[2021] UGIC 46

# **THE REPUBLIC OF UGANDA IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA LABOUR DISPUTE APPEAL NO. 36 OF 2019 [ARISING FROM KCCA/CEN/LC/133/2017]**

# **BETWEEN**

# **UGANDA TELECOM LIMITED (IN ADMINSTRATION) …………..……….. APPELLANT**

#### **VERSUS**

**ABUKHZAM ALI SALIM HAMDI…………………………………….………. RESPONDENT**

## **BEFORE**

1. Hon. Head Judge Ruhinda Asaph Ntengye

#### **PANELISTS**

- 1. Ms Adrine Namara - 2. Ms. Suzan Nabirye - 3. Mr. Micheal Matovu

## **AWARD**

This is an appeal from the decision of Ms Irene Nabumba, a labour officer sitting at Kampala City Council (Central).

The background of the appeal is that the respondent was employed by the appellant as a Mobile Network Engineer on 1/11/2011 under a contract for 2 years. Subsequently the contract was renewed under various periodical terms and additional terms of conditions. Eventually the renewal was from 1/11/2010 up to 31/10/2018 with an amendment to the effect that the notice period before termination would be 2 months or payment in lieu of notice of 2 months' gross salary. On 28/4/2017 and 22/5/2017 (according to the respondent) the appellant went into provisional administration later culminating into full-fledged administration.

Following the appointment of an official receiver as the administrator and in order to rationalize operational costs, the respondent's contract was revised to reduce his salary to 10,000,000/= per month which was rejected by the respondent. Following this rejection of the new terms of employment, the contract of the claimant was terminated by letter dated 6/6/2017. When the claimant lodged a complaint to the labour officer on 19/6/2017, the appellant raised a preliminary objection contending that the labour officer had no jurisdiction to entertain the claim since it was governed by the insolvency act. The labour officer overruled the appellant who filed an appeal to this court which dismissed the appeal and sent back the file for the labour officer to hear the claim on merits. The labour officer, Ms. Irene Nabbumba heard the parties and delivered her Award against the appellant and granted the respondent the following remedies:

- (a) Payment in lieu of notice of USD 9,000/= - (b) Severance allowance of USD30,000/= - (c) An order for production of his NSSF statement indicating remittances made during the period 2009-2017. - (d) Outstanding leave days not taken USD 1,472. - (e) Annual flight benefit of USD 3,100 - (f) Repatriation of USD 9,100 - (g) Compensation for unlawful termination from date of termination till Award USD 121,500 - (h) Basic compensation and additional compensation USD 18,000

The appellant being dissatisfied with the labour officer's Award filed this appeal with the following grounds:

- 1. That the Labour Officer erred in law when she held that the Respondent was unlawfully and unfairly terminated from employment by the Appellant. - 2. That the Labour Officer erred in law when she awarded USD\$30,000 as severance allowance to the respondent. - 3. That the Labour Officer erred in law when she awarded USD\$ 1472 as payment for outstanding annual leave not taken to the Respondent. - 4. That the Labour Officer erred in law when she awarded USD\$ 31,000 as annual flight benefit to the Respondent.

- 5. That the Labour officer erred in law when she awarded repatriation allowance of USD\$ 9100 to the respondent. - 6. That the Labour Officer erred in law when she awarded USD\$ 121,500 as compensation for unlawful termination from the date of termination of the Respondent's contract till the award. - 7. That the Labour officer erred in law when she awarded USD\$ 13,000 as additional compensation for unlawful termination to the respondent.

## **REPRESENTATIONS**

The appellant was represented by Mr. Wadembere Nuhu from the legal department of the appellant while the respondent was represented by Mr. Mukuve Mugaga from M/s. Mukuve & Co. Advocates.

## **SUBMISSIONS**

It was the submission of counsel for the appellant on the first ground of appeal that an employer may terminate the employee's employment for a reason or for no reason at all. Counsel relied on the case of **Okori Vs Uganda Electricity Board (1981) HCB 52, and Hilda Musinguzi Vs Stanbic Bank (U) Limited SCCA No. 28/2012** which according to counsel was relied upon by Justice Irene Mulyagonja while determining the case of **Bank of Uganda Vs Joseph Kibuuka & 4 Others, Civil Appeal 281/2016**.

