Cassation Decision Case No. 214864: Duration of Employment Contract

Federal Democratic Republic of Ethiopia Federal Supreme Court Cassation Division

Case No.: 214864 Date: March 29, 2014 E.C.

Justices:

• Birhanu Amenew
• Teshome Shiferaw
• Habtamu Erkiyihun
• Birhanu Mengistu
• Netsanet Tegegn

Applicant: Sino Hydro Corporation Ltd., Gedo-Mana Benja Road Project (represented by Legal Representative Alemayehu Gobena) Respondent: Ato Frew Zewdu (absent)

Decision

This case concerns a labor dispute. The respondent filed a claim in the Chelia Woreda Court (West Shewa Zone, Oromia Region) against the applicant, stating that he had been employed as a foreman since October 14, 2011 E.C., with a monthly salary of 10,000.00 Birr. He alleged unlawful termination on February 13, 2013 E.C., without receiving due payments, and sought payment of outstanding salary and other entitlements under Labor Proclamation No. 1156/2011.

The applicant, raising preliminary objections, argued that the respondent’s claim of 1 year and 6 months of service was false and that his monthly salary was 3,600.00 Birr, not 10,000.00 Birr. The applicant contended that the respondent’s claim of 10,000.00 Birr included benefits that should not be considered part of salary under Article 53(2)(b) of Proclamation No. 1156/2011. The applicant stated that the respondent’s employment contract was from March 21, 2012 E.C., to June 22, 2012 E.C. However, due to the COVID-19 pandemic and the ensuing state of emergency, along with government directives for foreign investors, the contract was extended. The applicant argued that the contract legally expired according to its terms, and that the respondent received all due payments, including payment in lieu of notice. Therefore, the applicant requested the dismissal of the respondent’s claims.

The court (Case No. 25679), after hearing both parties and examining the evidence, ruled on October 18, 2013 E.C., that despite the absence of a formal contract, the respondent was employed for an indefinite period, not for a fixed term as the applicant claimed. The court found that the respondent worked from October 14, 2011 E.C., to April 14, 2013 E.C., and that his termination letter did not state any reason for dismissal, rendering it unlawful under Article 26(1) of Proclamation No. 1156/2011. Regarding salary, the court found that the applicant failed to provide evidence supporting its claim. Based on evidence obtained from the Jimma Rare Woreda Revenue Authority, the court determined that the respondent’s monthly salary was 10,000.00 Birr, not 3,600.00 Birr, and ordered the applicant to pay the respondent a total of 105,660.10 Birr.

The applicant appealed to the West Shewa Zone High Court, which dismissed the appeal on October 25, 2013 E.C. (Case No. 37217) under Federal Civil Procedure Code Article 337. The applicant then appealed to the Oromia Regional Supreme Court Cassation Division, which ruled on January 25, 2014 E.C. (Case No. 376740) that the applicant’s argument about the contract being for a fixed term extended due to the state of emergency lacked legal basis, as the emergency proclamation did not prohibit contract terminations. The regional cassation division also found that the applicant failed to prove termination due to project completion under Articles 24(1) and 30 of the Labor Proclamation and that the employment contract was for an indefinite period under Article 9 of Proclamation No. 1156/2011. The regional cassation division rejected the applicant’s argument regarding salary (10,000.00 Birr including benefits) as a new argument not raised in the lower court, citing Federal Civil Procedure Code Article 329/1. However, the regional cassation court reversed the lower court’s decision regarding penalty payments for delayed payments.

The applicant filed this cassation appeal on February 1, 2014 E.C., arguing that the regional cassation division’s decision contained fundamental legal errors. The applicant argued that the respondent was employed for a fixed term (March 22, 2012 E.C., to June 22, 2012 E.C.) and that the contract was extended due to force majeure (the state of emergency) until April 14, 2003 E.C. The applicant contends that it provided evidence (the employment contract and other documents) supporting this claim, yet the lower courts wrongly stated that no such evidence was provided and wrongly concluded that the contract was for an indefinite period and the dismissal unlawful. The applicant also argues that the respondent’s monthly salary was 3,600.00 Birr and that the additional amounts (bringing the total to 10,000.00 Birr) were for housing, food, transportation, and overtime, which are considered benefits and not part of salary under Article 53(2)(a-f) of Proclamation No. 1156/2011. The applicant contends that the regional cassation division erred by dismissing this argument as new under Federal Civil Procedure Code Article 329/1, and that ordering various payments based on a 10,000.00 Birr salary was also erroneous.

The cassation review chamber directed the case to this division to examine whether the regional cassation division correctly dismissed the applicant’s argument regarding salary as a new argument. The respondent responded on April 8, 2014 E.C., arguing that the applicant’s appeal was based on evidence evaluation and should not be reviewed by the cassation division. The respondent claimed that the copy of the employment contract submitted by the applicant was altered to appear as a fixed-term contract and that the applicant failed to produce the original contract when ordered by the lower court. The respondent argued that the lower court’s finding that the respondent’s salary was 10,000.00 Birr was based on evidence and should be upheld. The applicant submitted a rejoinder on April 28, 2014 E.C.

The key issues are whether the respondent was employed for a fixed or indefinite term, the legality of the termination, and the correct amount of the respondent's salary.

It is established that the applicant terminated the respondent’s employment on April 14, 2003 E.C., making Proclamation No. 1156/2011 applicable. The parties disputed whether the respondent was employed for a fixed or indefinite term, the legality of the termination, and the respondent’s salary. The applicant argued for a fixed term and a salary of 3,600.00 Birr, presenting an employment contract as evidence. The respondent claimed indefinite employment and a 10,000.00 Birr salary. The lower courts found that the applicant failed to prove a fixed-term contract or a lawful reason for termination and determined the employment was for an indefinite term and the salary was 10,000.00 Birr. The regional cassation division upheld these findings.

