Socio-economic and technological changes have been among the drivers affecting the labour markets across the globe. The employment relationship has therefore been shaped by socio-economic and technological changes that continue to take place around the world. As in any other jurisdiction, in Tanzania, labour laws have been developed, both by the legislature and judiciary, to respond to changes occurring from time to time. Although employment relationships are purely contractual, they are substantially regulated by the labour laws, which provide the minimum requirements/standards which every such relationship must adhere to. The minimum standards continue to be adjusted by legislation and their interpretation continues to be broadened by the judiciary in response to socio-economic and technological changes.
This article intends to highlight three legal and socio-economic issues which have been trending in employment law and practice in mainland Tanzania. It aims to enlighten employers and other interested readers on new developments in relation to the initial stage of the disciplinary process, the legal status of probationary employees who continue to work after expiration of probation without confirmation, and termination obligations due to operational reasons during the socio-economic crisis resulting from the COVID-19 pandemic.
The Three Trending Legal and Socio-economic Issues
Investigation of misconduct for purposes of a disciplinary hearing
Misconduct is recognised as one of the valid and fair reasons for which an employment relationship may be severed. But termination of employment must adhere to specific procedures stipulated under the Employment and Labour Relations Act, 2004 (ELRA) and its regulations. Before termination can be issued as a penalty following serious misconduct, the employer has an obligation to undertake a disciplinary hearing where the employee will be given an opportunity to be heard.
Before the disciplinary hearing is conducted the very first procedure an employer needs to comply with is to conduct an investigation. The requirement under Rule 13(1) of the Employment and Labour Relations (Code of Good Practice) Rules, 2007 (the Code), is to conduct an investigation to ascertain whether there are grounds for a disciplinary hearing to be held. The law is silent on what the scope of said investigation and the process to be undertaken during the investigation should be. That being the case, since the enactment of ELRA and since the coming into effect of the Code, where a dispute has arisen on the fairness of termination, it has been sufficient for an employer to show only that investigations have been conducted. It therefore sufficed for the employer to have a witness testify in court that an investigation was conducted before the disciplinary hearing was convened, without the need to prepare a formal Investigation Report.
However, it has become a trend for some of the judges of the High Court Labour Division (Labour Court) to interpret the requirement to investigate to mean that the same should lead to preparation of an Investigation Report. With this development, absence of the Investigation Report means that termination will be found to be procedurally unfair which could lead to the employer being required to pay compensation of not less than 12 months' remuneration to the employee for unfair termination. According to the principles of stare decisis, decisions of the Labour Court are binding to the Commission for Mediation and Arbitration (CMA) which is the first adjudication stage for labour matters. However, based on the same principle, said decisions are not binding to the fellow judges of the Labour Court. On that basis, some judges at the Labour Court have not followed the trend developed by others in relation to the requirement to prepare an Investigation Report. We believe, however, that it is only a matter of time before the trend will be picked up and adopted by the other Labour Court judges.
The highest court of the land in the United Republic of Tanzania is the Court of Appeal (the CAT). The decisions of the CAT are binding to the Labour Court and the CMA. The CAT has not had an opportunity to directly interpret Rule 13(1) or to consider the trend developed by the labour courts on the need to prepare an Investigation Report. However, in its most recent decision, on 18 June 2020, the CAT was faced with a situation where a finding in an audit report formed a basis for disciplinary actions against employees. This was in Civil Appeal No 343 of 2019, between Severo Mutegeki and Another and Mamlaka ya Maji Safi na Usafi wa Mazingira Mjini Dodoma (DUWASA) (Unreported). In the said case, the CAT was of the view that the finding of the investigations must be shared with the accused employee before a disciplinary hearing was held to make sure that the employee was accorded a proper opportunity to be heard. In the relevant case, there were internal policies and regulations that provided for the audit process which, among others, required the accused employee to be involved during the investigation. The CAT therefore underscored the need to exhaust the prescribed internal rules and regulations before a disciplinary hearing is held.
