Termination of Employment Contracts by Employee Resignation in Ethiopian Labor Law

Introduction

The right of an employee to terminate their employment contract with an employer at any time is a fundamental principle enshrined in Ethiopian labor law. This right can be exercised in two distinct ways, each with different legal implications under the Ethiopian Labour Proclamation:

  1. Voluntary Resignation with Notice: As per Article 31, an employee may terminate the contract by providing a thirty-day prior notice, without needing to state a specific reason. This represents a willing and unforced decision by the employee.
  2. Forced Resignation (Constructive Dismissal): Under Article 32, an employee may terminate the contract without prior notice, driven by specific, compelling reasons related to the employer’s conduct. In this scenario, the employee is compelled to leave their employment.

Both forms of termination by the employee will be examined in detail, highlighting their definitions, conditions, and the legal consequences, with reference to key court decisions.


Forced Resignation (Constructive Dismissal)

This type of employment termination is widely recognized in common law jurisdictions as “constructive dismissal.” The nomenclature arises from the fact that the employee, despite not desiring to leave their job, is compelled to do so due to severe pressure exerted by the employer, which violates their rights and human dignity. In essence, forced resignation is, in its outcome, considered an indirect dismissal initiated by the employer.

Article 32 of the Ethiopian Labour Proclamation outlines the specific reasons that compel an employee to terminate their contract without notice. These reasons fundamentally relate to situations where the employer’s actions pose a threat to the employee’s rights or safety, compelling the employee to escape such peril. The reasons can be broadly categorized into three main areas:

  1. Acts Affecting Human Dignity or Morale, or Criminal Offenses: The employer commits an act that infringes upon the employee’s human dignity or morale, or another act punishable under criminal law.
  2. Threats to Safety or Health: The employer, being aware of an imminent danger to the employee’s safety or health, fails to take necessary preventive measures within a specified timeframe. This timeframe is determined by an order from a competent authority, a prior warning from a relevant trade union, or the employee themselves.
    • Illustrative Case: Cassation File No. 117517 (Vol. 19) underscores the importance of the employer’s failure to act on warnings regarding safety or health risks.
  3. Repeated Non-Performance of Obligations: The employer repeatedly fails to fulfill obligations towards the employee, as stipulated in the Labour Proclamation, collective agreements, work rules, or other relevant laws.
  4. Sexual Harassment or Assault: The employee is subjected to sexual harassment or assault by the employer or a work supervisor.

From this enumeration, it is clear that, in principle, an employee has the right to terminate their contract without notice if the employer breaches their obligations. This right, however, is time-bound and lapses fifteen days after the act occurred or the situation leading to the forced resignation is removed.

It is important to note that for breaches related to human dignity, safety, health, and sexual harassment, there is no requirement to prove repeated occurrences; a single incident may suffice. However, concerning other types of obligations, “repetition” is an additional prerequisite. While using “repetition” as a criterion to measure the gravity of the damage may be understandable, numerous single breaches of other obligations can also inflict severe and unbearable harm upon an employee. For instance, the unlawful acts listed under Article 14(1), even if committed only once, can result in a significant violation of rights. From this perspective, such acts should ideally be included under Article 32 without the necessity of repetition.

It is crucial to recognize that Ethiopian labor law does not fully embrace the “constructive dismissal” doctrine as understood in common law. While employer pressure and coercion are recognized as grounds for contract termination, the termination is ultimately initiated by the employee. Consequently, it is not viewed as an unlawful termination carried out indirectly by the employer.

When an employee terminates their employment for reasons listed in Article 32, they are entitled to severance pay and compensation. The amount of compensation varies: in cases of sexual harassment or assault, it is ninety days’ average daily wage, while for other reasons, it is thirty days’ average daily wage. This compensation is notably less than what an employee unlawfully dismissed would receive. Given that termination under Article 32 is implicitly an employer-driven dismissal, rather than a voluntary resignation, the disparity in compensation raises concerns about fairness.

The disparity is particularly striking because an employee who terminates their contract due to unbearable pressure, violation of human dignity, sexual harassment, threats to safety and health, or repeated breaches of rights receives less compensation than an employee unlawfully dismissed by the employer. Even though the compensation for sexual harassment is higher (90 days), the limitation to one month’s salary for other compelling reasons, and the fact that compensation in all Article 32 cases is less than the six months’ salary granted for unlawful dismissal by the employer, suggests an incongruity in the law. It appears to implicitly favor an employer’s subtle coercion (“don’t dismiss, make them leave”) over outright dismissal, which can be seen as undermining the protection afforded to employees.


Voluntary Resignation

Voluntary resignation is the sole outcome of an employee’s free decision, fully based on their consent. Therefore, the action of resignation must be directly initiated by the employee. This can be substantiated by presenting the notice of resignation provided by the employee or other evidence demonstrating their cessation of work.

