Ethiopia

Sources of regulation

The central statute regulating termination of employment in Ethiopia is the Labour Proclamation (“LP”), adopted in 2003 (Labour Proclamation No. 377/2003) and most recently amended in 2006 (Labour (Amendment) Proclamation No. 494/2006).

In 1991, Ethiopia ratified the ILO Termination of Employment Convention (No. 158).

Scope of legislation

The LP is generally applicable to employment relations based on a contract of employment between a worker and an employer. However, it does not apply to the following employment relations arising out of a contract of employment (sec. 3(2), LP):

• Upbringing, treatment, care or rehabilitation;
• Educating or training, other than as an apprentice;
• Persons holding managerial posts who are directly engaged in major managerial functions and who give decisions within the power delegated to him/her by law or the employer;
• Personal service for non-profit-making purposes;
• Persons such as members of the armed forces, members of the police force, workers of state administration, judges of courts of law, prosecutors and others whose employment relationship is governed by special laws; or
• Persons who perform an act, for consideration of payment, at his/her own business or professional responsibility under a contract of service.

Contracts of employment

A contract of employment is deemed formed where a person agrees directly or indirectly to perform work, or a piece of work, for and under the authority of an employer, for a definite or indefinite period in return for remuneration. Unless otherwise provided by law, a contract of employment is not required to be in any special form (secs. 4 and 5, LP).

Any contract of employment is deemed concluded for an indefinite period, unless a definite duration is specified (sec. 9, LP). A contract may be concluded for a definite period or piece work, namely, in the following cases (sec. 10, LP):

• Performance of specified piece work;
• Replacement of a worker who is temporarily absent due to leave or sickness or other causes;
• Performance of urgent work to prevent damage or disaster to life or property, to repair defects or breakdowns in works, materials, building or plant of the enterprise;
• Irregular work which relates to a permanent part of the works of an employer, but is performed at irregular intervals;
• Seasonal work which relates to the permanent part of the works of an employment, but is performed only for a specified period of the year; and
• Occasional work which does not form part of the permanent activity of the employer, but which is done intermittently.

A probation period must be specified in writing and cannot exceed 45 consecutive days (sec. 11, LP).

Termination of employment

A contract of employment may only be terminated at the initiative of an employer or a worker, through law, collective agreement, or agreement between both parties (sec. 23(1), LP). The merger, division, or transfer of ownership on an enterprise will not have the effect of terminating a contract of employment (sec. 23(2), LP).

A contract of employment may be terminated by law on the following grounds (sec. 24, LP):

• Expiry of the period or on the completion of the work where the contract of employment is for a definite period or piece work;
• Death of the worker;
• Retirement of the worker in accordance with the relevant law;
• When the enterprise ceases operation permanently or due to bankruptcy or for any other cause; or
• Where the worker is unable to work due to partial or permanent incapacity.

The parties may terminate their contract of employment by agreement. Yet, a waiver by the worker of any of his/her rights under the law has no legal effect. In addition, the termination by agreement is effective and binding on the worker only where it is made in writing (sec. 25, LP).

A worker may terminate a contract of employment after completing his/her probation period by giving 30 days’ prior notice to the employer (sec. 31, LP). The worker may also terminate his/her contract without notice for good cause (constructive dismissal) such as in the following cases:

• Where the employer has committed against him/her any act contrary to his/her human dignity and morals or other acts punishable under the Penal Code;
• In the case of imminent danger threatening the worker’s safety or health, the employer, having been made aware of such danger, failed to act within the time-limit in accordance with an early warning given by the competent authority or appropriate trade union or the worker him/herself to avert the danger;
• If the employer has repeatedly failed to fulfil his/her basic obligations towards the worker as prescribed under the LP, collective agreements, work rules or other relevant laws.

Where a worker terminates his/her contract of employment for the above reasons, he/she must inform the employer, in writing, of the reasons for termination and the date on which the termination is to take effect (sec. 32(2), LP). However, the worker’s right to terminate such contract lapses after fifteen working days from the date on which the act occurred or ceased to exist (sec. 33, LP).

