Contract Of Employment In Nigeria: Termination And Available Remedies

Introduction

The determination of a contract of employment refers to the termination of the employment relationship between an employer and an employee. This usually occurs through termination or dismissal, depending on the specific facts of each case. Both processes may be governed by common law, statutory provisions, mutual agreements between the parties, or a combination thereof.¹ In certain situations, the terms regarding termination or dismissal are explicitly outlined in the contract of employment. In others, an employee may be protected from termination unless specific conditions are met, due to a special legal status.² Where the employment relationship is regulated by statutory or constitutional provisions, legal principles govern its termination.

For employment under statutory provisions, the relevant laws and regulations set out the terms and conditions for appointment, confirmation, promotion, and disciplinary actions. Compliance with these rules is mandatory. Therefore, where the law requires a particular procedure to be followed, any deviation renders the action null and void. In contrast, where employment is governed by common law or contractual agreement, termination must follow the agreed-upon procedures. However, failure to adhere to the agreement in such cases constitutes wrongful termination or dismissal, it does not render the action void or without legal effect. This distinction highlights the difference between wrongful and unlawful termination or dismissal, the latter of which can lead to remedies such as automatic reinstatement.

Ultimately, the method of ending an employment relationship depends on the specific terms of the contract and any applicable statutory provisions. The Labour Act of 2004 outlines the procedures for lawful termination of employment contracts.³

Key Legal Frameworks Governing Employment and Labor Relations in Nigeria

1. 1999 Constitution of the Federal Republic of Nigeria (as amended)
   The Constitution establishes the National Industrial Court (NIC) under Section 254C, granting it exclusive jurisdiction over employment-related disputes. This makes the NIC the primary forum for handling cases such as wrongful termination.
2. Labour Act (Laws of the Federation, 2004)
   The Labour Act is the foundational legislation regulating employment relationships in Nigeria. It outlines the rights, duties, and obligations of both employers and employees, as well as standards for fair labor practices.
3. National Industrial Court Act, 2006
   This Act supplements the constitutional provisions by defining the structure, powers, and operational framework of the NIC, ensuring its effectiveness in resolving labor disputes.
4. Employee's Compensation Act, 2010
   This legislation mandates compensation for employees who suffer workplace-related injuries, illnesses, or death. Employers are required to contribute 1% of their total payroll to the Nigeria Social Insurance Trust Fund (NSITF), which administers these benefits.
5. NICN (Civil Procedure) Rules, 2017
   These Rules guide the conduct of proceedings in the National Industrial Court. They are primarily used by judges and legal practitioners to manage timelines, format of filings, and procedures for handling employment litigation.
6. Judicial Precedents
   Decisions from previous court cases play a vital role in shaping employment law. These judicial interpretations clarify and expand upon existing statutes, providing guidance in resolving future disputes.⁴

Ways of terminating a Contract of Employment

1. By Notice

Termination of an employment contract that has statutory backing is generally done through notice. Such contracts typically specify a notice period, during which either party may exercise the right to terminate the agreement, or alternatively, make a payment in lieu of notice.⁵

In cases where the employment is for a fixed term, early termination is not permitted unless the terminating party pays compensation equivalent to the remaining duration of the contract. The right to terminate by notice is mutual, either the employer or the employee may invoke it and there is no legal requirement to provide reasons for doing so.

However, under Nigerian law, only individuals classified as "workers" under the Labour Act are subject to the statutory notice provisions in situations where the contract itself does not stipulate a notice period.

2. By Expiration of Time

After a certain period, a fixed-term contract may come to an end. Such a contract is defined as one that is set to last for a specific, predetermined duration and generally cannot be terminated early, except in cases of serious breach by either party. However, it is not uncommon to find contracts labeled as fixed-term that include a clause allowing either party to terminate the agreement with notice. Since these contracts are not guaranteed to run for the entire specified period, they do not truly qualify as fixed-term contracts. Despite this, the English Court of Appeal ruled that a contract could still be considered fixed-term if it was set for a specific duration, even if it allowed for termination by notice from either party during that term.⁶

