What is redundancy in Nigeria?
The Nigerian Labour Act (the Act) describes redundancy as an involuntary and permanent loss of employment caused by an excess of manpower. In other words, redundancy is a unique form of termination of employment by an employer. The Act does not provide a guide as to the events that could lead to termination due to excess manpower. However, factors such as acquisition of a company, restructuring of an existing company, reduction or closure of business operations, or a reduction in production lines due to shortage of materials, or in the age of digitization - a change from manual to automated processes, requiring fewer staff, etc. could be considered as valid grounds for redundancy.
Is redundancy legal in Nigeria?
Yes, redundancy is legal in Nigeria, in that it is recognized by the Act and Nigerian Courts. In the absence of any express provision in the contract of employment, employers are required to follow certain provisions, procedures and requirements outlined in the Act to ensure that the affected employees are treated fairly during the process of redundancy. For employees that do not fall within the scope of the Act i.e., employees other than manual or clerical workers, employers are required to comply with the terms that are mutually agreed by the parties, which may include the adoption of the provisions, procedures and requirements in the Act.
What is the procedure to be followed in carrying out a redundancy in Nigeria?
Employees governed by the Act
In the absence of any express provision in the contract of employment, the following shall apply with respect to employees that are governed by the Act:
- The employer shall inform the trade union or workers' representative concerned of the reasons for and the extent of the anticipated redundancy;
- The principle of "last in, first out" shall be adopted in the discharge of the particular category of workers affected, subject to all factors of relative merit, including skill, ability and reliability; and
- The employer shall use his/her/its best endeavours to negotiate redundancy payments to any discharged workers who are not protected by regulations made under subsection (2) of this section.
Implementing the steps outlined will generally involve (a) notification of the redundancy, including the reasons for its occurrence, any applicable dates etc., to the employee and any trade union(s) he or she may belong to; (b) discussions on any retention requirements of the employer (c) negotiations on the amounts to be paid to employees that will not be retained by the employer, and (d) effecting the agreed payouts. In implementing these steps, the employer must ensure discussions and consultations with the relevant parties transparency, and avoidance of any form of discrimination.
Employees excluded from the scope of the Act
The requirements for redundancy for this category of employees shall be strictly based on the terms that are mutually agreed by the parties, which may include the requirements outlined.
Are there any guiding principles in the selection process?
Yes. A common principle in the selection process of affected employees is the principle of "last in, first out." This involves selecting employees on the basis of their terms of employment. In other words, those with the shortest length of service will be selected for redundancy first, or scored the highest, while those with a longer service time with their employer will be selected last or scored the lowest. This principle is expected to be applied in the affected job categories subject to relevant factors such as relative merit, including skill, ability and reliability.
The principle of last in, first out, is increasingly being described as old fashioned among the international community. A more progressive approach is for employers to be more flexible in selecting employees to be declared redundant bearing in mind all relevant factors, while utilizing the principle as a tie breaker. That said, the principle remains valid and applicable in Nigeria. Whether Nigeria will gravitate towards the views of the international community remains to be seen.
How long should the notice period be for redundancy in Nigeria?
Generally, the law makes no stipulation as to the period of a redundancy notice. However, best practice requires the process to be concluded within a reasonable time. What amounts to a reasonable time is a question of fact and will naturally depend on the surrounding circumstances. For instance, the number of employees involved could impact on the timeframe for concluding negotiations for redundancy pay outs. The reasons for the redundancy and any peculiar issues arising could impact on the selection process e.g., administrative issues arising from the establishment of a spin off entity to assume responsibilities of an employer towards the employees to be retained. There is also the possibility of grievances arising that could impact on timelines for concluding a redundancy.
Can an employee challenge redundancy in Nigeria?
Yes, an employee can challenge redundancy in Nigeria for a number of reasons including where he or she believes that the agreed procedure was not followed by the employer, or that they were unfairly selected for redundancy or otherwise discriminated against. Such employees could seek redress at the applicable dispute resolution forum such as National Industrial Court of Nigeria, the Industrial Arbitration Panel, etc.
- The Nigerian Labour Act Cap L1 LFN 2004
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.