Windfall for Wrongful Termination of Employment: A Review of the Power of the National Industrial Court to Award Exemplary Damages

By Elvis E. Asia

Introduction

Buoyed by the National Industrial Court Act, 2006 and Third Alteration of the Constitution[1] which expanded the scope of its jurisdiction and vested it with the power to apply International Best Practices and Labour Standards[2], the National Industrial Court of Nigeria (NICN) is rewriting the rule book on employment and related rights. This is exemplified in the drastic deviation from established norms and precedence in adjudicating over employment rights and obligations.

For example, the court has struck down the old notion that employers have the power to hire and fire without reasons by holding that it was contrary to International Labour Standards for employers to terminate the employment of their employees without stating reasons[3]. It has accordingly treated ‘services no longer required’ as redundancy which attracts redundancy payment under the employer’s redundancy policy[4]. The court has also held that proper notices must be given and that salary in lieu of notice must be paid on the employee’s last working day or contemporaneously with termination, otherwise, the termination will be invalid and wrongful[5].  Employees are entitled to gross salary in lieu and not basic salary unless the terms of employment expressly state otherwise[6]. The court has also come to the aid of outsourced staff by implying the existence of a contract of employment between an outsourced staff and the end-user, thereby regarding both the out-sourcing agency and the end-user as co-employers[7]. On indefinite suspension, the court has held that indefinite suspension without pay in the absence of an express provision in the terms of employment is wrongful and entitles the employee to claim arrears of salaries and other benefits until the date of judgment in an action filed by the employee[8].

One main vestige of the old era when even case law used terminologies reminiscent of slavery-like ‘master’ and ‘servant’ to describe the relationship between employer/employee is the nature of damages that may be awarded for wrongful termination of employment. The general principle of law was that damages for wrongful termination were limited to salary in lieu of notice and accrued entitlements and benefits as agreed under the contract. This was a major obstacle to labour justice. The NICN has moved away from merely awarding payment in lieu of notice as damages; the court is instead awarding substantial general damages to reflect the unlawfulness of termination or dismissal[9]. In one case, the court awarded about N77m against United Bank for Africa for constructive dismissal[10] and another case went to the extreme of ordering reinstatement of the employee[11]. The court of appeal in Sahara Energy Resources Limited v Oyebola[12] endorsed the award of two years’ salary as general damages for wrongful termination of employment[13] and approved the application of international best practices by the NICN[14].

A recent decision of the court in Mr. Abdul-Hakeem A. Olasewere v. Airtel Networks Limited[15] highlights the current position of the court as it relates to the award of damages for wrongful termination of employment. The case typifies a drastic move away from the status quo. In the case, the court awarded the sum of N100m as exemplary damages for wrongful termination of employment in addition to N60m for general damages[16]. This is not the first time the court will be awarded exemplary damages[17] but it appears to be the most momentous both in terms of the amount involved and the nature of the complaint which necessitated the award. Against the background of this windfall for the ex-employee, this article takes a look at the power of the court to award exemplary damages for wrongful termination of employment. It must be pointed out that this article is a general thought on the power of the NICN to award exemplary damages, it is not the intention of the writer to discuss whether or not the award of exemplary damages was proper in the peculiar circumstance of the Airtel case or whether the amount was reasonable or amount to double compensation considering those general damages were also awarded. These are issues that may already be subject to an appeal.

 Nature and Circumstances for the Award of Exemplary Damages

Exemplary damages, also known as punitive or vindictive damages, are awarded by the court where the conduct of the defendant merits punishment, and this may be considered to be so where such conduct is wanton, as where it discloses fraud, malice, cruelty, insolence or the like, or where the Defendant acts in disregard of the law and the claimant’s rights[18].

Exemplary damages is awarded under strict conditions and is an attempt to punish the defendant for a grievous wrong, the law is that it is never awarded as damages recoverable for breach of contract. This makes it all the more significant when awarded for wrongful termination of employment.  In EMEGHARA v.  STERLING BANK[19], the Court of Appeal adumbrated this fact thus:

“On the issue of exemplary damages, the appellant’s counsel contended that the respondent’s conduct, in this case, deserved punishment and the learned trial Court did not award adequate, compensatory and exemplary damages. It should be noted that in an action for breach of contract, the plaintiff is mainly entitled to general and special damages or specific performance, (as the case may be). Exemplary and punitive damages do not fall into the realm of damages recoverable for breach of contract, except of course if for instance, it is an action founded on a breach of promise to marry; tort; specified by statutes or where the defendant’s conduct has been calculated by him to make a profit for himself, which may well exceed the compensation payable to the plaintiff. See the cases of Allied Bank of Nig. V. Akubueze (1997) 6 NWLR (Pt. 509) 374 and Odogu v. Attorney General of the Federation (1996) 6 NWLR (Pt. 456) 508. ….”

