the written approval of the Minister before embarking on any redundancy exercise.

CONCLUSION

The implication of the decision of the Court in PENGASSAN v Chevron is that the provisions of the Guidelines, which negate the basic principles of employment law and sanctity of contracts, are null and void since they are inconsistent with the provisions of the principal legislation. The decision has therefore resolved the controversy surrounding the legality of the Guidelines. Therefore, pending when the Court of Appeal makes a contrary pronouncement, the Guidelines have no binding force in Nigeria and the sanctions so provided cannot be enforced against an employer. However, this does not preclude parties to an employment contract from incorporating the Guidelines into their contracts.

Footnotes

1. Regulation 15A of Petroleum (Drilling and Production) Regulations 1969 (as amended)

2. Section 9 of the Petroleum Act, Cap P10 LFN, 2004

3. The requisite permit is provided for by virtue of the Guidelines and Requirements for the Application of Oil and Gas Industry Service Permits (OGISP)

4. Article 3 of the Guidelines for the Release of Staff in the Nigerian Oil and Gas Industry 2019 defines a Staff Release as, 'the removal of a Worker in a manner that permanently separates the said Worker from the Employer'.

5. Article 4.3 of the Guidelines for the Release of Staff in the Nigerian Oil and Gas Industry 2019

6. (Unreported) Suit No: NICN/LA/506/2015

7. (2003) 6 NWLR (Pt. 815) 184

8. (2015) 58 N.L.L.R 92

9. As provided for by virtue of Section 2 of the Nigerian Oil and Gas Industry Content Development (Local Content Act) 2010.

10. Section 1(3) of the Constitution of the Federal Republic of Nigeria 1999 (as amended), 'If any other law is inconsistent with the provisions of this Constitution, this Constitution shall prevail, and that other law shall, to the extent of the inconsistency, be void'.

11. (Unreported) Suit No: NICN/LA/411/2020

12. (2012) LPELR-7812(SC)

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