IN THE INDUSTRIAL RELATIONS COURT OF MALAWI
MATTER NO. IRC 149 OF 2000
SS RENT- A- CAR LIMITED RESPONDENT
R.Zibelu Banda (Ms.) Deputy Chairperson
Changa representing respondent
Ngalauka, Court Clerk.
Justification for dismissal- Reasons for dismissal- Redundancy- Compensation- Heads of compensation.
The applicant, Timothy Chiba Chiume, was employed by the respondent, SS Rent a Car Limited, on 18th August 1997 as an Accountant. On 10th July 2000, he was served with a letter of redundancy from the respondent. As redundancy package he received K12,735.22 comprising pay for 7 days worked in July, one months pay notice, refund of pension and interest on the same and unclaimed leave days. The applicant alleges that his dismissal was unlawful as proper procedure was not followed to declare him redundant. He also claims allowances and commissions to which he was entitled while in the employment of the respondent.
The undisputed facts of this matter were that the applicant was indeed employed as Accountant by the respondent until July 2000 when his services were terminated. All other facts alleged by the applicant were disputed by the respondents representative. The respondent disputed that the applicant was unlawfully dismissed. The respondent stated that the company was undergoing restructuring. They had four Accountants and they resolved to trim the number down to one. SS Rent A Car belonged to a group of companies. The four Accountants it transpired were working for each of these group of companies. According to this restructuring which only affected the accounts departments of the four companies, the applicant was the first to go. Later in cross examination the respondent stated that two other accountants were declared redundant at later dates whose details were not supplied to court.
Procedure for Redundancy
The termination of employment in this case occurred on 10th July 2000 before the Employment Act 2000 came into force. Therefore in determining this case the court will apply provisions of the Constitution, International Labour Organisation (ILO) Standards, case law, texts on Employment Law and internationally acceptable good industrial practice and procedure.
The respondent conceded that the applicant was not consulted before the redundancy. The respondent also conceded that they did not follow proper redundancy procedure as required under fair labour practices and in accordance with rules of natural justice. The respondent stated that in redundancy, the employer is supposed to inform the group that is selected for redundancy. They are supposed to warn them as to when they may be expected to have their services terminated. Relevant institutions like labour office, trade unions are supposed to be informed in advance. All these were not consulted except for the one meeting to which the applicant and other employees were informed of a pending restructuring program within the company. They were not told when the restructuring would commence, nor what criteria would be used to decide who should be dismissed for redundancy. They also conceded that the applicant was the only one who was declared redundant at this time.
Redundancy is where an employer terminates contract of an employment because the employees position no longer exists or is to be temporarily or permanently scrapped off due to operational needs of the employer. These situations are very common not only in Malawi but throughout the industrialized world. The situation in Malawi is more pronounced now than ever before because of liberalized market, which has seen a number of local companies not coping with foreign competitors thereby losing market and therefore reducing operations or shutting down completely.
The down side is that some employers have used the lacuna in national law on what constitutes fair termination on basis of redundancy, to carry out unfair dismissals. Fortunately, the Constitution of the Republic of Malawi 1994, provides for fair labour practices. What constitutes fair labour practices can be obtained from Labour Relations Act, the Constitution, ILO Conventions, case law, texts and practice.
The court would resort to other sources of the law to determine factors that constitute fair termination on grounds of redundancy. The International Labour Organisation (ILO) Conventions provide for fair labour practices. The various conventions of the ILO deal with various areas of labour law and provide necessary guidance on how to deal with situations like redundancy. The Convention Concerning Termination of Employment at the Initiative of the Employer is to the point. Malawi ratified this convention in 1986 and the convention forms part of Malawi Law. In Ngwenya and another V Automotive Products Ltd, IRC Matter Number 180 of 2000 (unreported) at 7, the Chairman of the court held that:
..section 211(1) of the Constitution provides .(that), any International agreement ratified by an Act of Parliament shall form part of the Law of the Republic if so provided for in the Act of Parliament ratifying the agreement. This is a Constitutional provision which mandates the courts to have recourse to International Labour Standards of the ILO ratified by Malawi.
