CHAPTER SEVEN

EMPLOYMENT AND LABOR LAW

1.1. Definition, formation and terms of the employment contract

Contract of employment is deemed formed between the employer and employee/worker where a
person (the employee) agrees, directly or indirectly, to perform work for and under the authority
of another (the employer) for a definite or indefinite period or piece work in return for wages.
(See; Art 4 of proc. No. 377/2003)
As just mentioned above, a contract of employment is defined under article 4 of the labor
Proc.No. 377/2003 as follows:
“A contract of employment shall be deemed formed where a person agrees directly or
indirectly to perform work for and under the authority of an employer for a definite or
indefinite period or piece work in return for wage.”
Based on the above definition of the labor proclamation we can drive the following fundamental
elements of contract of employment. The words/terms that are found in the definition which
elaborate the elements include, ‘agreement’, ‘Performance of work’, ‘under the authority of the
employer’, ‘Length of employment’ and ‘Wage’. Hence, in order to understand it well these
elements, let’s discuss them as follows:

 Agreement:
The agreement of the parties (i.e. the employer and the employee) is crucial to the employment
contract for the basic reason of excluding forced labor. Any employer cannot force another
person to enter in to an employment contract and engage her/him in any kind of work. Hence, the
consent of both parties is so crucial in order to conclude a valid contract of employment. This
consent shall be obtained whether the contract is made directly or indirectly. The contract of
employment is said to be concluded directly where the employee negotiates with the employer
personally. However, the contract of employment is said to be concluded indirectly where it is
contracted with the involvement and through private or public employment agencies.

 Performance of work:

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The performance of the work is usually expected to be carried out by the employee her/himself.
As a principle the employee is not allowed to delegate the work s/he is given by the employer.
Rather the employee is required to provide a personal service to her/his employee. In this sense,
the employee is expected to fully commit him/herself to render personal service for the benefit of
the employer. This is one of the very distinguishing characteristics of contract of employment
where it is a contract with the obligation to do rather than with the obligation to provide.

 Under the authority of the employer:

The instruction of the employer is the frame work of the employee as to the services s/he is
required to perform. The employee performs the task under the direct instruction, supervision
and control of the employer. Hence, the employer expected to prepare the framework for the
employee to be directed by that framework while performing the work. The framework helps the
employer to control the work to be done, when and where it would be done, and with whom to
be done. This is the primary element that differentiates employee from independent contractor
since the latter is not acting under the direct order of the employer and it is s/he who decides on
the manner of performing the job since the main interest of the client is the result, not the
process.

 Length of employment:
The principle is that a contract of employment is made to last for an indefinite period of time.
However, with regard to the duration of the employment contract the law stipulates it to be either
for some definite time (for six months, for one year etc.), or for indefinite period (i.e. for the life
of the company) or even it can be for a specific assignment (to unload sacks of grain from a
truck). Accordingly, a contract of employment can be made for definite and indefinite period of
time to perform a piece of work. Yet, when it is made for definite period of time, it has to be in
line with the law that which enumerated the list of such employments. (Art. 10). (See; Art 9 & 10
of proc. No. 377/2003)

 Wage:
Another important basic element, in addition to the above discussed ones, is wage. This is the
right of the employee and the duty of the employer, where the employee is committing

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himself/herself to render personal service for the benefit and under the authority of the employer,
and the employer will have a corresponding duty to pay wage. The definitional element is also
committed in informing the duty of the employer to pay wage. Among the contents that have to
be included in the contract of employment, the law provides that a contract of employment shall
specify the rate of wages, method of calculation thereof, manner and interval of payment and
duration of the contract. In general, in return for the personal performance of the work, the
employee is entitled to claim wage which is indicative of the fact that an employment
relationship is not a pro bono service.

1.2. Legal Regimes governing Employment Relations

Similar to many legal traditions in the world, the Ethiopian employment relation also has two
main legal regimes. These two regimes are the labor law regime that is governed by
proclamation No. 377/2003 and the civil servants regime that is governed by the federal civil
servant proclamation No. 515/2007. According to these two laws, while the labor proclamation is
applicable to other institutions, the Civil servants proclamation is applicable to ‘government
institutions’ and ‘civil servants’ of the federal government.
Accordingly, we have to bear in mind that an employment relation falling under either of the two
regimes has its own consequence for such relations under the labor law and under the Civil
Service have their own peculiar features. The labor regime allows or provides enough space for
the parties to bargain through the contract of employment or collectively as to the working
conditions including minimum wage. Nevertheless, when we come to the civil service regime
there is very little or no such space for negotiation rather it is the law that set the working
conditions. Meaning that, most of the working conditions including the minimum working
conditions, including wage, are already set and spelt out by the civil service instruments.
Accordingly, the government institutions are governed by the civil service regime which
includes any federal government offices established as an autonomous entity by a proclamation
or regulations and fully or partially financed by government budget. Based on this requirement,
if the government entity could finance its budget from its own sources, it could not be covered
under the Civil Servants Proclamation. Therefore, any person permanently employed by such
government institution considered as a civil servant.

