Termination Notice: Procedure and Effects

When an employment contract is terminated for reasons set out in Article 28, i.e. competence and health of the worker and operational requirements of the undertaking, the employer is obliged to give notice to the worker in advance. The purpose of notice is to make the worker aware of the termination and enable him make necessary preparations. (Ethio-Japan Textile S.C. vs. Tigstu Mamo (81 Respondents) Cassation File Number (Hereinafter C/F/N.) 42906 Vol. 8, 2001 E.C.) The length of notice extends from one to three months. It must be issued in writing specifying the reasons for the termination of the contract and the date on which the termination shall take effect. The primary mode of serving of notice is in person to the worker. The effect of not complying with notice requirement results only in payment of the salary due to the worker for the notice period.

When Notice Mandatory

Notice of termination for the reasons set out in Article 28 is a legal requirement. It is not mandatory to give notice when the contract is terminated for other reasons, but there is nothing to prevent the parties from agreeing otherwise. For instance, when a contract is terminated under Article 24 (3) due to retirement, there is no legal obligation to give notice, but notice as a prerequisite may be included in a collective agreement or contract.

Whether or not the employer has a legal obligation to give notice is determined based on the grounds of the termination. The existence of the reasons provided for in Article 28 of the Proclamation shall result in the obligation to give notice. In some cases, the reason given by the employer for terminating the contract and the legal provisions cited by the court while rendering decision may vary due to different assessment of the fact and the law. Hence, the existence of the obligation to give notice is determined when a court decides that the contract is terminated for the reasons set out in Article 28.

In C/F/N. 41385 (Giga Construction vs. Terefe Zeregaw (et al) Vol. 9, 2002 E.C.) respondent terminated applicants’ contract without notice due to shortage of construction materials. When the respondents filed a lawsuit claiming unlawful termination, the trial court accepted with their claim and awarded them compensation. The decision was sustained on appeal.

Lastly, applicant requested the Cassation Bench for review of the decisions on grounds fundamental error of law. It argued that termination is justified since shortage of raw materials has resulted in normal decrease in the volume of the construction work. However, such argument didn’t persuade the bench. [Article 30 applies when there is normal decrease in the volume of a construction as a result of its successive completion.] However, the bench followed a different path in determining the legality of the termination. It indicated I its ruling that shortage of raw materials is a valid ground of termination with notice pursuant to article 28/2/a/.

Due to the generality of article 28/2/a/ it is likely that some cases of termination, will fall in more than one category of valid grounds. Compare for instance Article 24/4/ [closure of undertaking] with Article 28/2/a/. The cause if closure in article 24/4/ could be bankruptcy or any other reason. In article 28/2/a/ the occurrence leading to termination is described as ‘total or partial cessation of the worker’s activities’ caused by any event. Practically, total cessation of work no more different than closure of undertaking. Irrespective of overlap, the law categorizes closure and cessation differently as two different modes of termination, the former automatically by operation of law, whereas the later with notice. Such lack of clarity will put employers in doubt in deciding whether to give prior notice or not.

In C/F/N 42985 (Wud metas nuro import export vs. Hunegnaw Sete (et al 11 respondents) Vol. 9 2002 E.C.) A bank took delivery of applicant’s business due to failure to repay bank loan. From the applicant side, this was a clear case of termination by operation of law as a result of closure of undertaking. However, the bench disagreed with this disposition and made him liable for payment

notice period. In its ruling, the bench indicated that the ground of termination falls under Article 28/2/a/ LP.

In C/F/N 42985, it is difficult to judge either the employer or the bench. When one instance falls in more than one means of termination the real culprit is the law that created such confusion. Before a court finds the employer liable for non-compliance with notice requirements, it has to be clear and mention in its decision the specific provision applicable in the circumstances of the case. In C/F/N 69125 (Selam Tesfaye vs. Alcan Plc. Vol. 13, 2004 E.C.) Applicant was employed as an English language teacher respondent’s college. Following issuance of government directive prohibiting private college teachers from employed in public schools, her contract was terminated without notice.

There is no reason for the applicant to pay a notice as the contract is terminated due to a government directive.