The ILO Conventions can be used to interpret national law where there is a lacuna in national law or it is unclear or ambiguous. The chairman in the Ngwenya case supra, at 9, explained that:
labour courts use International Labour Standards to assist them in understanding and interpreting national legislation and to decide on matters of equity and fairness. In these cases ILO Standards do not so much serve as legal basis on which questions (of law) can be decided, but serve as a tool to clarify issues on which national law is unclear or ambiguous.
Further, there have been a number of decisions from the High Court of Malawi, where judges have recognized and applied ILO Standards in their decisions. For example in Bongwe V. Ministry of Education, His Lordship, Justice Ndovie, applied the ILO Convention and concluded that employers must observe rules of natural justice as provided in ILO Standards before termination of employment.
Article 13 of Convention No. 158 Concerning Termination of Employment at the Initiative of the Employer provides that:
1. When the employer contemplates termination for reasons of an economic, technological, structural or similar nature, the employer shall:
(a) provide the workers representatives concerned in good time with relevant information including the reasons for the terminations contemplated, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out;
(b) give, in accordance with national law and practice, the workers representatives concerned, as early as possible, an opportunity for consultation on measures to be taken to avert or minimize the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment.
Article 14 of the same convention provides that competent authority should be notified of the contemplated terminations in the same manner as in Article 13. Competent authority in the case of Malawi could be the Ministry of Labour and Vocational Training.
Indeed the practice so far in Malawi is that when companies contemplate restructuring that would involve termination of employment, they notify the Ministry of Labour and Vocational Training. (See the Policy Statement on Retrenchment and Recruitment Procedures and Practices of 2000.) In this statement companies and employers are advised to inform the Ministry of Labour and Vocational Training well in advance of any intended or planed retrenchments, redundancies, mass dismissals of employees en-masse.
The information that is required to accompany the notification includes:
The rationale and justification for such intentions; the time frame within which the exercise would take place; and a systematic modus operandi of how the exercise will be carried out
None of these were complied with by the respondent. No information was given on the nature of restructuring that was taking place or indeed who else was on the list of termination. In fact according to the applicant the restructuring affected only him in the whole company. Although the respondent averred that other employees were dismissed at a later stage, this could not vindicate them as they did not follow the practice and procedure on redundancies. The court must therefore decide basing on the information whether the dismissal was fair.
In making this determination the court must find, whether, the applicant was indeed terminated for reasons of redundancy or for other reasons. The court decide whether the procedure for declaring the applicant redundant was fair and in accordance with the rules of natural justice as provided in ILO Convention, practice and procedure.
What is redundancy?
In determining the first part, it is necessary to define redundancy. Since the national law does not provide for redundancy, the court will resort to text books and other sources for a definition that properly describes redundancy. For purposes of this case:
An employee who is dismissed is taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:
(a) the fact that the employer has ceased, or intends to cease, to carry on the business for the purpose of which the employee was employed by him, or has ceased or intends to cease to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business for employees to carry out work of a particular kind or for employees to carry out work of a particular kind in the place where they were so employed, have ceased or diminished or are expected to cease or diminish. See Croners Employment Law Bulletin, April 1994, at D160.
According to this definition, an employer must prove any one of following:
(i) the business has ceased or diminished either permanently or temporarily or intends to cease or diminish
(ii) the employee cannot perform the work at the place where s/he was so employed
(iii) requirements of the business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish
(iv) the employee was supposed to perform work of a particular kind which must cease or diminish or expected to cease or diminish
The applicant was declared redundant because of the persistent downtrend in business at the respondents company. The question is whether this reason fits in any of the above elements.
The first two elements are clearly not covered as the business still existed at the same place as before. The third element deals with requirements of the business. According to the respondent, there was never a time when the respondent company wanted to operate without the services of an accountant, therefore the business requirements of the respondents company still demanded the services of an accountant. Lastly, the applicant was employed to work as an accountant and the respondent stated that they could not operate without an accountant. Therefore, the work for which the applicant was employed, that of an accountant still existed.