Article 9 of the Proclamation establishes that, in principle, any employment contract is considered to be for an indefinite period. An employer can rebut this presumption by proving that the employment was for a fixed term or a specific task, as covered by Article 10. This places the initial burden of proof on the employer. The employer can do this by providing the employment contract as evidence and demonstrating that the contract was made under one of the circumstances listed in Article 10. After the employer provides evidence, the employee can then present evidence to rebut the employer’s claims. If the contract fulfills the conditions of Article 10 and is for a fixed term, it remains valid only until the specified time or task is completed. Upon completion, the contract is legally terminated under Article 24(1). If the contract does not meet the requirements of Article 10, the employment relationship is considered indefinite under Article 9 and continues until a legally recognized reason for termination arises.

In the present case, although the applicant argued that the employment contract was for a fixed term, as stated above, merely specifying a time frame in the contract does not automatically make it a fixed-term or task-based contract. The applicant is required to demonstrate that the contract falls under one of the conditions stipulated in Article 10(1) of the Proclamation. In this regard, the applicant did not explicitly base its argument on any of the conditions listed in Article 10(1). While the respondent stated in his claim that he was employed as a foreman on a road construction project (which is generally understood to be a fixed-term project), the applicant limited its argument to the time frame, stating that the respondent was employed for a fixed term and dismissed upon its expiry. The applicant did not explicitly argue that the termination was due to the completion of the road construction project or the completion of the respondent’s foreman duties.

While the lower court should have examined the employment contract provided by the applicant as evidence and determined its relevance to the arguments, it incorrectly stated that the applicant did not provide any evidence, even though the contract was submitted.

However, the applicant did not explicitly argue that the employment contract shows that the respondent was employed due to one of the conditions listed in Article 10(1). The applicant’s argument for the contract to be considered as evidence is based on it showing that the respondent was employed for a specific time, not on it proving that the respondent was employed under one of the conditions of Article 10(1). Therefore, from a practical standpoint, the lower court’s failure to examine the contract as evidence does not change the outcome. Consequently, we find no error in the lower courts’ conclusion that the applicant failed to prove that the respondent was employed for a fixed term or a specific task under Article 10. Furthermore, as the applicant did not provide any other legal reason for terminating the respondent’s employment contract (which is considered indefinite), we find no error in the lower courts’ decision that the applicant unlawfully terminated the respondent’s employment.

On the other hand, we understand that the applicant argued in its response to the claim in the lower court that the respondent’s salary was 3,600.00 Birr, not 10,000.00 Birr, and that the amount exceeding 3,600.00 Birr constituted various benefits. The respondent argued that his salary was 10,000.00 Birr. Since the parties disputed this point, whether the respondent’s salary was 3,600.00 Birr or 10,000.00 Birr should have been properly established based on the evidence presented by both parties and, if necessary, evidence obtained by court order. This should have been considered in light of the definition of “salary” under Article 53 of Proclamation No. 1156/2011 and the payments listed as not to be considered part of salary. Although the applicant clearly presented this argument in the lower court, the regional cassation division incorrectly dismissed it as a new argument raised at the cassation level, improperly applying Federal Civil Procedure Code Article 329. This constitutes a procedural flaw.

Furthermore, while the Woreda Court noted that the evidence from the Jimma Rare Woreda Revenue Authority showed varying payment amounts to the respondent, it determined the respondent’s monthly salary to be 10,000.00 Birr by averaging, based on the income tax paid. This approach disregards Article 53 of Proclamation No. 1156/2011 and shows that the court made its decision based on assumptions rather than establishing the factual matter with evidence. This contradicts the binding legal interpretations given by the Federal Supreme Court Cassation Division in Case Nos. 113131, 196907, and numerous other cases regarding procedural management and the need to establish factual matters based on evidence. Therefore, the decisions of the regional courts are partially flawed and contain a fundamental legal error that must be rectified under Article 10(1)(c) of Proclamation No. 1234/2013. Therefore, the various payments awarded to the respondent should be determined after first distinguishing the respondent’s salary from the payments made in the form of benefits. We have therefore decided the following:

Decision:

1. The decision of the Chelia Woreda Court (Case No. 25679, October 18, 2013 E.C.), the order of the West Shewa Zone High Court (Case No. 37217, October 25, 2013 E.C.), and the decision of the Oromia Regional Supreme Court Cassation Division (Case No. 376740, January 25, 2014 E.C.) are modified under Federal Civil Procedure Code Article 348(1).
2. The portion of the decision stating that the applicant unlawfully dismissed the respondent is upheld. The regional cassation division’s decision that the applicant should not pay penalties for late payment (as there were no delayed payments) also remains unchanged. However, the portion of the decision determining the respondent’s salary to be 10,000.00 Birr and the subsequent awards based on this salary are reversed.
3. The case is remanded to the Woreda Court under Federal Civil Procedure Code Article 343(1) for the court to examine the evidence presented by both parties, as well as evidence obtained by court order from relevant bodies, to determine whether the applicant’s monthly salary, excluding various benefits, is 3,600.00 Birr or 10,000.00 Birr. After establishing the salary amount separate from other payments, the court shall then determine the payments due for unlawful dismissal based on the established salary.
4. Each party shall bear their own costs incurred at this level.