Introduction
Employment in the context of a specific project presents unique considerations under Ethiopian labor law. When an individual is hired for a defined project, the completion of that project inherently leads to the termination of their employment contract. This principle is enshrined in Article 24(1) of the Ethiopian Labour Proclamation, which governs the termination of employment contracts. For a project-based employment contract to be lawfully terminated under this provision, two crucial preconditions must be met concurrently:
- Verification of Specific Project Engagement: It must be unequivocally established that the employee was hired for a particular, distinct project of the employer’s organization, rather than for its general operational activities.
- Project Completion: The project itself must have reached its conclusion or completion.
We will delve into these points in detail, drawing upon illuminating decisions from the Cassation Bench of the Federal Supreme Court.
The Nature of a “Specific Project”
The legality of terminating an employment contract due to project completion hinges critically on the initial determination of whether the employee was, in fact, engaged exclusively for that specific project. Before addressing the completion of the project as a ground for termination, it is paramount to ascertain the precise nature of the employee’s engagement.
It is crucial to understand that employers often deploy human resources for projects that include not only individuals newly recruited specifically for that project but also existing employees with indefinite employment contracts who were initially hired for the organization’s general work. The employment contracts of these latter employees, who merely participate in a project, cannot be terminated simply because the project concludes. Such a termination would lack legal basis.
The Cassation Bench, in File No. 48648 (Applicant: Tsalqe Education and Integrated Development Association, Respondents: Ato Tatek Dejene (2 individuals), February 24, 2002 E.C., Vol. 9), clarified this distinction. The Court interpreted that if it is not proven that the recruitment was specifically for a distinct project under Article 10(1)(a) of the Labour Proclamation, then the termination of an employment contract solely due to the closure of a project would be unlawful. This ruling emphasizes the burden of proof on the employer to demonstrate that the employment was indeed project-specific from its inception.
The Completion of the Project
While the completion of a project generally legalizes the termination of a project-based employment contract, the non-completion of a project does not automatically render a termination unlawful. The legality of termination in such cases depends on the reasons provided by the employer, which could be either lawful or unlawful.
For instance, if an employee hired for a project engages in fraudulent or deceptive acts in the course of their work, their employment contract can be lawfully terminated even if the project is not yet complete. Conversely, if an employer terminates a contract before project completion for reasons not recognized as valid grounds for termination under the Labour Proclamation, such termination would be illegal.
A notable case illustrating this principle is the dispute between Ethiopian Electric Power Corporation (Applicant) and Ato Eyob Messele (4 individuals) (Respondents) (December 26, 2003 E.C., File No. 62370, Vol. 11). In this case, the Applicant terminated the respondents’ employment because they allegedly refused to sign contract renewals. The respondents sued, and the lower court ruled that the termination was unlawful and ordered their reinstatement, a decision affirmed by the appellate court.
The Applicant then lodged a cassation appeal, arguing that the respondents were hired for a specific task under Article 10(1)(a) for the Universal Electrification Access Project and that their refusal to renew their contracts under new terms rendered the termination lawful.
The Cassation Bench, upon reviewing the case, noted that the Applicant did not argue that the project work had been completed, thus acknowledging its non-completion. The Court stated that even if the respondents’ employment fell under Article 10(1)(a), “unless the project work is said to have been completed, there is no legal basis in the law to terminate an employment contract merely on the grounds that they have renewed or not renewed their contract or refused to renew.” Consequently, the appeal was dismissed, and the lower courts’ decisions were upheld.
When the completion of a project is presented as an argument for the termination of an employment contract, the dispute is primarily factual and must be substantiated by evidence. If lower courts make a decision based on the appealing party’s failure to provide sufficient evidence of project completion, the Cassation Bench, whose jurisdiction does not extend to factual re-evaluation, will not typically revisit the matter. This was demonstrated in File No. 51505 (Applicant: Selfhelp Africa Huruta Project, Respondent: Ato Abe Alemu, May 13, 2002 E.C., unpublished).
Project Completion: Factual versus Legal Questions
While often a factual matter, project completion can sometimes raise complex legal questions. A project might be closed before its scheduled completion due to a lack of funds, deemed unnecessary, or terminated due to external factors. In any such scenario, even if the project is practically non-existent, it is technically “not completed.” However, an employment contract cannot realistically continue when the project no longer exists. In such circumstances, the contract would likely be lawfully terminated for one of the reasons stipulated under Article 28 of the Labour Proclamation, which deals with termination due to objective reasons (e.g., redundancy, organizational restructuring, or inability to perform the work due to force majeure).
Furthermore, the concept of project completion can become contentious when linked to the end of a fiscal year. Projects funded by foreign donor organizations often have fiscal years that differ from the local fiscal calendar. While it is often assumed that a project concludes when its fiscal year ends, it is crucial to remember that project and fiscal timelines do not always align. Therefore, to unequivocally confirm project completion, it is preferable to rely on the project document’s timeline rather than solely on the fiscal year’s end.
The problems arising from relying on the fiscal year as the sole determinant of project completion are clearly illustrated in File No. 57337 (Applicant: Adventist Development and Relief Agency, Respondent: Ato Gebeyehu W/Michael, June 15, 2003 E.C., Vol. 11). The case reached the Cassation Bench after the respondent filed a claim with the Federal First Instance Court, alleging unlawful termination and seeking various payments. The First Instance Court ruled that the termination was lawful, as the employment contract was for a fixed period (June 2000 E.C. to December 2001 E.C.).