Counsel argued strongly that in a letter dated 6/6/2017 terminating the contract of the claimants, valid reasons were given for the termination and that therefore the termination was justified.

In reply on ground one of the appeal, counsel for the respondent argued strongly that the respondent was unlawfully terminated for failure to give him notice as provided for in the contract and under **Section 58(3) of the Employment Act.** counsel contended that regardless of the reasons for termination or lack thereof statutory notice must be given to an employee prior to termination in the absence of which the termination is unlawful and illegal. According to counsel the fact that the appellant did not appeal the labour officer's grant of payment in lieu of notice meant that the appellant was aware that the termination was illegal and unlawful. He submitted that a company being under insolvency administration was not an excuse to breach contractual obligations.

On the second ground, the appellant argued that the claimant's contract commenced on 1/11/2011 giving him a service of 6 years and not 8 years, the period used by the labour officer to compute the severance allowance. It was further submitted for the appellant that the respondent having pleaded for USD 13,500, the labour officer had no legal basis to Award USD 30,000. Counsel relied on **Interfreight Forwarders Uganda Limited Vs East African Development Bank SCCA 33/2014** and **Nantayi Louis Vs Marie stopes LDC 193/2014.**

In response to the above, counsel for the respondent argued that a labour complaint was not a court pleading within the meaning of the **Civil Procedure Rules** and parties could not be necessarily bound by the same. According to counsel, calculation of severance allowance is a factual issue based on years worked and not necessarily on pleadings.

Counsel reiterated that the claimant worked for 8 years culminating into severance of 30,000 USD having worked from 2009-2013 while earing USD 3,000 per month and from 2013-2017 earning 4,500USD. He contended that his client was entitled to an additional 30,000 USD as a penalty in accordance with **Section 92 of the Employment Act.**

Finally counsel argued that ground two offended **Section 94 of the Employment Act** since it touched on matters of fact which were to do with the number of years worked and ought to be struck off.

On the third ground the appellant argued that in absence of evidence that the respondent applied for leave and that the same was rejected, he was not entitled to payment in lieu of leave. Counsel relied on the authorities of **Levi Malinzi Vs Uganda Printing & Publishing Corporation** and **Kangaho Silver LDC 050/2015 and LDC 276/2014** respectively.

In response, the respondent's counsel submitted that from the reading of the **Human Resource Policy Clause 19.3.3**, the claimant could only forfeit leave if he did not apply for it without acceptable reasons. According to counsel, at page 3 of the Award of the labour officer the appellant conceded that the respondent would have applied for leave had he not been prematurely terminated. Counsel argued that this was an acceptable reason for having not applied for leave.

On the fourth ground, it was argued for the appellant that the benefit of an annual flight to the respondent could only be availed to him during his term of contract.

Relying **Stanbic Bank Uganda Limited Vs Kiyimba Mutale SCCA 02/2010, c**ounsel argued that such a claim was a mere holiday which was speculative and could not be justified in law. He argued that since the employment ended before the close of the year and the employment contract did not specify which month of the year the benefit accrued, the respondent could not be entitled to the same.

In response, the respondent argued that the only argument made in the lower proceedings was that the year had not yet ended and that the claim was speculative. According to him the claim was not merely a holiday benefit as defined in the **Kiyimba Mutale** case but a contractual clause binding the appellant. Counsel emphasized that the contract was from 1st November 2016 to 6th June 2018 and no flight benefit was given to the respondent.

On the fifth ground, the appellant contended that the Award of USD 9100 was excessive and high as repatriation allowance. Counsel argued that the respondent did not prove that he was entitled to USD 9,100 but he was quick to add that a flight to the home of the respondent cost 1000/= USD. According to counsel USD 9,100 was not within "**reasonable travel expenses"** as provided for under the contract of service. Counsel insisted that the burden to prove entitlement to 9,00USD was upon the respondent.

In reply, counsel for the respondent argued that the issue of repatriation was a matter of fact and not of law requiring leave of court which was not sought for by the appellant. He submitted that the ground should be struck out. In the alternative counsel contended that any factual reservation on the cost of repatriation should have been raised in cross-examination and this having not been done the question was left intact. He considered the assertion that a flight to Tripoli costs \$1000 as from the Bar and speculative. Counsel asserted that flights to Tripoli are not direct and that one has to fly to Istanbul by Turkish Airlines first at \$1,600 and then the same amount to Tripoli.