According to the decision, the applicant did not pay the notice period or severance pay because the contract was terminated due to a government directive. The court did not specify which provision of the proclamation would fall under this provision. If there is no work to be done by respondent as a result of the directive issued by the government, the contract shall be terminated due to cancellation of post for good cause. Such mode termination requires the employer to the provide the worker with advance notice.

The bench clearly committed an error in failing to read not only the letter of the law, but also its own previous decisions. In two similar cases [C/F/N. 39580 and C/F/N. 40804] where employment contract of teachers was terminated as a result of the same government directive, it was held termination is due to the cancellation of post.

Length of Notice Period

The length of notice period is determined based on the worker’s service year, and accordingly the probationary period ends. Accordingly, the law provides;

  1. One month notice period for one service year.
  2. Two months notice period for one to nine service years.
  3. Three months notice period for more than nine service years

When a contract is terminated due to a reduction of work force, two-month notice period should be given to all workers, regardless of service year.

The above rules are applicable only to workers who have completed their period and employed for an indefinite period of time. If duration of employment is for a specific job or period, the notice period shall be determined in accordance with the agreement entered between the employer and the employee.

The labour proclamation does not stipulate how notice period will be determined in the absence of agreement. It is submitted that the ordinary notice period provided for indefinite contracts referred to in paragraph 35 (1) must apply because the worker should not lose his or her right to receive notice. The cassation bench has also followed the same approach where agreement on notice period was absent. In C/F/N.22275 (Commercial Bank of Ethiopia VS. Haile Gebreselassie, Vol. 6, 1999 E.C.) respondent was employed for definite period without notice. Since notice period was not determined by agreement, the bench applied the standard notice period set forth in the law.

Procedure for Giving Notice

As stressed in C/F/N. 42906 the purpose of termination notice is inform the worker in advance so that he makes necessary preparations. To achieve this purpose, the manner of giving notice should be simple and ensure that the worker receive the notice. In this regard, the notice must be given in writing and clearly state the reasons for the termination and the date of termination of the contract. The law requires notice be delivered be delivered to the worker in person. Where it is not possible to find the worker or he refuses to receive the notice, it shall be affixed on the notice board in the work place of the worker for 10 consecutive days.

Effect of Giving Notice

Compliance with notice does not by itself make termination lawful. Prior to that existence of one of the sufficient reasons listed in Article 28 must be established. If notice is given with valid reason, the contract will be terminated legally on the day the notice expires.

During the notice period, the rights and obligations of the parties arising from the contract of employment remain intact. Therefore, the employee who is on notice will continue to do his or her work in the same manner as before. During this time, if he is absent from work or commits one of the offenses listed in article 27, his fate will be dismissal without notice.

Despite the fact that the rights and obligations of the parties remain unchanged during notice period, in some cases it is difficult to enforce the minimum labour conditions. For instance, if a worker who on notice becomes ill, is he or she entitled for sick leave? According to 86, granted to a worker in the following manner:

1/ For the first one month, with payment of 100% of his wages;

2/ For the next two months, with payment of 50% of his wage;

3/ For the next three months, without pay.

The question is, should the employer wait for additional six months if a worker on notice suddenly becomes sick? There is no guidance in the proclamation as to how this question is to be resolved.

Effect of Failure to Giving Notice

What is the legal consequence of terminating a contract when the law clearly imposes an obligation on the employer to give notice? Does it make the termination unlawful? Will it make the employer liable to pay compensation for breaching his legal obligation? To get answers for the above questions, let’s first compare the relevant provisions in the repealed and the new labour proclamations.

Article 44 labour proclamation no. 377/96

Notwithstanding the provisions of Article 43, non-compliance by the employer with the notice requirements specified under Article 35 shall only result in the payment by the employer, wages in Leu of the notice period, in addition to any other compensation provided for under Article 40 of this Proclamation.

Article 44 labour proclamation no. 1156/2019

Notwithstanding the provisions of Article 43, non-compliance by the employer with the notice requirements specified under Article 35 shall only result in the payment by the employer, wages in lieu of the notice period.

The repealed proclamation seems to imply that severance pay is additional consequence of failure to give notice. To avoid any confusion, the proclamation deleted the clause ‘in addition to any other compensation…’. Therefore, the only effect of failure to give notice is ‘wages in lieu of the notice period.’

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