COVID-19: VOLUNTARY UNPAID LEAVE AND OTHER EMPLOYMENT MANAGEMENT OPTIONS

COVID-19 pandemic has unleashed untold hardship on many employers of labour. The most affected are employers in the aviation, hospitality and tourism industries. Of course, every employer will be affected one way or the other as the government enforces lockdowns to try to curb the outbreak. Even in limited cases where employees can work remotely, there is bound to be a decline in productivity. Generally, restriction on movement and social distancing will affect consumer spending which will ultimately affect revenue and the capacity of employers to pay salaries and other emoluments. The question therefore on the lips of many employers is what they will do with their employees who have now been rendered ‘redundant’ by the pandemic. Employees are also worried about job security and the ability to weather the storm at this time.

An option for consideration by employers is to place workers on voluntary unpaid leave till when business returns to normal[1]. This will be devastating for employees who need to survive through the period of the pandemic. The legal question therefore is to what extent can an employer place an employee on unpaid leave under Nigerian law? Is an employee placed on voluntary unpaid leave entitled to any benefit? What other options are available to employers and employees? What is Nigeria’s response to the possibility of loss of jobs? This article addresses these and other related issues.

Unpaid Leave under Nigerian Law

There is no express provision on unpaid leave under Nigerian law. The only section of the Labour Act[2] relevant to the situation orchestrated by COVID-19 is section 17(1). The section provides that:

‘’17(1)  Except where a collective agreement provides otherwise, every employer shall, unless a worker has broken his contract, provide work suitable to the worker's capacity on every day (except rest days and public holidays) on which the worker presents himself and is fit for work; and, if the employer fails to provide work as aforesaid, he shall pay to the worker in respect of each day on which he has so failed wages at the same rate as would be payable if the worker had performed a day's work:

Provided that-

(a)          where, owing to a temporary emergency or other circumstances beyond the employer's control (the period of which shall not exceed one week or such longer period as an authorized labour officer may allow in any particular case), the employer is unable to provide work, the worker shall be entitled to those wages only on the first day of the period in question;…’’ 

The effect of the above provision is that an employer is only obligated to pay the worker one day wages where it is unable to provide work due to a temporary emergency or circumstances beyond the employer’s control. COVID-19 certainly can be classified as temporary emergency and other circumstances beyond the employer’s control. This also means that an employer is not under compulsion to continue with the contract of service in such circumstances. The provision is a statutory codification of force majeure. The implication is that voluntary unpaid leave is not outlawed and in fact, is a gratuitous arrangement by the employer.

There are however issues with this provision. In the first place, the Labour Act applies to a limited number of workers[3]. Many workers in the most affected industries cannot be considered manual or clerical staff to which the law principally applies. Employers cannot therefore rely on the provision in many cases. For these categories of employees, the applicable rules will be their terms of employment and collective agreements applicable to their employment if any.

Secondly, though there is no express provision on unpaid leave under the Nigerian law. However international best practices and labour standards have been directly incorporated into the Nigerian law[4]. This necessarily places a duty on employers to consider these standards in planning business sustainability as it relates to employees.

It is opined that employers considering placing employees on unpaid leave should communicate genuinely to the employees to get their buy-ins and in the first instance place them on a paid leave for a period of not less than one month. In developed countries, companies are offering at least 2 weeks paid leave. The employer may also consider giving employees their annual leave during this period of the outbreak as part of the paid leave period.

Unemployment Benefits for Unpaid Leave

An employee on voluntary unpaid leave is for all intent and purpose unemployed for the period of leave. This raises another question whether such an employee is entitled to unemployment benefits. There is no statutory unemployment, termination or suspension of employment benefits in Nigeria. This is one of the weakest links in our employment law. Beyond pension and employee compensation for injuries sustained in the cause of employment, there is no provision which obligates an employer to pay a certain benefit to employees. Even where an employment is terminated, the benefits payable are salaries in lieu of notice, accrued salaries and other emoluments and other agreed benefits of termination in the terms of employment. In the absence of a provision in the terms of employment which entitles an employee to benefit for suspension of employment, the employee has no claim to any benefit.

The point had earlier been made that unpaid leave of absence in the circumstances such as COVID-19 is practically a gift from the employer because the employer can bring the employment to an end. The closest to statutory benefit is section 20 of the Labour Act which provide for a negotiated compensation in the event of termination of employment due to redundancy. However, redundancy is defined within a narrow compass to mean involuntary loss of job due to excess of manpower which is not the case here.

The danger however is that an employee placed on unpaid leave may claim constructive dismissal in respect of which the employee will be entitled to damages. However, the reality of the situation is that employees are more likely to accept a voluntary unpaid leave rather than facing the termination of their employment. This is why the process to place an employee on unpaid leave should be open and transparent and the employees should be allowed to voluntarily choose to go on unpaid leave. To facilitate the process and given the dire circumstances of the times, the employer should offer a monetary incentive or a period of paid leave before the unpaid leave period.

