Nigeria

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KEY DEVELOPMENTS FOR 2024

Implications for employers arising from the Business Facilitation (Miscellaneous Provisions) Act 2022 (“BFA”)

The BFA came into effect in 2023 and has the following key implications for employers in Nigeria. Firstly, Sections 40 and 41 amended the provisions of the Industrial Training Fund Act, 2004, obliging any employer with 25 or more employees (and not operating in a free trade zone) to contribute 1% of a company’s total annual payroll. Secondly, the BFA amended the provisions of the National Housing Fund Act, 2004 (the “NHFA”). Section 45 of the BFA amends Section 4 of the NHFA such that the compulsory obligation under the NHF Act for any Nigerian worker earning NGN 3,000 or more per annum in both the public and private sectors to contribute 2.5% of their basic monthly salary to the National Housing Fund (the Fund), will now only be mandatory for public sector employees and optional for private sector employees. This obligation is now applicable to any employee earning the national minimum wage and above (currently NGN 30,000), though optional for employees in the private sector in Nigeria. The interest rate payable on the contribution to the Fund has also decreased from 4% to 2%, or as may be determined by the Federal Mortgage Bank of Nigeria.

Management of mental health

The National Mental Health Act 2021 (the “NMHA”) came into effect in at the end of 2022. Section 13(1) of the NMHA provides that individuals with mental health conditions are entitled to enjoy equal access to work and employment opportunities and have the right to receive remuneration for any work done comparable to that paid to employees without such conditions. Section 13(3) further requires an employer to assist an employee to seek medical advice or treatment where an employee suffers from a mental health condition severe enough to affect the employee’s work output. However, section 13(2) of the NMHA prohibits an employer from terminating the employment of an employee or otherwise depriving the employee of any benefit to which s/he is entitled merely on the grounds of a present or past mental health condition or while the employee is receiving treatment for the mental health condition. This section does not provide any qualifications for the continuous employment and payment of an employee suffering from mental health challenges. This issue is yet to be addressed in Nigerian courts, and employers will need to continue to be cautious in this regard in 2024.

Extension of protections to all categories of employee

The principal legislation governing the employment of persons in Nigeria is the Labour Act, 2004 (the “Labour Act”). The Labour Act only applies to the employment of persons who perform manual labour or clerical work. The provisions of the Labour Act are outdated and there is a need to expand its scope of application to cover all categories of employee. There are several legislative bills before the Nigerian National Assembly, which propose amendments to the Labour Act. It is anticipated that these amendments will expand the Labour Act’s scope to address the current employment landscape.

KEY DEVELOPMENTS FOR 2023

Termination of employment in the oil and gas sector in Nigeria further to the provisions of the Guidelines for the Release of Employees in the Oil and Gas Industry 2019 (“the Guidelines”)

The Guidelines require employers in the oil and gas industry to obtain prior approval from the Minister of Petroleum Resources (“the Minister”) through the Department of Petroleum Resources (now known as the Nigerian Upstream Petroleum Regulatory Commission) for the release of any staff employed by a holder of an oil mining lease, license or permit under the Petroleum Act, Cap P10, Laws of the Federation of Nigeria (“LFN”) 2004 (“PA”) (now the Petroleum Industry Act (“PIA”)) or under Regulations made thereunder or any person registered to provide any services in relation thereto.

Prior to the recent case of Shell Petroleum Development Company of Nigeria v. The Minister of Petroleum Resources & 2 Ors (Unreported Suit No. NICN/ABJ/178/2022) (“the Shell Case”), the position of the National Industrial Court of Nigeria (“NICN”) about the applicability of the Guidelines was that the Minister did not have the powers to regulate private employment contracts, which is in consonance with the age-old principle of sanctity of contracts. Also, the PA, which provided for the powers of the Minister, did not contemplate regulations such as the Guidelines, which seek to regulate private employment contracts, and so, the Guidelines were held to be ultra vires to the power of the Minister.

However, in the Shell Case, the NICN held that pursuant to the promulgation of the PIA, there is a marked difference in the powers of the Minister under the PIA and the old PA. Under the PIA, the Minister now has the powers to formulate, monitor, and administer government policy in the petroleum industry, which powers can be delegated in writing to the NUPRC. The powers provided under the PIA are now wide enough to cover the Guidelines. Therefore, the Guidelines are not ultra vires to the powers of the Minister.

The anticipated impact of this decision in 2023 is that employers of labour for businesses that operate in the oil and gas sector will now need to comply with the provisions of the Guidelines when they wish to terminate the employment of their employees and this would, most likely, cause employers to reconsider the mode of engagement of employees. We foresee a review of the traditional employment arrangements and a shift towards alternative arrangements for the engagement of personnel in the oil and gas industry to enable such employers not to be negatively impacted by the delay that the process of seeking the prior approval of the Minister or a situation where the Minister refuses to grant such approval.

This new case expounds on the applicability of the provisions of the Guidelines, to all employers in the oil and gas industry with respect to the termination of their employees. It should be noted that the Guidelines provide consequences for non-compliance, which includes a penalty not exceeding USD 250,000 (two hundred and fifty thousand United States Dollars) and the withdrawal or cancellation of any permit, license, or lease granted to such employer.

