Bonga University

Department of law

• Course title – Law of employment

• TERMINATION OF CONTRACT OF
EMPLOYMENT

• 25/08/2015 E.C
• Termination is a situation where by the
employment r/n ship of the parties are abandon
because of different reasons.
• Termination is end of the employment
relationship between the worker and the employer.
• Such a relationship is given birth by the contract
entered into by the worker and the employer.
• However, the relationship doesn’t stay forever.
• Whether one likes it or not, one day the contract
will terminate /die. As the worker is always
physical person, and for man is mortal, at least the
death of the worker is inevitable.
• In general, a contract of employment can be
terminated either lawfully or unlawfully.
• It is lawful if the termination is made in accordance
with the labour law provisions.
• The law categorizes lawful termination into 3 broad
grounds. These are:
1. Termination by the operation of the law (Art. 24);
2. Termination by the agreement of the parties (Art.
25); and
3. Termination upon the initiation of either party
(Arts. 27 – 33).
 Termination by the Operation of the
Law
• This results from the law itself without initiation
from the parties.
• What are z grounds upon which contract of
employment terminates by operation of the law?
• The grounds upon which contract of employment
terminates by operation of the law are
enumerated under Article 24 of the Labour
Proclamation.
• See Article 24 of the Labour Proclamation.
Expiry of the period of employment- it is only on
contracts that are concluded for a definite period or
completed works.
Death of the worker-why? because it is personal
service, , if the worker dies termination follows.
• In some foreign jurisdictions like Japan,
employment inheritance is given recognition.
• According to such countries’ experiences, if there is
any able bodied daughter or son of the deceased
worker, she/he is entitled to employment by the
same employer.
• However, employment inheritance is not
recognized by the Ethiopian Legal System.
• Dear learner, looking in to our socio-economic
reality, do you think it would be sound if we inject
such an approach into our Legal System?
• Retirement of the worker - What is the retirement
age in labor law?& why
• For various reasons, retirement is believed to render
important purposes for the employer, the worker and
even for the society at large.
• Upon attainment of a certain age people become less
productive, more sick; and may not be receptive to
training or new way of life.
• Such people should also give a way to young
employees.
• So, there arises a need to marginalize people at a
certain age for one or another reason.
• Accordingly, retirement should be there.
• Proclamation No. 1267/2022 has prescribed 60
years as a retirement age for both male and
female workers.
• But, this Proclamation seems to be applicable only
for the public service.
• So, it is not a flat rate Proclamation, and doesn’t
apply to the private sector, which encompasses all
subjects of the Labour Proclamation.
Employer’s permanent cease of operation due
to bankruptcy or for any other cause, is
assimilated as to the death of the enterprise.
eg. change of purpose or activity.
Workers inability to work due to partial or
permanent incapacity
Q. Compare art.24(5) and 28(1(b))
 Termination by Agreement of the
parties
• Parties to contract of employment are liberty to
terminate their contract, (freedom of contract =
entering into + walking away)
• But it should be made in writing (Art. 25(2)) and
that the worker cannot waive any of his rights
under the law (Art. 25(1)).
• What are the worker’s rights under the law?
Payments or any other benefits due to the worker
(may arise from overtime, unused leaves, …)
 Termination upon the initiation of
either party
• Termination by the initiation of the employer is
also known as dismissal.
• Two types- summary dismissal vs.
ordinary dismissal
• summary dismissal-to dismiss the worker without
giving advance notice for the worker, it is summary
dismissal. Art 27
• It is ordinary dismissal- dismiss granting an
advance notice for the worker. Art 28
• What are the grounds for summary
dismissal & ordinary
dismissal??????????

• Read Art 27 & 28????????????

