Questions
1. In the case of U.T.C (Nig) Plc v Peters (2022) 18 NWLR (Pt. 1878) 531, the issue of contract of
employment and determination of same were succinctly explained. Discuss with statutory provisions,
your understanding of what and how contract of employment is constituted and how it could be
brought to an end
2. In Toyinbo v Union Bank Plc (2023) 1 NWLR (Pt. 1865) 403, the employee is entitled to some remedies
upon wrongful termination. The employer is not left out. Discuss with case laws and statutory
provisions, the concepts of remedies and compensation in contract of employment
3. There is no difference except in words between contract of service and contract for service. Examine
the above statement with statutory provisions and case laws.
4. Formation of contract of employment is a contractual relationship between the parties to it with
attendant duties and obligations.Do you agree?
5. With the aid of case laws and statutory provisions, discuss the classes of employees known to you
ANSWERS
1. A contract of employment is governed in Nigeria by the common law rule of contract. Employment
contract like any other contract, has its peculiar ways by which such a relationship could be established.
The contract of employment in Nigeria is used under the employment and labour relations to attribute
rights and responsibilities between parties to a bargain. It emphasizes the power of the employer to
control the work of the employee. Contract of employment is defined under section 91 of the Labour
Act 2004 as “an agreement whether oral or written, express or implied whereby one person agrees to
employ another as a worker and that person agrees to serve the employer as a worker”. In Nigeria, with
the enforcement of the laws that guide employment relationship, a contract of employment must be
signed and agreed by parties to the contract, when signed it becomes binding on the parties. Where
there is a breach of the contract, the aggrieved party can enforce his rights at the National Industrial
Court within the jurisdiction of the aggrieved party. A legally binding contract must include five
components. The Court of Appeal held that a contract must contain five elements in ORIENT BANK V.
BILANTE INTERNATIONAL LTD (1997) 8 NWLR 515. They are an offer, an acceptance, consideration, and
an intention to create legal relationship and capacity to contract. A contract of employment generally
includes information about the parties, the place of employment, duties of the employee, employment
benefits, remuneration and a termination clause.
A contract of employment may be determined principally by termination or by dismissal depending on
peculiar facts. The words termination and dismissal are often used interchangeably more particularly the
former as describing both events. Termination and dismissal have different connotations and do not
mean the same thing in law. 7
TERMINATION
Termination in law is defined to mean end in time or existence, cessation which implies the end or
existence or cessation of the rights and obligations arising from and under contract. In termination both
the employer and employee can bring an end to or terminate a contract. The motive for termination of a
contract is irrelevant. Termination as defined involves acts or circumstances that bring to an end the
contract of employment in other words extinguishing the rights and obligations created by the contract.
The usual circumstances of termination can be reduced into termination by notice, resignation, lapse of
time, operation of law - by subsequent legal events or legal impossibility, by subsequent agreement by
repudiation. 3
BY NOTICE: Termination by notice is the more usual method of determining a contract of employment.
Normally the concept of termination give either party too short contracts the right to determine and
end the contract at any time by giving the appropriate notice to the other party or making payment in
lieu of notice. The court cannot force an unwilling employer to retain an employee regardless of his
impeccable character nor force an unwilling employee to work. The right to determine by notice is
available and can be exercised by both parties and when they do so no reason is need be given. See
DAODU V UBA PLC. Payment in lieu of notice means dispensing with the period during which the notice
is supposed to run and expire by paying a monetary sum agreeably commensurate with that period. This
usually is calculated by way of salary and other entitlements for the stipulated. And this must be paid at
the very time the notice of the termination is given otherwise it will be invalid. 5
RESIGNATION: The term resignation is commonly used in referring to termination by notice done by the
employee. A relevant points to note is that resignation must be voluntary and if the employee is forced
to resign that would amount to dismissal. In other words if coerced by circumstances deliberately
designed for the purpose by the employer of following traits that if he fails to voluntarily resign he will
be dismissed, then the consequent resignation will amount to a constructive dismissal. But if induced by
other extraneous factors such as financial inducement, golden handshake, that is not dismissal. 4
LAPSE OF TIME: Following lapse of time a fixed-term contract could terminate. A fixed-term contract has
been defined as a contract which most runs for a fixed period and one which cannot thus be terminated
earlier except for a gross breach by either party. See DIXON V BBC. 2
BY OPERATION OF LAW: Termination by operation of law implies the occurrence of either is subsequent
legal event or subsequent legal impossibility that the law will recognise. Common instances of such legal
events include liquidation, bankruptcy, dissolution of partnership and assignment in personal contracts.
The concept of frustration of the contract of employment implies that there is no fault by any party and
the contract becomes impossible to perform due to an extraneous events some of such events include
accident, illness and imprisonment or sometimes death.
