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22 April 2020
The world economy has come to a halt due to the COVID-19 pandemic, with many countries having implemented stay-at-home or social distancing policies to curtail the spread of the virus. On 27 February 2020 Nigeria recorded its first case of COVID-19 and since then, the number of cases has increased drastically and shows no sign of slowing. At the date of writing, more than five billion people worldwide had been asked to work from home due to the pandemic, with the World Health Organisation reporting more than 2 million cases and over 139,000 deaths due to COVID-19 complications.
The pandemic has many implications, including economic and contractual issues. However, this article considers the impact of COVID-19 on Nigerian labour law.
The Labour Act 2004 requires employers to provide a safe system of work (ie, carry out their operations in a manner that complies with safety regulations). Similarly, the Factories Act 2004 requires employers and factory owners or occupiers to ensure the health, safety and welfare of employees within their factory. Thus, it is employers' duty to ensure compliance with the provisions of the relevant employment statues relating to cleanliness, overcrowding, ventilation, lighting, drainage and sanitation. In view of this, employers must take measures to prevent the spread of COVID-19 in their workplaces.
In Iyere v Bendel Feed and Flour Mills Limited,(1) the Supreme Court held that:
Where there exists a service relationship between employer and employee, the former is under a duty to take reasonable care for the safety of the latter so as not to expose him to unnecessary risk.
The Supreme Court further stated that employers have a duty to take reasonable care to ensure the safety of their employees in all circumstances so as not to expose them to unnecessary risks.
Thus, both public and private sector employers have a duty to ensure that workers are not exposed to COVID-19, taking into account the ease with which the virus is transmitted. This would have been a major consideration for the stay-at-home policies imposed by many governments worldwide.
Nigerian businesses are not exempt from the harsh economic realities caused by COVID-19. With an economy heavily reliant on a benchmark oil price in the international market for the implementation of its economic objectives and imports (especially from China), Nigerian businesses have been seriously affected. On 25 March 2020 the Lagos State government introduced restrictions by ordering the closure of non-essential markets, stores, supermarkets, cinemas and entertainment centres and banning gatherings. On 29 March 2020 the federal government imposed further restrictions by announcing the implementation of measures aimed at curbing the spread of COVID-19 in the states of Lagos and Ogun, as well as the Federal Capital Territory. These measures include a two-week restriction on movement commencing from 30 March 2020. Due to the associated loss of revenue and work, businesses are thinking of ways to handle their staff without running afoul of the law, especially with regard to their obligation to remunerate employees for work performed.
An employer's obligation to remunerate its workers or employees is directly tied to the latter's performance of their obligations under the employment contract. The pertinent question that arises is whether the 'no work, no pay' principle applies in a situation where the employee's inability to work stems from the employer's inability to provide work. The Labour Act(2) provides some clarity in this respect: Section 17, which concerns an employer's duty to provide work, provides as follows:
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 authorized 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.
Further, the Protection of Wages Convention 1949(3) prohibits employers from making deductions out of a worker's or an employee's salary except to the extent prescribed by national laws or regulations or fixed by a collective bargaining agreement or an arbitration award. At the time of writing, there are no national laws or regulations which permit employers to make deductions from a worker's or an employee's salary. Thus, employers' ability to make deductions from a worker's or an employee's salary rest solely on the existence of a clause to that effect in a collective bargaining agreement or an arbitration award.
However, not all categories of worker are contemplated by the Labour Act. Rather, the act governs the employment of 'lower cadre' workers, which are defined in Section 91 as:
Any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour, but does not include-
a. any person employed otherwise than for the purposes of the employer's business, or
b. persons exercising administrative, executive, technical or professional functions as public officers or otherwise, or
c. members of the employer's family, or
d. representatives, agents and commercial travellers in so far as their work is carried on outside the permanent workplace of the employer's establishment; or
e. any person to whom articles or materials are given out to be made up, cleaned, washed, altered, ornamented, finished, repaired or adapted for sale in his own home or on other premises not under the control or management of the person who gave out the articles or the material; or
f. any person employed in a vessel or aircraft to which the laws regulating merchant shipping or civil aviation apply.
In this article, employees contemplated by the Labour Act are referred to as 'workers' and those whose employment is governed by their employment contract are referred to as 'employees' (both employees and workers are regarded as 'staff'). Employees who are not covered by the Labour Act are governed by the relevant employment contract, HR policies and collective or union agreements. For employees in this category, no provisions under Nigerian law stipulate that work must be provided by the employer as all aspects of the employment relationship are fully governed by the employment contract. Hence, regardless of whether work is made available by their employer, employees will be entitled to be compensated as agreed in their employment contract, unless the contract states otherwise.
