Impact of Covid-19 On Employment Relations in the Private Sector In Nigeria [1]

It is no longer news that
the Corona Virus (COVID-19) pandemic has greatly impacted the world’s economy.

Nigeria announced its
first case of the COVID-19 on Friday the 28^th of January, 2020.
Following the rapid increase in the number of reported cases of the virus in
Nigeria and globally, countries around the world, including Nigeria have put in
place strict measures such as border closures, total and partial lockdown of businesses,
restriction of movements of people, goods and services which are not essential
amongst other measures to curtail further spread of the virus. However despite
these measures the number of reported cases of persons infected with the virus
continues to increase. As at the time of this writing the report from the World
Health Organization shows that over 3 million people have been infected with
the virus globally with over two hundred thousand deaths.

The pandemic has many
economic and contractual implications. As a result of the measures put in place
to curtail further spread of the virus cash reserves have dried up, there is no
revenue and no government relief by way of cash is readily in sight for
business owners consequently, business owners are thinking of ways to handle
their obligation to pay wages and salary for the period of the lockdown and
inactivity without running afoul of the law.

The
case for Nigerian businesses

The outbreak of the global pandemic has put severe pressure on the Nigerian
economy. Nigeria is a developing economy with heavy reliance on oil, which
accounts for about 90 per cent of Nigeria’s export.  The recent crash in the global demand for oil
and oil price stemming from the pandemic has adversely affected the volume and
value of Nigeria’s net export. As result businesses in Nigeria especially those
in the private sector and the medium and small scale enterprises have been
adversely affected.

On 25 March, 2020 the Lagos State government introduced movement restrictions
by ordering the closure of non-essential markets, businesses, stores,
supermarkets, cinemas, entertainment centres and banning all public and
religious gatherings in the State. On 29^th March, 2020 the Federal
government imposed further restrictions by announcing the implementation of
measures aimed at curbing the spread of the pandemic in the states of Lagos,
Ogun and the Federal Capital Territory (FCT) Abuja. These measures include a
two-week restriction on movement commencing from 30^th March, 2020. A
further 2 weeks restriction was imposed by the Federal government in the above
states and the FCT and an additional one week till the 4^th of May,
2020 at which time partial ease of the lockdown will begin with further
guidelines.

Other states not covered by the Federal Government lockdown also
instituted partial or full state-wide lockdowns and curfews to reduce the
spread of the virus in their respective states.

This paper will consider
the impact of the COVID-19 on employment relations in the private sector in
Nigeria especially with regard to the employer’s obligation to pay wages and
salary to its employee. The paper will also make recommendations on how the issues
of remuneration of employees can be resolved by the employers to avoid unending
litigations.

Employer’s
duty to pay remuneration

The relationship between an
employer and employee is contractual and based on the contract of employment. Until
a contract of employment is determined, the mutual obligations of parties
continue and none of the parties can unilaterally amend the contract without
consulting the other. In jeremiah v.
Ziregbe & Anor (1996) 7 NWLR (Pt. 347) 356 the Court held that the
employers duty to pay salary or wages to the employee is determined by the
letter of employment. Thus it is usually said that an employer owes the
employee duty to pay wages or salary in accordance with the terms of the
contract express or implied.

 Where the contract of employment does not
expressly provide for remuneration, amount payable will depend on the value of
service rendered. Once the duty to pay wages or salary exists, the employer is
at common law, to continue to pay such remuneration to a worker who is ready
and willing to work whether or not work is provided by the employer.

Are
there instances where an employer will be relieved of this duty to pay
remuneration?

Under common law where
the employers inability to provide work is as a result of a circumstance beyond
his control then the employer will not be under a duty to pay. see Devonald v. Rosser & S one (1906) 2 K.B.
728. From the above exception an employer may argue that his inability to
provide work was as a result of circumstances beyond his control in this case
the compulsory lockdown imposed by the government and so he is not liable to
pay remuneration for the periods of the lockdown.

Under Statute Section 17
of the Nigerian Labour Act provides for the employers duty to provide work and
pay remuneration 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:
(underlined is mine for emphasis)

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

It is important to note
that by the above provisions the period of emergency or circumstances beyond
the employers control shall not exceed one week and so for the employer to rely
on this provision for a period exceeding one week he must get the approval of
an authorized labour officer and the employee is still entitled to wages on the
first day of the period in question.

However, it is important
to note that the provisions of the labour Act only applies to junior staffs
referred to as “workers “. It does not apply to persons employed as
administrative, executive, technical or professional staffs according to
Section 91 of the Labour Act. Thus for employees not covered by the Labour Act
their employment is governed by the contract of employment and employee’s
handbook. Any variation in the salary of such employees must be based on the
contract of employment and the employee handbook.

How
then can employers mitigate the financial effect of COVID-19 on their businesses
to ensure that they remain in business?