Dismissal

A contract of employment may only be terminated, at the employer’s initiative, where there are grounds connected with the worker’s conduct or with objective circumstances arising out of the worker’s ability to do his/her work or the organizational or operational requirements of the enterprise (sec. 26(1), LP).

Unless otherwise determined by a collective agreement, a summary dismissal without notice may only be justified on the following grounds (sec. 27(1), LP):

• Repeated and unjustified tardiness despite warning to that effect;
• Absence from work without good cause for a period of 5 consecutive working days or 10 working days in any period of one month or 30 working days in a year;
• Deceitful or fraudulent conduct in carrying out his/her duties having regard to the gravity of the case;
• Misappropriation of the property or fund of the employer with intent to procure for himself/herself or a third person undue enrichment;
• Returning work product which, despite the potential of the worker, is persistently below the qualities and quantities stipulated in the collective agreement or determined by the agreement of the two parties;
• Responsibility for brawls or quarrels at the work place having regard to the gravity of the case;
• Conviction for an offence where such conviction renders him/her unsuitable for the post which he/she holds;
• Responsibility for causing damage intentionally or through gross negligence to any property of the employer or to another property which is directly connected with the work of the employer;
• Commission of any of the unlawful activities (referred to in section 14(2) of the LP);
• Absence from work due to a sentence passed against him/her of imprisonment for more than 30 days; and
• Commission of other offences stipulated in a collective agreement as grounds for terminating a contract of employment without notice.

The right of the employer to terminate the contract due to the above provisions lapses after 30 working days from the date that the employer has knowledge of the ground for the termination (sec. 27(3), LP).

The following grounds relating to the loss of capacity of the worker may constitute good cause for terminating a contract of employment with notice (sec. 28(1), LP):

• Worker’s manifest loss of capacity to perform the work to which he/she has been assigned;
• Lack of skill as a result of refusal to take the opportunity of training prepared by the employer to upgrade skills, or after having been trained, the inability to acquire the necessary skills;
• Reasons of health or disability which renders the worker permanently unable to carry out his/her obligations under the contract of employment;
• Worker’s unwillingness to move to a locality to which the enterprise relocates; and
• Cancellation of the worker’s post for a good reason when the worker cannot be transferred to another post.

The following grounds, relating to the organization or operational requirements of the enterprise, constitute good cause for a dismissal with notice (sec. 28(2), LP):

• Any event which entails direct and permanent cessation of the worker’s activities, in part or in whole, making a reduction of the workforce necessary;
• A fall in demand for the products or services of the employer resulting in work volume reduction and profit reduction, making a reduction of the workforce necessary; and
• A decision to alter work methods or introduce new technology with a view to raising productivity resulting in the reduction of the workforce.

A redundancy due to the operational requirements of the enterprise is considered a collective dismissal when it effects at least:

• 10 per cent of the number of workers employed; or
• 5 workers over a continuous period of not less than 10 days, in the case of an enterprise where the number of workers is between 20 and 50 (sec. 29(1), LP).

The following does not constitute legitimate grounds for the termination of a contract of employment of a worker (sec. 26(2), LP):

• Membership in a trade union or participation in its lawful activities;
• Seeking or holding office as a worker's representative;
• Submission of a grievance or participation in judicial or other proceedings against the employer; and
• Nationality, sex, religion, political outlook, marital status, race, colour, family responsibility, pregnancy, or lineage.

Notice and prior procedural safeguards

The notice of termination must be done in writing and specify the reasons for the termination of the contract and the date on which the termination will take effect (sec. 34(1), LP). The notice of termination by the employer must be handed to the worker in person. When this is not possible, it must be fixed to the notice board in the workplace for 10 consecutive days (sec. 34(2), LP).

Unless otherwise provided for in the LP, the period of notice for the termination of a contract of employment must be as follows (sec. 35, LP):

• One month in the case of a worker who has completed his/her probation and has a period of service not exceeding one year;
• Two months in the case of a worker who has a period of service of one to nine years;
• Three months in the case of a worker whose period of service is more than nine years;
• Two months in the case of a worker whose probationary period is completed and contract of employment is terminated due to reduction of workforce;
• A period agreed upon by the parties for a contract of employment that is for a definite period or piece work.

