Court rules that employers can terminate employee contracts without giving reasons

Kampala, (UG): The Court of Appeal has ruled that employers can terminate the contracts of their employees without giving any reason for doing so. The court also ruled that when one’s employment contract is terminated without reason, there is no need for a hearing.

During the hearing of a case between Nassanga Saphinah Kasule and Stanbic Bank, the court held that unless it was explicitly stated in the employment contract, the employer for as long as gives notice or pays the salary of three months in lieu of the notice, the termination stands.

“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 other two justices who agreed with Gashirabake were Richard Butera and Catherine Bamugemereire.

According to court records, Nassanga was employed by Stanbic Bank in 2001 however her contract was terminated in 2012 without stating any reasons.

The Bank paid her 17 million Shillings for three months payment in lieu of the notice of termination which was issued one day to the date when it would take effect.

Dissatisfied, she filed a case with the Industrial Court which found that she had been wrongfully dismissed. The Court awarded her 65 million Shillings for wrongful termination without reason and a hearing.

The bank appealed this decision saying the law does not require them to give any reason for terminating the contract of their workers provided they give notice or pay three months salary in lieu of the notice.

The court agreed with the reasoning of the bank. “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.

On whether there must be a hearing before an employee’s contract is terminated, the court ruled that any hearing before termination can only happen where the employee is dismissed on the grounds of misconduct or poor performance. “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 judgment reads in part.

The court wholly ruled in favor of the Bank and set aside the ruling of the industrial court. It also ordered Nassanga to pay the cost of the appeal and also the one in the industrial court.