TERMINATION OF EMPLOYMENT, ITS LEGAL OBLIGATIONS AND SOME ECONOMIC IMPLICATIONS OF UNEMPLOYMENT ON AN ECONOMY
Authors:
Dr. Bernice Welbeck, Public Administrator, HR, IR & Management Consultant & an Adjunct
Lecturer Dr. Julius Kwaku Kattah, International Economist, Educationist, Lecturer & Consultant
Accra, Ghana December 2018
THE EMPLOYMENT RELATIONSHIP
The International Labour Organization (ILO) defines the employment relationship as the legal link between employers and employees. This relationship exists when a person performs work or service under certain stated conditions in return for compensation.
Through the employment relationship, there are reciprocal rights and obligations created between the employee and the employer. Such a relationship remains the vehicle through which workers gain access to the rights and benefits associated with employment in the areas of labour law and social security. This same relationship serves as the key reference for determining the nature and extent of employers’ rights and obligations towards their workers.
LEGAL REQUIREMENTS FOR ENDING AN EMPLOYMENT RELATIONSHIP ON GROUNDS OF TERMINATION OR DISMISSAL
There is no employment for life. A worker may leave employment during the course of his or her working life voluntarily or compulsorily at the legal age established by Law in a particular jurisdiction. But whatever the case may be, ending an employment relationship must have its basis in Law, especially where the relationship is one of a Contract of Service – meaning there is an employer-employee relationship.
This Article addresses the existence of an EMPLOYMENT RELATIONSHIP – CONTRACT OF SERVICE.
An employment relationship is not that of servitude or one of life-employment. Factors may arise which may call for any of the parties – employer or employee to end the relationship.
The employment relationship is governed by Labour Law whose purpose is to ensure that there is equal and same opportunity for employers and employees in the relationship to ensure protection of their rights and responsibilities.
There are many grounds upon which an employment relationship may be ended. But there are two main means of legally terminating an employment relationship –
Voluntary Termination – the employee can voluntarily terminate the employment relationship through resignation.
Involuntary Termination – the employer can terminate for “cause.” This could be through dismissal or redundancy.
The Constitution of the Republic of Ghana
The 1992 Constitution of the Republic of Ghana provides in Article 199 as follows:
- “A public officer shall, except as otherwise provided in this Constitution, retire from the public service on attaining the age of sixty
- A public officer may, except as otherwise provided in this Constitution, retire from the public service at any time after attaining the age of forty-five
- The pension payable to any person shall be exempt from ”
The Labour Act, 2003 (Act 651) and Termination of Employment
A fair termination as provided by Law is for just cause while unfair termination is for unjust cause.
Part VIII of Labour Act, 2003, (Act 651) of the Republic of Ghana provides for Fair and
Unfair Termination of Employment.
Fair Termination
“62. A termination of a worker’s employment is fair if the contract of employment is terminated by the employer on any of the following grounds:
- that the worker is incompetent or lacks the qualification in relation to the work for which the worker is employed;
- the proven misconduct of the worker;
- redundancy under section 65;
- due to legal restriction imposed on the worker prohibiting the worker from performing the work for which he or she is ”
Under the above provision, the non-application or improper application of Section 62 (b) “the proven misconduct of the worker” has been the source of most of the disputes recorded by the National Labour Commission of the Republic of Ghana in the area of terminations triggered as a result of misconduct. The operational word is “proven,” but unfortunately, most of these so-called misconducts are never proven or established. This may be attributable to lack of appreciation, or expediency in dispensing with the services of a worker who is seen as
“difficult,” “disobedient,” committed an offence, or flouted a rule or order.
That the Law provides for grounds for fair termination indicates that, research has proven over the years that, there have been grounds for unfair termination or unilateral terminations and so there is the need to protect the worker against unfair treatment by an employer.
Indeed, records available at the National Labour Commission reveal that, since its establishment in the year 2005 “Unfair Termination” has recorded the highest percentage in terms of the type of disputes filed, ranging between 28%-33% during the 13 years of the Commission’s existence.
The import of the provisions on “Fair Termination” calls for natural justice, i.e. that there must be just cause upon which a worker’s employment may be terminated; and this just cause calls for the right to a fair hearing.
What is Natural Justice and Fair Procedure?
Natural Justice is the legal language of two ancient rules from the Romans who believed that some legal principles were self-evident and did not require a statutory basis.
