WRJ-NICN No.3: Constructive Dismissal and Enforcement of Employee Handbooks – A Review of Adewunmi vs. Atlas Copco

By Elvis Evbaruovbokhanre Asia

Case: Olawale Nathaniel Adewunmi V Atlas Copco Nigeria Limited[1]

Judges: Justice M.N. Esowe    

Date: 16/7/2024

 Main issues of law

1. Enforcement of handbook
2. Constructive dismissal
3. Damages for wrongful termination
4. Application of international best practices (IBP)

Summary of facts

Upon return from leave, the Claimant was called into a meeting with options to either resign or have his employment terminated. The Claimant resigned and instituted the claim for constructive dismissal and claimed damages calculated on the number of years he had left in the employment as well as exemplary damages. The Claimant also claimed that the “standard operating procedure for resource management Atlas Copco Nigeria Ltd” which the Defendant referred to as a draft policy or collective agreement was binding on the Defendant.

Court’s Decision 

The court held that the “standard operating procedure for resource management of Atlas Copco Nigeria Ltd” was in the nature of a handbook.  Contrary to the defendant’s position, the court reasoned that the policy statement indicated that it had been approved; irrespective of the ‘draft’ stated on it and that it was not in the nature of a collective agreement. The Court was of the view that the management staff in the meeting at which options were presented to the Claimant hints a show of dominance or power capable of depriving any reasonable person of free will and the options presented demonstrated the Defendant’s intention to terminate the employment. Hence, the Claimant’s claim of constructive or forced termination was established. The Court, however, refused the Claimant compensatory damages claim on the premise that it was speculative and that he was entitled only to damages in lieu of notice. The Claimant had claimed N102,437,280.00 being annual gross salary and annual variable compensation multiplied over a period of 22years.

Legal principles relied on

Enforcement of handbook

1. An employee handbook usually takes the form of a “quasi-contract” that goes into specific details as to workplace policies and expectations, employee rights and benefits, company values, guidelines for use of company properties, discipline and or grievance management procedures, and is deemed binding on the parties. An employees’ handbook sets forth the terms and conditions of employment between one employer and many employees, employees use it to understand their rights and responsibilities, as well as learn of the resources available to them; employers, on the other hand, use the handbook to enforce policies, company values, and expectations. The employee’s handbook bears similarities with a collective agreement but in its truest sense is not a collective bargaining agreement, where not a product of collective bargaining.
2. Where the contents of an employees’ handbook serve as an informational guide, it is generally not legally binding. But where there is no disclaimer to that effect, certain policies in the handbook could be considered binding if they are implied as contractual promises.
3. One can gather from employees’ handbook whether the policies and procedures contained therein were meant to guide the employee’s conduct at work like the work hours, fringe benefits and disciplinary or grievance procedures. The fact that the disclaimer clause unequivocally stated that the procedure has been approved overrides the portion stating the status of the document as a draft.
4. The contents of an employee’s handbook are subject to update, change or modification, usually unilaterally effected by the employer when the need arises due to shift in company policies or corporate culture or in compliance with new laws and regulations.
5. Evidence of enforcement of the handbook by the employer means that it is enforceable and binding.

Constructive dismissal

1. Constructive dismissal is an involuntary resignation due to harsh, hostile and unfavourable conditions set by the employer.
2. Forced resignation, which can be subsumed as constructive discharge is when an employee quits his or her position as a result of pressure from managers, supervisors or members of a board.
3. The conduct of an employer, insisting on getting a decision to the options placed before the employee on the modality of terminating his employment, clearly indicates a situation of constructive discharge.
4. Having a number of one’s superiors, supervisors, and managers in a private office informing an employee of the intention to terminate the employee’s appointment with an option presented to the employee on how he or she wants it carried out, in the natural course of human conduct leaves such employee with no other option.

Damages for wrongful termination

1. In an action for termination of appointment, where the Court finds that the termination is wrongful, the proper measure of damages is what the employee would have earned within the period of notice required to properly bring the employment to an end, together with other benefits by way of overtime, rent, subsidy, etc., in accordance with the terms of the contract of employment.
2. In a case for wrongful termination of employment without statutory flavour, the remedy open to the Claimant is a claim for damages, not reinstatement nor compensation to cover remuneration for years had the Claimant remained in the employment of the Defendant.
3. Though the law is that the quantum of damages an employee is entitled to for the wrongful determination of his employment is the amount he ought to be paid for the notice period, the law permits the Court to award exemplary damages in addition to normal compensatory damages.

Application of international best practices

1. The applicability of international best labour practice is not such that is undertaken arbitrarily or in such a way to stifle business operations of employers.

Commentary 

This decision provides a detailed and practical consideration for the enforcement of employees’ handbook. It also serves as a guide to employers giving employees the option of resignation. Such conduct may amount to constructive dismissal in appropriate cases as in the instant case. There are however aspects of the judgment that are subject to questions. There is no doubt that the court’s refusal to award the damages claimed by the claimant was justified in the circumstances of the case, however, certain statement of law as it relates to damages and the reliance on the common law postulation of salary in lieu of notice in Dangote Cement Plc v Ager[2], were confusing and reminiscent of the common law era. It must be stated that in another part of the judgment, the court turned around to say that the claimant may have been entitled to compensatory damages if properly proved.  Again, by Section 19 of the National Industrial Court Act, the court has the powers to award compensatory damages but the award of exemplary damages is based on other considerations which may not be suitable for breach of employment contract[3].

Another important part of the judgment is the refusal of the Court to apply IBP to award the damages claimed by the Claimant as the court had done in some other cases. The court seemed to have jettisoned the decision of the Court of Appeal in Oyebola v Sahara Energy[4] which considered the effect of the application of international best practices on quantum of damages and relied on the recent Supreme Court decision in Dangote Cement Plc v Ager, where the old common law position was restated. While the decision of the court to be circumspect in the application of IBP is salutary and should be the model for the court, it is contended that Dangote Cement Plc v Ager is no authority for the question of whether the court can award damages beyond salary in lieu of notice in view of the current jurisprudence of the court which did not arise in Dangote’s case. It must be noted that in another recent decision of the Supreme Court in Skye Bank Plc v Adegun[5], the court waded into the IBP debate uninvited albeit obiter, and impliedly endorsed Oyebola v Sahara Energy. Again, that decision also cannot be said to be the authority for the point as the issue did not arise in the case. These conflicting decisions have given rise to some level of uncertainty on the quantum of damages for wrongful termination beyond the strict common law stance.

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/182/2019. The full judgment is available at https://nicnadr.gov.ng/judgement/judgement.php?id=9100

[2] (2024) 10 NWLR (Pt. 1945) 1

[3]See Elvis E. Asia, ‘Windfall for Wrongful Termination Of Employment: A Review of The Power of The National Industrial Court To Award Exemplary Damages’, available online  https://lawpavilion.com/blog/windfall-for-wrongful-termination-of-employment-a-review-of-the-power-of-the-national-industrial-court-to-award-exemplary-damages/#google_vignette. Accessed on 12/6/2024

[4] (2020) LPELR-51806 (CA)

[5] (2024) LPELR-62219 (SC)