Zambia Institute Of Human Resource Mangement

SCENARIO BUILDING FOR CRITICAL ANALYSIS AND DECISION MAKING ON REDUNANCY AND RETRENCHMENT (SINGUMBE KEITH MUTUPO AND B.P. ZAMBIA LIMITED)

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REDUNDANCY

Section 26B of the Employment Act, Cap 286 of the Laws of Zambia provides redundancy for employees under “Oral Contracts”, an aspect that has remained intriguing in any discourse on the growth of labour law jurisprudence in Zambia. There is also the assessment and determination of redundancy packages for employees being laid off under this doctrine.

Section 26B (3) of the Zambian Employment Act provides that:-

“An employee whose contract of service has been terminated by reason of redundancy shall be paid a package as agreed between the employer and the employee or as determined by the Minister whichever is greater.”

Redundancy Packages under Statutory Instruments number 1 and 2 of 2011 (Kindly get copies of these important Statutory Instruments)

Section 9 of S.I. Number 1 provides for:-

one month notice

payment of 2 months basic salary for each completed year of service

Section 10 of S.I. Number 2 provides for:-

one month notice

payment of 2 months basic salary for each completed year of service

With the above pieces of legislation in view, how would a domestic worker be paid, when declared redundant? This poses a moot question for more analysis and introspection.

EMPLOYEES EXCLUDED FROM THE ABOVE REDUNDANCY PROVISIONS

The following categories of employees are precluded from being declared redundant under the above provisions:-

Where business is carried out by reason of bankruptcy or compulsory liquidation;

Casual employees

Employees under a fixed term of contract, and time expires at the same time;

Employees on probation; and

Where an employee is offered alternative employment and has refused the offer.

The above scenarios pose a challenge on decisions to declare employees redundant.

What have been some of the decisions made when laying off workers in your firm or organization that have been congruent with the provisions of the above law?

When the crunch comes and redundancy is contemplated in the Boardroom, there is need to have recourse to the law, and avoid the danger of breaching laid out statutory provisions.

RETRENCHMENT

How often have decision to “retrench” workers been made in a company or organisation? Retrenchment has been

a common doctrine in Zambia for some time now, and it is usually resorted to for various reasons, ranging from

poor performance of workers to emergent liquidity conditions in a company.

The concept of retrenchment in Zambia has more or less been known to be a civil service phenomenon,

and is not provided for under the Zambian Employment Act.

The question is, how do companies or organisations carry out retrenchment exercises, if at all any? It would be

important to share information on the methods used to lay-off workers under the above doctrine to see whether there

could be some legal basis for the phenomenon which resounds in most every board meeting when the going is getting

tough and “some of the employees must go”. In Kabwe v B.P. (Z) Ltd. (1995 - 1997) Z.R. 218, an employee opted to be retired early. His salary

was reduced by the employer based on which his retrenchment package was calculated and paid out to him.

The court in that case held that, the employee was declared redundant at the reduction of his salary,

and he ought to be paid his early retirement package based on his new salary.

What inferences can one draw from the BP v Kabwe case, referred to in Singumbe Mutupo? The Singumbe

case is fully produced below and it is advisable to go through it and follow the court’s ruling on the matter. One

of the interesting aspects of the case is the appellant’s prayer to purchase company’s personal-to-holder car when

he had not used it for the required period (at the time) of 5 years

SINGUMBE KEITH MUTUPO AND B.P. ZAMBIA LIMITED

SUPREME COURT

SAKALA, A.G.

1ST AUGUST 2000 AND 24TH NOVEMBER, 2000

(S.C.Z. APPEAL NO. 13/2000)

Flynote

Employment Law - Reduction in Salary without employee's consent -Employee deemed to be declared redundant or an early retirement from that date.

Headnote

The respondent had reversed a general salary increase, which resulted in the appellants salary being reduced to the level prior to the increase. The appellant opted to apply for early retirement and the respondent offered him a retirement package which was based on his salary prior to the increase. The appellant brought an action against the respondent seeking a declaration that he was entitled to the package calculated on his increased salary. He referred to the Kabwe V. B.P. case as his authority. The court dismissed his claim and attempted to distinguish this matter from the Kabwe case.

