Case: Federal Supreme Court Cassation Division, Case No. 214864 Parties: Sino Hydro Corporation Ltd. (Applicant) vs. Ato Frew Zewdu (Respondent) Date of Decision: March 29, 2014 E.C. Core Issues: Is an employment contract for a fixed or indefinite period? How should salary be distinguished from benefits when calculating termination payments?
In a significant labor dispute ruling, the Federal Supreme Court’s Cassation Division has provided crucial clarifications on the nature of employment contracts and the proper calculation of salary. While upholding a finding of unlawful termination against Sino Hydro Corporation, the court reversed the substantial payment awarded to the employee, citing fundamental errors by lower courts in determining his actual salary. The case was remanded for re-evaluation, highlighting the critical importance of distinguishing base salary from other benefits.
The Dispute: A Tale of Two Contracts
The case began when Ato Frew Zewdu, a foreman, filed a claim against his employer, Sino Hydro Corporation, a company working on the Gedo-Mana Benja Road Project. Ato Frew alleged that he had been employed since October 2011 E.C. for a monthly salary of 10,000 Birr and was unlawfully terminated in February 2013 E.C.
Sino Hydro Corporation painted a very different picture. They argued the employment was for a fixed term, from March 2012 E.C. to June 2012 E.C., which was only extended due to the COVID-19 state of emergency. They contended the contract legally expired. Crucially, they stated Ato Frew’s salary was only 3,600 Birr per month, and the 10,000 Birr figure he claimed included non-salary benefits like housing, food, and transport, which should not be part of severance calculations under Article 53 of Labor Proclamation No. 1156/2011.
Rulings of the Lower Courts
The Chelia Woreda Court sided entirely with the employee. It found the employment contract was for an indefinite period and the termination was unlawful because no valid reason was given. On the contentious issue of salary, the court, based on evidence from the revenue authority, determined the salary was indeed 10,000 Birr and ordered Sino Hydro to pay a total of 105,660.10 Birr in compensation.
Sino Hydro’s appeals to the West Shewa Zone High Court and the Oromia Regional Supreme Court Cassation Division were largely unsuccessful. The Oromia Cassation Division upheld the finding of an indefinite contract and dismissed the employer’s argument about the salary, claiming it was a new argument not raised in the lower court.
The Federal Cassation Division’s Judgment: A Split Decision
The Federal Supreme Court Cassation Division took a more nuanced approach, carefully dissecting the two main issues.
1. On the Contract Type: Unlawful Termination Upheld
The court affirmed a core principle of Ethiopian labor law (Article 9 of the Proclamation): an employment contract is presumed to be for an indefinite period unless the employer proves otherwise. The burden of proof is squarely on the employer to show not just that the contract had a date, but that it met the specific, legally allowed conditions for a fixed-term contract under Article 10 (e.g., completion of a specific project).
Sino Hydro had failed to argue that the contract was tied to one of these conditions; they merely pointed to an expiry date. Therefore, the Cassation Division agreed with the lower courts: the contract was indefinite, and the termination without legal cause was unlawful.
2. On the Salary: A Fundamental Error and a Reversal
This is where the Cassation Division found a critical flaw. It ruled that the Oromia Cassation Division was wrong to dismiss the employer’s salary argument as “new.” The record clearly showed that Sino Hydro had disputed the 10,000 Birr figure from the very beginning, arguing it was a mix of salary and benefits.
Furthermore, the Woreda Court had erred by simply averaging payment amounts to arrive at the 10,000 Birr salary. This approach ignored the legal definition of “salary” in Article 53, which explicitly excludes payments like benefits. The court made a decision based on assumption rather than rigorously establishing the factual matter of the base salary.
The Final Decision and Its Implications
The Cassation Division issued a modified judgment:
- Upheld: The finding that Sino Hydro Corporation unlawfully dismissed Ato Frew Zewdu.
- Reversed: The determination that the salary was 10,000 Birr and the entire monetary award based on that figure.
- Remanded: The case was sent back to the Woreda Court with clear instructions: to properly investigate and determine the respondent’s actual monthly salary, separate from any benefits. Once that correct salary is established, the court must recalculate the payments due for the unlawful dismissal.
This decision serves as a powerful reminder to both employers and judicial bodies. For employers, it reinforces that claiming a contract is “fixed-term” requires more than just a date; it requires proof that it meets the strict criteria of the law. For the courts, it emphasizes the duty to meticulously establish facts—especially financial ones—based on legal definitions and evidence, not on procedural shortcuts or assumptions.