The Court of Appeal rules that Employee Consent for Payment in Lieu of Notice is mandatory.

In the case of Stanbic Bank (U) Limited vs. Okou R. Constant Civil Appeal No. 60 of 2020, the Court of Appeal (COA) delivered a significant judgment regarding the termination of employment contracts under the Employment Act 2006. The court ruled that employees must willingly consent to receive payment in lieu of notice upon termination of their employment. Failure to obtain such consent renders the termination unlawful and exposes the employer to liability for damages and other legal remedies.

Prior to this decision, employers traditionally had the discretion to either provide employees with actual notice or offer payment in lieu of notice without seeking explicit consent. However, the COA’s interpretation of Section 58(5) of the Employment Act 2006 mandates employers to secure the employee’s consent at the point of termination for any payment made in lieu of notice.

Moreover, the court clarified that any pre-existing agreements or clauses in employment contracts regarding payment in lieu of notice hold no legal validity unless the employee expressly consents to such terms at the time of termination.

While recognizing the practical challenges for employers in implementing this requirement, the court emphasized the unequivocal nature of the law, stressing compliance to avoid legal repercussions.

In light of this decision, we advise the following actions for employers:

It’s important to note that while the COA’s ruling primarily addressed terminations, its principles are equally applicable to dismissals, as governed by the Employment Act 2006. However, it does not extend to summary terminations where no notice is required under the Act.

1. Engage Legal Counsel: Employers, particularly HR practitioners, should seek legal guidance from counsel when navigating employee separation processes.
2. Draft Clear Termination Letters: Ensure termination and dismissal letters explicitly allow employees to consent to payment in lieu of notice, documenting their acceptance of such arrangements at the conclusion of their employment.
3. Review Documentation: Conduct a thorough review of employment contracts, HR policies, and related documents to eliminate any provisions permitting unilateral imposition of payment in lieu of notice.
4. Handle Notice Periods Appropriately: If an employee opts for actual notice, grant paid time off and allow them to remain at home for the duration of their notice period, ensuring regular payment until the conclusion of their employment term.

In summary, adherence to the COA’s ruling regarding employee consent for payment in lieu of notice is imperative for employers to avoid legal challenges and uphold compliance with the Employment Act 2006.

William Muhumuza