02 Feb National Labour Commission – V – First Atlantic Bank Limited [Unreported] [J4/62/2019] (2 December, 2020).
“There is a point of diversion between Redundancy occasioned under section 65(1) and 65(2) of Act 651: Redundancy under section 65(2) unlike under 65(1) mandatorily requires the employer to pay the employee Redundancy Pay”.
The employment of two workers were terminated by the Appellant Bank. The Letters of Termination stated that significant changes had occurred in the demands or skills and competencies required for the delivery of the Bank’s objectives, and as such their employment was terminated.
The Appellant Bank undertook to submit proposals for the negotiation of a Redundancy package with the labour representative of the affected employees. However, negotiations broke down due to the inaction of the Appellant Bank.
A complaint was lodged at the Labour Commission (the “Respondent”). The Respondent determined that the Complainants should be paid Redundancy Pay. The Respondent subsequently applied to the High Court to enforce its decision. The High Court dismissed the application on the grounds that the ruling of the Respondent was not justified in law since the conditions precedent for Redundancy were not proven. The Respondent appealed. The Court of Appeal unanimously upheld the appeal.
The Appellant Bank appealed to the Supreme Court. One of the grounds of appeal was: that the Court of Appeal erred in law in interpreting the Redundancy Pay provisions under section 65(2)(b) of the of the Labour Act, 2003 (Act 651) (the “Act”) as applicable to a person whose employment had been terminated under circumstances not involving a close down, arrangement, or amalgamation.
The Supreme Court had to define the scope of Redundancy and determine whether a person was entitled to Redundancy Pay in all circumstances under Section 65.
The Supreme Court held that Redundancy occurs in either of the following instances:
- when an employer contemplates the introduction of major changes in production, programme, organisation, structure or technology of an undertaking that are likely to entail terminations of employment of workers in the undertaking (Section 65(1) of the Act); or
- when an undertaking is closed down or undergoes an arrangement or amalgamation and this causes the severance of the legal relationship of worker and employer as it existed immediately before or the worker suffers any diminution in the terms and conditions of employment (Section 65 (2) of the Act).
The only point of diversion between the two types is that in the case of Section 65 (2) of the Act, the employer is mandatorily required to pay the employee a Redundancy Pay.
The Court interpreted Section 65(1) of the Act to be rather expansive in its prescription of the mitigating measures an employer may introduce (including but not limited to the payment of a Redundancy Pay) against the adverse effects of the termination on the employee.
The Appellant Bank’s scenario was under the scope of Section 65(1). However, since the Appellant Bank had agreed to pay the employees Redundancy Pay in mitigation of the effects of termination, the Appeal failed.
Insight: Redundancy does not always necessitate Redundancy Pay. Under Section 65(2) of the Act, Redundancy Pay is mandatory. However, under Section 65 (1), the employer is simply required to consult the trade union on measures to put in place to mitigate the effects of the termination on workers.