Edotun v Okra Beverages Limited (Labour Dispute Reference 261 of 2021) [2023] UGIC 48 (27 October 2023)

Full Case Text

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# **THE REPUBLIC OF UGANDA IN THE INDUSTRIAL COURT OF UGANDA AT KAMPALA LABOUR DISPUTE REFERENCE NO. 261 OF 2021**

*(Arising from Labour Dispute No. MDLG/01/09/2021)*

**EDOTUN JAMES :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::CLAIMANT**

## **VERSUS**

**OKRA BEVERAGES LTD::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::RESPONDENT**

## **Before:**

The Hon. Mr. Justice Anthony Wabwire Musana,

# **Panelists:**

- 1. Hon. Jimmy Musimbi - 2. Hon. Robinah Kagoye & - 3. Hon. Can Amos Lapenga.

## **Representation:**

- 1. Mr. Felix Ampeire of M/s. Byarugaba & Co. Advocates for the Claimant. - 2. M/s. Sewankambo & Co. Advocates for the Respondent.

# **Introduction W**

**[1]** dn:.the?lst of May 2015, the Claimant was employed as General Manager of the Respondent. He was confirmed in the position on the 12th of May 2015. On the 28th of August 2021, the Respondent's Managing Director, Chen Lianren, convened a meeting with Administration staff and directed the Claimant to hand over the office all keys and equipment. The Director promised to call the Claimant back when conditions had improved. The Claimant's case was that all other workers returned to work, and one Magambo Wilson replaced him. He lodged a complaint at the Mpigi District Labour Office, and the Labour Officer, Ms. Frances Nayiga, referred the matter to this Court. .

- **[2]** In his claim before this Court, the Claimant sought a declaration that he was illegally, irregularly, unlawfully, and wrongfully dismissed and asked for UGX 7,000,000 as accrued leave, UGX 2,000,000 as salary arrears, severance allowance, one month's notice pay, general and aggravated damages and costs of the claim. - **[3]** The Respondent opposed the claim, contending that it had not wrongfully or unlawfully dismissed the Claimant. The company had stopped operations and was shipping in more machinery to resume work, and the Claimant would be resummoned as soon as the operations resumed. - **[4]** In rejoinder, the Claimant suggested that the Respondent's answer to the memorandum of claim was general and evasive and that his employment with the Respondent was not based upon continued operations of the Respondent company.

## **The Proceedings and evidence of the parties**

[5] On the 28th of September 2022 and 31st of October 2022, the Respondent did not attend Court. On 29th of May 2023, Mr. Arnpeire informed this Court that M/s. Sewankambo & Co. Advocates had advised him that they did not have instructions. We noted that said Advocates filed a notice of withdrawal on the record on the 7th of November, 2022. We directed the Claimant's Counsel to effect service by substituted means in a Wide-circulation newspaper. On the 17th of August 2023, upon hearing Mr. Ampaire arid, upon perusal of the affidavit of Mr. Leonard Mugwanya, we were satisfied that service had been effected on the Respondent by way of advertisemehtpf the hearing notice in the Daily Monitor Newspaper of 1st August 2023; We granted the Claimant leave to proceed *exparte* under Order 9 Rule 20(l)(a) ofi^Sfie^Giyii-Procedure Rules, S.l 71-1 *(from now CPR).* The claimant's scheduling notes were adopted with two issues for determination, namely:

*(i) Whether the Claimant was unfairly terminated from employment by the Respondent?*