On ground number 6, the appellant contended that under **Section 78 of the Employment Act** the labour officer could only award a basic compensation for four weeks' wages.

Relying on **Stanbic Bank Vs Kiyemba Mutale SCCA 02/2010**, counsel contended that a claim for compensation for reminder of 4 years on contract was speculative. Counsel insisted that the labour officer erred when after pointing out that under **Section 78 of the Employment Act** he was authorized to grant four weeks' wages as compensation, he went ahead to allow USD121,000 which was not even pleaded.

In answer to this ground, counsel relied on **Uganda development Bank Vs Florence Mufumba Civil Appeal No. 241/2015, arising from LDC 158/2014 i**n support of the award of compensation for the remainder of the period till date of the Award.

On ground No. 7, although the appellant conceded that the labour officer was empowered to award additional compensation, counsel argued that the circumstances of this case did not warrant such remedy, especially when the appellant was under administration.

In response, counsel for the respondent argued that the award of addition compensation was a question of fact having been a discretion of the labour officer.

# **DECISION OF COURT**

1) **Whether the labour officer erred in law when he held that the respondent was unlawfully and unfairly terminated from employment**.

> Counsel for the appellant relied on the case of **Okori Vs Uganda Electricity Board (1981) HCB 52** and **Bank of Uganda vs Joseph Kibuuka & 4 Others Civil appeal 281/2016 (Court of Appeal)** where according to counsel Justice Irene Mulyagonja relied on **Hilda Musinguzi Vs Stanbic Bank (U) Limited SCCA 28/2012** for the legal proposition that an employer may terminate the employee's employment for a reason or for no reason at all.

> The question whether or not an employer can terminate employment of an employee without any reason was settled by the Employment Act in **Section 68** which demands proof of a reason before termination/dismissal.

In **Hilda Musinguzi Vs Stanbic Bank (U) Limited SCCA 28/2012**, the Supreme Court was clear on this point when it stated at page 12 of the lead judgement of Hon. Justice Mwangusya JSC (as he then was) that:

**"The respondent has in my view been rightly held accountable for the loss in the branch and as already stated, the right of an employer to terminate a contract cannot be fettered by the court so long as the procedure for termination is followed to ensure that no employee's contract is terminated at the whims of an employer and if it were to happen the employee would be entitled to compensation."**

This case is not for the legal proposition (as counsel for the appellant seems to suggest) that an employer can unreasonably and without justification terminate a contract of an employee just because there is a clause in the employment contract that allows payment in lieu of notice. The termination of Employment convention, No. 158 of 1982 reinforces the above decision in Article 4 which provides:

"**The employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking establishment or service".**

The authority of **Hilda Musinguzi** and the **Employment Convention No 158** read together with **Section 68 of the Employment Act** give credence to the fact that reasons of termination are given to the employee not in the termination letter but much before the termination.

Whereas we accept the contention of the appellant that Administration is an insolvency procedure allowing the insolvent company to continue in business as it reorganizes itself, we do not accept the argument that the administrator in the process may do away with legal requirements pertaining to termination of employment of employees. Terms of an employment contract in our view do not automatically change to the disadvantage of the employee by a stroke of a pen after the employer is put under receivership. The administrator is expected to inform the employee in good time (which in terms of **Section 81 of the Employment Act)** is not less than four weeks. Although this section of the law applies to collective termination of not less than 10 employees, we think that it equally applies to situations where the employer genuinely intends to reorganize the business like in the instant case. The respondent in the instant case was entitled to be notified about the circumstances that would lead to alteration of his terms of employment before being terminated. To our minds altering terms of employment in the manner that the administrator did in the instant case, was a form of restructuring and therefore doing it without due regard to **Section 81 of the employment Act** was illegal irrespective of the fact that the appellant was under insolvency.

In addition to altering the terms of the contract relating to salary, thus breaching the contract of service, the appellant terminated the respondent's contract without issuing him the requisite notice under **Section 58 of the Employment Act.** The,authority of **Uganda Development Bank vs Florence Mufumba civl Appeal 241/2015(court of Appeal)** is for the legal proposition that no employer has a right to terminate a contract of service without notice or with less notice than what is provided for in the statutory provision or in the contract unless such employee has fundamentally breached the contract of service.

