The National Industrial Court of Nigeria (“NICN”), by applying the same principle, reached opposing decisions in two similar matters relating to labour outsourcing and contract staffing arrangements in Nigeria. The court held, in the first decision (a 2019 decision), that the labour contractor was the ONLY employer of the contract staff, and as such, the ONLY party that would be held liable for breaches of employment terms against the contract staff. In the second decision (a 2022 decision), however, the court held that both the labour contractor and the end user would be jointly or severally liable to the contract staff over breaches of employment terms.
The question is:
how did the court arrive at the opposing decisions in two labour outsourcing
arrangements while applying the same principle?
A Short
Background: Privity of Contract Doctrine
There is a
general rule that only parties to a contract can be entitled to rights and
liabilities arising from the contract.[1]
This is a common law doctrine known as privity of contract. The implication of
this doctrine is that only parties to a contract can sue or be sued on the
contract. A stranger can neither sue nor be sued on the contract even if the
contract is made for the benefit of such a stranger.[2]
Applying this
doctrine, a typical labour outsourcing arrangement would have two contracts:
(1) an employment contract between an employment agency (“labour contractor”)
and the employee (“contract staff”) who would be seconded to another employer;
(2) a labour supply contract between the labour contractor and their client
(“end user”) to whom the contract staff provides services. As a result, an
action for enforcement of contractual agreements in such an arrangement would only
occur between the labour contractor and the contract staff, or between the
labour contractor and the end user; not between the end user and the contract
staff.
There is a
problem. Let me explain.
Imagine People
Management Limited (“PML”), a labour outsourcing company, recruited Bala Badmus
as a note counter. PML thereafter seconded Bala to work for Propel Bank PLC (“Propel”)
in the same capacity as a note counter. After working for 8 years, PML wrongfully
terminated Bala employment, and without giving him his terminal benefits
totalling the sum of N10,000,000.00 (Ten Million Naira). Bala instituted an
action at the NICN against PML and Propel for wrongful termination and for
payment of his terminal benefits.
Propel challenged
the jurisdiction of the Court on the basis that there was no employment
relationship between it and Bala, as the employment contract was between Bala
and PML. In the meantime, PML had disappeared or became insolvent. This means
that even if Bala gets a judgment against PML alone, it would be difficult for him
to enforce the judgment against PML. Does that mean Bala would suffer injury
without a remedy?
Introducing
the International Labour Organisation
The
International Labour Organisation (“ILO”) is the United Nations (“UN”) agency
for the world of work.[3] The
ILO was created in 1919 as part of the Treaty of Versailles that ended World
War I to ensure social justice for people through work.[4] It
became a specialised agency of the newly formed UN after World War II, engaging
in promoting the protection of workers through the adoption of a wide range of
instruments and policies that aim to ensure that workers, irrespective of their
employment status, can work in conditions of freedom, equity, security, and
human dignity. The ILO currently has a membership of 187 countries, which
include Nigeria.[5]
How does ILO
come into this discussion? Please hold on a second.
The NICN and
the 1999 Constitution of the Federal Republic of Nigeria
An amendment to
the Constitution of the Federal Republic of Nigeria (Third Alteration) Act 2010
(“Constitution”), established the National Industrial Court of Nigeria as a
superior court of record, to resolve disputes between employers and employees,
workers and workers, trade unions and workers, and trade unions and trade
unions. To effectively carry out its responsibilities of resolving labour
disputes, the Constitution empowers the NICN to rely on international best
practices and international labour conventions, treaties, or protocols.[6]
This is where
ILO comes in; the Organisation sets international best practices and standards
for labour matters.
ILO Report V:
The Scope of the Employment Relationship[7]
The ILO Report
title, “The Scope of the Employment Relationship” is the most important
international instrument that sets the international best practices on labour
outsourcing arrangements for member States to follow. There are no legislations
in Nigeria that set out the obligations and liabilities of respective parties
in such arrangements. The NICN, by relying on the provisions of the ILO Report,
appears to have made significant changes to the law governing labour outsourcing
arrangements in Nigeria.