3. By Operation of Law

Regardless of the parties' intentions, there are situations where an employment relationship must end because the law deems the contract to be terminated. In such cases, the contract of employment is brought to an end by operation of law. Termination by operation of law occurs when a subsequent legal event or a legal impossibility arises that the law recognizes. This means that the employment contract can no longer be performed due to these intervening legal events. Common examples include company liquidation, bankruptcy, dissolution of a partnership, or the assignment of obligations in personal service contracts.⁷

4. By Death of an Employee

An employment contract is a personal service agreement, meaning it comes to an end upon the death of either party. Since such a contract can only be fulfilled during the lifetime of the individual who entered into it, death brings it to an automatic close. Consequently, if a party dies, their executor cannot pursue a claim for breach of contract arising from obligations that became impossible due to the death.⁸

Wrongful Termination of Appointment

In matters of contract termination, a distinction exists between wrongful termination and unlawful termination, primarily in the remedies available for each. Termination that contravenes a relevant statute is considered unlawful and is therefore null and void. In contrast, under common law, parties may terminate an employment contract according to the terms they have agreed upon. If a party fails to follow the agreed procedure, this constitutes wrongful termination or dismissal, but it does not render the termination void. As a result, remedies for unlawful termination may include damages and/or reinstatement, whereas remedies for wrongful termination are generally limited to an award of damages.⁹

Remedies for Wrongful Termination

1. Reinstatement

In this context, specific performance or reinstatement refers to restoring an employee to their previous position when the court finds that the termination of employment was wrongful, particularly where the employment has statutory protection. While reinstatement is not commonly granted since an employee is generally not considered to have a proprietary interest in their job, recent decisions by the Supreme Court of Nigeria suggest a shift. In suitable cases, the court may now grant declaratory reliefs ordering reinstatement or issue injunctions preventing dismissal. This remedy is typically available to individuals employed in the public sector, whose appointments are governed by statutes under Nigerian labour law.

2. Damages

Given the unique nature of employment contracts with statutory flavour, the primary remedy available to an aggrieved party is usually the award of damages. However, courts generally do not grant general damages in such cases. The Court of Appeal has held that awarding general damages for wrongful dismissal under an employment contract is inappropriate. This is because any compensation awarded must be specifically proven as special damages, not presumed or generalized, and must reflect actual losses incurred by the claimant.¹⁰

3. Severance Pay

This lump sum payment serves as compensation for job loss, but it is usually awarded only when provided for in the employment contract or relevant regulations.

4. Unpaid Entitlements

Courts may order employers to compensate employees for any outstanding wages, unused leave, or other entitlements that are due.

Conclusion

The determination of a contract of employment in Nigeria is a multifaceted legal issue shaped by statutory provisions, contractual agreements, and common law principles. The legal framework governing employment relationships anchored in the Constitution, Labour Act, judicial precedents, and other relevant statutes clearly outlines the acceptable methods for terminating employment, whether by notice, expiration, operation of law, or death.

A key distinction in employment termination lies in whether it is wrongful or unlawful, as this determines the remedies available to the aggrieved party. While wrongful termination arises from a breach of contractual terms, unlawful termination violates statutory provisions and renders the termination void. Courts have recognized remedies such as reinstatement, special damages, severance pay, and unpaid entitlements, particularly for employment relationships with statutory backing.

Ultimately, employers and employees must understand the nature of their employment contract, whether purely contractual or statutorily flavoured, to ensure that terminations are carried out in compliance with the applicable legal standards. Doing so not only protects the rights of both parties but also promotes fairness, accountability, and due process in Nigeria's labour and employment landscape.

Footnotes

1. UBN v. Ogbo (1995)2 NWLR (Part 380) 647, SC

2. Section 13 of the Federal Universities of Technology Act 1986 (as amended)

3. Section 9(7) of the Labour Act 2004

4. https://www.resolutionlawng.com/legal-remedies-for-wrongful-termination-of-employment-in-nigeria/

5. Section 11(1) of the Labour Act 2004

6. Dixon v BBC (1979) QB 546.

7. Section 9(7) of the Labour Act

8. Busari Morufu Salawu, Legal framework for the determination of employment contract under the Nigerian Labour law https://journal.ucc.edu.gh/index.php/ucclj/article/view/1723/815

9. ibid

10. New Nigeria Newspapers Limited v. Mr. Felix Atoyebi 2013) NGSC 2.

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.