Held:

  1. (1)          This case was on all fours with the Kabwe V. B.P. case.
  2. (2)          If an employer varies a basic condition or basic conditions of employment without the consent of the employee then the contract of employment terminates and the employee is deemed to have been declared redundant on the date of such variation and must get a redundancy payment if the conditions of service provide for such payment.
  3. (3)          If the conditions of service provide for early retirement and not redundancy then the employee should be deemed to be on early retirement.
  4. (4)          The appellant’s contract of employment was therefore terminated on the date his salary was decreased and his benefits ought to have been calculated on the increased salary applicable to him then.

Cases referred to:

  1. Kabwe v B.P. (Z) Ltd. (1995 - 1997) Z.R. 218.
  2. Marriot v Oxford and District Co-operative Society Ltd. (1969) 3 ALL E.R. 1126.

For the Appellant,           W. Mubanga,   Permanent Chambers.

For the Respondent,      A. Shonga, Shamwana & Co.

___________________________________

Judgment

SAKALA, A.G. D.C.J, delivered the judgment of the court.

This is an appeal against a judgment of the High Court dismissing the appellant's claims: for arrears of salary increments, from 1st July, 1994 to 31st August, 1994, with interest on the said arrears at the rate of 120 percent from August 1994 until payment, a declaration that the plaintiff's terminal benefits be calculated as per statutory instrument No. 99 of 1994 and on the revised salary, and a declaration that the plaintiff buys his personal-to-holder vehicle in terms of clause 2 of a letter dated 3rd June 1993 and for damages for breach of contract.

The facts of the case are that the appellant was employed by the respondent from 1st December to 1981 to 30th August, 1994. During this period, he worked in various capacities until he reached the position of Senior Human Resources Manager, the post he held until his early retirement. He served under Management Team Conditions of Service dated 1st April 1993. In 1994, there was a general salary increase for all employees of the respondent. By a letter dated 13th May 1994, the respondent's Managing Director advised the appellant of the increase of his annual basic salary to K35, 437,500 million with effect from 1st April 1994. The revised increased salary was paid for the months of April and May but on 9th June, 1994, the increment was reversed. On 26th August, 1994, the appellant opted to go on early retirement and to accept early retirement package discussed with the Managing Director that included the purchase of a Patrol Nissan Vehicle. The appellant's request was accepted on the same day. The terminal benefits were then worked out on the basis of the old salary and was sold his personal-to-holder car not in terms of the Conditions of Service. This displeased the appellant. He then took out a writ of summons seeking various claims and declarations. He lost his case in the High Court, hence this appeal.

There is no serious dispute that the facts of this case are on all fours with the facts in the case of Kabwe -Vs- B.P. (Z) Ltd. (1) in which, following the Marriot case (2) we made several holdings, among them, that the fact that the appellant continued working after his salary was reduced cannot be said that he accepted the new conditions and that the contract of employment between the parties terminated on 9th June 1994, when the respondent reduced the appellant's salary without his consent.

In a 59 paged judgment, the learned trial High Court Commissioner considered the oral and documentary evidence. He cited at great length numerous passages from this court's judgment in the case of Kabwe (1).  But at great pains the learned Commissioner attempted to distinguish the Kabwe case (1) while acknowledging that the decision was binding and that he could only depart from it if the facts were different. According to the learning High Court Commissioner, one of the facts in the present case distinguishing the Kabwe case (1) was that a document of computation of Mr Lishomwa's benefits was not produced in the Kabwe case (1) yet Mr Lishomwa gave oral evidence in the Kabwe case (1) which was not the position in the present case.

On the basis of the computation sheet of the benefits of Mr Lishomwa, who was not called as a witness, the learned Commissioner accepted the argument that Mr, Lishomwa was paid his terminal benefits on the basis of the reduced salary. The court also found as a fact that the appellant in the instant case consented through discussions he had with the Managing Director to have his terminal benefits computed on the basis of his old or reduced salary. The court also found that the appellant had used the Nissan Patrol vehicle for only one day which was not the case in the Kabwe case. The court also found that the B.P. Africa Allowance and Calendar Special Allowance were not paid on a pro rata basis.