The ILO, by
critically examining the scope of employment relationship in labour outsourcing
arrangements, introduces principles such as “disguised and objectively ambiguous
employment relationship” and “triangular employment”. An understanding of these
principles is important to the development of this discussion.
Please note that
the ILO does not brand labour outsourcing arrangements as unlawful or unfair
labour practices. All the ILO enjoins is that the respective laws of members
States on the issue should be respected and applied.[8]
Disguised and
Objectively Ambiguous Employment Relationship
The Report describes
a disguised employment relationship as “one which is lent an appearance that
is different from the underlying reality, with the intention of nullifying or
attenuating the protection afforded by the law. It is thus an attempt to
conceal or distort the employment relationship, either by cloaking it in
another legal guise or by giving it another form in which the worker enjoys
less protection. Disguised employment relationships may also involve masking
the identity of the employer, when the person designated as an employer is an intermediary,
with the intention of releasing the real employer from any involvement in the
employment relationship and above all from any responsibility to the workers.”[9]
What this means
is that some employers employ the services of an intermediary in employing
workers for their businesses, to mask the employers’ identity as the true
employers of the employees. This way, such employers would be able to release
themselves from certain legal responsibilities attached to the employment
relationships, including statutory employment obligations such as
employee’s compensation, health insurance, severance packages, and pension.
Triangular
Employment Relationship
A typical
employment relationship involves two parties; the employer and the employee;
and the employment relationship is governed by a contract of employment. There
are, however, more complex situations in which one or more third parties are
involved, in what might be termed a “triangular” employment relationship.[10]
Such situations can be beneficial to all those concerned, but in certain
circumstances, they can result in a lack of protection for workers. For the
employee, three key questions arise: Who is my employer? What are my rights?
Who is responsible for ensuring them?[11]
A triangular
employment relationship can occur under various arrangements. A typical example
is the labour outsourcing arrangement. The Report, in essence, contemplates that
all employment relationships where the employees work for a third party, to
whom their direct employer provides labour, as triangular employment
relationships. The labour contractor can be an independent third party engaged
for the sole purpose of providing labour or a subsidiary of the end user.
In answering the
question of who would be responsible for the worker’s rights, the Report states
that, “Depending on the circumstances and national law, the employer (or
provider) and the user bear joint and several liability, so that the worker can
claim against both or either of them without distinction. In other
circumstances, the user bears subsidiary liability, in the sense that a claim
may only be brought against the user in the event of non-compliance by the
provider.”[12]
The Principle
of the Primacy of Fact
The ILO therefore
states, flowing form the above principles explained, that the determination of
the existence of an employment relationship should be guided by the principle
of the primacy of fact, and not by the name parties have given the contract.
The ILO states as follows:
“The determination of the existence of an employment relationship
should be guided by the facts of what was actually agreed and performed by the
parties, and not by the name they have given the contract. That is why the
existence of an employment relationship depends on certain objective conditions
being met (the form in which the worker and the employer have established their
respective positions, rights and obligations, and the actual services to be
provided), and not on how either or both of the parties describe the
relationship. This is known in law as the principle of the primacy of fact,
which is explicitly enshrined in some national legal systems. This principle might
also be applied by judges in the absence of an express rule.
“Some legal systems rely on certain indicators, evidence or factors
to determine whether or not there is an employment relationship. These include
compliance with the employer’s instructions, being at the employer’s disposal,
socio-economic inequality between the parties and the worker’s economic
dependency. In common law countries, judges base their rulings on certain tests
developed by case law, for example the tests of control, integration in the
enterprise, economic reality (who bears the financial risk?) and mutuality of
obligation. In all systems, the judge must normally decide on the basis of the
facts, irrespective of how the parties construe or describe a given contractual
relationship.”[13]
The primacy of
fact principle, in other words, posits that the court must give preference to the facts of the case over the contractual agreements between the parties. The
court therefore relies on certain indicators, evidence, and factors to determine
whether or not there is an employment relationship between the end user and the
contract staff.