In the said case, the employees were terminated after being found guilty of gross negligence and dishonesty occasioning monetary loss to the employer, according to an audit finding. Before the disciplinary hearing, the employees were only given access to extracts of the audit report and not the full report. The CAT therefore emphasised the fact that non-supply of the full report amounted to a denial of the employees’ right to be heard.
In that regard, based on this decision by the CAT, it is clear that employers are required to make sure that investigation of a misconduct must comply with the applicable internal policies and regulations, if any, and that before a disciplinary hearing, an employee must have access to the findings of the report for the purposes of preparing for the hearing. With this trend requiring the findings to be shared before the hearing, it is only a matter of time before the Labour Court’s trend for the need to prepare a formal Investigation Report is adopted and becomes a requirement of law as developed by case law. It is therefore very important for employers to adopt the new trend to keep up with the ever-evolving legal environment as it adapts to the changing business world.
On a similar note, the Code also requires that investigations are undertaken before termination of employment due to incapacity (ie, poor performance, ill-health or injury) and incompatibility. While in these circumstances, an investigation is not a prerequisite for a disciplinary hearing to be held, it is for the purposes of determining the reasons and extent of incapacity or incompatibility. Investigations will also assist the employer to determine whether there is a possibility of accommodating the employee before termination, or to consider all possible alternatives short of termination in cases of ill-health or injury and incompatibility, as required by the labour laws. In this regard, it goes without saying that it is only a matter of time before the trend to provide an Investigation Report is adopted in relation to the investigations conducted for incapacity and incompatibility issues. Employers should therefore consider adopting the trend in preparation for this.
Legal status of a probationary employee who continues to work after expiry of the probation period without confirmation
Labour laws allow employers to apply probation periods at the commencement of employment relationships for the purposes of making an informed assessment of the employee’s competence and suitability for the role. The Code requires that when the employer decides to put an employee under probation, the terms of such probation must be made known to the employee. Such terms may include the period of probation, what is required of the employee during the probation period and what happens at the end of the probation period. The probation period is required to be of reasonable length, depending on the nature of the job, the standard required, the custom and practice in the relevant sector. The maximum length provided under the Code is 12 months.
There is very limited jurisprudence in mainland Tanzania on the interpretation of the provisions of ELRA. It has therefore been a trend for both the CMA and the Labour Court, the labour dispute resolution regimes in Tanzania, to look into the persuasive decisions made in South Africa in interpreting various provisions of ELRA. This is because most of the provisions of ELRA and its regulations are similar to those of the labour laws of South Africa. ELRA and its regulations are silent on the status of an employee who continues to work after the expiry of the probation period without formal confirmation of employment. Therefore, in circumstances where an employee continues to work for an employer after the expiry of the probation period without an official confirmation of employment, it is, in most of the said instances, taken for granted that the employment contract was automatically confirmed where there were no internal policies and regulations providing otherwise. Where there were internal policies and regulations, it was left to the employer to determine the status of the said employees in accordance with such internal policies and regulations.
Before 30 August 2019, the CAT was yet to determine the legal status of such employees. It was a position, as stipulated by the CAT, in Civil Appeal No 72 of 2002, between Stella Temu and the Tanzania Revenue Authority (2005) TLR 178, that probation is a practical interview. There was, however, no conclusion as to what happens to the employee after the period of the practical interview expires and the employee continues to provide services to the employer.
On 30 August 2019, the CAT had an opportunity to determine the status of a probationary employee who continued to provide services to the employer after expiration of the probation period without the employment being confirmed. This was in Civil Appeal No 61 of 2016, between David Nzaligo and National Microfinance Bank PLC (unreported). The CAT made it clear that continuation of work after the expiration of a probation period without the employer having made a decision on whether or not to confirm the employee, does not amount to automatic confirmation of employment.
In the relevant case, the employee had continued to provide services to the bank for close to two weeks after the expiration of the probation period and proceeded to resign after not being satisfied with the result of his performance evaluation. He then put in a claim alleging constructive termination by the bank. He was unsuccessful at both the CMA and the Labour Court, hence the relevant appeal at the CAT. In arriving at its decision, the CAT relied on its own prior decisions, made before ELRA came into effect, including the decision in the Stella Temu case (above), and held that confirmation of an employee on probation is subject to fulfilment of established conditions and that expiry of the probation period does not mean automatic confirmation. The CAT was of the view that expiry of the period set for probation does not automatically lead to a change in status from probationer to confirmed employee. The case makes it clear that the only way to confirm an employee’s employment is for the employer to issue an express confirmation.