A case highlighting the importance of clear evidence for voluntary resignation is the dispute between U-Tech Construction PLC (Applicant) and Ato Jemal Mohammed (Respondent) (Cassation File No. 39042, May 26, 2001 E.C., Vol. 8). The respondent received a letter from the employer (applicant) stating that he had voluntarily resigned and subsequently collected various payments. Later, the respondent filed a lawsuit, claiming he was unlawfully dismissed without verbal or written notice and sought full payments permitted by law. The applicant, in turn, denied any dismissal, arguing that the contract was terminated because the respondent had voluntarily resigned.

The court of first instance rejected the applicant’s argument, stating that the applicant had failed to present evidence proving the respondent’s resignation, and the appellate court affirmed this decision. However, the Cassation Bench criticized the lower courts’ decision on this point, stating:

“As the respondent affirmed in his complaint filed with the Federal First Instance Court, he initiated the lawsuit after receiving a dismissal letter and leaving his job. One of the arguments raised by the applicant was also this one. The criticism recorded by the Federal First Instance Court in its decision that ‘no evidence was presented regarding the plaintiff’s resignation’ is an error in light of this article. It is not possible to disregard a fact clearly admitted in the pleadings.” (Emphasis added)

Despite the Cassation Bench’s conclusion, there was no evidence, let alone an indication, that the respondent had voluntarily resigned. The fact that the respondent initiated a lawsuit “after receiving a dismissal letter and leaving his job” does not in any way indicate an admission of voluntary resignation. In fact, the respondent explicitly stated in his complaint that “I received the letter stating that I had voluntarily resigned because I was told I would not get my salary if I didn’t accept the letter, not because I agreed to resign.” A dismissal letter is issued by the employer. Given that the letter was clearly written by the applicant (employer), concluding that the contract was terminated at the employee’s initiative is erroneous. Resignation must be proven by evidence that overtly reflects the employee’s will, not by indirect admissions or an employer’s letter. For an action to be deemed a voluntary resignation, it must unambiguously and unequivocally manifest the employee’s consent.

Similarly, for an employer to be deemed to have terminated a contract, the action taken, or implied by conduct, must clearly aim to terminate the contract and reflect the employer’s intent and decision. In Cassation File No. 44410 (Applicant: W/ro Leyla Redi, Respondent: Dire Industries PLC, November 01, 2002 E.C., Vol. 9), the applicant detailed various injustices inflicted by her immediate supervisor at her workplace. Believing that her supervisor had dismissed her against her will, she wrote a letter to the respondent company’s personnel administration, stating that she had ceased work and requesting that her benefits be protected and a work experience certificate be issued. The department head of the respondent company then forwarded the letter to the company’s administrative service section, stating, “to be handled according to employee administration rules.”

Subsequently, the applicant filed a lawsuit, claiming her employment contract was unlawfully terminated. The respondent denied any dismissal. The court of first instance, based on the evidence and arguments, particularly the letter written by the applicant, ruled that the applicant had voluntarily resigned. The Federal High Court dismissed the appeal against this decision. Finally, the applicant lodged a cassation appeal, arguing that “the content of the letter does not show that I resigned voluntarily but rather that I was dismissed from work,” and requested that the lower courts’ decisions be rectified due to fundamental legal errors.

The Cassation Bench, interpreting the letter contrary to the lower courts, concluded that “the content of the letter shows that the applicant left her job because her immediate supervisor dismissed her and she requested appropriate payments, and does not indicate resignation…” Consequently, it overturned the lower courts’ decisions.

In Cassation File No. 25526, an employee wrote a letter stating, “Please provide me with a work experience certificate because I am leaving the college.” The Cassation Bench, without examining the content of the letter in light of the employee’s intent, ambiguously concluded that “…it does not state that I am leaving the college voluntarily, except for requesting a work experience certificate…” This conclusion lacked proper reasoning. In both cases mentioned above, the employer did not take any direct or indirect action intended to terminate the contract.

When an employee leaves their job due to employer pressure, coercion, or violation of rights, under the reasons specified in Article 32 of the Proclamation, the contract is terminated at the employee’s initiative. Therefore, in Cassation File No. 25526, even if the applicant left the college due to employer pressure rather than voluntarily, the termination of the employment contract would be at the employee’s initiative under Article 32, not at the employer’s. Similarly, in Cassation File No. 44410, the applicant’s cessation of work after detailing the injustices she suffered falls under Article 32 and does not, by any measure, indicate that the contract was terminated at the employer’s initiative.

When both parties are involved in the termination process, it can be challenging to determine who initiated the termination. In Cassation File No. 93511 (Applicant: Ato Derese Worke, Respondent: Berhe Hagos General Contractor, February 24, 2006 E.C., Vol. 16), the applicant filed a complaint stating that his non-transfer after the completion of a road construction project undertaken by the respondent organization was inappropriate. He was subsequently issued a final written warning. The applicant, in turn, wrote a letter to the organization objecting to the warning. Among the facts mentioned in his letter was the statement, “…the organization can either send me back to the office where I was originally hired, or if this is not possible, it can dismiss me.” Following this, the applicant was dismissed.

