Uganda court rules employers can terminate workers’ contracts without cause

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Kampala, Uganda | By Michael Wandati | Employers have been bestowed with the prerogative to terminate the contracts of their employees at their discretion, with or without specific justifications provided, in a recent ruling by the Court of Appeal of Uganda. This landmark ruling underscores the considerable authority granted to employers in the realm of employment contract termination, shaping the landscape of employment law in Uganda.

Furthermore, the court specified that in cases where an employment contract is terminated without providing a reason, there is no requirement for a formal hearing. This precedent was established in a legal dispute between Nassanga Saphinah Kasule and Stanbic Bank.

The court’s decision emphasized that unless the employment contract explicitly states otherwise, the employer can effect termination by giving notice or providing payment equivalent to three months’ salary in lieu of notice.

“In turning to whether termination under section 65 (I)(a) needs reasons and/or a hearing, is a matter that has been handled by both the Supreme court and this court. Where it has been held that an employer can terminate the employee’s employment contract for a reason or no reason at all…It is therefore very clear…that the employer is not required to give reasons for termination of the employment contract under section 65(1)(a). Unless the employment contract states it.” 

“Otherwise, the employer does not need to have a good reason or any reason to terminate the employment contract. It suffices that the employer has given sufficient notice as provided for under section 58 of the Employment Act, the employment contract, and any other documents governing the said contract. Where notice is not given, payment in lieu is required as provided by the law and contract,” the unanimous decision written by Justice Christopher Gashirabake reads in part. 

The consensus reached by Justices Gashirabake, Richard Butera, and Catherine Bamugemereire was supported by court records. Nassanga had been employed by Stanbic Bank on 15th February 2001, and her contract was terminated in 2012 without a specified reason.

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Stanbic Bank compensated her with Shs 17 million as a three-month payment in lieu of the termination notice, issued just one day before it took effect. Dissatisfied with this outcome, Nassanga pursued a case with the Industrial Court, which ruled in her favor, declaring that she had been wrongfully dismissed. The court awarded her Shs 65 million for wrongful termination without reason and without a hearing.

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In response, the bank appealed, contending that the law does not mandate them to provide a reason for terminating contracts as long as they give notice or pay three months’ salary in lieu of the notice. The court sided with the bank’s argument, upholding their stance on the matter.

“It is undeniable that the employment contract…provided for an avenue for either party to terminate the contract either with notice or without notice as long as there was payment in lieu of the notice…The appellant having complied with the requirements of the law cannot be faulted,” the court ruled. 

Regarding the necessity of a hearing before terminating an employee’s contract, the court stipulated that a hearing is only required in cases of dismissal based on misconduct or poor performance.

The judgment stated, “It is my view; this was not a dismissal but a termination. For one to invoke the application of section 66 of the Employment Act, it must be a dismissal on grounds of misconduct or poor performance. Since it is not the case in this matter, it is my view, that there was no need for a hearing. The purpose of the hearing is to establish whether the allegations advanced against the employee are true…where no allegations were made against the respondents, then there was no need for a hearing.” 

The court unequivocally sided with the bank, overturning the Industrial Court’s ruling. Additionally, it directed Nassanga to bear the costs of both the appeal and the Industrial Court proceedings.