Sick Leave

Apart from cases where the employer is unable to provide work due to COVID-19, there are cases where the employer is opened for business but a staff is infected by the virus. Nigerian law and practice recognizes sick leave[5]. An employee who is sick is entitled to twelve working days of paid sick leave in a year. Sick leave is fully paid leave and is calculated as workers’ monetary wages excluding overtime and other allowances.

In line with international best practices and labour standards, employers are expected to afford the same facilities to employees outside the purview of the Labour Act and may be under obligation to extend the leave period to cover employee who are affected by COVID-19 indirectly, like, having to take care of family infected or children as a result of closure of schools. Public policy also demands that employees in mandatory isolation or quarantine should be given paid time off for the period.

Other Options

There are no easy options. Employers may choose to retain employees but in some cases, they may be unable to afford to pay salaries. It is not in the interest of both parties for the employment to be terminated. Employers would not want to lose good staff particularly where there is hope that the pandemic will not last forever. Employees obviously would want to have something to fall back on after the period of the outbreak. Where the parties cannot agree on a mutually beneficial option, the employer may terminate the employment with requisite notice or payment in lieu under the terms of employment.

COVID-19 and Economic Stimulus by Governments

The choices before employers and employees are difficult. This is why globally, countries are stepping in to provide succor to both employers and employers. For example, on March 18, the United States’ (US) president signed the Families First Coronavirus Response Act, which provides for up to 80 hours of emergency paid sick leave for an individual who is quarantined, has to care for somebody else who is quarantined or if their child's school or daycare is shut down. The law intends to compensate employers with tax credits. States and Local Governments are doing something similar across the US. On March 20, 2020, the United Kingdom (UK) proposed to pay up to 80% of salaries of workers to avoid loss of jobs.

In Nigeria, on March 18, 2020, the Central Bank announced One Trillion Naira intervention fund in critical sectors of the economy. This was followed by the House of Representatives’ Emergency Economic Stimulus Bill, 2020 passed on March 26, 2020. The Bill provides, amongst other things, that any employer duly registered under the Companies and Allied Matters Act Cap C20 LFN 2004 which maintains the same employees status without retrenching workers as at March 1, 2020 till December 31, 2020 shall be entitled to 50% income tax rebate on the total amount due or paid as PAYE under the Personal Income Tax Act Cap C8 LFN 2004 as amended. The Bill also grants import duty on medical equipment, medicines, personal protection equipment and other medical necessities required for the treatment and management of COVID-19 disease in Nigeria. Also mortgage obligations on residential properties obtained by individual contributors to the National Housing Fund are deferred for a period of 180 days effective from March 1, 2020. The December 2020 timeline may be extended by the president.

It is doubtful whether the incentive conceived in the Emergency Economic Stimulus Bill will sufficiently motivate employers to retain workers particularly in the most affected sectors like aviation and related businesses, leisure, tourism and entertainment. 50% of the total amount due or paid on PAYE is insignificant compared to the cost of maintaining workers in such sectors. Oil and Gas companies subject to the Petroleum Profit Tax Act are also excluded from the application of the Bill. This appears surprising because the industry lubricates other sectors of the economy and is also hit by low crude oil prices. From the way the Bill is currently framed, no employer is likely going to retain workers because of the tax rebate provided in it.

Secondly, the Bill fails to make provision for a mandatory paid leave period and does not consider the possibility of unpaid leave periods. There is also complete silence on how unemployed persons, gig workers and self-employed individuals can survive the period of lockdowns and restriction on movements.

Conclusion

COVID-19 has thrown the world into unchartered territories in many respects. For employers and employees, this is no time for undue legalism but realism and practical solutions that would reasonably serve the interest of both parties.  Some employers would be justified to call for a temporary review of terms of employment during the period of the outbreak of the virus. This review may call for unpaid leave of absence but not after a period of paid leave is given and with compassionate incentives to assist employees survive economic lockdown. Unpaid leave or any other available options should not be arbitrary as many employees can work from home and not all employers are impacted to the point of inability to maintain the workforce.

Overall, responsible governments across the globe are already putting measures in place to cushion the effect of the global pandemic with a view to protecting workers. While attempts are being made in this direction by Nigeria, the Emergency Economic Stimulus Bill does not appear to appreciate the relevant issues for employers, employees and self- employed individuals. We need to do more if we want to help companies retain workers.

[1] This option is being taken by Emirate airlines and a few others. See https://www.tvcnews.tv/emirates-orders-pilots-cabin-crew-to-take-unpaid-leave/

[2] Cap L1, LFN 2004 (hereafter referred to as the Act)

[3] Section 91 (1) defines a worker under the Act to mean any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour, but does not include persons exercising administrative, executive, technical or professional functions as public officers or otherwise

[4]  See section 254C (1) (f) and (h) of the 1999Constitution  as amended by The Constitution of the Federal Republic of Nigeria (Third Alteration) Act No. 3 of 2010

[5] See section 16 and 19 of the Labour Act