Given the above reasons, we do not find any fault with the labour officer's holding that the respondent was unlawfully and unfairly terminated.

The rest of the grounds relate to the remedies which the labour officer granted to the respondent.

### **a) Severance allowance**

The complaint of the appellant was that the Labour Officer awarded a figure not pleaded in the complaint. According to counsel the respondent was bound by his pleadings and so he could not get what he did not plead.

We agree with the submission of the appellant that a complaint before a labour officer is not "a pleading" attributed to the meaning in the **Civil Procedure Rules** so as to be strictly binding on the complainant. We also agree that calculation of severance is a factual issue based on years worked and not necessary on the pleadings. We therefore agree with counsel for the respondent that the calculation of severance allowance having constituted a factual issue should have been argued only after seeking for leave in accordance with section **94 (2) of the Employment Act**. Accordingly, we leave intact the allowance of 30,000USD since the respondent worked from 2009 – 2013 at USD 3000 per month and from 2013 to 2017 at 4,500USD per month and the calculation is in accordance with the formula in the decision of **Donna Kamuli Vs DFCU Bank Labour Dispute Claim 02/2015.** As for the penalty for failure to pay severance, this Court in **Ugafode Mcrofinance vs Mark Kyaribona LDA 034/2019** held that an employer cannot be said to have committed an offence under **Section 92 of the Employment Act** if such employer has not paid severance for the reason that the liability to pay was still under contention in the courts of law. The same was held in the case of **Umeme vs Harriet Negesa LDA 072/2018**. Therefore, no penalty could arise in the instant case.

### **b) Outstanding Annual Leave**

The complaint of the appellant is that the respondent did not show that he applied for leave and that the said application was rejected by the respondent. Whereas it is true that this court in **Mbiika Dennis Vs Centenary Bank, Labour Dispute Claim 023/2014** and in other cases held that an employee can only be granted payment in lieu of leave if he/she proved that he/she applied for the

leave but it was rejected, it is also true that this principle applies in cases where an employee seeks such payment in respect to previous calendar years.

Section 54 (5) of the Employment Act provides

*"An employee is entitled to receive upon termination of employment, a holiday with pay proportionate to the length of service for which he/she has not received such a holiday or compensation in lieu of the holiday."*

In view of the entitlement by an employee to a holiday of 7 days in respect of each period of a continuous 4 months service during a given calendar year as prescribed under **Section 54 (1)(a) of the Employment Act**, this Court in the recent case of **Ugafode Microfinance Ltd(MDI) Vs Mark Kyoribona L. D. A 034/2019** held that if before a given calendar year elapses and an employee is terminated having not taken his leave, such employee is entitled to the number of days he ought to have taken up to the time of termination.

In the instant case the respondent was terminated on 7/06/2017 and was therefore entitled to the 7 days leave for the consecutive four months he served the respondent before termination. He was earning USD 4,500 per month which translates to USD 150 per day. This means for 7 days he was entitled to USD 1,050 which we hereby grant.

### **c) Annual flight benefit**

The complaint of the appellant was that the respondent could only benefit during the existence of the contract and not after termination. In any case the appellant contended that the respondent having been terminated before end of year it was possible that this benefit could have been offered at any time but for the termination given that there was no definite period when the benefit was due. According to Counsel this made the claim speculative and unjustified.

### **Clause 4 (a) of the contract of service** provided

*"The company will provide you and your wife and depend ant children one round trip economy per year from Uganda to your home base………"*

We agree that the above clause was effective and could only be invoked during the existence of the contract of Service. The contract was terminated before the respondent was offered the benefit. In line with **Stanbic Bank Vs Kiyinde Mutale (Supra**) we think this benefit is not payable as if the respondent was still in the service of the appellant. We form the opinion that the loss of the benefit as a result of unlawful termination could only be considered as court assesses general damages suffered by the respondent. This ground therefore fails

# **(e) Repatriation.**

The Employment Act under Section 39 provides:

# **"Section 39 Repatriation**

- (1) An employee recruited for employment at a place which is more than one hundred kilometers from his/her home shall have the right to be repatriated at the expense of the employer to the place of engagement in the following cases - **a) On the expiry of the period of service stipulated in the contract;** - **b) On the termination of the contract by reason of the employee's sickens or accident;** - **c) On the termination of the contract by agreement between the parties, unless the contract contains a written provision to the contrary; and** - d) **On the termination of the contract by order of the labour officer, the Industrial court or any other court**."