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Other than what we just discussed above, any government institution established for profit
making such as the ethio-telecom and the Ethiopian electric power corporation are not covered
by the Civil Servants Proclamation. And if their case is not covered through the Civil Servant
Proclamation and other laws specifically meant for them, the labor proclamation is there to be
applicable since the law provides that it shall be applicable to employment relations based on a
contract of employment that exist between a worker and an employer. One other thing we have
to know at this level is that while the labor proclamation is applicable nationwide, the Civil
Servants Proclamation is only there to regulate employment relationships of the federal
government. However, we have to bear in mind also that the regional states are entitled to come
up with their own civil servant laws to govern their employees.

1.3. Performance of Contract of Employment

Once a valid employment contract is formed, both the employee and the employer have
obligations and rights that they are expected to live up to and entitled under the law respectively.
In this section we are going to consider such rights and obligations of these parties. In principle it
is up to the parties to fix their certain rights and obligations in their contract of employment. The
law has also such rights and obligations in default and as a way of setting minimum standards in
the case of the labor proclamation. It is again important to bear in mind that the obligation of the
employer are at the same time the rights of the employee and the obligations of the employee are
at the same time the rights of the employer.
In addition, it is worthwhile to indicate at this level who the employer is and also who the
employee is under the laws we just mentioned above. Accordingly, the labor proclamation gives
us a clear picture of who the employer and employee are. It defines an employee as: "worker"
means a person who has an employment relationship with an employer. And it also does the
same for employer as: "employer" means a person or an undertaking that employs one or more
persons. (See; Art, 2& Art.4 (1) of the labor proclamation)
 Obligations of the Employer
Among the first important duties that the employer should do is providing the work to be
performed to the employee. The employer is, hence, obliged to provide the work for the
employee before anything else. Paying the wage alone is not satisfactory to the employer rather
s/he should provide the work to be performed by the employee. The employer is also obliged to

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provide all the materials which are essential for the performance of the work. This additional
obligation is, actually, another factor that differentiates a worker from an independent contractor
since the latter performs her/his work with her/his own materials.
Another important obligation of the employer is, the obligation to pay wages including all the
additional benefits. It is also expected from the employer that upon termination of a contract of
employment or whenever the worker so requests, to provide the worker, free of charge, with a
certificate stating the type of work s/he performed, the length of service and the wages s/he was
earning. The employer further is expected to treat all the workers equally and without any kind
of discrimination on the bases of various grounds. Needless to mention, that the employer is also
expected to protect the dignity and safety of the workers.

 Obligation of the Worker

Like the employer, the worker also assumes some obligations based on their employment
contract and by the law. Some of the important obligations that the worker should respect include
the obligation to perform the work personally. Meaning that the worker must perform the work
that specified in the contract of employment by her/himself. In line with the above obligation, the
worker also expected to appear at the work place in fit and normal physical conditions which
enables her/him to perform the work with due care and diligence. Most importantly the worker is
expected to respect all the rules and regulations of work and abide by the work rules.

1.4. Termination of Contract of Employment

As we discussed above, the principle is that a contract of employment is made to last for an
indefinite period of time. However, it doesn’t mean that the contract of employment cannot be
terminated. Accordingly, both the Labor Proclamation and the FCSP spelt out grounds of
termination in their respective regimes of employment. Under the labor law regime the grounds
of termination, there are basically two grounds of contract of employment. These are termination
by the law and termination by the agreement of the parties. (See; Art 24-32 of the labor
proclamation)
Termination of employment contract by the law includes expiry of the period or the completion
of the work where the contract of employment is for a definite period or piece work, the death of

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the worker, the retirement of the worker in accordance with the relevant law, when the
undertaking ceases operation permanently due to bankruptcy or for any other cause, and when
the worker is unable to work due to partial or total permanent incapacity. Whereas termination of
the employment contract by the act of the parties includes the termination at the initiation of the
employer and/or termination at the initiation of the employee.
The contract of employment could also be terminated with the sole initiation of the employer.
For such termination to be lawful, the instances should be connected with the worker's conduct
or with objective circumstances arising out of her/his ability to do her/his work or the
organizational or operational requirements of the undertaking. Such instances may either be with
or without notice. It could be generally said that due to the instances relating to the conducts of
the employee, the contract could be terminated by the employer without notice. The other
instances could only be terminated by giving notice to be lawful.
The last instance is termination by the worker either with or without notice. So long as the
worker may not lose her/his benefits as the effect of termination, the parties could agree to
terminate the contract by making it to be made in written form. The worker could unilaterally
terminate the contract of employment by giving a thirty days prior notice to the employer. There
are also grounds enumerated under article 32 of the labor proclamation where the worker could
terminate the contract without giving notice. Once a contract of employment is terminated in
accordance with the stipulation of the law and the parties are separated for good, there will be
some consequences which will follow the termination. Most of the consequences are attached
with the ground for termination while few others are available to all terminations.
The same situation and circumstances are available under the Federal Civil Service
Proclamation, which include the following: resignation, termination due to illness, termination
on grounds of inefficiency, termination due to force majeure, nullification of employment,
retrenchment, termination on disciplinary grounds, retirement, and termination on the ground of
death. (See; Art, 78-86 of the Federal Civil Service Proclamation)

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