For businesses,
especially those that have been forced to close to curtail the spread of the
virus, it would be economically unsustainable to continue incurring excess
costs at this time. Thus, businesses must take cost-cutting measures to ensure
that they stay afloat, which will likely affect workers and employees.

There are a number of
options open to employers in this case. However it is recommended that whatever
measures taken by employers should have a human face and be weighed in terms of
its economic, social and health impact on the employees. Also employees should
be reasonable and ready to negotiate and make adjustments to mitigate the
economic impact of the global pandemic on their employers business.

There is a need to create
a culture of social dialogue and workplace cooperation at this time in order to
prevent a downward spiral in employment and labour during and after the crisis
caused by the pandemic.

Some measures that can be
taken by employers with their legal implications include:

1.
        Reduction of salary of employees:

Except
for the purpose of making contributions to Provident or Pension schemes as
agreed by the employee, an employer shall not unilaterally make deductions from
the employee’s salary. Article 8 of
the Protection of Wages Convention 1949 prohibits employers from making
deductions out of 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. Also section 5 of the Nigerian Labour Act provides that
an employer shall not make any deduction or make any arrangement or contract
with a worker for any deduction from the wages to be paid by the employer to
the worker.

From the above any attempt to unilaterally deduct
the salary of an employee will amount to a breach of contract and an employee
can sue for damages.

Consequently, it is very important that an
employer considering this option as a way of mitigating the impact of the
pandemic must negotiate and get the consent of the employee in writing before
any deduction of salary can be made.

It is important to state here that the National
Industrial Court is the Court with jurisdiction to deal with all matters
relating to labour and industrial relations in Nigeria. The Court is empowered by
the combined reading of Sections 254C (1)(f) and (h) and (2) of the
Constitution of the Federal Republic of Nigeria (1999) as amended to apply international
best practices, treaties, conventions and protocols ratified by Nigeria. This
includes the various ILO conventions and recommendations on labour and
employment.

Consequently an employer who unilaterally deducts
the employee’s salary risks having an action being brought against him at the
National Industrial Court by an aggrieved worker or employee.

2.         Compelling employees to
take the period of the lockdown as their annual leave without pay.

Every employee who
has worked for a period of 12 months is entitled to an annual leave with pay (see
Section 18 Labour Act; ILO Convention on Holiday with Pay, No. 132 of 1970 as
revised). Thus it will amount to a
breach of contract for an employer to unilaterally elect to treat the stay at
home period as an annual leave period for which he is not obligated to pay.

However, an employer whose business could not continue
during the period of the lockdown can negotiate with his employees to have
their annual leave during the period of the lockdown rather than having it
deferred, provided full salary is paid. Where such is the case, such employee
is not required to perform any work or task during the period.

The courts will not enforce any contract that compels workers
or employees to take unpaid leave. This is inconsistent with the law and also
contrary to international best practices. 

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3.         Reducing
the number of hours of work thereby reducing salary:

As part of the measures to reduce the spread of
the corona virus government have adopted measures and guidelines for the
partial ease of lockdown which include reduction in the number of hours of work
for businesses. Businesses are mandated to only operate between the hours of
9am to 3pm. Some businesses have been able to continue operations remotely and
employees are given task to complete while in the comfort of their homes. This notwithstanding
there has been an unprecedented global decline in revenue which can be
generated from such works as a result of the decline in economic activities. It
is also possible that output may reduce with such arrangements as a result of
various challenges of remote work especially in this part of the world such as slow
or interrupted access to the internet, epileptic power supply and sometimes
distractions from family members.

            An
employer can decide to reduce the work hours of the employee and as a result
negotiate reduced salary based on the hours of work. Section 17 of the Labour
Act cited above supports this arrangement.

4.         Temporary layoff and furlough:

Temporary layoff is a period of temporary
suspension or dismissal of an employee as a result of lack of work or because
of cooperate reorganization with a right to recall by the employer under
defined circumstance. Furlough on the other hand is a suspension of employment
either pursuant to provisions in the employee’s contract of employment or by
mutual agreement between employer and employee. Generally when there is
temporary layoff and furlough an employer is not under obligation to pay salary
but the employee is still entitled to other benefits of the employment since
the contract of employment is not terminated. Most employers use temporary
layoff and furlough as an alternative to termination and redundancy.

However it should be noted that in the absence
of an agreement to the contrary in the contract of employment, layoffs actually
have the effect of terminating the contract of employment and will trigger the
application of any redundancy provision in the employee’s contract of
employment. An employee who is put on temporary layoff without pay as a result
of the pandemic cannot at the same time be expected to work. If an employer
requires the employee to work, he should provide compensation for the work
performed. Also an employee who is put on temporary layoff can personally
choose to perform limited tasks while on layoff. If an employee who is not
being paid refuses to work and the employer as a result terminates his
employment, it would amount to wrongful dismissal, and the employee can sue to
claim severance benefits.