In its decision, the CAT went further and held that an employee who is still under probation is precluded from the unfair termination protection available under ELRA. Generally, an employee who is found to be unfairly terminated under ELRA and its regulations, is entitled to either compensation of not less than 12 months’ remuneration, reinstatement without loss of remuneration, or re-engagement. However, Section 35 of ELRA excludes employees with less than six months’ employment from claiming unfair termination. The relevant section had yet to go through the interpretation test by the CAT before 30 August 2019. When interpreting the said section, the CAT extended the exclusion to employees who are still under probation, notwithstanding the length of the probation period. This is despite the fact that ELRA only excluded employees who had worked for the employer for less than six months.
The CAT was of the view that although the relevant section excludes employees with a specific period of employment and not employees of a specific status, in interpreting the section there is a need to differentiate between a probationer and a fully recognised employee. It was the CAT’s view that the law on unfair termination only envisaged confirmed employees and therefore an employee who is still under probation cannot enjoy the rights and benefits enjoyed by confirmed employees. The rationale behind the finding is that the purpose of probation is to assess the employee's competence and suitability for employment, and therefore as long as an employee is still under assessment, the employee is not considered to be a confirmed employee and therefore their termination cannot be regarded as unfair.
Based on this new development, the current position is that the change of status of a probationary employee is not automatic. It will depend on a formal confirmation from the employer as well as confirmation of any applicable internal policies and regulations. On a similar note, as long as an employee is yet to be officially confirmed to employment, notwithstanding the length of employment, the provisions of ELRA in relation to unfair termination will not apply to the relevant employee. It is therefore important for employers and employees to agree on clear terms and conditions applicable during the probation period, including clear terms in relation to confirmation of employment.
The position, as noted above, was born out of circumstance where the employee had only worked for a period of two weeks past the expiry of the probation period of six months. One may wonder, will the position remain the same in a situation where an employee works for a period longer than two weeks after the expiry of the probation period? It is, however, important to note that the length of the period worked after the expiry of the probation period was not one of the factors considered by the CAT. The other question based on this new development is what the interpretation will be if the employee is not confirmed after working for more than 12 months, considering the fact that the Code restricts probation to a maximum 12-month period. Will the labour dispute regime conclude that employment is automatically confirmed in that case? It is our view that probation cannot be endless, pending official confirmation by the employer, and that it should be limited to a 12-month period, as provided by the Code. Once the 12 months expire, therefore, we believe the employee should be considered to have been automatically confirmed.
Termination of employment arising from operational requirements as a result of the economic crisis caused by COVID-19
Labour laws allow termination of employment due to the operational requirements of a business arising from the economic, technological and structural needs of the business (Rule 23(1) of the Code). The economic impact on businesses of the COVID-19 pandemic falls within the circumstances that legitimately form a basis for termination of employment due to operational reasons.
The COVID-19 pandemic has hit world economies and forced many employers to adjust their operations in an attempt to guarantee the survival of their businesses post the pandemic. The effect of the pandemic in Tanzania has been witnessed in various industries, but especially those industries which largely depend on tourism. These include the hospitality and leisure industry, especially hotels, lodges and other real estate businesses that rely on foreign clients; transport and aviation; schools and others. The travel restrictions imposed by most countries in the world to flatten the curve of COVID-19 infections, has caused significant pressure on cashflow to the tourism industry in Tanzania. We have seen the impact of COVID-19 on our clients in the hospitality industry who have been forced to shut down their businesses either temporarily or permanently. This has had a major impact on their cashflow, forcing the relevant businesses to take measures to reduce operational costs in order to guarantee their survival. Some businesses have been forced to make agreements with their employees to accept pay cuts or take holiday leave without pay where this is feasible, while others have been forced to change their operational structures, rendering some existing positions redundant. The latter situation has led to reduction of the work force.