### *(ii) What remedies are available to the parties?*

#### **The Claimant's Evidence**

**[6]** The Claimant's witness statement, made on the 26th day of October 2022, was adopted as his evidence in chief. He testified that in May 2015, he was appointed General Manager of the Respondent at a salary of UGX 1,000,000/= per month. He'

served in that position until 1st May 2015, when he was terminated from employment by the Respondents Director. It was his evidence that he had not taken leave for his entire term of office. In paragraph 5 of his witness statement, he said he seldom asked for leave and the Respondent's Director denied him an opportunity to break off for leave. On 28th August 2021, the Respondent's Director, Mr. Chen Lianren, instructed him to convene a staff meeting. The Respondent's workers were asked to leave the meeting. With a smaller team, the Director directed the Claimant to issue a circular to all staff indicating that VAT had been increased from 18-24%, excise duty had been increased, and production was not continuous. Mr. Chen requested all the Respondent's staff to go home and wait for his call. He testified that Mr. Chen offered him lunch and, during the lunch meeting, gave him UGX 2,000,000/= and asked him to go home and wait for a call. The next day, when he went to the factory, he found his office had been taken up by Mr. Wilson Magambo, and all other workers were back on duty. After that, all his calls to the Company Director and auditor went unanswered. He lodged a complaint with the Mpigi District Labour Office. He asked for UGX 150,000,000/= in general damages, UGX 7,000,000/= for accrued leave, one month's pay in lieu of notice of termination, UGX 2,000,000/= being salary arrears and costs of the claim.

[7] Being ex-parte, the evidence was not subjected to cross-examination. Mr. Ampeire closed the Claimant's case, and we directed the filing of written submissions.

#### **Analysis and Decision of the Court**

*Issue 1. Whether the Claimant was unfairly terminated?*

#### **Submissions of the Claimant**

**[8]** It was submitted that the Claimant's termination was ended without any regard for the provisions of **Section 65(l)(a)-(c) of the Employment Act,** *2006(from now EA)* and particularly without notice. It was argued that the claimant's services were instantly terminated in contravention of the Employment Act and in disregard of the employment contract, which was admitted as CEX2 and CEX3. We were asked to find that the Claimant's employment had been illegally and irregularly terminated.

#### **Resolution of Issue 1**

**[9]** At the centre of every termination of employment in our jurisdiction sits the ever present dicta of the Supreme Court of Uganda. It is this:

*"... the right of the 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 the employer and ifit were to happen the employee would be entitled to compensation..."[1](#page-3-0)*

- [10] The above dicta is the cornerstone of the law on termination of the employment contract. Put otherwise, every employer has the right to terminate an employee, but the employer must follow procedure. This is all there is to it. The rules of procedure are to ensure that the employee's rights are respected and, simultaneously, ensure that the employer is not found guilty of flouting procedure. In a way, procedure protects both parties and engenders fairness, balancing the competing interests of the employers versus the employees. - **[11]** The procedure for termination or dismissal is very well laid down under **Sections 65, 66, 68, 69, and 70(6) of the Employment Act,** *2006(from now EA).[2](#page-3-1) \Ne* will attempt to summarise these provisions below: - (i) **Section 65EA** provides for termination of a contract of service by the employer by giving notice, expiry of a fixed term or task, ended by the employee because of the employer's unreasonable conduct, or where an employee ends the contract before expiry of a notice period. - (ii) **Section 66EA** provides for the dismissal of an employee for reasons of poor performance or misconduct. The rules of procedure require a hearing and have been elaborated in many cases. - (iii) **Section 68 EA** requires an employer to justify the reason for termination. This provision is inextricably linked to **Section 66EA** because a hearing must be held to verify misconduct. - (iv) **Section 69EA** prohibits summary termination, which is termination without or less than statutory or contractual notice. Under **Section 69(3)EA,** summary dismissal is justifiable where the employee has fundamentally broken the obligations under the contract of service. This is another inextricable link to holding a hearing to prove a fundamental breach. - (v) Finally, under **Section 70(6),** the employee has the onus to prove a dismissal, while the employer must justify the grounds for dismissal.