Finally, the learned trial High Court Commissioner dismissed all the claims of the appellant with costs. Both learned counsel, filed detailed heads of argument based on seven grounds namely; that the learned trial High Court Commissioner erred in both law and fact when he found that the appellant accepted and consented to have his terminal benefits or separation package computed on the basis of his reduced or old salary; that the court misdirected itself when it found that Mr. Lishomwa's terminal benefits were computed on the basis of a reduced salary; that the learned trial Commissioner erred in law and fact when he held that the appellant had the use of the Nissan Patrol vehicle, Registration No. AAL 9572 for one day only and therefore not entitled to purchase the same at Book Value; that the court misdirected itself when it held that B.P. Africa and Calendar Special Allowances were never paid on a pro rata basis and therefore that the appellant was not entitled to the same; that the learned Commissioner erred in both law and fact when held that the appellant was estopped from denying the existence of a separation package agreement made between himself and the then Managing Director; that the learned trial Commissioner erred in both law and fact that the appellant did not prove his case on the totality of the evidence; that the learned trial Commissioner misdirected himself in both law and fact when he held that the present case was distinguishable from the decision of this court in the Kabwe case; and that the learned trial Commissioner was biased in favour of the respondent and failed to favourably consider or refer to the evidence and submissions of the appellant. We take note that the advocates in the present appeal were the same advocates who argued the appeal in the Kabwe case. Indeed, similar submissions were also advanced in the Kabwe case. We are satisfied that the oral and documentary evidence in the present case is no different from that adduced in the Kabwe Case.

We have examined the learned High Court Commissioner's judgment. In our view, the learned Commissioner's judgment is substantially a reproduction of the Kabwe judgment but with a different result. We are satisfied that the learned High Court Commissioner totally misunderstood our decision in the Kabwe case.

Indeed, the reproduction and use of Mr. Lishomwa's evidence as presented in the Kabwe case, when in the present case he did not give evidence was totally wrong and a serious misdirection. The present case is the Kabwe case all over again. The facts are the same. The principle in the Kabwe case was not one of the fact but one of law namely; what is the effect of varying a fundamental term of a contract by an employer? It was most futile, in our view, to attempt, as the learned High Court Commissioner did, to distinguishing the Kabwe case on the basis of the documentary evidence of computation of Mr. Lishomwa's benefits.

As was pointed out in the Kabwe case, the minutes of Management meetings established that Management did not agree or resolve to reverse the salary increments.   The minutes of a special meeting of the Board of Directors of the respondent also established that the Board of Directors took it upon them to reverse the salary increments after Management had failed to make a decision. It was clear in the Kabwe case, as in the present case, that the Board of Directors took the decision of reversing a decision of salary increments on account of government pressure and not because the increments were without approval. Indeed, we said in the Kabwe case that on these facts we were unable to support the court's finding that the appellant had assented to the reduction of his salary.

We are equally unable to accept the finding that the appellant had agreed, accepted and consented to have his terminal benefits or separation package computed on the basis of his reduced salary. We agreed with the decision in the Marriot case (2) that if an employer varies basic conditions of employment without the consent of the employee then the employee is deemed to have been declared redundant and must get a package based on redundancy payment if the conditions do provide for such. The learned Commissioner attempted, in vain, to distinguish the Kabwe case (1) and so did the respondent's advocates in his spirited submissions. The present case is indistinguishable from the Kabwe case (1). The employment between the appellant and the respondent was terminated on 9th June, 1994 when the respondent reduced the appellant's salary without his consent. We rejected Mr. Shonga's submissions in the Kabwe case (1). We find no basis to depart from our decision in the Kabwe case (1). We also reject the submissions on behalf of the respondent here. We hold that the appellant's benefits ought to have been calculated on the basis of the increased salary applicable to him at the time of termination on 9th June, 1994. On this ground, this appeal must succeed.

On the question of personal-to-holder car, there was ample evidence that the appellant had not been in use of this car for a period of five years to be considered to purchase it at book value. The appellant’s claim to purchase this vehicle at book value cannot therefore succeed. On the other claims, including those relating to B.P. Africa Allowances, we affirm our decision in the Kabwe case and allow those claims too. Apart from the claim based on the Nissan Patrol car which cannot succeed, this appeal is allowed with costs to the appellant in this court and in the court below to be taxed in default of agreement.`


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