The first rule is a rule against bias known as “nemo iudex in causa sua,” which means no person can judge a case in which they have an interest. That is why those being asked to conduct an investigation into a matter must be sufficiently removed from the incident, that is, they must have no direct management or responsibility in the issue under consideration.
“Audi alteram partem” meaning “hear the other side too.” It is unfair to judge based on one sided story. No person should be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against them.
The principles of natural justice represent the basic requirements of fair procedure.
The basic principles of fair procedure are –
- It must be fair and rational
- The offence must be clearly stated and the basis for the disciplinary procedure must be clear, i.e., the employee must know his/her offence
- An unbiased consideration of the employee’s explanation devoid of pre-determination by irrelevant
- The penalties must be clear
- There should be an internal appeals mechanism in place
What is Dismissal?
In other jurisdictions, dismissal and termination are used interchangeably or may mean the same thing, but in Ghana there is a distinction on what constitutes dismissal and what constitutes termination.
There are stated grounds on which an employer can terminate a worker’s employment and where this happens, the worker is entitled to “notice” or “pay in lieu of notice” in addition to any accrued benefits.
On the contrary, an employer can dismiss a worker without notice or without notice pay Dismissal is often triggered on grounds of gross misconduct by the worker.
Dismissal from employment often referred to as “firing” or “letting go” is the termination of employment against the employee’s will, but it is said to be the employee’s fault.
Studies show that some of the reasons for dismissal are – poor performance, incompetence, insubordination, and misconduct.
Dismissal is often triggered based upon major misconduct such as, lying, falsifying records/information and stealing.
ILO Convention No. 158 – Termination of Employment Convention, 1982
Article 1 of the Convention provides as follows:
“The provisions of this Convention, shall in so far as they are not otherwise made effective by means of collective agreements, arbitration awards or court decisions or in such other manner as may be consistent with national practice, be given effect by laws or regulations.”
Article 2 of this Convention states that the Convention applies to all branches of economic activity and to all employed persons, but the following categories of employed persons may be excluded from all or some of the provisions.
These categories of workers are:
- workers engaged under a contract of employment for a specified period of time or a specified task;
- workers serving a period of probation or a qualifying period of employment, determined in advance and of reasonable duration;
- workers engaged on a casual basis for a short ”
Article 3 provides for safeguards against recourse to contracts of employment for a specified period of time the aim of which is to avoid the protection resulting from this Convention.
ENDING AN EMPLOYMENT RELATIONSHIP ON GROUNDS OF REDUNDANCY
The other legal reason why an employer can fairly terminate the employment of an employee is on grounds of redundancy. Redundancy is where an employee’s services are no longer required, or where there is diminution in the terms and conditions of employment.
According to Article 13 of ILO Convention No. 158, terminations of employment may be occasioned by economic, technological, structural or similar reasons. Where this occurs, the employer must consult the workers’ representatives.
During the consultation, the employer must provide all relevant information including reasons for the terminations contemplated, the number and categories of workers who are likely to be affected and the period of which the terminations are intended to be carried out.
As part of the process, and given in accordance with the country’s national law and practices and the workers’ representatives concerned, the consultation must include measures to be taken to avert or to minimize the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment.
Section 65 of the Labour Law of Ghana provides for “Redundancy” in line with Article 13 of ILO Convention No. 158.
This Section provides under 65 (2) that where an undertaking is closed down or undergoes an arrangement or amalgamation and any of these actions cause severance of the legal relationship of the worker and the employer as it existed before the action; and as a result of and in addition to the severance that worker becomes unemployed or suffers any diminution in the terms and conditions of employment then the worker is entitled to “redundancy pay.”
The import of this is that a worker shall be paid “redundancy pay” only where there is any diminution in the terms and conditions of employment or where the employment relationship is terminated under any of the arrangements afore-mentioned. However, where during the action the terms and conditions of the employee is preserved as it existed before the new arrangements or changes the worker is not entitled to any payment because the worker has not suffered any diminution. For example, if during a merger, or re-organization, an employee does not suffer any termination or any change in its terms and conditions of employment, such an employee is not entitled to any redundancy pay.
SOME ECONOMIC IMPLICATIONS OF UNEMPLOYMENT
The International Labour Organization (ILO) defines Unemployment as a situation where persons who are available for work are without job; and they are actively looking for job within a period of four weeks. Unemployment refers to the inability for willing workers to find a gainful job. The degree of unemployment in a country is an indicator of the country’s economic health.
