How to Terminate an Employment Contract

Last revision: Last revision:July 29, 2021

Every good thing must come to an end. A person who has been hired may be laid-off one day. An employer may end an employment for several reasons, such as redundancy, merger or acquisition, misconduct of an employee, and for no reason at all. To avoid industrial actions, trade union disputes, or wrongful termination suits, employers need to understand the proper legal procedure for bringing an employment relationship to an end.

The Labour Act, 2004 regulates employment relationships between employers and employees as it defines the rights, duties, and obligations of the employers and employees and provides a clear procedure on how an Employment Contract may be terminated.

Who is an Employee?

An employee is a person employed by another to do specific work in exchange for remuneration or salary. Under the Labour Act, the categories of workers that are entitled to protection under the employment law are:

  • Workers in private employments;
  • Workers in public/statutory corporations; and
  • Workers in civil service.

The Difference Between a Dismissal and Termination of Employment under the Labour Act

Under the Labour Act, dismissal refers to the termination of an employee's employment for reasons connected to the employee's misconduct at work. Grounds for dismissal include sexual harassment, gross misconduct, criminal act, and other unacceptable conduct. However, termination occurs when an employer brings an employment relationship to an end, owing to no fault of the employee.

1. Dismissal

According to the Labour Act, an employee who has committed gross misconduct can be dismissed without notice. However, before the employee is dismissed, the employee should be allowed to defend himself, and a tribunal constituted to hear the case should be made up of independent parties.

Depending on the gravity of the offence, an employer may issue a warning letter to the employee or utilize other punitive sanctions such as suspension, instead of outright dismissal.

2. Termination of Employment

If the employer intends to terminate the employment for any reasons owing to no fault of the employee, the employer is required to either issue a Notice of Termination or offer salary in lieu of notice to the employee. According to the Labour Act, the minimum notice period according is as follows:

  • one day, if the employment has continued for a period of three months or less;
  • one week, if the employment has continued for more than three months but less than two years;
  • two weeks, if the employment has continued for a period of two years but less than five years;
  • one month, if the employment has continued for five years or more.

However, the parties may agree to longer notice periods in their Employment Contract.

The procedure of termination also depends on the industry the employer operates in. For example, to terminate an employee working for an employer in an oil and gas sector, the employer is required to obtain the consent of the Department of Petroleum Resources and notify the Nigerian Content Development and Monitoring Board of any intended termination.

How can an Employee Terminate their Employment Contract?

On the other hand, an employee can resign from employment for any reason with provided they give appropriate notice of their resignation to the employer in writing. The length of notice depends on what has been agreed upon by the parties in the employment contract. For some organizations, the employee may resign by issuing a Resignation Letter or forfeiting their one month salary.

About the Author

Vivian Umelue is an attorney and legal templates programmer at Wonder.Legal and is based in Nigeria.

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