Approval of paternity leave for employees in the federal civil service

The Federal Government of Nigeria (“FGN”), through a circular issued by the Office of the Head of Service of the Federation on 25th November 2022, has approved a 14-day paternity leave benefit for employees of the federal civil service. The circular provides that this paternity leave shall not be more than once in two years, and it is for a maximum of four children. This benefit also applies when a male employee adopts a child under four months of age.

We anticipate that this benefit to male employees in the federal civil service would transcend to the male employees in the private sector as more private sector employers may look to replicate this benefit for their employees. It should, however, be noted that some states of Nigeria e.g., Lagos state, already offer paternity leave to male employees in the service of the state government.

Given the proposed amendment of the Nigerian Labour Act, Cap L1, LFN 2004, we anticipate that this benefit may also be provided for in the amended Labour Act to be promulgated. We expect the implementation and adoption of this benefit in the relevant civil service rules. Also, employers in the private sector may decide to use the circular as a benchmark for adopting a paternity leave benefit for their male employees.

Nigeria’s ratification of the Promotional Framework for Occupational Safety and Health Convention, 2006 (No. 187) (“Occupational Safety and Health Convention”) and the Violence and Harassment Convention, 2019 (No. 190) (“Violence and Harassment Convention”) (jointly referred to as “the ILO Conventions”)

Nigeria recently ratified the ILO Conventions on 8 November 2022. The Occupational Safety and Health Convention seeks to promote continuous improvement of occupational safety and health to prevent occupational injuries, diseases, and deaths by the development of a national policy, national system, and national programme. This national policy, system, and programme are to be done in consultation with representative organisations of employers and workers.

The Violence and Harassment Convention, which applies to all sectors, both private and public and in the formal and informal economy and whether in urban or rural areas, seeks to protect workers and other persons in the workforce. These persons include employees as defined by national law and practice, as well as persons working irrespective of their contractual status, persons in training, including interns and apprentices, workers whose employment has been terminated, volunteers, job seekers and job applicants, and individuals exercising the authority, duties or responsibilities of an employer.

The anticipated impact of the ratification of the ILO Conventions is minimal in the immediate future as it must first be domesticated under Nigerian laws before it can be implemented in Nigeria. Section 12 of the 1999 Constitution of the Federal Republic of Nigeria (as amended) provides that no treaty between Nigeria and any other country shall have the force of law except to the extent to which any such treaty has been enacted into law by the National Assembly of Nigeria. It is interesting to note, though, that the NICN, in some recent decisions, has been known to uphold the provisions of un-domesticated Conventions in the exercise of its right to apply international best practices in its adjudication of labour, employment, and industrial relation matters. Employers in Nigeria should familiarise themselves with the provisions of these ILO Conventions and prepare to comply with the provisions same by implementing workplace policies that incorporate the provisions of the Conventions.

KEY DEVELOPMENTS FOR 2022

Anticipated litigation relating to mandatory COVID-19 vaccinations

The Nigerian Government, through the Chairman of the Presidential Steering Committee on COVID-19, has directed that all federal government employees get vaccinated against COVID-19. The cut-off date was 1st December 2021. From such date, employees have been required to show proof of COVID-19 vaccination or present a negative PCR result to gain access to their various offices.  

The anticipated impact of this announcement by the Nigerian Government is that employers in the private sector may require the same from their employees (although this is not legally mandated).  This may result in lawsuits on the lawfulness of compulsory vaccinations/mandatory PCR COVID-19 testing, who should bear the cost of such tests, and other issues.   

Employers should be aware of the risks associated with mandatory vaccination policies and associated issues.  

Impact of COVID-19 on the ability of employers to unilaterally change employment terms and conditions

Further litigation relating to measures unilaterally imposed by employers as a result of COVID-19 are expected in 2022.  The current position of the law in Nigeria is that an employer cannot unilaterally alter the terms of its employees’ contracts of employment.  However, it is anticipated that, similar to other jurisdictions, the impact of the COVID-19 pandemic on employment agreements will be sufficient cause for permitting an employer to unilaterally alter the terms and conditions of employment and invariably the benefits accruable to employees at the relevant time.

Employers should continue to monitor developments in the law in this regard.

Increasing trend of remote working arrangements

The implementation of remote working policies has been a continuing trend for 2022.  An increasing number of employers are expected to implement remote working policies (or hybrid working arrangements) as a result of the COVID-19 pandemic and the adjustment of employees having to work from home due to lockdowns and other regulations to prevent the spread of the virus.  

Employers should review their working practices in connection with the easing of COVID-19 restrictions and consider whether a remote working policy (or hybrid working policy) may be suitable for the organisation moving forward.