Many factors can negatively affect the unemployment rate. These include corporate downsizing, mergers, implementation of automation technologies, and job outsourcing. Some have argued that illegal immigration impacts the unemployment rate, though critics of this viewpoint counter that jobs held by illegal migrants are generally low paying or undesirable.
Unemployment does not only affect the person directly involved, but also his/her family and the wider community. The effect of unemployment can be long-lasting; this makes unemployment a major life event. In terms of the economy, unemployment is a loss of valuable productive resources to a nation, so it is not only about personal impact.
Unemployment causes loss of revenue to an economy and also affects family life as well as reduces family expenditure. Most often when people lose their jobs unexpectedly or unwillingly it plunges them into serious financial crisis since they may not have the resources that will enable them live a comfortable life. In some developed economies, the effect of this phenomenon is increased income support and health care.
Unemployment also causes a reduction in human capital productivity and economic growth. It is not a good signal to attract Foreign Direct Investment.
When workers lose their jobs due to terminations, dismissals or redundancies, it creates two economic problems – (1) those with jobs benefit from economic growth, and (2) the unemployed are relegated to secondary status. Where there is high unemployment, it could lead to a reduction in the literacy rate and this may affect the education status of a country, especially where the unemployed constitute the mature-age people who have significant on- going financial commitments like child education, mortgages, loans, etc.
Unemployment also affects marriages and child-bearing in young people because they are not resourceful to start families. In families where only a few people are employed, it puts a lot of pressure on them as they are burdened with a lot of responsibilities like taking care of
aged parents and also assuming responsibilities for other younger ones in the family. This situation can lead to too much pressure and stress which can affect the life span of the persons involved. It could also lead to serious illnesses and even death. Unemployment is very expensive when it comes to health care because unemployed people have greater use of health services and this increases the health bill of a country where unemployment is high.
Some social implications of unemployment are xenophobia and protectionism as workers may fear that foreigners are taking their jobs. Efforts to preserve existing jobs of domestic and native workers include legal barriers against “outsiders” who want jobs, obstacles to immigration and tariffs and similar trade barriers against foreign competitors. High unemployment can lead to an increase in crime levels in a country.
Politically, unemployment can result in political unrest and also lead to revolution.
THE IMPORTANCE OF LAWS
Labour Laws are important instruments when it comes to protection of employment because they contribute to economic development and growth. Labour Laws which have fairness norms in the employment contract ensure coordination within the firm and can contribute to positive productivity and employment effects across the wider economy.
Renner, 1929 and Polanyi, 1994 observed that over the long run, labour laws, along with other institutions of the “social state” has modified the operation of the market in ways which have, far from undermining capitalism, have made it more stable and enduring.
Labour Laws protect the employer’s rights to hire or engage qualified and competent persons to carry out the employer’s business for the business to be productive and remain competitive in the marketplace.
Labour Laws offer dual protections to both employers and employees, thereby eliminating or managing conflicts that may arise during the employment relationship by allowing for the establishment of mechanisms both internally and externally to manage and settle conflicts.
Labour Laws allow for value recognition by discouraging discrimination and establishing clear systems for employing workers under various forms of contracts.
Labour Laws promote economic stability as it preserves the right of the employer to profit and the employee to receive compensation, which can be spent and invested to make an economy healthy.
In conclusion, labour laws offer important benefits to an economy because they ensure fairness, i.e. fairness to the employer (capital) and fairness to the employee (workman). An effective and operational Labour Law makes an economy attractive for investment thereby creating employment and reducing the unemployment figures, and ultimately contributing to the overall growth of an economy.
REFERENCES
Bradley R. Schiller, Cynthia D. Hill, Sherri L. Wall (1943) “The Economic Today” 13th Edition
Bruce E. Kaufman and Julie L. Hotchkiss (2003) “The Economics of Labour Markets” Sixth Edition
Constitution of the Republic of Ghana (1992)
Deaken, Simon (March, 2016) The Contribution of Labour Law to Economic Development and Growth: WP 478
http://ilo.org/ifdial/areas-of-work/labour/labour-law: Employment Relationship
HSE (4/14/2017) Incident Management Framework Co-Design Group
Labour Act, 2003 (Act 651) Republic of Ghana
Powell, Anthony, Temporary Kings: a Novel, Heinemann, London, 1973 p.3): Consequences of Unemployment
Wanda Thibodeaux (2018) “The Importance of Employment Laws and Compliance with Intentions of the Laws”
www.ug.edu.gh “Labour Economics II” (2010)