The facts as provided do not fit in any way to the definition of redundancy. However, in the absence of proper guidance in our law it is still necessary to assess the facts in the light of the respondents procedure or lack thereof.
They said that the company was not doing well. Therefore there was need to trim the accounts section. The problem is that in the evidence of the respondent himself, there was nothing to trim in SS Rent A - Car. This is because there was only one accountant in that company. The respondent himself alluded to the fact that there were other companies which operated as a group and SS Rent A Car was one of the companies. Each of these companies including the respondent company had their own accountants, one each to be precise. Why was it necessary then to declare the post of the applicant redundant for the benefit of a group of companies to which the applicant was not a party?
The applicant was employed by the respondent and not by a consortium of companies. His rights therefore could not be infringed for the benefit of a group of companies to which he had no interest. His allegiance was with the respondent company and according to evidence the applicant discharged his duties diligently. He had never been accused of misconduct or incapacity at any time during his employment with the respondent. How could he then have contributed to the downtrend of the company if at all. SS Rent a Car is a big car hire organization, its downtrend can never be said to be attributable to one person.
The letter of redundancy was written on 10th July and according to the contents of that letter the applicant was dismissed with immediate effect. The letter was signed by a Personnel Officer for and on behalf of the respondent company. The respondent did not bring to court the person or group of persons who actually made the decision to declare the applicant redundant. Nor were there minutes or documentation to show that there were prior consultations where the applicant was selected for redundancy. The Employment Appeal Tribunal (EAT) of England in Bristol Channel Ship Repairers Ltd v OKeefe 2 All ER 258 in dismissing the employers leave to appeal observed that:
.there was no system of weighting or points or criteria prescribed which would enable those assessed to be arranged in order of priority. Or, if there was, not only was no document produced to show such a process, but no evidence was given describing how, where, when and by whom it was done.
In that case 35 employees were declared redundant. Thirteen of those employees initiated an action claiming that they had been unfairly dismissed and applied to an industrial tribunal for compensation. The tribunal held in favour of the applicants because the employers were unable to show who had taken the decision to dismiss the applicants, other that that the decisions were taken by senior management; nor was there any evidence as to what information the persons who dismissed the applicants had taken into account. The employer appealed against this decision but the EAT dismissed the appeal and denied them leave to appeal to the Court of Appeal.
The case before this court fits on all fours with the Bristol case supra. There was no evidence from the respondent to show why the applicant had to be dismissed at the time he was dismissed. There was no evidence as to what criteria they used to select the applicant to be dismissed among all other staff. There was no evidence that the applicants performance was assessed and that information was used to dismiss him. In short there was no criteria that the respondent used to select the applicant for redundancy among other employees including those other accountants in other companies. This court finds on that basis that the dismissal was not based on redundancy.
Reason for dismissal.
The applicant produced and tendered a document which was positively identified by the respondent as having been prepared by one of the employees of the respondent and endorsed by the respondents former chairman and Managing Director a Mr. Sing. He was presented with a claim form for transport, efficiency and house allowances for the applicant. When Mr. Sing saw this form, he wrote in his own handwriting across the form the following words:
N/A ; 1) Too many absenteeism; Discontinued from service
The court interprets N/A to meant (Not Applicable).
The interesting thing about this document was that it was signed on 10th July, 2000. On this date the applicant was at home recuperating from illness. He had been discharged from hospital the previous day. He had only been away due to this illness for two days. The respondent was aware of the reason why the applicant was absent on that day.
The first effect of that endorsement, was that the applicant did not receive his allowances as claimed for work he had already performed the previous month. The money claimed was K3740.80.
The second effect was that the directive Discontinued service was complied with by the respondents servants or agents who immediately discontinued the services of the applicant.
The respondent was asked to prove to court that the applicant had too many absenteeism, but was not able to produce any evidence either in the form of a witness or documents. He had been asked by the registrar of this court at pre hearing conference to bring the attendance register to court. He defied this order and failed to produce or bring to court any attendance register. The respondent failed to substantiate the allegations that the applicant was in the habit of absenting himself from work without permission. Therefore the court found that this allegation was not true.