• Summary dismissal may arise from unsuitable
conducts of the employee such as lack of
diligence, unfaithfulness, absence from work
without good cause, work place quarrel or fight,
etc (Art. 27)
• Procedural requirements for summary
dismissal
Giving written statement showing reasons for the
decision & the date of termination (art. 27(2))
Should be exercised only within 30 working days
from the date the employer knew ground of
termination (art.27(3))
Ordinary dismissal Art 83-90 FCSP
• Grounds/reasons for ordinary dismissal
relates to:
A. loss of capacity by, and situations affecting,
the worker’s conditions, or
B. organizational and operational requirements
of the undertaking.
A) Possible grounds related to worker’s capacity &
working conditions are:
Manifest loss of capacity (to be assessed by
periodical job performance evaluation);
Inability to carry on obligation due to health or
disability;
Unwillingness to move to a locality where the
undertaking relocated;
Cancellation of the worker’s post for good cause &
the worker cannot be transferred to another job
position (Art. 28(1))
B) Possible grounds related to organizational &
operational requirements of the undertaking are:
1. Any event entailing cessation of worker’s
activities;
2. Fall in demand of the employer’s
products/services thereby resulting in reduction of
volume of work or profit of the undertaking;
3. Alteration of work method or introduction of new
technology so as to raise productivity (Art. 28(3))
• NB: if cancellation of job position results in
“reduction of work force” defined under art. 29(1),
we need to be guided by Art. 29(3)
 RESIGNATION (Unilateral
termination by employee) Art 83
FCSP
• When termination is upon the demand of the
worker it is resignation.
• Is two types- ordinary resignation vs.
constructive resignation.
• Ordinary resignation-undertaken upon duty to
give notice. Art 31
• Constructive dismissal- can be exercised without
notice (resignation attributable to the misconducts
of the employer). Art. 32
 • Ordinary resignation:
• The worker has the right to unilaterally terminate
the contract; i.e. he is at liberty to resign without
necessarily mentioning the cause.
• The only requirement imposed on the worker is to
give notice of 30 days for his employer about his
decision.
• This is regardless of the nature of the post of the
worker or his replace ability.
• What is purpose of notice?
• The purpose of notice is to give the
employer an opportunity to look for a
substitute worker.
 Extra-Ordinary Resignation
• It is referred to as termination of a contract of
employment by the initiation of the employee
without notice.
• As a counterpart to summary dismissal, the worker
is at liberty to automatically terminate his contract
of employment.
• Sometimes, the employer may do certain acts
deliberately so that the worker bring the contract to
an end, so it is called “indirect dismissal” or
constructive dismissal.
• The grounds are;
Sexual harassment
Acts contrary to the workers dignity
Discrimination
• Grounds for Termination of Contracts: the existing Labour Proclamation allows
employers’ ability to terminate contract of employments only to specific
conditions provided by law. Any termination that is not in line with the labour
law will be deemed as unlawful termination. An unlawful termination of a
contract by an employer may have two consequences. a) It may either allow the
employee to be reinstated to his/her previous position or b) it may entitle the
employee severance and compensation payments. Under the new proclamation,
the same approach is retained and grounds for termination of contracts (with
notice and without notice) are exhaustively listed. However, there were some
adjustments made to the maximum number of days that employees may be late
or absent from work. Failure to adhere to these numbers of days will entitle the
employer to a summary termination of employment contracts. Accordingly, the
new law provides that reporting late to work eight times in six months period;
and absence from work for a total of five days in six months’ period while being
warned in writing of such a problem will lead to termination of contracts without
notice. Furthermore, employers will be able to terminate contracts of
employment with prior notice, if there is a manifested loss of capacity or skills on
the part of the employees. Employer must, however, prove this by creating a
performance evaluation system.
• Termination of employment relations, FCSP
• Grounds:
• Resignation
– by giving a one month prior notice, resign at any time
• Termination Due to Illness
– Where a civil servant is unable to resume work with in the time specified
under Article 42/2/ and /4/ of this Proclamation.
• Termination on Grounds of Inefficiency
– The service of a civil servant who has completed his probation period may
be terminated due to inefficiency where his performance evaluation result
is below satisfactory for two successive evaluation periods despite
exerting all his knowledge and ability to accomplish his work.
• Termination due to Force Majeure Situations
– A civil servant who has completed probation and is absent from work due
to force majeure, shall inform the situation within one month to the
respective government institution.
• • Retirement
– • The service of a civil servant, whose service is not extended beyond retirement
age pursuant to article 89, shall be terminated on the last date of the last month in
which he attained the retirement age determined by law.
• • Termination on the Ground of Death
– • The service of a civil servant shall be terminated on the day of his death.
• • Absence
• • Nullification of Appointment
• • Retrenchment
– • Any civil servant shall be retrenched where: a) his position is abolished; b) the
government office is closed; or c) redundancy of man power is created;
• Termination of Service due to Disciplinary Grounds:
• • The service of a civil servant shall be terminated where: a) a disciplinary
penalty under Sub-Article 1/f/ of Article 67 of this Proclamation is imposed on
him; and
• • The penalty is not revoked on appeal made under Article 76 of this
Proclamation. Where the penalty is mitigated or revoked on appeal the civil
servant shall be entitled without interest, the payment of his unpaid salary
withheld during the appeal.