BY SUBSEQUENT AGREEMENT :This is a consensual termination and follows from a mutual agreement
and the reason for that agreement is generally irrelevant but it has to be a satisfactory settlement like as
was recognised in BELL V LEVER BROTHERS.
BY REPUDIATION: A contract of employment could be terminated by repudiation by either party to it.
Repudiation may be lawful and justified or wrongful and unjustified. Whether lawful or wrongful
repudiation is deemed to determine the contract and will entitle the other party to treat the contract as
at an end. To amount to repudiation, there must be a deliberate breach of a provision of the contract.
Other instances of termination include redundancy and termination by transfer of business.
DISMISSAL
Dismissal refers to the special cases of discipline for repudiation by the employee. This concept
espouses power exercisable by the employer only usually as a disciplinary action. A lawful
dismissal implies a wrongful repudiation by the employee which is deemed to determine the
contract thereby entitling the employer to treat the contract as at an end and justifying the
sacking or dismissal of the employee if the employer so wishes. In this case dismissal is a
punitive measure for misconduct meaning that a motive is relevant and the reasons for which
an employer brings a contract of employment to an end must be stated and justifiable. For
dismissal to be justifiable the misconduct must go to the roots and fundamental breach of the
employee's duties under the contract of employment. If the employer decides to condone the
misconduct of the employee and elects to retain him in his services, the employer cannot at any
subsequent time dismiss him on account of that which he has waived on condoned. Misconduct
can be classified into ordinary misconduct and criminal misconduct. See GARBA V UNIVERSITY
OF MAIDUGURI. There are some consequences peculiar to dismissal which includes infamy,
stigma, deprivation and loss of benefits, personal injuries, injured feelings, humiliation, and
mental suffering. All this combined, in a case of wrongful dismissal, can serve as grounds for
recovering damages in a suit against wrongful dismissal.
2.The termination of an employment contract becomes wrongful when it fails to follow the
procedure outlined in the employment contract. For example, it is typical for an employment
contract to state that either party may bring the employment relationship to an end, provided
that a written notice of the termination of the contract is given. The length of notice for
terminating a contract of employment also depends on the provisions of the contract of
employment. It is common to find 1 (one) month notice requirement, and if this is not complied
with, then the party who failed to provide the required notice will be liable for wrongfully
terminating the employment contract.
For an employer, when an employee wrongfully terminates a contract the employer is entitled
to the remedy of payment in lieu of notice which is when the employee pays a sum of money
commensurate with the amount of notice that should have been given before termination (one
month notice at least). Also the employer is entitled to damages for wrongful termination of
the employment contract. In this instance, an employer will become entitled to be paid
damages by the employee for the failure of the employee to provide the required notice of
resignation of employment.
For an employee, the employee is entitled to payment in lieu of notice of termination. This is
usually the situation where the termination letter from an employer to an employee is
immediate and takes effect instantly. The employee is also entitled to damages for wrongful
termination. An employee may claim against his employer damages for wrongful termination of
his employment. It is usually measured based on the monthly salary plus the sum which an
employee would have earned had his employment not be so wrongfully terminated.
In cases of wrongful termination or dismissal, damages and compensation are currently the
remedies for the injured employee since the act is complete and the fact that it is wrongful
makes no further difference. In BRITISH AIRWAYS V MAKANJUOLA the court of appeal held that
the quantum of damages recoverable by an employee depends on whether the wrongful
termination of employment was as a result of the failure to give the required notice as a result
of an alleged malpractice. If the former the quantum of damages may be the employee's salary
in lieu of notice but if the latter than since such a termination carries with it some kind of
stigma on the character of the employee, he shall be entitled to substantial damages far
beyond the payment of salary in lieu of notice. Section 19(d) of the National industrial court act
extends the power of the court to award compensation or damages in a matter it has
jurisdiction to adjudicate. See CHUKWUMA V SHELL.
Also specific performance and injuction is not usually a remedy in contracts of personal services
as the court cannot foist an unwilling employee on an employee or vice versa. Declaration on
invalidity of termination or dismissal is also a remedy in cases of wrongful termination. See
VINE V NATIONAL DOCK LABOUR BOARD.
3. A contract for service is an agreement that is entered into by the company with a third-party
for availing its services.The third-party is an independent service provider or an independent
contractor, not an employee of the company. The third party is not entitled to the benefits that
the employees of the company receive or are entitled to from time to time during the course of
their employment.The company does not exercise control over the third-party.The company
enters into such contracts where they want the service provider to assign the ownership of the
intellectual property rights in the created work to it and in return pay for the work done by the
service provider. Examples where a contract for services is entered into- A company taking the
assistance of a third party to develop a website for them, development of certain artwork, etc.