The burden of proving the reason for dismissal is on the respondent. If the respondent cannot prove the reason for dismissal there is a conclusive presumption that the dismissal is unfair. (See Earl v. Slater & Wheeler Ltd 1 WLR 51 at 55.)
Further, the constitution in section 43 provides that:
Every person shall have the right to-
(a) lawful and procedurally fair administrative action, which is justifiable in relation to reasons given where his or her rights, freedoms, legitimate expectations or interests are affected or threatened; and
(b) be furnished with reasons in writing for administrative action where his or her rights, freedoms, legitimate expectations or interests if those interests are known.
The applicant like any other employee earned his living through his employment. He had legitimate expectations in the position he held that it would provide him with his lifes and those of his familys needs. It is unlawful for an employer to just wake up one day and tell his employee that his contract was terminated without valid reason. (See Dr Chawani v. Attorney General (MSCA Civil Appeal no. 18 2000) (unreported)) and generally Blantyre Netting Company v. Chidzulo MSCA Civil Appeal No.17 of 1995 (unreported).
Further, good industrial practice demands that there must be justification for dismissal. The employment of an employee shall not be terminated by an employer unless there is a valid reason for such termination connected with his capacity or conduct or based on the operational requirements of the undertaking.
No valid reason was given to the applicant for the termination. His capacity and conduct were impeccable. The respondent had no single bad word to say against the applicant. The applicants personal file was untainted, he was blameless.
The respondents operational requirements did not necessitate the dismissal of the applicant. The respondent conceded that he needed an accountant to do accounts for SS Rent a Car. The applicant had been employed to perform that particular work and had performed to the best of his ability until the day he was served with the dismissal letter.
The court finds that there was no restructuring at the respondents company. If there was one it was done illegally. The respondent failed to provide reason for dismissing the applicant and failed to afford him an opportunity to be heard. This was contrary to section 43 of the Constitution, Articles 13 and 14 of Convention number 158 of ILO and rules of natural justice. Therefore the court finds that the dismissal was unfair.
The law provides that where an employee succeeds in a claim for unfair dismissal the court shall consider from a number of remedies to award the employee. In considering which remedy to award the court shall first consider the remedy of reinstatement. In deciding this remedy the views of the employee shall be taken into account. The applicant looked a knowledgeable person who knew what he wanted from this court. In fact he did not wish to be reinstated as he feared for his life. In evidence he wanted the respondent to compensate him for the unfair dismissal. Where reinstatement is not an option, the remedy of compensation shall be applied.
The factors to be considered when deciding an award of compensation under the section are:
§ Just and equitable;
§ Loss sustained in consequence of the dismissal;
§ Loss to be attributable to the action of the employer; and
§ Employees contribution to the dismissal
The court shall endeavour firstly, to arrive at a sum of money that is just and equitable to compensate the applicant fully, but not to award a bonus, save in special situations where the employer refuses to reinstate the applicant if so ordered by court.
Secondly, the amount to be awarded is that which is just and equitable in all circumstances, having regard to the loss sustained by the applicant. It must be borne in mind that the court has wide discretion in determining a just and equitable compensation having regard to the loss. However, the applicant must show the loss, which he has suffered due to the dismissal and must show that the loss is attributable to the action of the respondent. It was thus put in Norton Tool Co. Ltd. V. Tewson 1WLR 45 at 49:
This does not mean that the court or tribunal can have regard to other matters, but rather that the amount of the compensation is not precisely and arithmetically related to the proved loss. Such a provision will be seen to be natural and possibly essential, when it is remembered that the claims with which the court and tribunals are concerned are more often than not presented by claimants in person and in condition of informality. It is not, therefore, to be expected that precise and detailed proof of every item of loss will be presented, although, after making due allowance for the skills of the persons presenting the claims, the statutory requirement for informality of procedure and the undesirability of burdening the parties with the expense of adducing evidence of an elaboration which is disproportionate to the sums in issue, the burden of proof lies squarely on the applicant
The informalities and lack of legal presentation in industrial court mentioned in the above case apply in our court especially be virtue of provisions of the Labour Relations Act 1996, sections 73 and 71 of the said Act. Therefore the position expounded by the court in Norton Case is the same position that applies in Malawi today at this court. Basing on Norton case, this court concluded that the applicant must be awarded compensation with is just and equitable having regard to the loss he sustained as a result of the dismissal.