For businesses, especially those that have been forced to close, it would be economically unsustainable to continue incurring excess costs at this time. Thus, businesses must take cost-cutting measures (eg, downsizing or pay cuts) to ensure that they stay afloat, which will likely affect workers and employees. The steps often taken by employers in times such as these include:
Compelling workers or employees to take annual leave with full pay
Section 18 of the Labour Act mandates employers to grant workers leave annually. Due to the COVID-19 pandemic, some businesses are compelling their workers to take annual leave rather than having it deferred. This may also apply to employees under the terms of their employment contract.
The Labour Act does not provide for employers compelling workers to take annual leave. Rather, employees cannot be compelled to take annual leave as it is an entitlement which they have the sole discretion to exercise. Hence, unless it has been mutually agreed by an employer and a worker or employee that the latter will take annual leave with pay, compelling them to do so would amount to a breach of their employment contract.
Compelling workers or employees to take compulsory leave without pay
Pursuant to Section 5 of the Labour Act, employers cannot make any wage deductions or enter into an agreement or contract with a worker regarding wage deductions. Further, as stated above, Section 18 of the Labour Act mandates employers to grant their workers fully paid leave.
Therefore, any attempt by an employer to compel its workers to take unpaid leave will amount to a breach of Sections 5 and 18 of the Labour Act. The courts will therefore not enforce any contract that compels workers or employees to take unpaid leave – not only because it is inconsistent with the law, but also because it is contrary to international best practices. In Aero Contractor Co of Nigeria Ltd v National Association of Aircrafts Pilots and Engineers,(4) the National Industrial Court held as follows:
by section 254C(1)(f) and (h) and (2) of the 1999 Constitution, as amended, this Court is mandated to apply international best practices and treaties, conventions and protocols ratified by Nigeria.
Hence, where an employer takes this approach, it risks having an action brought against it at the National Industrial Court by an aggrieved worker or employee.
Reducing number of employees' salaries
As stated above, Section 5 of the Labour Act and Article 8 of the Wages Protection Convention prohibit the deduction of an employee's wages whether unilaterally or by an agreement. Article 8 of the Wages Protection Convention provides that:
(1) Deductions from wages shall be permitted only under conditions and to the extent prescribed by national laws or regulations or fixed by collective agreement or arbitration award.
(2) Workers shall be informed, in the manner deemed most appropriate by the competent authority, of the conditions under which and the extent to which such deductions may be made.
Thus, based on the above provisions, an employer cannot make wage deductions unless the law or regulations prescribe that deductions can made. Although Nigeria is a party to and has ratified the Wages Protection Convention, the National Assembly has yet to codify the provisions thereof into an act. As such, the Wages Protection Convention is generally not enforceable in Nigeria.
Nonetheless, the National Industrial Court has adopted a different position on the enforceability of international labour conventions in Nigeria and has sought to apply such conventions regardless of whether they have been codified by the National Assembly. In this regard, the court has relied on an amendment to Section 254(C) of the Constitution 1999 which provides that:
notwithstanding anything to the contrary in this Constitution, the National Industrial Court (NIC) shall have the jurisdiction and power to deal with any matter connected with or pertaining to the application of any international convention, treaty or protocol of which Nigeria has ratified relating to labour, employment, workplace, industrial relations or matters connected therewith.
Therefore, any action initiated by workers or employees at the National Industrial Court due to a salary reduction may be decided in favour of the aggrieved worker or employer to the extent that:
This is because the court may see such a deduction as a contravention of the Wages Protection Convention.
However, in practice, employers can negotiate with employees; in extreme cases, employees can have their employment contracts terminated and many would rather receive a reduced salary than no salary. Further, with regard to workers, there may be some leeway under the proviso to Section 17, which states that:
Provided that –
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 authorized 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.
This suggests that workers' hours and, consequently, their wages can be reduced.
Reducing number of hours worked (for workers paid an hourly basis)
Although not the norm, some employment relationships in Nigeria involve the payment of remuneration per hour. Section 13(1) of the Labour Act provides that normal hours of work are those fixed either by mutual agreement, collective bargaining or the industrial wages board (where collective bargaining does not apply). Employers typically fix working hours before engaging a worker. However, nothing precludes employers from renegotiating and agreeing in writing working hours during the COVID-19 pandemic, which would result in some cost savings for the employer. However, this would apply only to workers whose salaries are paid per hour. For such workers, the employer will simply reduce the number of the hours allocated to such workers, thereby reducing their salaries.
Employers wanting to take this step should renegotiate their workers' hours and set this out in writing beforehand. Consideration should also be given to the proviso to Section 17 of the Labour Act (as discussed above).
