Introduction
In the ever-evolving world of employment law, redundancy remains a critical yet often misunderstood concept. As in many jurisdictions, redundancy is a legitimate ground for terminating employment in Uganda, provided the right procedures are followed. Employers should understand the complexities of redundancy to avoid expensive litigation that start as labour claims and reputational damage. For employees, knowing their rights ensures they are adequately protected in the event of job loss.
Understanding nuances of redundancy is crucial, especially in contexts where unpredicted economic factors, such as changes in foreign aid, could influence job security.
Redundancy can be a challenging experience for employees, causing both emotional and financial strain. Therefore, employers are always advised to handle these situations with sensitivity and fairness.
What is redundancy in employment?
Redundancy means “a situation in which an employee is laid off from work because the employer no longer needs the employee.”1 Redundancy often occurs when an employee’s role is no longer needed, either because it’s eliminated, taken over by another employee, or its responsibilities are absorbed into other positions within the company.
It is now a settled position of the employment and labour law in Uganda that an employer has the right to terminate the employment relationship on grounds of redundancy.2
The courts have held that the employer reserves the right to determine the requirements of his or her business to improve its efficiency, and the courts will not fetter his or her discretion to increase the number and or quality of staff required for the business. The court’s role has been limited to ensuring that the reorganization or restructuring is carried out according to the law or that the subject of the court’s inquiry is whether such termination for redundancy is fair and therefore lawful.
Employers have an undoubted right to terminate an employee’s employment for economic reasons. However, because of the greater economic and social ill effects of terminating an active employee who may have rendered impeccable service to the employer and is still able to do so, the procedural requirements of such terminations ought to be adhered to in order to minimize the prejudice associated with redundancy terminations.3
What laws govern termination by redundancy in Uganda?
The Employment Act Cap. 226 and the Employment Regulations, 2011 govern termination of employment for redundancy. While these laws offer some guidance, they do not explicitly address redundancy. As a result, court decisions through legal actions and claims have played a crucial role in shaping the legal framework for redundancy, filling the gaps where legislation is silent.
After establishing the legal groundwork for redundancy in Uganda, it is imperative to delve into the practical aspects, specifically the procedure that has to be followed in such terminations.
What is the procedure for termination over redundancy?
Following the right procedure is paramount since courts will always look at the entire process followed to decide as to whether the termination was fair and as such lawful. Below is the procedure an employer must follow in such circumstances;
- Notification
Where an employer wishes to terminate not less than ten employees in three months for reasons of an economic, technological, structural, or similar nature, such employer is required to:
a. Notify the labour union at least four weeks before the first of such terminations is to take place or;
b. Notify the Commissioner in writing of the reasons for terminations, the number and categories likely to be affected and the period in which they are to be carried out.4
For instance, if a company plans to close a department due to restructuring or introduce new technology that eliminates several positions. - Consultation
The procedural guidelines impose a level of substantive fairness in the decision to terminate on account of redundancy since such termination is at no fault of the employee. Where an employer finds that he/she, or it must sever an employment relation due to redundancy, there ought to be a consultative process.5 A consultative process promotes fair labour practices.
When conducting a consultation within a redundancy process, the employer should ensure that it carries out the process fairly and that all mitigating factors are considered.6 Mitigation factors might include exploring roles for the employee, offering retraining opportunities, or considering flexible work arrangements.
The fairness of the consultative process means that an employer ought not to draw a list of targeted employees and then meet the procedural threshold for termination to justify the same. In establishing substantive fairness of redundancy, it ought to be shown that the process was fair, transparent, objective, and involved the employee.
- Selection
Upon consultation, the selection of employees must be based on a fair and objective criterion. The common factors may include:
a. Length of service.
b. Skills and qualifications.
c. Performance records.
d. Attendance and disciplinary history.
Employees who believe the selection process was discriminatory or biased have the right to challenge the decision. - Notice of Termination
Selected employees must be given adequate notice of termination. The minimum notice period required under Section 57(3) of the Employment Act, Cap 226 is:
a. Two weeks for employees with six months but less than one year of service
b. One month for employees with more than twelve months but less than five years of service.
c. Two months for employees with five years but less than ten years of service.
d. Three months for employees with ten years of service or more.
The employer has to follow the employee exit process which includes payment of the employee’s benefits.
What are the fair reasons for redundancy?
