[2023] UGIC 37

# **THE REPUBLIC OF UGANDA**

# **LABOUR DISPUTE CLAIM NO. 247 OF 2019**

### **(ARISING FROM LABOUR DISPUTE NO. MGLSD/CENT/LC/570/2020)**

### **KAKANDE CHARLES CLAIMANT**

# **⁵ VERSUS**

MOTORCARE UGANDA LIMITED RESPONDENT

BEFORE:

THE HON. AG HEAD JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA PANELISTS

- io 1. MS. HARRIET MUGAMBWA NGANZI - 2. MR. FX MUBUUKE - 3. MR. EBYAU FIDEL

#### AWARD

### **¹⁵** BRIEF FACTS

On the morning of 02/11/2018, the Claimant and the sales team were invited to a meeting which he considered a usual sales team business meeting. During the **²⁰** supply of vehicles to Parliamentary Commission. The chair guided that, all those who lay any claim on the Commission should adduce evidence to that effect. The Claimant insisted that he was the only one entitled to the commission, because he meeting which was chaired by Mr. Joseph Obunga Okecho as the head of Sales and Marketing, an issue arose as to who was entitled to commission arising out of the

**25 30** originated the supply of thirty six vehicle units to the Parliamentary Commission and according to him he tendered evidence in support of his claim. However, according to the Claimant, a one Hawa Male Nantumbwe who also lay on the Commission, was granted commission on 15 units out of the 36, by the Deputy General Manager, without any proof. Laterthat day while he was in Mukono to meet with a business client, he received a call from the Deputy General Manager inviting him to the office board room for an impromptu meeting. The reason for the reason/purpose of the meeting was not disclosed to him and his immediate supervisor was not informed. At 7.22pm on the same day, 02/11/2018, the Deputy General Manager crafted a letter dismissing him from employment. He contends that the dismissal was wrongful and unlawful.

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**35** costs. The Respondent on the other hand contended that, the Claimant was lawfully terminated because of restructuring therefore the claim should be dismissed with

#### **REPRESENTATION**

The Claimant was represented by Mr. Pius Olaki of LEX Uganda Advocates and Solicitors, Kampala and the Respondent was represented by Mr. Mumpenje Andrew ofM/S Makede and Partners Advocates, Kampala.

#### **ISSUES**

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- **1. Whether the Claimant was illegally terminated from his employment?** - **2. Whether the withholding ofsome of the Claimant's terminal benefits was legal and justified?** - **3. personal use per week? Whether the Claimant was entitled to 60 Liters of fuel for his office and**

- **4. How much commission on sale of vehicles and motorcycles/accessories is** due **to the Claimant?** - **5. What other remedies are the parties entitled to?** - **6. Whether the Industrial Court has jurisdiction to award the compensation as prayed for by the Claimant?**

# **ISSUE 1. Whether the Claimant was legally terminated from his employment?**

It was submitted for the Claimant that, the argument that the claimant was dismissed on grounds ofrestructuring , therefore he was not under any obligation to prove the reasons for dismissal as provided under section 68 could not hold because this court in **Abigaba Charles Lwanga vs Bank of Uganda LDC No 142,** stated, that an employer was bound to comply with section 81 ofthe Employment Act 2016, which requires him or her to give an affected employee 4 weeks' notice prior to termination and this was not the case in the instant claim.

According to him, RW1 did not deny that the claimant came to work normally and on the evening of 2/11/2018, he was issued with a termination letter. Fie also disputed the reliance on the amalgamation document tendered in court by the Respondent on the grounds that, the document indicated that, the restructure took place on 16/12/2019, which was almost ¹ year after the Claimant's dismissal. In addition, the document made no reference the respondent suffering any financial complications.

**In** reply Counsel for the Respondent submitted that, the onus of proving that, the Claimant was unfairly, illegally, wrongfully, and unlawfully dismissed and therefore, he was entitled to the remedies sought lay on him. He argued that in accordance with section 2 ofthe Employment Act the Respondent was justified to terminate the Claimant on grounds ofrestructuring through a merger, which was a

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result ofthe companies poor financial performance. It was his submission that, the Claimant was not the only one affected, because CW1 Joseph Obunga, his immediate supervisor was also terminated and the spray booth and panel beating departments were abolished, therefore the assertion that the Claimant was summarily dismissed could not hold.

