Termination of Employment Due to Death of Employee or Employer in Ethiopian Labor Law

Since an employment contract is based on the employee’s personal ability, death immediately terminates the rights and obligations established with the employer. Article 24(2) states that the death of the employee, but not the death of the employer, is a reason for employment contract termination. When an employer dies, does the employment contract continue with the heirs and the spouse, or does it terminate? The Proclamation does not provide a clear answer to this question. According to the definition in Article 2(1), an employer can be an individual or an organization. If the employer is an organization, the transfer of ownership does not terminate the employment contract, so there will be no ambiguous legal question in this regard. However, it is difficult to determine the fate of the employment contract when an “individual” employer dies.

In this regard, two types of arguments can be presented. On the one hand, since Article 23(2) stipulates that the transfer of enterprise ownership does not terminate an employment contract, and an individual employer is not covered under this provision, the death of the employer terminates the employment contract. On the other hand, since the death of the employer is not specified as a reason in Article 23(1), which stipulates the principal reasons for employment contract termination, nor in the detailed provisions listing reasons for employment contract termination, the contract does not terminate due to this. Particularly, the latter argument seems more plausible in light of Article 42, which stipulates situations where employment contract termination is unlawful.

To properly resolve these arguments, it is necessary to look beyond the Proclamation to relevant civil law provisions, both directly and indirectly. Article 2586 of the Civil Code clearly states the effect of the employer’s death. Accordingly, an employment contract does not terminate upon the employer’s death “unless his person has been a material element in making it.” When an employment contract is made with an individual employer based on their personal unique circumstances, it can be said to have been made “in consideration of the employer.” Conversely, if an individual owns a commercial establishment, but the work is managed by a management, the death of the individual does not cause a fundamental change in the work’s operations. Especially if actions such as hiring, suspending, transferring, and dismissing employees are taken by a manager authorized to manage the work, the employment contract is not considered to have been made in consideration of the employer.

The Bulgarian Civil Code stipulates that an employment contract made in consideration of the employer terminates immediately upon the employer’s death. A local legal scholar explains the law’s stance as follows:

“[W]here a labour contract is concluded with a natural person and with whom the worker has established an employment relationship intuitu personae, with a view to his/her personal qualities and needs such as to act as private secretary, assistant chauffeur, household servant and the like, the natural employer having died, …the labour contract loses not only one of its parties but also the grounds for its existence, as a result of which it terminates.”

It can be argued that the criterion of “in consideration of the employer” in Article 2586 of the Civil Code, for distinguishing between individual and non-individual employers, is implicitly included in Proclamation No. 1156/2011. The definition of “employer” in Article 2(1) of the Proclamation is not based on the distinction between natural and legal persons. For example, a five-star hotel, even if owned by an individual, is a self-contained enterprise. This is because the hotel, in the language of Article 2(1), is an “entity established under a united management,” and thus meets the definition of an enterprise. If the hotel meets the definition of an employer as an enterprise, the death of the hotel’s owner will not result in the termination of the employment contract.

Conversely, the owner of a dump truck (who hires a driver) becomes an employer as an individual, not as an enterprise. When we compare this with the content of Article 2586 of the Civil Code, the employment contract made between the truck owner and the driver is made in consideration of the employer. Therefore, according to the Civil Code, the employment contract terminates upon the death of the truck owner.

If we view the death of the truck owner from the perspective of Proclamation No. 1156/2011, there is no provision in the Proclamation that indicates the employment contract would terminate even in this case. On the other hand, due to the applicability of Article 23(1) being limited to enterprises, the death of an individual (employer) is not covered under the provision, and therefore, the employment contract does not continue with the heirs and the spouse. In conclusion, if Article 2586 of the Civil Code were applied by analogy to the Proclamation, it would not adequately resolve the problems arising in connection with the contract’s continuity.

In this situation, the alternative is to apply Article 1986 of the Civil Code. According to this provision, unless a contrary agreement is made or the nature of the contract prohibits it, the heirs of a contracting party step into the shoes of their predecessors in the contract. When an individual employer dies, the nature of the contract does not permit the employment contract to continue with the heirs. Therefore, it is reasonable to conclude that the death of an individual employer results in the termination of the employment contract.