It is our firm view that unless the circumstances surrounding the termination of employment constitute any of the above situations and unless the contrary is specifically provided for in the contract of service, no repatriation allowance ensues upon termination.

In the instant case, the termination of the respondent was as a result of the breach of contractual terms by the appellant which was not envisaged under the above section of the law. However, on perusal of submissions of the appellant at page 10, we note that it is conceded that under **Clause 6 of the Contract of Service** of the respondent the respondent was entitled to repatriation for him, his 4 children and wife. Counsel's contention was about the amount awarded in repatriation.

We accept the submission of the respondent that the quantum of repatriation was a matter of fact that required leave of court for the appellant to be able to submit on it. In the absence of such application for leave and a ruling on the same this ground of appeal can only be struck out and the repatriation allowance by the labour officer left intact.

## **(f) Compensation for unlawful termination from date of contract to date of Award.**

Although this court held in **Florence Mufumba Vs Uganda Development Bank LDC 138/2014**, that an employee was entitled to payment of special damages in salary arrears from date of termination to date of Award, in subsequent cases of **Simon Kapiyo Vs Centenary Bank LDC 30/2015, Equity Bank Vs Musimenta Mugisha Rogers LDA 26/2007, Blanche Byarugaba Kaira Vs AFNET LDR 131/2018 and chandia Christopher Vs Abacus Pharma (Africa) Ltd. LDR 237/2016**, this court was of the view that the Mufumba case was decided in per in curium having not taken into account **Section 41 of the Employment Act** which provides for salary to an employee only for the work done in the course of Employment. Accordingly our view is that the court may only take into account the fact of loss of future income as it determines general damages. Accordingly it was in error that the labour officer ordered compensation up to time of the Award which is hereby set aside.

### **(g) Additional compensation for unlawful termination**

The complaint of the appellant is that the labour officer failed to take into account circumstances required of him under **Section 78(2) of the Employment Act** as he determined the additional compensation. The inclusion of additional compensation in the award is indeed a discretionary matter within the powers of the labour officer. We agree with the submission of counsel for the appellant that this discretion was exercisable taking into account all the circumstances surrounding the termination of employment, particularly those specified in the above section of the law. Taking into account the value of severance allowed and the fact that the appellant was undergoing administration we agree that additional compensation was not called for. Accordingly we set aside the order of additional compensation.

### **(h) General Damages**

No doubt the award of general damages is in the discretion of the court taking into account various factors including the nature of termination, how much the employee was earning including privileges and benefits, how long the contract was yet to elapse, and whether the employee tried to ameliorate the loss of employment. Given all these factors and especially the fact that the appellant was in insolvency administration, we hereby grant 15 million shillings as general damages.

In conclusion the appeal partially succeeds with the following orders/declarations:

- 1) The respondent was unlawfully and unfairly terminated. - 2) The Order of the labour officer of 9,000 USD as payment in lieu of notice is hereby sustained.

- 3) The order of severance of 30,000 USD by the labour officer payable to the respondent is hereby sustained. - 4) The order of the labour officer of 1,472USD relating to outstanding annual leave is hereby set aside and substituted for an order of 1,050USD. - 5) The order of the labour officer relating to annual flight benefit of USD 31,000 is hereby sustained. - 6) The order of the labour officer of 9,100 USD relating to repatriation allowance is hereby sustained. - 7) The order of the labour officer of USD 121,500 relating to compensation for unlawful termination from the date of termination is hereby set aside. - 8) The order of the labour officer of USD 13,500 as additional compensation is hereby set aside. - 9) The respondent is hereby awarded 15,000,000 as general damages. - 10) No order as to costs is made.

### **Delivered and signed by:**

| 1. | Hon. Head Judge Ruhinda Asaph Ntengye<br>……………. | | |-----------|-------------------------------------------------|-----------| | PANELISTS | | | | 4. | Ms Adrine Namara | ……………………. | | 5. | Ms. Suzan Nabirye | ……………………. | | 6. | Mr. Micheal Matovu | ……………………. |

Dated: 24/09/2021