See also NSITF v. ACCESS BANK PLC [20] where the court held:

“…, generally, exemplary damages are not awarded in an action of breach of contract, such as the subject of this appeal. In the case of Allied Bank Nig Ltd v Akubueze (1997) 6 NWLR (Pt. 509) 374 at 406 and 411, the Supreme Court, per Iguh JSC held -“Indeed, with the exemption of promise of marriage, exemplary damages are a rule, not recoverable in actions for breach of contract.”

In FIRST INLAND BANK v. CRAFT 2000 LTD & ANOR (2011) LPELR-4167(CA) where exemplary damages were awarded for breach of contract, the court held that the award was wrong in law because exemplary damages can be awarded to a party for tortuous liability and not for breach of contract. In fact, in FCMB v Oku[21], the court described the award of exemplary damages outside the exact monetary damage suffered by the plaintiff as restitutio in oppulentiam – award of a windfall which is not permitted. In LONGE MEDICAL CENTRE & ANOR v. AG, OGUN STATE & ANOR[22], the Court of appeal held that exemplary damages are awarded in actions rooted in tort in limited circumstances and not contract. The court outlined three categories of tortuous actions that may result in the award of exemplary damages as follows:

1) Oppressive, arbitrary or unconstitutional action by the servants of the Government[23].

2) Where the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff.

3) Where exemplary damages are expressly authorized by Statute[24].

In light of the above, does the National Industrial Court have the power to award exemplary damages for breach of contract? The next subtopic attempts to answer that question.

Power of the NICN to Award Exemplary Damages for Wrongful Termination of Employment

From the above position of the law on the award of exemplary damages, even where an employment action is founded on tort, there are limited instances where damages can be awarded to punish the defendant. Exemplary damages do not apply to breach of the employment contract. The only instance where the NICN can without question award exemplary damages for wrongful termination of employment therefore will be where there is a statutory basis for the award. It is therefore expedient to examine the statutory firmaments of the court to determine whether there is a legislative authority for the award of exemplary damages.

A cursory review of section 19 of the National Industrial Court Act, 2006 shows that the legislature deliberately decided to enlarge the powers of the court beyond the realm of common law rules and strictures. The sections vest the court with enormous powers with a view to ensuring that the court is able to do proper justice beyond the limitations of the common law and compensate claimants for the wrongs suffered in employment relationships.  In particular, section 19 (a) provides thus:

‘’19     The court may in all other cases and where necessary make any appropriate order, including-

 (d)      An award of compensation or damages in any circumstances contemplated by this Act or any Act of the National Assembly dealing with any matter’’

There is no doubt that the above section empowers the court to expand the limit of damages recoverable for wrongful termination beyond payment of salary in lieu of notice to include compensation for the wrong suffered by an employee.  It may therefore be argued that the section gives legislative vent to the award of all types of damages including exemplary damages for breach of contract and accordingly, meets the requirement that exemplary damages may be awarded when the statute says so and that the NICN has an exceptional basis for making the award. On the other side of the scale, however, exemplary damages are not compensatory but punitive in nature[25]. The goal of exemplary damages is essential to make an ‘example’ of the defendant by punishing him for his conduct. The terms ‘compensation’ and ‘damages’ used under the section, therefore, do not appear to empower the court to award exemplary damages without more. This is because special and general damages are compensatory enough for wrongful termination of employment. Section 14 of the Act which gives the court the power to grant all ‘remedies’ cannot come in aid because the remedies referred to in the section are those the parties are entitled to, a fact which is determined by existing legal principles and the goal of the section is to ensure that the NICN is able to fully determine legal and equitable claims arising from a matter[26].  It is therefore contended that for the position at common law to change so drastically, an express mention of exemplary or punitive damages or anything that suggests punishment for wrongful termination with required parameters for the award is required.

Assuming that sections 14 and 19 of the NICN Act provide a general statutory basis for the award of exemplary damages, the power can only be exercised sparingly ‘where necessary and within the strictures of award of exemplary damages. In Oak Pensions Limited & Ors v. Mr. Michael Oladipo Olayinka[27], the Court of Appeal admonished that the discretion under section 19 (d) of the NICN Act is not at large and must be exercised in accordance with established principles of law.  The conduct to be punished must be such as can be described as ‘ high handed’, ‘outrageous’, ‘insolent’, ‘vindictive’, ‘oppressive’ or ‘malicious’.  There have to be facts justifying a reckless act on the part of the employer in wrongfully bringing the employment to an end. Even in tort law where exemplary damages are typically applied, in the absence of intentional and willful misconduct by the defendant, the ‘windfall’ cannot be justified. In the realm of employment, constructive dismissal may qualify under these heads and not wrongful termination without notice or without stating reason simpliciter. Other aspects of the employment relationship that may qualify will be cases dealing with failure to prevent harassment of any kind in the workplace, termination for activating the whistleblower policy of a company (retaliation), breach of fundamental human rights, discrimination and other unfair labour practices, wrongful termination for unjustified misconduct, failure to follow the disciplinary procedure in circumstances where the integrity of the employee is damaged etc. Indeed, in these circumstances, existing principles of law already endorse the award of substantial damages beyond payment of salary in lieu of notice[28] and the affected employee is able to predicate his action on other causes of action other than a breach of the employment contract without more.