Dissatisfied, the respondent appealed to the Federal High Court. After hearing arguments, the High Court overturned the lower court’s decision, stating that “even if the employment contract was for a fixed period, since [the respondent] was employed for project work, and the project was said to be completed in one year (fiscal and work year), and the respondent (now applicant) did not present evidence of the project’s completion…” it ruled that the termination was unlawful.
The applicant then appealed to the Cassation Bench, arguing that the respondent’s employment contract was for a fixed period ending in December 2001 E.C., making the termination lawful. They further contended that the project, being supported by an international relief organization, had a fiscal year ending in December, and therefore the High Court’s decision based on a June fiscal year end contained a fundamental error of law.
The Cassation Bench thus framed the issue as: “Was the employment relationship between the respondent and the applicant for a fixed period or not?” The Court, after noting that merely stating an employment contract is for a fixed period does not make it so without considering the nature of the work, stated that the applicant had not only explained that the employment contract was for a fixed period but also that “the work was a project work supported by a foreign organization, and that its annual work activity would continue only if the project was decided to continue, and that its fiscal year would end in December 2001 E.C., and that the Federal First Instance Court had heard evidence on this point and confirmed it as a factual matter.”
The Cassation Bench then criticized the High Court’s decision, pointing out its error in fact-finding: “While the Federal First Instance Court, which has the power to receive and evaluate evidence, confirmed that the project’s fiscal year would end in December, and the respondent did not present evidence to refute this, the Federal High Court’s conclusion that the fiscal year would end on June 30, 2001 E.C. without stating sufficient reasons for this conclusion, did not follow basic principles of evidence evaluation and is thus unacceptable.”
While the Cassation Bench overturned the High Court’s decision on this basis, its own ruling is not without criticism. The Cassation Bench’s framing of the issue was flawed. Given the decisions of the lower courts and the applicant’s cassation appeal, there was no initial dispute about whether the employment contract was for a fixed period. The Federal First Instance Court’s decision clearly stated that the contract was for a fixed period and that its termination upon the expiry of that period was lawful. The High Court also accepted that the contract was for a fixed period. Its conclusion that the termination was unlawful stemmed from the lack of evidence of project completion and its erroneous assumption that the fiscal year ended in June 2001 E.C., not December 2001 E.C. The applicant’s appeal did not claim that the contract was indefinite; rather, it argued that the fixed-term contract was lawfully terminated and that the project’s fiscal year (and thus its completion) was December 2001 E.C., not June 2001 E.C.
It is true that in their response to the cassation appeal, the respondents argued that even if the contract stipulated a fixed term, its enforceability depended on the nature of the work, and that the applicant had not presented evidence to the Federal First Instance Court that their employment was project-based. However, since the High Court had already ruled that the contract was for a fixed term, and the respondents did not file a cassation appeal against that specific point, the argument raised in their response to the applicant’s appeal should not have been taken as a distinct issue for review by the Cassation Bench.
The Cassation Bench’s failure to squarely address the issue of project completion meant that the question of when the project for which the respondents were hired began and ended remained unanswered. While the decision noted that the Federal First Instance Court had heard evidence and confirmed that the work was a project supported by a foreign organization, that its continuation depended on annual work activity review, and that its fiscal year ended in December 2001 E.C., the section of the decision recounting the case’s history only stated that the Federal First Instance Court reached its decision based on the expiry of the term, without detailing how these specific facts were established through evidence.
Even assuming these “confirmed” facts, individually or collectively, they do not lead to the conclusive finding that the project was completed. The fact that a project is supported by a foreign organization and continues based on annual work reviews does not establish its implementation period (i.e., its start and end dates). Every project has its own distinct life cycle (Tom Kendrick, The Project Management Tool Kit: 100 Tips and Techniques for Getting the Job Done Right, 2nd edn, American Management Association: New York, 2010, p. 58). If a funding body ceases financial support before the project’s scheduled completion, the project is terminated due to lack of funds, not completion. This distinction is vital, as it would lead to termination under Article 28 of the Proclamation, not Article 24(1). Similarly, unless there’s a direct correlation, the end of a fiscal year does not necessarily signify project completion.
The absence of any clear indication in both the High Court and Cassation Bench decisions regarding the start and end dates of the project for which the respondents were hired is a significant oversight. The core issue was obscured, and the debate unnecessarily revolved around the difference between the Ethiopian (June) and foreign (December) fiscal years, rendering both the High Court’s and the Cassation Bench’s decisions vulnerable to criticism.
On another note, an important point regarding the non-completion of the project, which was indicative of its ongoing nature, should not be overlooked. After the respondents’ termination, the applicant hired other individuals. The Cassation Bench, however, dismissed this point, stating that “the hiring of other persons by the organization after the termination of the employment contract does not signify that the employment contract was for an indefinite period.” As noted above, the lower courts had already settled that the employment contract was for a fixed term. Since the respondents did not appeal this specific finding, the duration of the employment contract should not have been reopened as a contested issue. Nevertheless, the hiring of other individuals should have been considered in the context of the project’s non-completion.
Conclusion
Understanding the nuances of project-based employment contracts under Ethiopian law is crucial for both employers and employees. The validity of such contracts’ termination hinges on two fundamental principles: the clear identification of the employment as project-specific and the actual completion of that project. As demonstrated by the Cassation Bench’s decisions, issues such as the precise definition of a “specific project,” the burden of proof for project completion, and the distinction between factual and legal questions related to project termination, all contribute to the complexity of this area of law. Reliance solely on fiscal year endings or general organizational staffing changes without concrete evidence of project conclusion can lead to unlawful terminations, highlighting the need for meticulous adherence to legal principles and robust documentary evidence in project-based employment.