1 Per Mangutsya JSC(as he then was) in Hilda Musinguzi Vs Stanblc Bank (U) Ltd SCCA 05/2016.

2 See Kasenge Geoffrey Oscar v St Augustine Montessori School LDR 207 of 2017, and Eva Nazziwa Lubowa v NSSF LDR 001 of 2019

- **[12]** These five provisions cover the law and procedure for ending an employment relationship. They also provide the threshold for determining the fairness and lawfulness of any termination. It is these provisions against which the Courts or any other adjudicator would test any termination. - [13] In the matter before us, the Claimant's evidence was unchallenged. The position of the law where evidence stands unchallenged is that on failure to challenge the evidence on a material or essential point, such evidence is deemed admitted as inherently credible and probably true. In **Geoffrey Brown v Ojijo Pascal, [3](#page-4-0)** the Honourable Mr. Justice Musa Ssekaana observes:

*"The law is that where the evidence of a witness is unchallenged in crossexamination, it is deemed to have been admitted by the other side. In evaluating such evidence the court would consider the totality of the evidence adduced by the party. The assessment of the evidence gives value and quality of such evidence to the issues for determination. Evaluation of evidence of the plaintiff by this court has resulted in a reasoned belief of his evidence or a reasoned preference of his version of facts as against the defence which has opted not to lead any evidence."*

**[14]** As the evidence stands, on the 28th day of August 2021, the Respondent's Director, Mr. Chen Lianren, asked the Claimant to step away from work on the premises that he would be called back after the Respondent resumed work. By some stroke of good fortune, the Claimant went to work on the 29th day of August 2021 and found his erstwhile office occupied by one Wilson Magambo. He also found all the other workers, ostensibly laid off the previous day, back at work. The Respondent countered by pleading that it had simply stopped operations and would call the Claimant as soonas work resumed. We do not find the Respondent's impleaded account believable, substantiated, or proven. We are inclined to accept and believe the Claimant's version of events. He was asked to leave work and advised to await a call: When he returned to work the following day, he found someone else occupying his office. He filed his complaint with the labour office on the 20th day of September 2021 regarding a disguised termination. He asserted that he had been forced out of work and sought his accrued leave, severance allowance, salary arrears, social security contributions, bonus, and other damages. His complaint was admitted in evidence as "CEX4".

3 Per Ssekaana J in Geofrey Brown v Ojijo Pascal H. C. C. S No. 228 of 2017 where His Lordship cited Uganda Revenue Authority vs Stephen Mabosi No. SCCA No. 26 of 1995 I

**[15] Section 65(l)(c)EA** provides for the termination of a contract by the unreasonable conduct of the employer. The section reads:

*"Termination shall be deemed to take place in thefollowing instances*

*c) where the contract of service is ended by the employee with or without notice, as a consequence ofunreasonable conduct on the part of the employer towards the employee; and"*

What is unreasonable conduct? In **George Wimpey Ltd v Cooper4** it was suggested that unreasonable conduct is of the kind which, in accordance with good industrial relations practice, no employee could reasonably be expected to accept. In the case of **Nyakabwa J. Abwoli vs Security 2000 LTD** 5 the Industrial Court observed that:

*"Once the employer removes the instruments of an office for which the employee is employed to occupy and instructs another employee to take up such instruments without providing an alternative to the employee, such oct constitutes termination of employment by reason of the employer's conduct, such termination is referred to as constructive dismissal thefact of the claimant leaving his job was in response to the unilateral removal of the instruments of his office and giving them to other employees, rendering him jobless this amounted to constructive dismissal or termination of contract in accordance with Section 65(c) of the Employment Act."*

- [16] In our view^and-applying the dicta of the Nyakabwa case to the case before us, by asking the Claimant to stay away from the office and assigning the office to Wilson Magambo a.day later, the Respondent had acted unreasonably. One month later, there had been ho communication asking the Claimant to return to work. The inescapable conclusion is that the Respondent did not want the Claimant to return to work.:The Respondent had elected to replace the Claimant with Mr. Magambo. The Claimant demanded his terminal benefits and treated the employment contract as broken. This means, and we hold, that the Claimant had been constructively dismissed. - [17] We are fortified in this view by the decision of the Industrial Court of Kenya in the case of **Moses Kiplagat Changwony v Tana and Athi Rivers Development Authority6** where it was observed that the employee has to show that there has been no actual dismissal, but all the elements of dismissal are present and that the