Even in cases where there is justification for the award of exemplary damages, there must be clear limits to the compensation awardable[29]. In the United Kingdom, compensation including exemplary damages for unfair dismissal is within limits except where the action is predicated under the Equality Act, 2010. The United States clearly limits the amount that may be awarded depending on the number of employees in the employment of the defendant.

Another statutory basis that may be considered as justification for the award of exemplary damages is the application of international best practices and labour standards[30]. Indeed, the revolution taking place in the employment relationship in Nigeria has been largely anchored on this novel constitutional power vested in the NICN. However, such international best practices or labour standards must be proved in individual cases before they can be applied. This is the whole essence of order 14A of the National Industrial Court Rules, 2017[31]. International best practices or international labour standards within the section and our law generally are matters of fact which must be proved. As has been argued elsewhere[32], section 254C (1) (f) and (h) does not give a “blank cheque” to the NICN to identify and choose any international best practice and international labour standards to apply. Though generally, exemplary damages need not be specifically claimed, provided there are facts justifying the award[33], where predicated on the factual concept of international best practices, the practice ought to be pleaded and proved.  This position was clearly reechoed by the Court of Appeal in Oak Pensions Limited & Ors v. Mr. Michael Oladipo Olayinka[34] where the court held that international best practices cannot be imported or written into the contract of the parties and that it must be pleaded and proved. The court accordingly set aside 2 years’ salary awarded as compensation without proof on the basis of international best practices. See also the more recent decisions of the court in Giwa & Ors v. Wema Bank Nig. Plc[35] and LASUN & ORS v. WEMA BANK[36] where the court emphasized that international best practices must be pleaded and proved.

The above is important because the application of international best practices without restraints would introduce uncertainty to the law. Employers and employees must be able to predict the law governing their relationship.  It is doubtful whether there is a generally acceptable intentional best practice for the award of exemplary damages in civil cases. There is even a doubt as to whether exemplary damages should be awarded at all. As noted by Lawrence Atsegbua, exemplary damages are anomalous in the civil sphere because it introduces criminal elements into civil law without the necessary safeguards of the criminal justice process. The argument is that if a defendant’s conduct is sufficient to merit punishment, he should be prosecuted in a criminal court of law[37]. Hence, the Privy Council in Australian Consolidated Press Ltd v. Uren[38], held that the decision in Rookes v. Barnard[39] on limited instances for the award of exemplary damages does not apply to Australia.

Implication for Employers

There is no doubt that it is debatable whether or not the NICN has the power to award exemplary damages for wrongful termination of employment simpliciter.  What is beyond doubt however is that the era where employees were equated to slaves is over. The NICN has the power to ensure equity in employer/employee relationships. An employee whose employment has been terminated in unpalatable circumstances can now claim beyond mere payment in lieu of notice as compensation or damages.  The court can simply refer to the damages awarded as compensation without making reference to the concept of exemplary damages. Employers must therefore carefully ensure that termination of employment complies strictly with the terms of employment and are justified to avoid incurring substantial windfall for wrongful termination and other unfair labour practices.

Conclusion

 It is hoped that the court of appeal will soon determine whether or not the NICN can award exemplary damages for wrongful termination and set guidelines for the award (if at all) to ensure certainty in the employment relationship. Though the Court had approved the wind of change in the quantum of damages in the Sahara Energy case, the question of exemplary damages was not an issue in that case. The issue was the award of over N7m as general damages. There is a balancing, jurisprudential and even public policy consideration that is required in applying section 19 (d) of the NICN Act and section 254C (1) (f) and (h) of 1999 as amended, whichever way they are interpreted. Whilst the paltry sum hitherto awarded for wrongful termination of employment has been justifiably jettisoned, the indication from the Court of Appeal decision in the Oak Pension case is that the award of a ‘windfall’ for wrongful termination of employment should not be left to an unrestrained exercise of discretion on the basis of unproven international best practices.

Elvis E. Asia is the Managing Partner of Law Future Partners.  He may be contacted at 09017163850, elvis.easia@gmail.com, elvis.easia@lawfuturepartners.com

Source: dnllegalandstyle