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**80 85 90** He insisted that, the claimant did not adduce evidence to prove the unfairness ofthe termination as provided under section 73 and 75 ofthe Employment Act and about the procedure of termination the Respondent had always informally told its staff about an impending restructuring therefore the claimant was always aware about it. He insisted that the Claimant's termination was not unfair and he was not discriminated against because it was a means of reducing costs. In any case his supervisor was terminated as well. He argued that, RX6 showed the amalgamation of Motorcare Uganda Limited and Motorcare Services Limited, which was proof that, the Company needed streamlining. He refuted the argument that, the amalgamation was a concoction since it occurred in 2019, yet the Claimant was terminated in 2018, because amalgamation was a process. Therefore, it was not true that the termination was orchestrated by his disagreement with Nantumbwe on the issue of commission or the allegation that, he was accused of not collecting vehicles from Bollore moreover when this was not pleaded. He insisted that, the Respondent had a right to reduce its workers as a means ofremaining financially viable, therefore the claimant's termination was not illegal.

#### **DECISION OF COURT**

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**95 ISSUE1. Whether the Claimant was illegally terminated from his employment?**

It is trite law that, before terminating or dismissing an employee, the employer must give the employee a reason or reasons for the termination or dismissal. The employer

must also give the employee an opportunity to respond to the reason or reasons, in writing or orally before an impartial tribunal or disciplinary committee, accompanied by a person of his or her choice, (see Section 66 of the Employment Act 2006). The reason or reasons must be genuinely existing at the time of the termination or dismissal. In cases of termination resulting from restructuring, the employer is still under an obligation to give notice to the affected employees.

It is not in dispute that, on 2/11/2018, the claimant participated in a sales meeting in which the issue regarding payment of commission for 36 Vehicles which were sold to parliamentary commission was raised and all those who had any claim to it were asked to provide evidence to that effect.

110 It is also not in dispute that, the claimant claimed the entire commission on grounds that he originated the sale process, and he provided evidence to that effect. It is also not in dispute that a one Hawa Nantumbwe who also claimed a part of the Commission was granted commission on ¹⁵ out ofthe 36 Vehicles, although she did not provide evidence of her role in the sale. It is equally not in dispute that on the same date, the Respondent's Deputy General Manager invited the Claimant for a meeting in the evening and later at 7.22, he was issued with a termination letter, on the grounds ofrestructuring in the sales department.

The letter oftermination states in part that;:

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*" ...the position ofsenior sales professional is not needed and as afurther measure ofreducing staffcosts.*

120 *As per the contract signed between yourself and Motorcare Uganda Ltd on 12th February 2016, either party is entitled to give the other notice period and therefore, Motorcare has exercised its right underyour employment contract to give you notice period ofone month which will be paid to you in lieu ofnotice... "*


125 130 Although the Respondent insists that, the Claimant was terminated because of a restructuring process, there was no evidence adduced to indicate that, staff were notified about this process or that the Commissioner labour was notified about it nor is there evidence that the list of employees who would be affected was given to the commissioner Labour in accordance with Section 81 ofthe Employment Act 2006, which this court in of **Programme for Accessible Health Communication and Eduation [PACE] vs Graham Nagasha LDA 35 of 2018,** interpreted as follows:

*"Our interpretation ofthis section is thatfor a termination to amount to Collective termination it must be due to economic, technological structural or reasons ofa similar nature, and not less than 10 employees should be contemplated for termination. The section makes it mandatoryfor the employees contemplatedfor termination to be informed through their representatives (unions) and in our view where they are not unionized or represented, to be informed individually, at least I month before the terminations takes effect.*

*Secondly the Commissioner labour must be notified in writing ofthe reasonsfor the terminations, the number, and categories likely to be affected and the period over which the terminations will take place.*

*It is clear therefore, that a collective termination can never be a summary termination and it cannot be done without a justifiable reason. Although the Employer is at liberty to restructure his or her business or organization, he or she is expected to think through the process, because by so doing some ofhis or her employees are likely to lose theirjobs. Therefore, the employer must prepare the employees for any eventuality and the choice of those to be affected must be justifiable... "*

Although it is a settled position of the law that an employer can terminate an employee/render and employee redundant for reasons of an economic, technological, structural, or similar nature, the Court in **ZTE Uganda Limited Vs Sseyiga Hermenegild and 7 others, Labour Dispute Appeal No. 24/2019,** held that:

> "... *it is mandatoryfor the employer, before terminating an employee by redundancy, to give such an employee or employees a warning about the impending redundancy*... "

Also see **(Ochuru Henry vs ACE Global (U) Ltd LDR No.164 of 2017).** Even, if it is the prerogative of an employer to determine the requirements of its business including its Human Resources, the costs of running the business or organization among other things, he or she has a right to terminate any of its employees, for economic reasons such as poor financial performance of the organization, the employer still has an obligation to notify the employees about the impending termination by redundancy.