The reduction of the work force brings disharmony to the relationship between employers and employees. This is evidenced by the number of labour disputes currently referred to the CMA. While some of the disputes are on unfair termination following retrenchment (termination on operational requirement), others are on unfair labour practice and constructive termination following the decision to grant indefinite unpaid leave, reduced pay or lack of payment of remuneration. It is therefore important for employers to make sure that the measures taken to curb the impact of COVID-19 are either taken following consultations and agreement with the relevant employees where there are no specific procedures provided under the labour laws, or by following the relevant procedures provided by the labour laws to reduce the risk of said decisions being found to be unfair, which will result in employers being forced to pay compensation. The obligations set under the law must therefore be followed when making relevant decisions in an attempt to reduce the adverse impact of COVID-19 to businesses.
Before proceeding with termination on operational requirements, the labour laws require that employers first consider measures that will minimise or avoid termination. Such measures may include the transfer of employees to other jobs, if available, early retirement, voluntary retrenchment packages or lay-offs, leave without pay or any other measures that may be agreed between the employer and employees or a trade union, where applicable. Provided there is an agreement to this effect, this can be achieved without the need to follow the entire retrenchment procedure stipulated under ELRA and its regulations. However, if this is not achieved and it is clear that retrenchment will be necessary, then three main obligations must be followed. These are: notice of retrenchment; consultations, where relevant information on the retrenchment will be disclosed; and reaching an agreement.
The notice of retrenchment must be issued as soon as the retrenchment is contemplated. The notice is to be issued to all employees who will be affected or the trade union, if the affected employees are members of a trade union. The notice should contain information on the reasons for retrenchment – in this case, the economic impact of COVID-19 – which may either lead to closure of the business or branches or reduction of the work force as a result of structural changes. The employer is also required to indicate any measures that will be considered to avoid/minimise the intended retrenchment; the criteria for selection of the employees to be retrenched; the proposed period of retrenchment; and the benefits applicable in respect of retrenchment.
Thereafter, the employer is required to consult the employees and disclose relevant information on the retrenchment process. The purpose of disclosure is to enable the employees to obtain information for proper and meaningful consultations in order to reach an agreement on the retrenchment. Consultations can be with individual employees, groups or through a trade union, where applicable. Consultations do not need to be face to face and therefore, with the travel restrictions and social distancing requirement imposed as a result of COVID-19, the same can be conducted through virtual meetings.
Consultation is the most important part of the retrenchment process, as it is intended to assist the parties to reach an agreement on the retrenchment. It is therefore important for the employer to be transparent and disclose relevant information in relation to the impact on the business of the COVID-19 pandemic, to enable the employees to make an informed decision. It is not expected that employees will automatically understand the situation. The relevant information should be made available to help them understand the impact on the business for the purposes of reaching an agreement. Only after an agreement is reached is the employer allowed to proceed with termination on operational requirements.
If no agreement is reached with all or some of the employees to be retrenched, the employer is prohibited from unilaterally proceeding with termination in relation to the employees who did not agree to the process. In such circumstances, the law requires either the employee or the employer to refer the dispute to the CMA for mediation. If no settlement can be reached through mediation, the dispute will be referred to arbitration. When the matter is pending arbitration, the employer is prohibited from proceeding with retrenchment until a decision is made in favour of the employer. If the decision is made against the employer, the employer will continue to be prohibited from proceeding with the retrenchment even after the dispute is referred to the Labour Court.
With several employment cases currently pending at the CMA, challenging the retrenchment processes undertaken by employers or alleging unfair practice in relation to various measures undertaken by employers in an attempt to ensure the survival of businesses following COVID-19, it is incumbent on employers to understand their legal obligations when terminating employment on operational requirements. Where retrenchment is inevitable, employers should ensure that the procedure stipulated under the law is followed, in order to avoid further impact to the business caused by unfavourable decisions on the part of the labour adjudication regime.
The employment laws in mainland Tanzania are procedurally oriented. Since the inception of the ELRA in 2004, the labour adjudication regime has interpreted the labour laws in favour of employees. The new development in relation to the status of probationary employees has shed light on the changing position of the law to accommodate shifts in the labour market.
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