4 1977(IRLR] 205

s LDC. NO.108/2014

6 Industrial Cause No.785 of 2010(2010] UR 175

employer has fundamentally breached the contract by failure to provide work for instance. There was no termination letter in the case before us, but the Respondent allocated the Claimant's job to one Wilson Magambo. The Respondent had a duty to provide work under **Section 40EA.** And under **Section 40 (6)EA,** the employer is exempted from providing work for a maximum of fifteen days in any one-six month period. In the present case, the employer did not provide work between the 28th of August 2021 and 20th of September 2021, when the Claimant lodged his complaint with the Labour Officer. At this point, the Claimant had signaled that he had left the job due to the Respondent's unreasonable conduct. In the words of Lord Denning MR (os *he then was),* the employer was guilty of conduct which is a significant breach going to the root of the contract of employment or which shows that the employer no longer intends to be bound by one or more of the essential terms then the employee is entitled to treat himself as discharged from any further performance.

- **[18]** If we were to consider the Respondent's contention that operations of the company had stalled, the rules of procedure required the Respondent to comply with the provisions of **Section 81EA** by notifying the Labour Union or the Commissioner of its intention to terminate workers for economic, technological, or structural reasons (see **Okumu and Ors v Shreeji Stationers[7](#page-6-0)).** - **[19]** In sum, after objectively considering all the facts, evidence, pleadings, and submissions, there can be no other outcome except the conclusion that the Claimant was constructively dismissed. Issue one would be answered in the affirmative for constructive dismissal.

#### **Issue II. What remedies are available to the parties?**

- **[20]** Having found that the Claimant was constructively dismissed, we would answer the second issue in the affirmative and consider the appropriate individual remedies. **Declaratory relief** - **[21]** We declare that the Claimant was constructively dismissed.

#### **Accrued Leave**

**[22]** The position of this Court has been that for a grant of unpaid leave, an employee must show that leave was applied for and denied[8](#page-6-1). In the circumstances of the case before us, no such evidence was led, and the claim for unpaid leave is denied.

7 LDR 138 of 2021 This Court held that employers must follow procedure in effecting collective terminations.

8 See Edace Michael v Watoto Child Care Ministries L. D. A 21 of 2015

#### **Salary Arrears**

**[23]** It was the Claimant's case that his salary for August and September 2021 was withheld. According to the termination letter (CEX6), there is no indication of payment of any terminal benefits. Instead, the Respondent required the Claimant to pay UGX 850,000/=. The Claimant was suspended without pay in the suspension letter (CEX5). The question of salary arrears was the subject of appeal before the Court of Appeal **in African Field Epidemiology Network v Peter Waswa Kityaba[9](#page-7-0)** and the Court of Appeal established that a former employee should not get more than what he or she would have earned. The dictum of this case is consistent with the principle of "fair go all round," which postulates that an employment relationship is based on equal and reciprocal responsibility. In the Australian case **of Re Loty and Holloway v Australian Workers' Union [10](#page-7-1)** the idea is that in the award of remedies for unfair dismissal, the Court is to balance the individual justice with the right of the employer to run its business. The principle takes a broad view of industrial justice. In effect, the employee who supplies labour is paid a salary or wages and does not earn what he or she hasnot worked for. From our assessment, the Claimant had not been paid his salary for August 2021 at the time of his constructive dismissal. He filed hisi complaint about a month later. We are satisfied that the Claimant would be entitled to his salary for August 2021, and we would award him the sum of **UGX 1,000,000/=** being salary for August 2021.