After carefully considering the Document which proposed the merger marked as RX6, on the Respondent's trial bundle, we established the following key aspects:

- 1. That, the purpose ofthe merger ofMotorcare Services Limited and Motorcare Uganda Limited was aimed at achieving synergies associated in both entities. - 2. That, the amalgamating companies shared the same strategic vision, and it was in the interest ofstakeholders that they merge for better management. - 3. That, all employment contracts that Motorcare Services Limited entered into would be automatically transferred to Motorcare Uganda Limited and all the rights and obligations between employees of Motorcare Services Limited

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would continue to apply as ifthey had been rights and obligations concluded with Motorcare Uganda Limited.

4. The shareholders of Motorcare Services limited and Motorcare Uganda

Limited were requested to authorize the amalgamation by special resolution

5. The proposal was signed by the Directors on 16/12/2019.

It was also the testimony of RW1 Benon Mascot, the Deputy General Manager in charge of Sales that, it was the board's decision to merge departments due to financial constraints however, the minutes of the board meeting in which the decision was made were not attached, to enable this court verify this.

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& Whereas this document was relied on by the Respondent as the document that effected the restructuring, when we scrutinized it as summarized above, we established that it was a mere proposal for the merger of the 2 companies, and it had to be approved by the shareholders of both Companies.

185 190 195 Further, whereas the said document was signed on the 16/12/2019, the Claimant was terminated on 2/11/2018, almost ¹ year before the proposal was endorsed by the Directors of both Companies and before it was approved by the shareholders as stated under clause 13 ofthe proposal. When we further scrutinized the document, we found that the merger was aimed at achieving synergies associated in both entities. There was nothing mentioned about reducing the costs of operations or to indicate that, any department would be eliminated as a result of the merger, rather clause 9 of the proposal provided that: " ... *9. All employment contracts that MOTORCARE SERVICES LIMITED has entered will be automatically transferred to MOTORCARE UGANDA LIMITED and all rights and obligations between the employees ofMOTORCARE UGANDA .. LIMITED and MOTORCARE SERVICES LIMITED will cease to exist as a* *separate legal entity and will henceforth be removed from the Register of Companies... "*

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In circumstances, even if RW1 testified that the process of amalgamation of the 2 companies was a process, given the foregoing, we are not convinced that, at the time the Claimant was terminated on 2/11/2018, the process was at the stage of considering possibilities of eliminating certain departments or terminating some employees due to a possible merger. This is because the document indicates that, the merger ofthe 2 companies was still at proposal stage moreover which had to be approved by the shareholders ofthe respective companies and this was not yet done. Therefore, the assertion that, the Claimant was terminated as result of a restructuring which had not yet been approved cannot hold.

### **The question then is whether the Claimant's termination was lawful?**

210 **o** 215 220 We have already established that, the Claimant was summoned for a meeting on 2/11/2018 and he was issued with a termination letter on the same date, on 2/11/2018 at 7.22 pm. There is no evidence on the record to indicate that, the Claimant had prior notice ofthe meeting or that he was aware ofthe reasons for the meeting. There was also no evidence to indicate that, he was given notice about the impending restructuring or that he would be affected by it. We have already established that, the restructuring process was not a justifiable reason for his termination and his aware ofthe said meeting. RW1 testified that, he had instructed Charles to deliver to a big client and *he needed everyone who could drive a manual car to be available to drive these cars for delivery...* Charles did not comply with these instructions because he had gone to visit a client out oftown, he then told Charles that it was a bad habit not to do what a team required ofhim because they operated as a team. He admitted that he met him after 5.00pm and he issued him with the termination letter at 7.22pm on the same date. It was very clear from the evidence adduced by RW1

that the Respondent did not have any basis for terminating the Claimant, and he was not accorded an opportunity to defend himself as provided under section 66 of the