Controlling or
supervisory factor is one of the major determinants in picking employment
relations from independent contracts.[14]
That is, regardless of the contractual agreements, who controls the contract
staff, as to the manner and time of the work? Who actually pays the contract staff
wages or salaries? Who supervises or provides equipment to the contract staff?
Who provides accommodation and secretary for the employee?[15]
The NICN Decided
Cases
In 2019, the
NICN in the case of COLLINS U. OKEKE & ANOR. V. DELONG MEDICAL SERVICES
LIMITED & ANOR.,[16]
where the 1st Defendant employed and seconded the deceased to the 2nd
Defendant, held that the 2nd Defendant was not a co-employer of the
deceased, based on the principle of primacy of facts. The Court held the 1st
Defendant as the only employer of the deceased and would be solely liable for
breach of employment terms against the deceased. The Court specifically held as
follows:
“The determination of the existence of an employment relationship
should be guided by the facts of what was actually agreed and performed by the
parties, and not by the name they have given the contract. That is why the existence
of an employment relationship depends on certain objective conditions being met
(the form in which the worker and the employer have established their
respective positions, rights and obligations, and the actual services to be
provided), and not on how either or both of the parties, describe the
relationship. This is known in law as the principle of the primacy of facts,
which is explicitly enshrined in some national systems. This principle might
also be applied by judges in the absence of an express rule.
“The ILO concluded by advising that the judge must normally decide
on the basis of the facts, irrespective of how the parties construe or describe
a given contractual relationship. See generally The Scope of the Employment
Relationship at page 23. It is the law that he who asserts must prove. See
Sections 131 (1) & (2) and 132 of the Evidence Act 2011, Calabar
Co-operative Ltd V Ekpo [2008] 1-2 SC 229 at 255. Applying the principle of the primacy of
facts, CW under cross-examination admitted that the deceased was in the
employment of the 1st defendant until she passed away. The evidence
of DW2 is that the deceased worked in the premises of the 2nd
defendant, but was not a direct employee of the 2nd defendant having
been brought in by the 1st defendant. There is no evidence the
deceased had a contract of employment with the 2nd defendant. There
is also no evidence that the 2nd defendant assigned a supervisor for
the deceased who instructed her on a daily basis as alleged by CW. The
supervisor was not called to testify. There is also no evidence that the 2nd
defendant evaluated the performance of the deceased, or that the 1st
defendant paid the deceased’s salary on behalf of the 2nd defendant
and got reimbursed. There is no evidence of the 2nd defendant’s
approved time sheets, or of control and management of the deceased by the 2nd
defendant.
“In appropriate cases, the courts have upheld the fact of
co-employer status between two employers in relation to an employee. See Engr
Josiah Wukari Wasa V Seaforce Shipping Company Ltd & 3 Ors (unreported)
Suit No: NICN/LA/05/2014. Judgement delivered September 20, 2019, Onumalobi v
NNPC and Warri Reëning and Petrochemical Company [2004] 1 NLLR (Pt 2) 304. I
find no evidence of a co-employer status between the 1st and 2nd
defendant in relation to the deceased. See Ayodeji Oyewole Oyedokun V Chevron
Nigeria Limited & Anor (unreported) Suit No: NICN/LA/388/2013 judgement
delivered on January 8, 2019. I hold that the 1st defendant only was
the employer of the deceased. Consequently, the suit against the 2nd
defendant is hereby dismissed. Costs of N100,000.00 awarded the 2nd
defendant.”
Later this year
2022, The NICN found a case for a triangular employment relationship in NORBERT CHUKWUEMEKA NWORAH V. ZENITH SECURITIES LTD.