'Redundancy' is defined by Section 20(3) of the Labour Act as an "involuntary and permanent loss of employment caused by an excess of manpower".
As a rule, the need for termination by redundancy arises from no fault of the worker but rather a situation which is beyond the employer's control. In Peugeot Automobile Nigeria Limited vv OJE,(5) the court defined 'redundancy' as:
a mode of removing of an employee from service when his post is declared "redundant" by his employer. It is not a voluntary or forced retirement. It is not a dismissal from service. It is not a voluntary or forced resignation. It is not a termination of appointment as is known in public service. It is a form unique only to its procedure where an employee is quietly and lawfully relieved of his post. Such type of removal from office does not, in my view, carry along with it any other benefit except those benefits enumerated by the terms of contract to be payable to an employee declared redundant.
Determination of redundant workers or employees
In determining the workers to be made redundant, Section 20(1)(b) of the Labour Act prescribes a principle known as 'last in, first out', subject to other factors, such as skill, ability and reliability. There are no restrictions on the use of other methods for selecting workers to be made redundant as the provisions of the Labour Act in this regard are prescriptive and the act does not preclude the use of management discretion in determining redundant workers. As regards employees, the Labour Act is also indicative and employers may use any reasonable method.
Nigerian law provides no mandatory procedure for effecting a redundancy, save that, in applicable cases, the employer must inform the trade union or workers' representative of the reasons for and extent of the anticipated redundancy where the workers or employees are unionised.
It is not uncommon for employment contracts and employee handbooks to include specific provisions on redundancy. Where they do, these should be strictly followed. However, in the absence of specific redundancy provisions in an HR document or employment contract does not preclude the employer from declaring a position redundant, which it can rightfully do at any time. Employers must terminate the employment contracts of affected employees in accordance with their respective terms (ie, with regard to the giving of notice or payment in lieu of notice, as applicable).
Under Nigerian Law, employers must make compulsory redundancy payments to redundant workers or employees only where this is provided for in the employment contract or other applicable company policies. Where these do not exist, the employer has the discretion to offer such severance payments to affected workers or employees and inform them of this offer during the redundancy. Unionised sectors or workers may also be entitled to such benefits on redundancy, as stipulated in the relevant collective bargaining agreements.
Collective bargaining agreements are agreed at the industry sector level and are binding on members of the relevant unions and associations (employers and employees). Typically, they will include provisions for the calculation of any severance payments due to member-employees. Thus, in the event of a redundancy, where the workers or employees are unionised, the applicable collective bargaining agreement should be examined. It is not unusual for terminal benefits on redundancy to be negotiated either directly with affected workers or employees (non-union) or at the union level for unionised workers or employees.
Notice period for redundancy
Where persons fall outside the category of employees envisaged by the Labour Act (eg, workers, lower cadre employees and labourers), the applicable notice period is that which is stated in the employment contract. As such, any notice or termination that fails to comply with the contract will be deemed invalid and the employee will be liable to compensation. Notably, an employee's obligations and rights continue to apply during their notice period.
Where a contract of employment does not provide for a notice or where the redundancy involves the category of employee envisaged by the Labour Act, the applicable notice period is provided for in Section 11(2) of the Labour Act.
Duration of employment
Prescribed notice period
Up to three months
Up to two years
Up to five years
Five years or more
Sections 11(3) and (4) of the Labour Act mandate that notice periods for three months' service or longer must be made in writing and that the notice period excludes the day on which notice is given.
Under Nigerian law and trade customs and traditions, employers can offer staff the option of payment in lieu of notice. Hence, nothing prevents staff from waiving their right to notice by accepting the payment of one month's salary in lieu of notice. Pursuant to this, it can be implied that the law acknowledges payment of salary in lieu of notice as a means of termination.
By virtue of Section 11(9) of the Labour Act, where an offer for payment in lieu of notice is accepted, the employer must pay only the existing salary before the termination, excluding overtime and other allowances.
Where an employer opts for payment in lieu of notice, they cannot default as the employment relationship will still exist and the employer will be liable to pay all benefits accrued to the employee or worker during that period.
Employers should engage with their employees and workers to discuss the impact of COVID-19 on their business operations and employment contracts and issue new policies and procedures in line with any proposed measures.
The pandemic may trigger redundancies, but these should be implemented only after employees and workers have been engaged in line with their employment contracts and the company's policy. Union representatives must also be notified where applicable.
For further information on this topic please contact Adekunle Obebe, Bolaji Fasehun or Solomon Oshinubi at Bloomfield Law by telephone (+234 1 454 2130) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Bloomfield Law website can be accessed at www.bloomfield-law.com.
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