In the argument before the Cassation Bench, the existence of dismissal became a contentious issue. After examining the content of the letter, it was concluded that the employment contract was terminated at the respondent’s (employer’s) initiative. The Court understood the phrase, “…or if this is not possible, it can dismiss me,” as the applicant questioning whether “the respondent, if it chooses to dismiss him instead of providing other solutions, would accept the legal consequences of the dismissal action,” rather than indicating his desire to voluntarily resign. This interpretation emphasizes that the employee was not initiating resignation but rather seeking clarity on the employer’s intended action and its legal implications.


Post-Resignation Relationship

If an employee gives clear notice of voluntary resignation and the employer, at the appropriate time, rejects the resignation, and the employment relationship continues, the initial resignation notice cannot later be invoked as a ground for contract termination. Some employers, whether due to ignorance or a defiant stance (treating the employee as their “prisoner” for seeking to leave, thus making the employee the source of the problem), stubbornly refuse to release the employee. What then becomes the fate of the employment contract if the employee continues to work after being denied resignation?

In Cassation File No. 104465 (Applicant: W/t Shewit Hailu, Respondent: Defense Construction Enterprise, March 30, 2007 E.C., Vol. 18), the Cassation Bench rendered a legal interpretation stating that an employer who has rejected a resignation cannot later unilaterally terminate the contract by saying “you may leave” whenever they wish. This ruling safeguards the employee from being trapped in an ambiguous employment status after their resignation attempt.

If an employee gives notice of resignation and then ceases to work, the employment contract with the employer terminates. After this point, even if sufficient evidence of a terminable offense committed by the employee were found, any subsequent dismissal action taken by the employer would be ineffective, as the employee had already initiated the termination of the contract.

This principle was demonstrated in the dispute between Ato Kabrak Tekola (Applicant) and Ethiopian Shipping and Logistics Services Enterprise (Respondent) (Cassation File No. 106610, May 04, 2007 E.C., Vol. 18). The applicant submitted a letter on January 26, 2005 E.C., stating his voluntary resignation. The respondent, however, issued a dismissal letter on April 11, 2005 E.C. This letter stated that the applicant was dismissed for being absent for five consecutive days starting November 17, 2005 E.C., after taking unpaid leave and failing to return to work.

The applicant filed a lawsuit with the Federal First Instance Court, stating that he had worked for the respondent organization for 5 years and 1 month, from December 26, 2000 E.C. to January 25, 2005 E.C., and had then voluntarily resigned, seeking severance pay. The respondent argued that the payment was not due because the contract was lawfully terminated on November 17, 2005 E.C. The court of first instance ruled in favor of the applicant, stating that the respondent’s argument to deny payment after accepting the resignation and then finding a reason for termination was inappropriate, and ordered severance pay for the applicant.

The appellate court, however, overturned this decision, citing the binding legal interpretation in Cassation File No. 45889, and stating that “the respondent can rectify its error.” The Cassation Bench, in turn, affirmed the appellate court’s decision, explaining that the interpretation in File No. 45889 applies when the employment contract is still in force, but it has no effect once the contract has already been terminated. This implies that once a valid resignation has occurred, the employer cannot retroactively introduce a new ground for termination to avoid their obligations.


Consequences of Failing to Give Notice

An employee who voluntarily resigns is required by Article 31 to provide the employer with one month’s prior notice. The purpose of this notice is to allow the employer sufficient time to prepare for a replacement. When an employee abruptly leaves without notice (especially if their work is essential), it can cause significant harm to the employer. Although the monetary value of such damage might exceed a month’s salary, Article 45(2) of the Proclamation limits the compensation payable for failure to give notice to thirty days’ wages, taking into account the employee’s capacity.

While the compensation amount cannot exceed thirty days’ wages, it can be less. There is a slight discrepancy between the Amharic and English versions of Article 45(2) regarding the amount of compensation. The Amharic version states that the compensation “shall not exceed 30 days more than the remaining payment the employer owes to the employee,” whereas the English version translates this as “…shall not exceed thirty days wages of the worker.”

The linking of compensation to “remaining payment” in the Amharic version is confusing and provides no additional utility, as an employee who leaves without notice is liable to pay compensation regardless of any remaining payments, as stipulated in Article 45(1). Beyond its confusing nature, this phrasing also inappropriately suggests that the employer has the right to unilaterally deduct compensation from payments due to the employee for not providing notice.

Any payment due following resignation must be determined through a legal judgment after a proper claim is made. Conversely, the employer is not permitted to unilaterally reduce payments due to an employee merely because the employee failed to give notice. The Cassation Bench, in File No. 119448 (Applicant: Addis Gas and Plastic Factory PLC, Respondent: Ato Solomon Haile, December 06, 2009 E.C., Vol. 21), emphatically stated that:

“There is no law that permits an employer to unilaterally deduct money from an employee’s payment by judging their own case.”

This ruling underscores the principle that self-help by the employer in deducting compensation is prohibited, and any such claim must be pursued through due legal process.

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