In case of a dismissal without notice for disciplinary reasons, , the employer must provide the worker with a written statement specifying the reasons for and the date of termination (sec. 27(2), LP).

In case of collective dismissals for economic reasons, the employer, in consultation with trade union or workers’ representatives, is entitled to prioritise workers who have skills and a higher rate of productivity by allowing them to retain their posts. In the case of equal skill and rate of productivity, the workers to be affected first by the workforce reduction must be in the following order (sec. 29(3), LP):

• Workers with the shortest length of service in the enterprise;
• Those who have fewer dependants;
• Those who are disabled by an employment injury in the enterprise;
• Workers’ representatives; and
• Pregnant workers.

Severance pay

worker has the right to receive severance pay from an employer, provided the worker has completed his/her probationary period, in the following cases where (sec. 39, LP):

• The worker’s contract is terminated for economic reasons;
• The worker’ resignation is deemed constructive dismissal;
• The employer, informed of the danger, does not act to prevent the threat to the security and health of the worker;
• The worker’s contract is terminated due to partial or complete disability (certified by a medical examiner);
• The worker is not entitlement to a pension fund and his/her contract of employment is terminated upon attainment of retirement age;
• The worker has given service to the employer for a minimum of five years and his/her contract is terminated because of his/her sickness or death, or termination by his/her initiative provided that he/she has no contractual obligation related to training to the employer; and
• The contract is terminated by the worker because of HIV/AIDS.

The severance pay is calculated as follows:

• 30 times the average daily wage of the last week of service for the first year of service. For service of less than one year, severance pay must be calculated in proportion to the period of service (sec. 40(1), LP);
• In the case of a worker who has served more than one year, payment is increased by one-third of the said sum for every additional year of service, provided the total amount does not exceed 12 months’ wages (sec. 40(2), LP);
• Where a contract of employment is terminated because the enterprise ceases operation due to bankruptcy or general reduction of workforce, the worker is entitled to a sum equal to 60 times his/her average daily wage of the last week of service(sec. 40(3), LP).

Finally, in case of constructive dismissal, the worker is entitled to compensation, in addition to severance pay, which must be 30 times his/her daily average wage of the last week of service (sec. 41, LP).

Avenues for redress

If an employer or a worker fails to comply with the requirements of the LP regarding termination, the termination is unlawful (sec. 42, LP).

If the contract of employment is terminated unlawfully, the labour dispute settlement tribunal may order the reinstatement of the worker or payment of compensation by the employer (sec. 43, LP).

The compensation to be paid to the worker, in addition to severance pay, must be calculated as follows (sec. 43(4), LP):

• 180 times the average daily wage, and a sum equal to the remuneration for the appropriate notice period in the case of unlawful termination of a contract of employment for an indefinite period; or
• In case of unlawful termination of a fixed-term or piece-work contract, a sum equal to the wages which the worker would have obtained if the contract of employment had lasted up to its date of expiry or completion, provided that such compensation does not exceed 180 times the average daily wage.

However, a worker who terminates his/her contract of employment without good reason or without a 30-day notice, is liable to pay compensation to the employer, which must not exceed 30 days’ wages of the worker (sec. 45, LP).

Labour disputes related to termination of employment are dealt with by the Labour Division of the Regional First Instance Court. A decision has to be taken within 60 days from the date on which the claim is lodged (sec. 138, LP). An appeal to the Labour Division of the Regional Appellate Court is possible within 30 days from the date on which the decision is delivered. The decision of the Regional Appellate Court will be made within 60 days from the date of the appeal and this decision will be final (sec. 139, LC).

No court fees will be charged in respect of cases submitted to conciliation and to the Labour Relations Board by an employer or employers associations (sec. 161(1), LP). Moreover, no court fees will be charged in respect of cases submitted by any worker or trade unions (sec. 161(2), LP).

Any claim for reinstatement by a worker must be barred after three months from the date of the termination of his/her contract of employment (sec. 162(2), LP). Any claims by a worker or employer for any kind of payment must be barred by limitation, unless an action is brought within six months from the date of termination of the contract of employment (sec. 162(4), LP).

Further information

• ILO Natlex Ethiopia
• Ministry of Labour and Social Affairs of Ethiopia