A contract of service is an agreement that is entered into by the company with an individual for
availing his/her services.The individual here is the employee of the company and is entitled to
the benefits that the employees of the company receive or are entitled to from time to time
during the course of their employment. The company enjoys control over the work created by
the employee and the employee is bound to obey the orders of his employer.The ownership of
the intellectual property created by the employee rests with the company. However, in cases
where an invention is created by the employee during the course of his employment, such
ownership rests solely with the employee. In order to claim ownership over such intellectual
property, a separate inventions assignment agreement can be entered into or a clause
regarding the same can be incorporated in the terms and conditions of the employment.
A number of tests have been prescribed to help in determining when a contract of employment
is a contract of service or contract for service or to distinguish between a servant and an
independent contractor. They include:
CONTROL TEST: The factors behind this test include duty to obey orders, discretion on work
hours and supervision of mode of working. In the case of PERFORMING RIGHT SOCIETY LTD V
MITCHELL AND BROOKER LTD, the test lies in the nature and degree of detailed control over the
person alleged to be a servant.
INTEGRATION/ORGANIZATIONAL TEST: This emerged as a remedy or an improvement on the
control test. Factors considered under this case includes the disciplinary or grievance procedure
and inclusion in occupational benefit schemes. The question being, Did the alleged servant form
part of the alleged master's organization?. If the answer is yes it would suggest a servant
employee and possibly eliminate the conceived myopia of the control test. See the case of
STEVENSON V MCDONALD.
MULTIPLE TEST: This is the test to resort to when other tests fail. In this test, relevant factors
are invoked from multiple tests to ensure an answer to all possible situations. In this test two
questions that must be considered are whether there is control and whether the provisions of
the contract are consistent with it being a contract of service. READY MIXED CONCRETE V
MINISTER OF PENSIONS. Also see the case of NIGERIAN AIRWAYS LTD V GBAJUMO.
MUTUALITY TEST: This is a more recent common law test based on the mutuality of obligations
on the parties. See CARMICHAEL V NATIONAL POWER PLC. Factors behind this test include
duration of employment, regularity of employment, right to refuse work and risk involved.
ENTREPRENEURIAL TEST: This test eme emerged to address with distinction form a self-
employed person's point of view. The relevant questions asked here, 'is he on business on his
own?, does he provide his own equipment, hire his own helpers?, Is there any degree of
financial responsibility for investment or degree of risk?, Dues he undertake any sort of
commissions etc. See HALL V LORIMER.
4. When a contract of employment is formed each if the parties acquire duties and obligations
they are legally required to fulfill before the contract can be determined. Duties of the
employee generally includes personal service, obedience to the employer's orders(reasonable
and lawful), duty of disclosure of relevant and necessary information to the employer, duty to
take care(careful service), obligation to indemnify the master, fidelity(good faith), duty to not
make secret profits from the employer's business and the duty to disclose if profit is made,
secrecy and the duty to protect employer's confidential information, covenants in restraint of
trade while employed etc.
The employer also owes duties to the employee. These include the duty to pay the agrees
wages, to provide board, lodgings and medical attention, to provide holidays, clothing and
other benefits, to provide work, to indemnify the servant, to take care of the employee's safety
and to insure where necessary.
5. There are different classes of employees which are broadly categorized into:
MENIAL AND DOMESTIC SERVANTS: Domestic servants are servants whose main or general
function is to be about their employer's persons or establishments, residential or quasi-
residential for the purpose of attending to their enployer's needsand wants as well as the needs
and wants if the enployer's guests.
SEAMEN: Contracts of employment of seamen have peculiar conditions attached to them which
puts them in class of their own. Such contracts usually have factors like being formal in writing
etc. See Section 22(1) of the merchant's shipping Act about nature of voyage, duration, capacity
as a worker, wages etc, all as contents of a seaman's contract.
APPRENTICE: A contract of apprenticeship is one under which one party the master agrees to
instruct and teach the other the apprentice, in his trade, profession or business and to maintain
him during the existence of the relationship and the apprentice agrees to serve the master and
to learn from him. Some features of an apprenticeship contract includes the apprentice must
not be an infant, it must be in writing, consent if an infant is necessary, the attestation by an
authorized labour officer etc.
COMMON LAW EMPLOYEES: This consists if category of employees in the private sector whose
employment remain largely regulated by the common law principles and their agreements, that
is, the contracts of employment to the extent influenced by other recognized factors.
EMPLOYEES WITH LEGAL STATUS: This category of employees is accorded special recognition as
having constitutional or statutory flavour. These include employees in the public or civil
services, the public sector and dockworkers.