There are several reasons that could be deemed fair:
- Genuine Operational Requirements
A redundancy should arise from genuine business needs, such as:
a. Economic downturns or financial constraints.
b. Reorganization or restructuring of the business.
c. Technological changes rendering certain roles obsolete.
d. Closure of a department or branch. - Cessation of the Employer’s Business
If the employer ceases operations entirely or in part, redundancy may be justified. For example:
a. Closure of a specific project or division.
b. Relocation of the business to another area or country. - Reduction in Workforce Due to Reduced Workload
A reduction in the volume of work or demand for certain services may justify redundancy. For instance:
a. A decline in customer orders or contracts.
b. A reduction in production capacity or market share. - Reorganization for Efficiency
Employers may reorganize their operations to improve efficiency, which may result in redundancy. Examples include:
a. Merging roles or departments.
b. Automating processes, leading to reduced need for human labour.
It’s important to remember that each redundancy situation is unique, and the fairness of the reasons will be assessed based on the specific circumstances of the case. The Employment Act also provides for reasons that do not constitute fair reasons for termination such as a female employee’s pregnancy, membership to a labour union, and employee taking leave, among others.7 Determining fair reasons for termination can be complex with high chances of getting it wrong; therefore, before an employer comes to any conclusion or takes further steps, it is advisable that he/she or it consults a lawyer.
What have courts determined concerning termination for redundancy?
As mentioned earlier, the legal landscape on redundancy in Uganda has been developed by the different court decisions. These include:
- Aporo v Mercy Corps Uganda8
The Court held that a redundancy can never be a summary termination and cannot be done without a justifiable reason. The employer is expected to comply with the law through preparing employees for redundancy by giving them one month’s notice. - Kakande Charles Vs Motorcare Uganda Limited9
The Court in its determination held that even if it is the prerogative of an employer to determine the requirements of its business including its Human Resources, and the costs of running the business or organization among other things, he or she has a right to terminate any of its employees, for economic reasons such as poor financial performance of the organization, and the employer still must notify the employees about the impending termination by redundancy. - Ndaula Abubaker & Anor Vs Post Bank Uganda Limited10
The Court acknowledged the usefulness of town hall meeting in commencing the consultative process of a redundancy termination, however, it noted that it is not sufficient notification of an impending redundancy as the employer is required to put in writing the reasons for the impending termination in its notification to the union or Commissioner and by necessary implication to an individual employee.
Conclusion
The Court of Appeal of Uganda in Stanbic Bank (Uganda) Limited v Nassanga11 held that an employer can terminate an employee’s contract of employment for a reason or even for no reason at all. What is most important is that the requisite notice or payment in lieu of notice, as provided for under the law, has been given.
Therefore, would a termination based on redundancy be both fair and lawful if the employer only issues the requisite notice or payment in lieu of notice? No. As detailed above, redundancy termination has a specific procedure that every employer must follow when opting to terminate an employee on the grounds of redundancy; otherwise, the employee will be entitled to challenge the termination. While employers have the right to make necessary business decisions, they should remember that fairness, transparency, and adherence to procedure are paramount when implementing such decisions.
DISCLAIMER: The contents of this article are intended solely for general informational purposes and should not be construed as legal advice or opinions. If you have any questions about the information set out above, or need assistance with a legal matter with connection to the above or any other for which we have the experience and expertise to assist with, please do not hesitate to contact us.
1 Aporo v Mercy Corps Uganda [2024] UGIC 23
2 Ndaula Abubaker & Anor v Postbank Uganda Limited Labour Dispute Ref. No. 161 of 2022
3 Grogan, J. (2010) Workplace Law, Cape Town, Juta and Co Limited, ISBN: 13-978-0-7021-8185-6
4 Section 80(1) of the Employment Act, Okumu and 2 Others V Shreeji Stationers 2009 Uganda Limited [2023] UGIC 34
5 Ndaula Abubaker & Anor v Postbank Uganda Limited (supra)
6 The German School Society & Another v Ohany & Another [2023]KECA 894
7 Section 74 of the Employment Act, Cap 226
8 Supra
9 Kakande Charles Vs Motorcare Uganda Limited Labour Dispute Appeal No.247/2019[2023]
10 Supra
11 Stanbic Bank (Uganda) Limited v Nassanga (Civil Appeal 182 of 2021)