The applicant proved in detail his entitlements which were withheld. He claimed for unpaid allowances for housing, transport, efficiency bonus and commissions upon successfully collecting debts for the company. These were not priviledges as alluded to by the respondent because of the following reasons:-
Applicant was entitled to house, transport, efficiency and bonus allowances by virtue of contract. He was able to produce the contract document, which, was not disputed by the respondent. Applicant therefore proved that the respondent owed him money for allowances for six months. It is ordered by court that these unpaid allowances be paid to the respondent.
The respondent earned commission for debt collection. This was the practice that applied in the organization for all debt collectors. However on one occasion he was only paid part of the commission. He proved that the respondent owes him the balance and the court orders that this balance be paid.
None of the parties mentioned the issue of severance allowance. The letter of dismissal outlines the benefits that the applicant received at dismissal. There was a refund of pension and equivalent of one months salary as notice. There is no mention of severance allowance. The court orders that the parties attend court in chambers to explain the position on severance allowance. An employee is entitled as matter of law to severance allowance. Its absence in terminal benefits must therefore have a valid explanation, without which the court shall order that the applicant be paid severance allowance.
The awards made above do not constitute compensation, these are sums of money which the applicant was entitled to as of right at termination of employment. On the other hand, compensation is a sum of money paid to compensate the applicant for unfair dismissal. The court has a duty to show how the compensatory award is made up.
There is not much from evidence that shows the loss that the applicant suffered as a consequence of this dismissal. This could have arisen out of ignorance of what constitutes loss in terms of actions of unfair dismissal. The applicant concentrated on his withheld allowances but nothing on what he had lost as a result of the dismissal. It must be borne in mind that the loss that the section is referring to does not include injury to pride or feelings. The loss must be related to the consequences of lost job. For example, the Norton Case considered, Immediate loss of wages and future loss of wages as heads of compensation. Croners Employment Law Bulletin,( November 1993) adds loss of pension benefits among other heads.
(1) Immediate loss of pay: The applicant must show that he lost pay as a result of the dismissal. If he was re-employed soon after dismissal, this factor will be taken into account by assessing when he got employed elsewhere and what his pay was. The assessment according to Croners Employment Law Bulletin (November 1993) at 12 is from the date of dismissal to the date of judgment of the court.
(2) Future loss of earnings: The court will assess compensation under this head if the applicant is unemployed at the time of hearing and will take into account the labour market, personal characteristics of the applicant, whether he is in a state that he can be re employed. The court must take care not to regard the contract of employment as contract for life. Therefore the applicant cannot be paid future wages for the rest of his life or until retirement.
(3) Loss of pension benefits: The court will consider whether the applicant was on company pension and whether if he has secured another employment this facility is offered. Otherwise the court would make an award for loss of enhancement of the pension benefits, which the applicant would have earned if his employment was not terminated at the time that it did. The court may also consider loss of employers contributions if the dismissal is such that the applicant only receives his own contributions and not the contribution of the employer if that was the case. This will depend on the evidence as adduced by the applicant.
As stated earlier by, this court, the onus is on the applicant to prove that the dismissal has occasioned loss and the loss is attributable to the action of the employer. The above heads only provide some examples of loss that is capable of being proved.
In conclusion the court orders that the parties appear in chambers to allow the applicant an opportunity to prove his loss for purposes of compensation. In must not be forgotten that in all assessments for compensation the court must show how it arrived at the sum that it awards. The court is allowed to award any sum that is just and equitable.
Assessment of Terminal Benefits
Assessment of terminal benefits, that is, the allowances shall be done in chambers on a date to be fixed.
Pronounced in open Court this day of ..2003 at LIMBE.
R. Zibelu Banda (Ms.)