Learn the legal steps and best practices for terminating an employment contract in Nigeria, including notice periods, payment in lieu of notice, and how to avoid wrongful termination claims under the Nigerian Labour Act.
Understanding Employment Contract Termination
“Your employment with the company will be on an “at will” basis, meaning that either you or the company may terminate your employment at any time for any reason or no reason.”
Have you ever seen this clause in an employment contract? If you are an employee, you would likely have encountered it while reviewing your employment contract. This clause highlights that an employment relationship is not permanent and can be terminated by either the employer or the employee.
The Nigerian Labour Act 2004 is Nigeria’s primary legislation regulating employer-employee relationships. Although the Act only applies to employees engaged under a contract of manual labour or clerical work in the private or public sector, it guides how an employment contract can be terminated.
Employment Termination Notice Periods Under the Nigerian Labour Act
The Act stipulates that either party to an employment contract may terminate the contract, by giving notice of the intention to terminate to the other party or by making a payment in lieu of notice.
The notice period required under the Act depends on the duration of the employee’s employment, as follows:
- 1 day’s notice is required if the employment has continued for 3 months or less.
- 1 week’s notice is required if the employment has continued for more than 3 months but less than 2 years.
- 2 weeks’ notice is required if the employment has continued for 2 years but less than 5 years.
- 1 month’s notice is required if the employment has continued for 5 years or more.
Nonetheless, the provisions of the Act allow employers and employees to agree on the procedure for terminating the employment contract and the notice period to be given to the non-terminating party when either party intends to terminate the employment contract.
Steps for Employers to Legally Terminate an Employment Contract in Nigeria
An employee’s employment contract may be terminated for various reasons, including redundancy, lack of performance, misconduct, or voluntary resignation.
Regardless of the reason for termination, it’s essential that the employment contract be terminated properly and in accordance with its terms.
As an employer, when you intend to terminate your employee’s employment contract:
- Ensure you give the employee notice of your intention to terminate the contract, in accordance with the employment contract.
- If you choose to provide a payment in lieu of notice, communicate this to the employee.
- Ensure any outstanding salary is paid before the effective termination date.
- Reimburse all out-of-pocket expenses to the employee before the effective termination date.
- Pay all accrued and unpaid incentives and awards to the employee before the effective termination date.
- Ensure that the reasons for termination are well-documented, whether due to performance issues, redundancy, or other factors. This helps protect the employer in case of any disputes or legal claims.
- Depending on the complexity of the situation, it might be wise to consult with legal counsel to ensure compliance with local labour laws and minimise the risk of wrongful termination claims.
- While not mandatory, an exit interview can provide valuable feedback and help address any concerns the employee may have. It also offers an opportunity to retrieve company property.
- Ensure that any company data, intellectual property, and confidential information in the employee’s possession are returned and secured before their departure.
- After the termination, inform relevant team members about the employee’s departure in a professional manner. This helps maintain morale and ensures that responsibilities are appropriately reassigned.
- Depending on the circumstances of the employee’s resignation or termination, consider offering support such as career counselling, job placement services, or a severance package to assist them in transitioning to their next opportunity.
Legal Risks of Improper Termination
It’s important to note that if an employer terminates an employee’s contract without following the procedure outlined in the employment contract, the employee may file a claim for wrongful termination in the National Industrial Court of Nigeria, which handles employment-related disputes. This underscores the importance of adhering strictly to the agreed-upon termination procedures.
Final Considerations for Employers
Terminating an employment contract is a serious action that must be handled with care. By following the correct legal procedures, employers can avoid potential legal disputes and ensure a smooth transition for both the company and the departing employee. Proper documentation, clear communication, and legal compliance are key to minimising risks and maintaining a positive workplace environment.
