IS AN EMPLOYER’S FINANCIAL DISTRESS A LEGAL JUSTIFICATION FOR FAILURE TO PAY SALARIES?
- July 30, 2023
- Posted by: Stephen Azubuike
- Category: Case Law Blog
It is not uncommon for some employers of labour to owe salaries. Some responsible employers do well to live up to their responsibilities by ensuring that even when salaries are owed, efforts are made to pay up timeously. This category of employers understand that workers deserve their wages, as even the Bible instructs. However, there is another category of employers who prefer to muzzle the ox while it threshes the grain. They prefer to outwit their employees, throw in some unconscionable bargains, abuse their superior position, and make bold to defend their acts even before a court of law.
In the recent case of Emeka Igweze v. Emerald Energy Resources Ltd, Suit No. NICN/LA/263/2019, something interesting happened. The case was decided on 5 July 2023 by Hon. Justice R. H. Gwandu of the National Industrial Court, Lagos Division.
Emeka Igweze v. Emerald Energy
Mr. Emeka Igweze was employed by Emerald Energy in 2005 as a Manager, Administrative Services. He was later promoted in 2006 to a General Manager, Human Resources and Administration. While in this position, Mr. Igweze was owed salaries and other benefits. This situation remained the same until Emerald Energy converted the employment contract into a Consultancy Contract in 2017. Mr. Igweze signed the contract. However, he resigned in 2018 due to lack of remuneration.
Aggrieved, Mr. Igweze (as Claimant) sued Emerald Energy (as Defendant) for breach of contract, claiming outstanding payments being his salaries and other entitlements amounting to over N127 Million. Emerald Energy defended the action. Interestingly, the Court found that there was no material dispute regarding the amount claimed by the Claimant. As a matter of fact, the computation of the outstanding payment relied on by the Claimant emanated from Emerald Energy. Emerald Energy’s subsequent attempt to distance itself from the computation was futile. The Court had no time for frivolities.
I also found interesting one of the defences put forward by Emerald Energy. The company contended that Mr. Igweze was bound by a clause in the Consultancy Contract which provided that the outstanding payment due to Mr. Igweze was to be paid by the company subject to availability of funds. Emerald Energy also argued that Mr. Igweze knew of the perennial financial challenges of the company. The Court was unmoved. It was of the view that Emerald Energy had a better option on how to approach the situation but failed to take it. Gwandu, J. held:
A perusal of the Defendants Statement of Defence was not convincing, even though they tried to deny the Claimant’s entitlements, they also tried to convince the Court that the Company is in financial distress which could have been raised and agreed to out of Court between the Claimant and the Defendant and a payment plan agreed to, the Defendant did not also do this but insisted on defending this matter without convincing proof.
Clearly, Emerald Energy made no definite commitment to Mr. Igweze on when and how he would be paid his acknowledged entitlements. The fate of his payment was left to hang in the balance.
As expected, the Court refused to allow such uncertainty to thrive. It granted Mr. Igweze’s claims, directing Emerald Energy to pay up, instalmentally, the sum of N127,066,872.90 within three months. The first installment was to be paid one month after the Judgment. The Court held that should Emerald Energy fail to pay the first installment as ordered, “the full sum will be due immediately and will attract an interest of 10% per annum until final liquidation of the Judgment sum.”
In concluding this piece, I have a few observations. The Court refused to grant any prejudgment interest (21% per annum was claimed) without supplying any reason for the refusal. Also, with what seemed like a wave of the hand, the Court refused the claim for general damages, leaving the parties with no single reason for this decision.
All these form part of other crucial points canvassed by the parties, especially the Claimant, which the Court appeared to have ignored. For instance, the issue as to whether Emerald Energy was right to have converted the employment contract with Mr. Igweze to a consultancy contract in the circumstances was not addressed. Although the issue was not separately raised by the parties, the Claimant’s Counsel, Chief Emeka Okwuosa, made submissions in that regard. He contended that the conversion was done “abruptly, surreptitiously, unilaterally, unceremoniously and fraudulently.”
Claimant’s Counsel also argued that “in spite of the Claimant’s apprehension and reservation, he accepted the Defendant’s offer of position as consultant by signing the consultancy contract dated 2nd April 2017 in other to keep up and maintain his cordial employer/employee relationship with the Defendant and not abruptly thrown into the labour market.” However, the Court failed to make vital pronouncements.
The above sums up a not-too-exciting Judgment of 26 pages. Of the 26 pages, 22 and half pages were used to state the case and arguments by the parties. The Court’s decision was found sitting in the remaining 3 and half pages. While I commend the Court for allowing the claims it granted, I believe, with respect, that the Judgment would have benefitted from a more thorough judicial toothcomb.