Termination of Employees on account of Redundancy
The Employment Act defines Redundancy as “the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.” Redundancy, which is also known as “retrenchment”, “staff rationalization” etc, occurs through no fault on the part of either the employee or the employer and may be caused by factors such as economic conditions, business closure, restructuring or technological development.
For the termination of employment of account of redundancy to be valid and fair, the redundancy process must be carried out in accordance with the law to avoid any claims for unfair termination. The procedure laid out in the Employment Act is mandatory and must be strictly followed for the redundancy to be valid. Where the procedure is not followed the termination will be termed as unfair and the employer will be held liable to pay damages.
A summary of the steps to be followed on termination of employee’s contract on account of redundancy under Section 40 of the Employment Act are set out below as follows:
Step 1: Notice of Intended Redundancy
- The employer must give notice of the intended retrenchment programme. The notice should be for not less than 30 days or longer if so required by the employment contract or a Collective Bargaining Agreement (CBA). This notice must also be served on the labour officer and on the trade union if the employee is a member of one.
- In addition to this, the employer is required to have consultation with the employee or their trade union with an aim of finding a way out of the intended redundancy or the best way of implementing it, if it is inevitable. Such consultations must be genuine rather than merely going through the motions to comply with the law.
Step 2: Criteria for Selection of Employee(s) for Termination
- In selecting the employees to be declared redundant, the employer must have due regard to the seniority in time, skill, ability and reliability of each employee. The criteria used by an employer must be precise and documented and the employee scored on the basis of the laid-out criteria.
- This selection criteria must be objective and not be based on discriminatory or subjective factors as such as membership to trade union, race, age or gender.
Step 3: Payment of Dues
- An employee who is declared redundant is entitled to payment as follows:
- Salary up to the date of termination on account of redundancy;
- Accrued leave days paid off in cash.
- one month’s wages in lieu of notice (if notice period is not to be served);
- Severance pay at the rate of not less than fifteen days’ pay for each completed year of service.
- Where there exists a CBA between the employer and the trade union with better terms than those provided in the Act, the employee shall be entitled to be paid the higher rates in the CBA or in the employment contract.
Failure to comply with the procedure leaves the employer liable for unfair termination and he may be ordered by a court of law to pay damages which may be calculated at year’s salary along with payment of the statutory dues discussed herein.