It is recommended that an employer who intends
to adopt any of the above measures communicate and negotiate the terms of the
temporary layoff and furlough with the employee or employee’s representatives
in order to avoid litigations.  

With regard to layoff of employees in the
banking industry, on the 3^rd of May, 2020 there was a press release
from the Central Bank of Nigeria (CBN) and the Bankers’ Committee suspending
layoffs in Banks emanating from the issue of corporate cost in view of the
disruptions caused by the global economic difficulties occasioned by the
COVID-19 pandemic. The CBN further directed that in order to help minimize and
mitigate the negative impact of the COVID-19 pandemic on families and
livelihood no bank shall retrench or layoff any staff of any cadre including
full time and part-time staffs without the express approval of the CBN.

One may ask what the effect of this directive is
and whether it is binding on the banks. Banks are privately owned corporate entities
and not a creation of statute. The relationship between a bank and its employees
are based on contract. There
is no existing power granted to the Central Bank of Nigeria to suspend the
powers of an employer derived under a contract which in reality forces an
employer to continue to bear financial obligations to employees when the
business cannot support such obligations. Thus such directive from the CBN is at best persuasive but it
further emphasizes the need for social dialogue and workplace cooperation in
mitigating the effect of the harsh economic condition caused by the COVID-19 pandemic
especially in view of the fact that the directive was reached in consultation
with Banker’s Committee.

5.         Initiating redundancy procedure:

Redundancy is a situation where an employee
loses his job because the employer does not need him anymore. Redundancy
disengagement is a form of termination of employment. Section 20(3) of the
Nigerian Labour Act defines redundancy as an involuntary and permanent loss of
employment caused by an excess of manpower. Although the Act did not define
what can lead to excess of manpower but the circumstance caused by the impact
of the corona virus such as loss of revenue and change in the nature of work
from physical to remote work arrangements thus necessitating fewer staff can be
considered as valid grounds for declaring redundancy. In Alexander O. Ejah & Ors v Niger Mills
Co. Ltd NICN/CA/97/2013, 27-2-2015, the National Industrial Court reasoned
that from the evidence which showed that the mass termination of employment of
the Defendant’s employees arose from a change from a manual to an automated
process requiring fewer staff, the disengagement was necessitated by economic
and technological reasons, and being justified, was thus within the
contemplation of the Act as a ground for redundancy. In Peugeot
Automobile Nigeria Limited v. OJE (1997)11 NWLR (Part 530) 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.

Usually a provision for redundancy is contained
in the contract of employment. Where such provisions are express the procedure
as stipulated should be strictly followed. However, absence of a specific
provision on redundancy does not preclude the employer from declaring a
particular position redundant.

Where an employer declares an employee redundant
he is entitled to terminate the contract of employment in accordance with the
terms of the contract of employment as to length of notice or payment in lieu
of notice as applicable.

It is important to note that Section 20 of the
Labour Act provides that before an employer terminates a contract of employment
based on redundancy, the employer shall for unionized workers first inform the
trade union or workers’ representatives concerned of the reasons and the extent
of the anticipated redundancy.

Conclusion

It
is beyond doubt that the economic difficulty occasioned by the impact of the
novel corona virus is unprecedented in the history of humanity. At a time like
this, it is most important that both employers and employees at all level focus
on measures that will ultimately mitigate the negative impact of the pandemic
both on families, livelihoods and businesses. Governments all over the world
including the Nigerian government at the Federal and state level are developing
fiscal measures aimed at supporting businesses and households to survive the
crisis. Government have made provisions to address the much needed access to
finance to ensure that employers in the private sectors including small and
medium scale enterprises are sustainable and reduce layoffs and retrenchment of
employees as a result of the pandemic. One of such measure is the N50 Billion
(Fifty Billion Naira) credit facility to be administered through the Nigerian
Incentive-Based Risk Sharing System for Agricultural lending (NIRSAL Plc.) a Microfinance
Bank for households, small and medium-sized enterprises that have been
significantly impacted by the COVID-19, including but not limited to hoteliers,
airline service providers, health care merchants etc. Also the Central Bank of
Nigeria has directed Banks to consider temporary and time-limited restructuring
of the tenor and other terms for loans granted to businesses and households
most affected by the outbreak of the COVID-19.

Worthy
of note also is the Emergency Economic Stimulus Bill 2020 which provides
measures aimed at providing staff retention tax relief amongst others.

Therefore,
it is recommended that employers take advantage of these fiscal measures as an
alternative to sustain their businesses.

NOTE:
This article is for general knowledge. Contact the writer @ ncroseline089@gmail.com
for legal advice specific to your business circumstance.