By Elvis Evbaruovbokhanre Asia
Case: Nigeria Social Insurance Trust Fund Management Board V. Livinstone College Limited (Doing Business Under The Name And Style Of “Livingstone College”) & Anor[1]
Judge: Justice S. A. Yelwa
Date: 10/7/2024-
Main Issue of Law
- Duty of Employers to Contribute 1% of Payroll under the Employees’ Compensation Act, 2010
- Meaning of “Employer” under the Employees’ Compensation Act, 2010
Summary of Facts
The Claimant’s case was that the 1st Defendant is an employer within the meaning of the Employees’ Compensation Act 2010, with an obligation to contribute a minimum of 1% of its total monthly payroll to the Employees’ Compensation Fund under the Act. However, the 1st Defendant has willfully neglected to provide the Claimant with an estimate of the probable amount of the Defendants’ payroll from July 2011 to date. The Claimant relied on the incorporation of the company as evidence. In defense, the Defendants argued that there was no proof the 1st Defendant was an employer, and that mere company incorporation does not establish the 1st Defendant as an employer.
Court’s Decision
The court held that, by virtue of the provisions of Sections 33(1) and 73 of the Employees’ Compensation Act, 2010 (ECA), the 1st Defendant qualifies as an employer within the meaning of the Act. The court interpreted Section 10 of the Nigeria Social Insurance Trust Fund Act, which specifies that the contribution obligation applies to all registered companies and partnerships, regardless of the number of persons employed.
Legal Principles Relied On
Duty of Employers to Contribute 1% of Payroll under the Employees’ Compensation Act, 2010
- Under the Employees’ Compensation Act 2010, employers operating under Nigerian laws are required to contribute 1% of each employee’s monthly salary to the Employees’ Compensation Fund, managed by the Nigeria Social Insurance Trust Fund Management Board. According to the Act, an employer who fails to submit accurate payroll information to the Board, or who provides untrue or inaccurate information, may be liable for a provisional assessment levied by the Board, along with a fine based on a percentage of the assessment.
- Section 39(2) of the Employees’ Compensation Act, 2010 clarifies that an employer who fails to meet the requirements of Section 39(1) is liable to pay a penalty for such a default. Based on the payroll estimates assessed by the Board, the employer is bound by such assessments.
Meaning of “Employer” under the Employees’ Compensation Act, 2010
Section 73 of the Employees’ Compensation Act defines “employee” as “a person employed by an employer under an oral or written contract of employment, whether on a continuous, part-time, temporary, apprenticeship, or casual basis, and includes a domestic servant not a member of the employer’s family, as well as any person employed in the Federal, State, and Local Governments, government agencies, and in the formal and informal sectors of the economy.” Based on the interpretation of Section 73 of the Employees’ Compensation Act 2010 and section 10 of the Nigeria Social Insurance Trust Fund Act, the court found that a company or partnership is within the scope of the Employees’ Compensation Act, 2010.
Commentary
This judgment is significant as it seeks to bring all registered companies and partnerships under the coverage of employee compensation, mandating a 1% payroll contribution. A similar judgment was delivered by the same judge on July 16, 2024, in Nigeria Social Insurance Trust Fund Management Board v. Kaydel Comprehensive College Lagos Limited, Lagos & Anor[2]. This decision seems to be a progressive attempt to encompass all employers, preventing technical arguments that might undermine the ECA’s purpose.
However, questions remain regarding the court’s interpretation of the relevant provisions. Section 73 of the ECA, which mandates the 1% payroll contribution, defines an employer in a way that suggests the presence of employees under a contract of employment. Sections 10 and 44 of the Nigeria Social Insurance Trust Fund Act similarly imply the requirement of actual employees in a company or partnership. The company in question may be run solely by directors or shareholders, or may have ceased operations. Perhaps, the judgment might be justified on the premise that schools, as in these cases, must be operated through employees. However, this should have been established by evidence, which was lacking; the Claimant relied solely on the fact of incorporation from the Corporate Affairs Commission’s records. Many registered companies and partnerships are dormant or lack employees. Will the obligation to contribute remain even in cases where business has ceased and there are no employees? Another justification may be that the duty was on the Defendant to establish it had no employees or that it had ceased operations.
While the court’s decision commendably seeks to eliminate technical objections to the fulfillment of obligations under the ECA, categorizing all registered companies and partnerships as employers without further inquiry appears inconsistent with the Act’s intent, which implies that an employee should be present. This interpretation aligns with the Act’s goal of protecting employees. The decision has significant implications for defunct businesses or single-member/director companies established under the Companies and Allied Matters Act without any employed individuals. Unfortunately, the court did not account for these scenarios, despite the Act’s definition of an employer as involving companies or partnerships with employees. Therefore, this decision may not be conclusive and could be interpreted differently by another judge in a proper case where a company or partnership genuinely claim it has no employees.
Elvis E. Asia is the Managing Partner of Law Future Partners and a PartneratBols Attorneys, Nigeria. He has an LLB, Ambrose Alli University; and LLM from the University of Lagos. He is a member of the Chartered Institute of Arbitrators, United Kingdom, Institute of Chartered Secretaries and Administrators of Nigeria and the Chartered Institute of Taxation of Nigeria. Elvis is the author of the book ‘Oil and Gas Insurance and Nigeria’s Local Content Policy’
Footnotes
[1] SUIT NO: NICN/LA/178/2023. The full judgment is available at https://nicnadr.gov.ng/judgement/judgement.php?id=9105
[2] SUIT NO: NICN/LA/258/2023. Full judgment available at https://nicnadr.gov.ng/judgement/judgement.php?id=9104