& 3 ORS.[17]
by also applying the international best practices laid down by the ILO. The 1st
Defendant, Zenith Securities Ltd., employed the Claimant and transferred the
Claimant's services to the 2nd and 3rd defendants, Zenith
Bank PLC and PeoplePlus Management Services Ltd, respectively. In determining
who would be responsible for the breach of terms of employment, the Court, by
examining the fact of the case, held that the three defendants were
co-employers of the Claimant, and were jointly and severally responsible for
any breach of the terms of employment. The Court specifically held as follows:
“Issue 1 deals with, who actually is the claimant’s employer amongst
the 1st, 2nd and 3rd defendants. I am of the
view that, the three defendants are the claimant’s employer and are, jointly
and severally responsible for any breach of the terms of employment or, torts
committed against him because, the basic incidence of employment is the
controlling or supervisory factor in employment relations. That is one of the major determinants in picking
out employment relations from independent contractors – see Adewunmi v. Plastex
Nigeria Limited (1986) LPELR-164 (SC) 41, C-F. All evidence points to the fact that,
the 3rd defendant provided the place of work and, exercised
immediate and direct work-control over the claimant, as to how he does his
work, while the 1st defendant issued the claimant’s letter of
appointment and transferred his services to the 2nd and 3rd defendants at different times and, the 2nd
defendant was responsible for his on-job medical treatments – see Exhibits
C1-C7, which in this capacity, described him as her employee.
“I have never seen where a non-employer would be responsible for
treatment of an employee of another independent and separate company as her
staff! It is thus clear that, the 1st-3rd defendant all exercised controls on
different aspects of the claimant’s employment. It is also clear from the above
that, the 1st-3rd defendants are related in a way that makes them principal and
dependent subsidiary companies, otherwise, it would not have been possible to
transfer the claimant from one to the other while another is responsible for
his medicals. They cannot therefore resile from their conducts which made the
claimant to believe that they were all together his joint employers – see AG
Bendel State v. AGF (1981) LPELR-605 (SC) 149, C-F and Nsirim v. Nsirim (2002)
LPELR-8060 (SC) 20, A-C. And there is no evidence that, the claimant’s consent
was sought and obtained before the transfer or that, he applied for job in the
3rd defendant or that, he negotiated with the 2nd defendant for his medicals.
So, the trio must be bound by their conducts, which the claimant took in good
faith to alter his position to his detriment.
“It would appear that, the one responsible for the medicals [2nd
defendant] is the parent [principal] company, while the 1st and 3rd are mere
dependent subsidiaries liable to her control otherwise; it would not have been
responsible for the medicals of the staff of the 3rd. As for the 1st defendant,
the name, without more, is a proof of its being subsidiary of the 2nd
defendant. Since the three are all responsible for the control of the claimant
on the job and, it is clear that the claimant was not an independent
contractor, it follows that; they all have privity of contract with the
claimant, irrespective of who issued the appointment and terminal letters. I so
find and hold. This much is confirmed by paragraph 2 of the Letter of
Employment (Exhibit C7), which says the claimant could be deployed to any of
the sister companies: meaning, the 1st and 3rd defendants. Paragraph 4 of the
same letter goes further to say, the claimant was employed to execute the 1st
defendant’s contract with Zenith Bank (the 2nd defendant). These paragraphs
proved to the hilt that, the three defendants (1st-3rd defendants) are one and
the same and, are the joint employers of the claimant. I further so find and
hold.
“I am even of the view that, this is a classical triangular
employment problem. And on this, the ILO looks at the actual practice of the
employment relationship and not the strict contract documents and, holds all
involved as co-employers of the victim-employees, in appropriate circumstances
– see Chibuzor Ofoha, “Patrelipartners Legal Practitioners: Triangular
Employment Relationships”, at https://www.patrelipartners.com [June 26, 22],
where the erudite author summarised the ILO standards and the NICN decisions on
point. Besides, this case seems to partly dovetail into torts and contract and,
might not be entirely dependent on contract until the proof offered is examined
on its merit. Torts and Employees Compensations Act [ECA] might govern the issues
of occupational hazards. Though, I observed the claimant had referred to the
Workmen Compensation Act [WCA], but the cause of action herein arose in 2019 –
see Exhibits C5, C6, C11, C16 & C17 – meaning, the ECA, which took effect
in 2010 and repealed the WCA, is the applicable statute. Under torts,
principals and agents are suable jointly and severally – see Ifeanyichukwu
(Osondu) Company Ltd v. Soleh Boneh (Nigeria) Ltd & Anor (2000) LPELR-1432
(SC) 12-14, F; 24-26, A-E, and the ECA. So, the three defendants and the 4th
defendants are suable jointly and severally. Which law is applicable between
contract and torts depends on the facts proved at trial and, I am yet to get to
that. Taking a cue from S. 254C-(1)(f) of the 1999 Constitution [as altered], which
enjoins this Court to do away with all manifestations of unfair labour
practices and, to enthrone international best practices, it is clear that, to
accede to the request of the defendants herein is, to enthrone the worst form
of unfair labour practice.