#### **Severance Allowance w ...**

**[24]** Under **Section 87EA,** aUnfairly dismissed employee is entitled to severance pay. The same isfcomputed at the rate of one month's salary for every year worked. [11](#page-7-2) The Claimantjoined the Respondent on the 12th of May 2015 and was constructively dismissed on the:28,h ofAugust 2021. This is a period of seven years, three months, and sixteen days. He would, therefore, be entitled to **UGX 7,294,443/=,** which we hereby award.

#### **Salary in lieu of notice**

**[25]** The Claimant sought payment of two month's salary in lieu of notice. He joined the Respondent on the 12th of May 2015 and was constructively dismissed on the 28th of August 2021. This is a period of seven years, three months, and sixteen days.

9 Civil Appeal No. 124 of 2017 [2019] UGCA 2098. The decision of the Court of Appeal was followed in Simon Kapio Vs Centenary Bank, LDC 300/2015. Equity Bank Vs Musimenta Rogers, LDA 26/2007, Blanche Byarugaba Kaira Vs AFNET LDR No. 131/2018 and Chandia Christopher Vs Abacus Pharma (AFRICARE) Ltd, 237/2016

10[1971] AR (NSW) 95. AustLII:

11 Donna Kamuli v DFCU Ltd LDC 002 of 2015

His claim would be consistent with **Section 58(l)(c) EA.** Accordingly, we award the sum of **UGX 2,000,000/=.**

#### **General Damages**

- [26] Mr. Ampeire was contending for UGX 30,000,000/= in general damages. Counsel argued that the Claimant had lost his job and the ability to care for his family. He has suffered from hypertension, and his health has deteriorated. The law is that general damages are those damages such as the law will presume to be the direct natural consequence of the action complained of[12](#page-8-0). In **Stanbic Bank (U) Ltd v Constant Okou[13](#page-8-1)** Madrama, JJA *(as he then was)* held that general damages are based on the common law principle of *restituto in integrum.* Appropriate general damages should be assessed on the prospects of the employee getting alternative employment or employability, how the services were terminated, and the inconvenience and uncertainty of future employment prospects. On the quantum of damages in **Donna Kamuli v DFCU Bank Ltd [14](#page-8-2)** the Industrial Court considered the earnings of the Claimant, the age, the position of responsibility, and the duration of the contract. And in **Kibimba Rice Limited v Umar Salim[15](#page-8-3)** the Supreme Court held that in assessing the quantum of damages, Courts are guided by the value of the subject matter and the economic inconvenience that a party may have been put through. - **[27]** In the case now before us, our assessment, the Claimant was earning **UGX 1,000,000/=** per month and had worked for the Respondent for seven years, three months, and sixteen days. He led unchallenged evidence of inconvenience. Considering all circumstances and the Claimant's employability, we determine that based on his monthly salary, the sum of **UGX 12,000,000/=** as general damages will suffice.

# **Costs of the Claim**

[28] In keeping with the dicta of this Court in Joseph Kalule v GIZ.[16](#page-8-4) We have not been persuaded to award the Claimant's costs.

In the final analysis, we make the following orders:

- (i) We declare that the Claimant was unfairly terminated from the Respondent's service. - (ii) The Respondent is ordered to pay the Claimant the following sums:

- 13 Civil Appeal No. 60 of 2020 - 14 LDC No. 002 of 2015 15 SCCA NO.17 of 1992 - 16 LDR 109/2020(Unreported)

12 Stroms v Hutchinson[1950]A. C 515

- (a) UGX 2,000,000/=as payment in lieu of notice, - (b) **UGX 7,294,443/=** as severance pay, - (c) **UGX 1,000,000/=** as salary arrears for August 2021, - (d) UGX 12,000,000/=general damages, - (e) The sums above shall carry interest at 18% p.a. from the date of this award until payment in full. - (iii) Under **Section 61EA,** the Respondent is ordered to issue a certificate of service within 21 days from the date hereof.

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1. The Claimant.

2. For the Respondent, **None**

Court Clerk: **Mr. Samuel Mukiza.**