 • Entitlements in Lawful Termination/effects of
Termination
• The fact that the worker’s contract is terminated
lawfully doesn’t mean that the worker goes empty
handed.
• There are various entitlements for the worker
which includes:-
Severance pay
Compensation
Letter (certificate) of service, &
Unutilized annual leave converted in to
cash.
• Severance payment (LP art 39)
• Severance pay is a payment which a worker is
entitled to get from the employer whenever there
is termination of a contract of employment.
• It is only when the worker would get pension
payment that he would not get severance pay.
• The grounds for severance pay are in case the
contract of employment is terminated;
By operation of the law
Illness or death
5 years’ service and resignation
Sickness due to HIV/AIDS
 • Amounts Severance payments
• Severance pay equals to thirty times the average
daily wages (of the last week of service) of the
worker for the first year of service, plus one-third
of the amount for each additional year (with the
maximum not exceeding a 12 months wage of the
worker).
• S = 30 x ADW (+ 1/3xS for each additional year
of service)
• This implies that the amount of severance pay is
contingent upon years of service and amount of
wage of the worker.
• S = x + 1/3 x (y-1) < 12 x
• Where S = severance pay
• X = one month wage of the worker
• Y = length of service in years
• The FCSP and the LP have slight difference with
respect to determining the amount of the
severance payment.(Refer Arts. 92(1) and Art 40
respectively)
• Three moths salary for the first year of service,
plus one-third of his montly salary for each
additional year of his service (with the maximum
not exceeding a 12 months wage of the worker).
Art 92 FCSP
• 2. Compensation
• Few grounds of termination have also produce
entitlements of compensation to employees who
have been separated on the basis of that
particular ground.
• These entitlements are applicable only to
employees under the labour law regime.
• It is another entitlement for a worker whose
contract is lawfully terminated by his initiation
under certain circumstances.
• In the majority of cases compensation is paid for
a worker only when the termination is unlawful
one.
• A worker who terminates his contract of
employment due to the misdeeds of the employer
entitled one additional benefit in the form of
compensation amounting to his one month’s wage.
Art 41 of LP, 32(1)
• The formula is T= S+X
• Where T = total sum of money
• S = severance pay
• X = one months wage
• Unlike severance payment which takes length of
service into consideration, the amount of
compensation in both cases does not take the
length of service of the employee into account.
 3. Letter (certificate) of service
• This is a document to be issued by the employer which
testifies how long the employee had been employed at
the employer; the position he/she held; and the wage
he/she was earning while employed.
• The employer has the obligation to grant the worker
with a letter (certificate) of service whenever the
worker so requests; and upon termination of their
contract. Art. 12(7) & art 91 of FCSP
• On the other side, it is also an entitlement for the
worker, especially for one whose contract comes to an
end.
• The worker is allowed to get this certificate free of
charge and with no negative indications on it.
• This document is available free of charge to all
terminations except for termination due to death of
the employee as it will not have a purpose to be
served in cases where the termination is the result of
death.
• As regards to the content of this certificate, reason for
termination is not an essential element to be spelt out
in such document. At times reason of termination may
be unhelpful to the employee’s future effort for
employment. For example, if the contract of
employment was terminated due to the serious
misdeed of the employee, mentioning such ground of
termination in the certificate may negatively affect the
employability of the individual.
4. Unutilized Annual Leave Converted into Cash
• In principle, annual leave should be taken by the
worker.
• Unless otherwise provided by the law, it is strictly
prohibited to pay wages in lieu of annual leaves.
Article 76(2)
• But, as an exception a worker can get payment in
lieu of the leave he has not used (upon termination
of his contract).
• Does this exception inclusive of employees whose
contract is terminated due to death?
 • PERIOD OF LIMITATION
• The time within which the entitlements are to be
claimed is also relevant.
• In principle, the labour proclamation tends to fix
short durations after the expiry of which the claim
may be barred by limitation.(refer Art.163)
• In addition to fixing short of period of limitation,
the law obligates the employer to effect all
payments due to the employee within seven
working days from the time of
termination.(refer.Arts.36).
• It is interesting to note that the FCSP does not
possess similar stipulations except in cases of
disciplinary measures.
 UNLAWFUL TERMINATION OF A
CONTRACT OF EMPLOYMENT (Arts.42-
45)
• A termination is unlawful if it contravenes the
substantive or procedural requirements for lawful
termination (Arts. 42, 14(1)(c), 23(1), 26(2)).
• Substantive requirements are those rules providing
or recognizing reasons or grounds for a lawful
termination, whereas procedural requirement is
related to duty to give prior notice for termination-
non-compliance with notification requirements of
the law..
 Effects/consequences of substantive unlawful
termination of labor relations
1) Severance payment (Art.43(4))
2) Reinstatement (Art.43(1)(2) cum Art.26(2))
(Reinstatement + back payment not exceeding 6
months or 1 year (Art. 43(5)).
3) Compensation (Art.43(1) cum Art.26(2));
(Art.43(2) cum Arts.24, 25, 27, 28 & 29)
** This compensation applies to pensioned
workers, too.
 Calculation of compensation (Art. 43(4))
1) For contract of indefinite period = 180 x ADW +
Wage for default notice,(art 35
2) For definite period or piece work = a sum of
wage he would have obtained (but shall not
exceed 180 x ADW.
• Effects/consequences of procedural unlawful
accompanying termination of labor relations
• Employer: Wage in lieu of notice period (Art. 44
cum 35)
• Employee: Compensation not exceeding 30 days’
wages (Art. 45 cum 31 or 35(2))