“The fairness of the situation is to resolve any ambiguity in the
employment relations in issue, for which the claimant is not responsible but
for which the defendants are solely responsible, in the claimant’s favour and
against the defendants. The defendants are therefore by this virtue fully
responsible for liability arising from the complexities of the employment
relations herein, as it is neither the duty of the claimant nor that of the
Court to resolve it. If the claimant wins the case, the defendants, who alone
know the arrangements between them would sort out, who amongst them, must be
responsible for compliance with the Court’s judgment and, where they failed to
do so, the judgment would simply be enforced against any or all of them. That
is the justice and fairness of the case in virtue of S. 254C-(1)(f) of the 1999
Constitution [as altered]. Hence, issue 1 is resolved in favour of the claimant
and against the defendant.”
In answering the
question raised in the introductory imaginary scenario of Bala Badmans, Bala
would be able to sue Propel Bank PLC for wrongful termination and payment of
his terminal benefits, if the court by applying the primacy of fact principle found
a case for triangular employment relationship in the labour outsourcing
arrangement.
It must be noted
further that the findings of the court for a triangular or co-employer
relationship do not remove or shift the burden of proof from the employees. The
onus remains on the employees to prove their assertions of their terminations
being wrongful by showing/providing evidence before the court for the wrongful
terminations. The burden of proof is also on employees when they claim damages
in employment matters.
Conclusion
[1] See ALI & ANOR. V.
MARADI (2018) LPELR-49383 (CA)
[2] See BASINCO MOTORS LTD v. WOERMANN-LINE & ANOR (2009) LPELR-756
(SC)
[3] https://www.ilo.org/global/about-the-ilo/lang--en/index.htm
“About the ILO.” Accessed on July 18, 2022.
[4] Ibid.
[5] https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11003:0::NO:::
“Country Profile.” Accessed on July 18, 2022.
[6] See S. 254C (2) of the
1999 Constitution of the Federal Republic of Nigeria, as amended.
[7] (2003) ILO Office: Geneva
[8] See Petroleum and Natural
Gas Senior Staff
Association of Nigeria
(PENGASSAN) v. Mobil Producing
Nigeria Unlimited [2013] 32 NLLR (Pt. 92) 243 NIC
[9] See generally the ILO Report titled, “The Scope of the Employment
Relationship” (ILO Office: Geneva), 2003
at pages 24-25
[10] Ibid. at page 37
[11] Ibid.
[12] Ibid. at page 49.
[13] See generally the ILO Report titled, “The Scope of the Employment
Relationship” (ILO Office: Geneva), 2003
at pages 23.
[14] See NORBERT CHUKWUEMEKA NWORAH V. ZENITH SECURITIES LTD. & 3
ORS Suit No: NICN/EN/48/2019 (NICN Enugu) Judgment delivered on June 29, 2022.
[15] See SHENA SECURITY CO.
LTD. V. AFROPAK (NIG) LTD. [2008] 4 & 5 SC (part II) 117, where the Supreme
Court of Nigeria subtly applied the principle of primacy of fact, including stating certain
indicators to look for.
[16] Suit No: NICN/LA/697/2016 Judgment delivered on October 31, 2019.
[17] Suit No: NICN/EN/48/2019 (NICN Enugu) Judgment delivered on June
29, 2022.
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