225 Employment Act (supra).

We are satisfied that, the Respondent did not follow the basic tenets ofnatural justice as elucidated in **Ebiju James vs UMEME Ltd HCCS No. 133 of 2012,** which set out the principles as follows:

- *1. That notice of the allegations against the Plaintiffwas served on him and sufficient time allowedfor the Plaintiffto prepare a defense.* - *2. That the notice shouldset out clearly what the allegations against the Plaintiff and his right at the oral hearing were. Such rights would include the right to respond to the allegations against him orally and or in writing, the right to be accompanied at the hearing and right him to cross examine the defendant's witnesses ofhis own.. "*

None ofthe above principles was applied in the instance case. As already discussed, the reason that the termination was because ofrestructuring was found untenable in law, therefore his dismissal without any reason, and without giving him an opportunity to be heard in accordance with the principles of natural justice as provided under Article 44 of the Constitution, Section 66 of the Employment Act and Ebiju(supra). It is therefore, our finding that, the Claimant's termination was both procedurally and substantively unlawful.

## **ISSUE 2 Whether the withholding ofthe Claimant's terminal Benefits was legal and justified?**

245 It was submitted for the Claimant section 43(6) of the Employment Act 2006, entitles an employee who has been discharged from employment to be paid his or her terminal benefits with 7 days from the date oftermination. According to Counsel

the termination letter indicates that, the Claimant was entitled payment of i) his outstanding salary up to 2/11/2018, ii) 17.5 leave days, iii) savings from employment, iv) one month payment in lieu of notice, v) two months Ex- gratia payment and commission on sales. Counsel asserted that the Claimant's certificate indicated that he had savings amounting to Ugx. 5,025,000/- and Ugx.l 1,345,000/ in advances, but he left with nothing. He refuted the Respondent's assertion that the only reason the claimant was not paid was because he refused to hand over in accordance with the respondent's handover procedures. He also refuted the allegations that, the Claimant failed to do accountability which had accumulated since 2017, because these were advances that enabled him undertake his official duties.

260 Counsel for the Respondent in reply, insisted that some of the advances were to enable the claimant pay school fees and although CW2 Obunga Joseph testified that he had settled these advances, no evidence was adduced to that effect. He argued that in the absence of evidence that he paid his advances, he was only entitled to Ugx.5,000,000/- which was the balance after offsetting the said advances. He reiterated that, the claimant was not paid because he stubbornly refused to complete the formal and mandatory exit process. According to Counsel, the claimant did not even sign the handover certificate and only sent someone to return the car keys and laptop. It was his submission that the 5 million was available for him to collect. **^65**

The contention as we understood it was, whether the claimant had filled the form or not and whether his terminal benefits were correctly assessed.

270 After scrutinizing the record we, established that it was indeed a requirement for an employee who was exiting the Respondent to complete an exit process that included filling an exit form and this was not disputed. It was also not disputed that, all the items that were in the Claimant's possession were handed over to the Respondent's


officers as evidenced on the exit form marked CEX 2 on the Claimant's trial bundle.

275 However, the form did not provide for space in which the exiting employee was expected to sign.

280 285 290 We also found several vouchers regarding advances made to him, however, save for the advance for school fees, the rest were advances relating to his work as a sales person. It is our considered opinion that it would be imprudent for the Respondent to grant the Claimant new advances before he settled those that were outstanding. In fact, we found it inconceivable that, a reputable company such as the Respondent could operate its business in such a manner. We are not convinced that this could be condoned. Given that, the Respondent was the custodian of all documents relating to the Claimants employment and it had not provided a basis to disprove the Claimant's assertion that he paid, before receiving more, we have no reason to fault the Claimant for advances that were taken for purposes of executing his duties as a salesperson. Even ifthe Claimant did not adduce any evidence to indicate that, he had settled all the advances he owed, the onus was on the Respondent, to prove that what was advanced for purposes of doing his official duties was not offset and this was not the case.

In the circumstances it is our finding that he was entitled to Ugx.5,025,000/- and Ugx.l 1,345,000/= less Ugx. 1,500,000/- advanced to him for school fees amounting to **Ugx. 14,870,000/-**

#### 295 **ISSUE 3; Whether the Claimant was entitled to 60 liters of fuel for his office and personal use per week?**

Although the Claimant, claimed Ugx. 18,565,200/= as unpaid fuel allowance, a scrutiny of his employment contract indicated that fuel amounting to 60 liters per week would be advanced for work and his personal use. We are therefore inclined 300 to agree with RW2 Magombe that, the fuel was issued in accordance to the work that was to be done hence the varying amounts issued at different times based on the various vouchers they relied. Even ifit was one ofthe benefits stated in the contract of employment the fuel was pegged to business and private use, a scrutiny of the vouchers on the record established that, the amounts issued to him on varied. On some occasions he received more than 60 litres per week and on other he received less than 60 litres per week.

