When employers ignore the contract

For decades, Nigerian employment law followed a rigid and predictable rule in ordinary master-servant employment relationships: where an employer wrongfully terminated employment, damages were generally limited to what the employee would have earned during the notice period.

In practical terms, an employee who had dedicated twenty or thirty years of service to an organisation could still leave with compensation equivalent to only one or three months’ salary if the termination process breached the contract. The law viewed the dispute narrowly — as a technical breach of contract rather than a disruption to a person’s economic future and livelihood.

That legal position may now be undergoing significant change.

In what could become a defining moment in Nigerian employment jurisprudence, the Supreme Court in IDSL v. Evbuomwan & Ors appears to have considerably expanded the traditional approach to damages for unlawful termination of employment.

Delivering the lead reasoning, Emmanuel Akomaye Agim, JSC, held in substance that where an employer acts outside the terms of the employment contract, the employer cannot subsequently hide under that same contract to artificially restrict damages merely to salary in lieu of notice.

That principle carries profound implications for employers, HR practitioners, outsourcing firms, and corporate boards.

The Supreme Court’s reasoning suggests that once an employer fundamentally breaches the contractual framework governing termination, damages should no longer be mechanically limited to notice pay alone. Instead, compensation may be assessed under the broader principles governing damages for breach of contract, including the real and consequential losses suffered by the employee.

Importantly, the court identified relevant considerations to include:

• the employee’s monthly remuneration;
• the employee’s age;
• proximity to retirement; and
• the economic consequences arising from the premature termination.

This represents a significant departure from the historical rigidity of Nigerian common law employment doctrine.

The implications are especially important in today’s workplace environment, where organisations are increasingly restructuring, automating, outsourcing, and redesigning workforce models under economic pressure.

For years, many employers approached termination processes as largely procedural exercises. Once notice pay was calculated, the legal risk was assumed to be contained. But the Supreme Court’s reasoning may now compel organisations to think differently.

A worker unlawfully disengaged at age 58 after decades of service does not suffer the same consequences as a younger employee still early in career progression. Loss of pension continuity, reduced employability, reputational harm, and disruption to retirement planning can produce devastating long-term economic effects.

The court appears to be acknowledging that employment is not merely a transactional exchange of labour for wages. For many Nigerians, employment represents economic stability, identity, social standing, and future security.

The decision also carries enormous implications for Nigeria’s rapidly growing outsourcing and third-party workforce ecosystem.

Traditionally, many client organisations assumed that employment exposure rested primarily with the outsourcing company as the direct employer, while operational control remained largely with the client. That assumption may now require reconsideration.

Where outsourced employees are subjected to arbitrary suspensions, abrupt return-to-vendor directives, procedural irregularities, reputational damage, or improperly managed exits, the legal and financial consequences may no longer remain neatly confined within narrow contractual boundaries.

Primary employment agencies must now exercise greater caution in:

• structuring employment contracts;
• documenting disciplinary procedures;
• managing suspensions carefully;
• handling disengagement processes transparently; and
• ensuring accrued employee entitlements are lawfully treated.

At the same time, client organisations must also appreciate that operational decisions taken at the site level can generate substantial downstream liability exposure.

A casual instruction to remove, suspend, blacklist, or return a deployed worker may ultimately become the foundation of a wrongful termination dispute capable of attracting substantial compensatory claims if due process is ignored.

This becomes particularly sensitive where the employee:

• is close to retirement;
• has long years of service;
• suffers reputational damage; or
• loses long-term economic opportunities as a result of the termination.

The outsourcing industry, therefore, sits at an important legal crossroads.

The traditional belief that termination risk can simply be outsourced may become increasingly difficult to sustain where courts begin focusing more heavily on the real economic consequences of unlawful exits rather than merely the wording of notice clauses.

For the National Industrial Court, the judgement may further strengthen the court’s increasingly equitable and international-best-practices orientation under Section 254C of the Constitution and Section 7(6) of the National Industrial Court Act.

This may encourage employers to:

• strengthen disciplinary governance;
• improve HR documentation standards;
• formalise disengagement protocols;
• reduce arbitrary exits;
• prioritise negotiated separation arrangements; and
• Involve legal and HR professionals earlier in termination decisions.

However, caution remains necessary.

The Supreme Court’s decision does not abolish the distinction between ordinary master-servant employment and employment clothed with a statutory flavour. Neither does it automatically open the floodgates for speculative or exaggerated damages.

Employees must still establish credible evidence linking the employer’s breach to actual consequential loss. Courts are unlikely to reward mere emotional dissatisfaction or unsupported financial projections.

Nonetheless, IDSL v. Evbuomwan may emerge as one of the most consequential Nigerian employment law decisions in recent years because of the powerful principle it reinforces:

An employer who acts outside the contract may no longer be permitted to hide behind the contract to minimise liability.

That single proposition could reshape how Nigerian organisations, outsourcing providers, HR leaders, and boards think about termination risk, workforce governance, and workplace fairness in the years ahead.

 

Dr Olufemi Ogunlowo is the CEO of Strategic Outsourcing Limited, a leading provider of personnel and business process outsourcing services in Nigeria. He is also a regular columnist on employment and workforce strategy.