Suspending, not terminating, employment contract obligations for up to 90 days is the best option
In late 2019, a novel coronavirus, COVID-19, originated in China, and has since developed into a worldwide crisis, claiming tens of thousands of lives and infecting more than a million people to date. The pandemic is causing unprecedented socio-economic disruption on a global scale, including massive lay-offs that the International Labour Organization (ILO) estimates will reach up to 25 million jobs in total.
Because of this impact, it is imperative that the rules governing relations between employers and employees are well-understood during this time of crisis. Countries are already implementing support measures in response to the unfolding unemployment crisis. These include new laws and regulations, and the implementation of existing ones. In Ethiopia, an examination of legal avenues available to employees and employers is not only useful but essential.
Ethiopia has not been spared by the COVID-19 outbreak, nor the consequences for workers. Many companies have stopped or are likely stop operating and many employees will not be working. Employers may not be willing or able to pay wages for non-working employees. In addition, they may not want to fire valuable staff. Moreover, a temporary reduction of demand for products and services is not acceptable legal grounds for terminating workers’ contracts under Ethiopian law. From the employee’s perspective, although the employer is not required to pay wages and other benefits, they may want to ensure they still have a jobs once this temporary cessation is over. The question is what are the legal grounds to reconcile these two positions in a way that benefits both employers and employees.
The rules about the “suspension” of employment contract under new Labour Proclamation No.1156/2019 appear to be the most sound solution. According to Article 4 of the law, an employment contract means a contract in which the employee agrees to perform work for the employer in return for wages. Important elements are that it is created by agreement; the agreement is for performance of work; the work needs to be performed for and under the authority of the employer; and the work should be in return for wages.
Article 17 describes “suspension” where the employee will not be required to work, and the employer will not be bound to pay. Nevertheless, despite suspension, the employment relationship remains intact. That is to say, it is a mechanism by which the rights and obligations of the parties may be suspended but the parties remain contractually engaged. This is of course different to termination, which is a definitive end to the employment relationship.
The law lists valid grounds for suspension under Article 18 These can be summarized as suspension by voluntary agreement of all parties; for public interest; for reasons beyond the control of the employer (force majeure); and due to disciplinary measures. Clearly, with the arrival of the pandemic in Ethiopia, force majeure is relevant here.
According to Article 18(5), employment contracts can be suspended due to force majeure for no less than 10 consecutive days. Once legal grounds for force majeure are determined, parties to a contract are freed from all obligations.
The first requirement for applying this article is that the activities of the employer should be at least partially interrupted. A second important element is that the interruption was due to force majeure. Under Ethiopian law, a force majeure encompasses, but is not limited to, events such as an unforeseeable act of a third party; an official prohibition preventing the performance of the contract; a natural catastrophe such as earthquakes or floods; international or civil war; death or serious accident, or unexpected serious illness.
Because COVID-19 has been declared a pandemic by the World Health Organisation, it can be considered a force majeure under Ethiopian law. It is evident that due to COVID-19, the operation of companies will be interrupted at least partially, as has occurred elsewhere, for a period of more than 10 days. So far major businesses have been relocated, inter-regional transport banned, and border restrictions are imposed for an undetermined period. The COVID-19 outbreak is therefore sound legal ground for suspension to be enacted under Ethiopian labor law.
Suspension of employment contracts due to force majeure is not automatic nor at the sole discretion of the employer. Rather, it is subject to revision by the federal Ministry of Labour and Social Affairs and regional labour bureaus. According to Article 19 of the labour proclamation, in order to suspend employment on the ground of force majeure, the employer should inform the ministry, or the competent authority, in writing within three working days of the occurrence of force majeure. Upon receiving such an application, the authority should determine the matter within three working days.
Where the authorities fail to notify of a decision within three working days, the employer is deemed to be allowed to suspend per Article 20 of the labor law. However, if the application is confirmed, the government sets the duration of suspension, which cannot not exceed 90 days. If the ground for suspension is to last longer than 90 days and the parties are unable to resume performing their obligation, the contract shall be terminated under Article 21.
It should be noted that there are a number of other possible measures in addition to suspension. For instance, sick leave, annual leave, or unpaid leave, could also be considered. But because of the nature of COVID-19 and how long it may last, those options are inappropriate. It should also be noted that COVID-19 is not valid grounds for termination of employment contracts per Article 28(3)b, as it is a temporary situation.
Due to its novelty, COVID-19 will continue to raise challenges for employment relationships. To tackle these challenges, suspension of employment contract should be considered as one of the key measures to help manage the situation.
Editors: Rebecca Zerihun, William Davison
Main photo: Workers at Hawassa Industrial Park; 30 August 2017; William Davison
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1 April 2020 Ethiopia’s COVID-19 quandary