In the circumstances, we had no basis to hold that, fuel worth Ugx.l 8,565,200/- was withheld from him as claimed. It is denied.

**ISSUE How much commission on sale of vehicles and 4; motorcycles/accessories is due to the Claimant.**

310 315 **The Claimant claims Unpaid commissions amounting to** Ugx.**652,575,000/=** It was the Respondent's evidence, that an employee would only be entitled to commission once the sale is completed. Whereas REX 11 which the Claimant relied on as evidence, that he completed several sales, indicated the list of customers, the number of units, model and amounts in USD, it did not clearly show who was responsible for the sale each item listed and therefore who had a claim on the resultant commission.

The claimant fell short of proving this claim. We found nothing on the record to show that, he actually completed, these sales and therefore he was entitled to the resultant commission which was not paid. In the circumstances we had no basis to

make a finding that, he was entitled to commission amounting to **UGX 652,575,000/** as claimed. This claim therefore fails.

#### **ISSUE 5; What other remedies are the parties entitled to**

**General damages**

325 330 335 It is an established principle of this court that, an employee who is unlawfully terminated is entitled to compensation by an award of General damages in addition to other claims pleaded under the Employment Act and the contract of employment. However, the assessment ofthe quantum ofgeneral damages is done at the discretion of Court and it is based on the merits of each case. We are cognizant of the consequences of dismissal from one's employment, and the difficulty one finding alternative employment in addition to the embarrassment suffered as a result ofbeing rendered unemployed and believe that an award of general damages ,which are compensatory in nature and are intended to bring an aggrieved party to as near as possible in monetary terms to the position he or she was before the unlawful termination is a sufficient remedy. The Claimant in the instant case had served the Respondent from 01/02/2016 to 2/11/2018 when he was unlawfully terminated. Ele was earning Ugx.2,500,000/- per month plus other benefits as stipulated in his contract ofemployment. He prayed for Ugx.l 00,000,000/- as General Damages. We believe that an award of Ugx.25,000,000/- is sufficient as General Damages.

#### **Aggravated damages,**

- 340 345 **It** is trite that, Aggravated damages are "extra compensation to a plaintiff for injury to his feelings and dignity caused by the way the defendant acted. They are awarded when aggravating circumstances exist in the act or intention ofthe wrongdoer. It is our considered view the manner in which the claimant who, on 2/11/2018, came to work normally only to be summoned for a meeting in the evening ofthe same day which he was not aware of and without disclosing the reason for the meeting and subsequently terminating him in the evening at 7.22 pm without any basis, in our considered amounted to 'aggravating circumstances" which entitles him to an award of aggravating damages amounting to **Ugx.7,000,000/-** - **Payment in lieu of notices.**

350 Having been unlawfully summarily terminated, the Claimant was not given notice. Considering Section 58(3) having served for 2 years and less than 5 years he was entitled to notice of ¹ month salary amounting to Ugx.2,500,000/-

#### Severance pay

- An employee who has been unlawfully terminated is entitled to payment of severance pay as provided under section 87 ofthe employment Act. However where there is no formula for its calculation as provided under section 89 of the employment Act, this court in **Donna Kamuli vs DFCU Bank LDC No. 002/2015,** provides for ¹ month pay for every year served, therefore the claimant who worked for 2 years and 8 months, he is entitled to Ugx.5,000,000/- . - 360 - Interest of 15 % per annum shall accrue on all the pecuniary awards from the date ofthis award until payment in full.

In conclusion, this claim partially succeeds in the terms above,. No order as to costs is made.

Delivered and signed by:

365 **THE HON. AG HEAD JUDGE, LINDA LILLIAN TUMUSIIME MUGISHA**

# **o PANELISTS**

**1. MS. HARRIET MUGAMBWA NGANZI**

- **2. MR. FX MUBUUKE** - 370 **3. MR. EBYAU FIDEL**

**DATE: 7/08/2023**