KEY DEVELOPMENTS FOR 2021

Transfer of retirement savings accounts

Changes were introduced to the pensions administration system in November 2020, which created some concern for Pension Fund Administrators (PFAs) but is seen as a welcome development by their customers. On 16 November 2020, the National Pension Commission ("PENCOM"), the industry regulator, issued a new regulation, pursuant to Section 13 of the Pension Reform Act, 2014 ("PRA"), which permits the transfer of Retirement Savings Accounts ("RSA") between PFAs ("The 2020 Regulation"). The PRA, which is the principal legislation for pension fund administration in Nigeria, requires an employer with three or more employees, to contribute the equivalent of 10% of each employee's monthly emoluments, while the employee is required to contribute 8%. The 18% contribution must be remitted every month to the employee's RSA that is managed by a PFA of the employee's choosing. Section 13 of the PRA provides that an RSA Holder may transfer his RSA from one PFA to another, not more than once a year, subject to the guidelines issued by PENCOM and the 2020 Regulation was issued by PENCOM to give effect to this provision of the PRA. Until the issuance of the 2020 Regulation, it was not possible for employees to change their PFA; this meant that everyone had to remain with the PFA they chose when the PRA was first enacted in 2004 or when they set up their RSA, even if the employee were to change his/her employment. The inability to change PFAs limited competition in the Nigerian pension administration industry.

We believe the 2020 Regulation will foster an increase in competition in the pension industry and will result in mergers and acquisitions in the pension industry, as there will likely be strategic collaborations between the players in the sector to enhance their marketability and attract existing and new RSA holders to transfer their accounts to them or open accounts with them, as the case may be. We believe this will strengthen the sector as the PFAs must now continually seek to improve the quality of their services to ensure that they increase, or at least maintain, their market share due to the mobility that the customers will now have.

Enforcement of covenants in restraint of trade

In the case of iROKOtv.com v. Michael Ugwu (unreported Suit No: NICN/LA/169/2015, judgment delivered on 12 November, 2020) the National Industrial Court ("NIC") refused to uphold a restraint of trade covenant, stating that there are conditions an employer must satisfy before the Court will enforce a covenant on restraint of trade in a contract of employment. In this case, the employer (the Claimant) employed the Defendant and the parties entered into a contract of employment. Two months into the Defendant's employment, the Claimant and the Defendant executed a Non‑Disclosure Agreement which provided that the Defendant would not work for any of the Claimant's clients, vendors, and partners without the written approval of the management of the Claimant, and that the Defendant would not work with the Claimant's clients or customers for a period of one year from the date of termination of his employment. The NIC relying on several decisions held that the Claimant's conduct in attempting to change the terms of the contract two months into the Defendant's employment, to the detriment of the Defendant, was an unfair labour practice because it found no basis for it in good conscience and it was against public policy. The NIC reiterated that in the context of the case, the Claimant was obliged to prove that it had an interest which was capable of being protected; that the restraint of the Defendant was reasonable and that it was not contrary to public policy or interest. The court held that the Claimant did not satisfy these requirements and it concluded that the restraint of trade covenant was invalid and unenforceable.

KEY DEVELOPMENTS FOR 2020

Reinstatement of Employees

The National Industrial Court ("NIC") appears to have expanded the grounds on which it would reinstate an employee whose appointment was terminated. The current grounds on which the NIC has indicated that it would be willing to reinstate an employee are:

• terminations arising from an employee's involvement in trade union activities; and
• terminations where any approval (contractual or otherwise) required to give effect to a termination of an employee's appointment is not obtained.

A third ground relied on by the Court in the case of Bello Ibrahim v Eco Bank Plc relates to the failure to pay an employee's severance benefits contemporaneously with the termination of the employee's employment contract. In this case, the employer had terminated the employee's appointment but paid the severance benefits 8 days after the effective termination date set out in the termination notice. In upholding the employee's claim of wrongful termination and granting the reinstatement order, the NIC relying on the decision of the Nigerian Supreme Court and held that the termination of an employment contract without the corresponding contemporaneous payment of severance benefits rendered such termination invalid, and therefore, wrongful. Given that the termination was ineffectual by reason of its invalidity, the Court held that the employee's employment had not been validly terminated. The employee was therefore reinstated.

This case is important because it clarifies:

• the requirements to effectively terminate an employee's employment contract; and
• the potentially significant consequences of failing to pay severance benefits contemporaneously with the issuance of the termination notice.

KEY DEVELOPMENTS FOR 2019

Removal of arbitration clauses from employment contracts

Based on the decisions of the National Industrial Court (“NIC”), employers should desist from including arbitration clauses based on the provisions of the Arbitration and Conciliation Act, chapter A18, Laws of the Federation of Nigeria 2004, in a contract of employment. The NIC held that the Arbitration and Conciliation Act is not meant to apply to labour and employment disputes. Employers should review all existing contracts between employees to ensure that they do not contain arbitration clauses that require the parties to submit to arbitration under the Arbitration and Conciliation Act, and should amend any contracts that contain such clauses.

Proposed amendments to the Labour Act

The Senate is currently considering Bills to amend the Labour Act. The Bills propose to increase the penalties paid by employers for breaching the provisions of the Labour Act and will remove the restriction that prevents women from carrying out underground work in mines.

It is not entirely clear if the Bills amending the Labour Act will be passed by the House of Representatives and the Senate and assented to by the President before the expiration of their respective terms of office on 29 May 2019.