Introduction: The Threshold of Labour Protection
In employment law, not all individuals working for an organization are afforded the same level of legal protection. A crucial distinction often drawn is between “employees” and “Managerial employees”. This classification is not merely semantic. It has profound implications for the applicability of labour legislation. This is particularly true in jurisdictions like Ethiopia. In these places, the Labour Proclamation does not apply to managerial personnel. The rationale behind this differentiation is that individuals with significant decision-making authority and control over the enterprise’s operations are often seen as acting on behalf of the employer. Therefore, their relationship is governed by different legal principles. These principles are often under general contract law (like the Civil Code) rather than specific labour protective statutes.
This distinction is crucial for employers. They seek to define their legal obligations. It is also vital for individuals. They attempt to assert their rights. Recent Supreme Court Cassation Bench rulings have provided critical clarity on the precise definition of a “Managerial employee” in Ethiopia, ensuring that this classification is based on actual authority rather than mere title. This chapter will delve into these pivotal interpretations.
The Legal Definition of a “Managerial Employee” in Ethiopia
The core legal interpretation concerning the classification of a “Managerial employee” (የስራ መሪ) in Ethiopia is found in Labour Proclamation No. 1156/2011, Article 2(10). This article provides the statutory definition.
Crucial Distinction: Applicability of the Labour Proclamation The significance of this definition is underscored by Article 3(2) of the Labour Proclamation, which explicitly states that the Proclamation does not apply to Managerial employees. This means that disputes involving individuals classified as “Managerial employees” are typically heard under the general civil law, often involving different procedures, remedies, and even limitation periods.
The Supreme Court’s Binding Interpretation: The Supreme Court has consistently reiterated its binding legal interpretation (from Cassation Case No. 117076 and others) of what constitutes a “Managerial employee.” To be considered a “Managerial employee,” an individual must possess one of the following key authorities:
- Authority to Issue Management Policies: Not merely to implement policies formulated by others, but to genuinely set the strategic direction and operational guidelines for the enterprise or a significant part of it.
- Authority to Make Core HR Decisions: This includes the independent power to make definitive decisions regarding:
- Hiring employees.
- Transferring employees.
- Suspending employees.
- Terminating employees.
- Assigning employees.
- Authority to Provide Independent Recommendations for Employer’s Benefit: This refers to the power to make significant, influential recommendations on the above matters that are typically adopted without further substantive review, effectively shaping the employer’s decisions.
What Does NOT Qualify as “Managerial Employee”? The Supreme Court’s interpretation clarifies that mere implementation of policies or general management duties alone do not qualify one as a “Managerial employee” if they lack these specific decision-making powers. A title like “manager” or “director” is not sufficient; the decisive factor is the actual authority exercised in practice. This prevents employers from simply labeling employees as “managers” to avoid the protective provisions of the Labour Proclamation.
Case Studies: Applying the “Managerial Employee” Definition
1. Anbessa Insurance S.C. v. W/ro Marta Bizuneh (Case No. 245250)
Case Information:
- Case No.: 245250
- Date: June 7, 2023 G.C. [ግንቦት 30 ቀን 2015 ዓ.ም]
- Applicant: Anbessa Insurance S.C.
- Respondent: W/ro Marta Bizuneh Haile
Background: The respondent, a Branch Office Manager for Anbessa Insurance, filed a claim regarding her demotion and salary reduction, arguing it was unlawful and tantamount to termination. Anbessa Insurance raised a preliminary objection, asserting that the respondent was a “Managerial employee,” and thus her case should not be heard under the Labour Proclamation, implying a lack of jurisdiction for the labour court.
Lower Courts’ Decisions:
- Federal First Instance Court: Agreed with Anbessa Insurance, ruling the respondent was a “Managerial employee” under Labour Proclamation Article 2(10), and dismissed the case.
- Federal High Court: Overturned this ruling. After examining the respondent’s job description and actual duties, it concluded that her responsibilities did not meet the stringent definition of a “Managerial employee.” It then remanded the case for a decision on its merits under the Labour Proclamation.
Supreme Court’s Analysis and Final Decision: Anbessa Insurance appealed to the Federal Supreme Court Cassation Division, arguing that the respondent’s responsibilities (e.g., implementing policies, planning, coordinating, controlling operations) clearly qualified her as a “Managerial employee” under the law and previous Cassation decisions. The respondent maintained she was an ordinary employee, not management, and did not perform the high-level management functions in practice.
The Cassation Division analyzed the definition of “Managerial employee” against the evidence of the respondent’s actual duties. It found that while she was indeed a branch manager with significant duties, her authority was consistently limited to implementing policies, not issuing them. Crucially, she did not possess independent decision-making power over the hiring, termination, transfer, or assignment of other employees. Therefore, she did not meet the specific legal criteria to be classified as a “Managerial employee” as defined by the Labour Proclamation and interpreted by the Supreme Court.
Final Decision: The Supreme Court found no fundamental error of law in the High Court’s decision and affirmed its ruling that the respondent was an ordinary employee, not a Managerial employee. This meant the Labour Proclamation applied to her case.
This ruling underscores that job titles alone are insufficient for classification. The true test lies in the actual authority and responsibilities exercised by the individual, particularly their power to set policy or make independent, substantive decisions regarding human resource functions. Mere general managerial duties or policy implementation do not equate to “Managerial employee” status for the purposes of the Labour Proclamation.
2. BAMET Energy Telecom Industry and Trade Plc v. Ato Moges Feyera Bulti (Case No. 245927)
Case Information:
- Case Number: 245927
- Date: October 2, 2016 Ethiopian Calendar
- Applicant: BAMET Energy Telecom Industry and Trade Plc
- Respondent: Ato Moges Feyera Bulti
Background: Ato Moges Feyera Bulti (employee) sued BAMET Energy Telecom Industry and Trade Plc (employer) for illegal termination. He had served in various roles, including acting general manager, before being demoted to an advisor and then terminated. He sought substantial payments. The employer argued he was a “manager” (work leader), thus outside the Labour Proclamation’s scope, and that his termination was legal under the Civil Code due to the high-trust nature of his position and the unavailability of alternative roles.
Lower Courts’ Decisions: The Woreda Court ruled that the employee was not a “managerial employee” at the time of termination and found the termination illegal, ordering a large sum in payments. This was affirmed by the Sheger City High Court. The Oromia Regional Supreme Court Cassation Bench generally upheld this decision, modifying only some calculation procedures.
Supreme Court’s Analysis and Final Decision: The Federal Supreme Court Cassation Bench upheld the lower courts’ finding that the employee was not a “managerial employee” at the time of his termination. This determination was based on evidence that his managerial authority had been revoked by the new company owners, and he was working in a geologist position, as confirmed by internal HR documents. The Supreme Court, consistent with its limited cassation power, found no fundamental error in the lower courts’ factual assessment on this point. Consequently, the case was correctly heard under the Labour Proclamation.
The Supreme Court also upheld the lower courts’ finding that the termination was illegal, as the employer’s argument of no available alternative position after removing him from management did not constitute a legally valid reason for termination under the Labour Proclamation.
Crucially, however, the Supreme Court found fundamental legal errors in the calculation of severance pay and costs/legal fees by the lower courts.
- Severance Pay: The lower courts had calculated severance pay based on the employee’s entire service period. The Supreme Court clarified that Labour Proclamation No. 1156/2011, Articles 39(1)(b) and 40(1) & (2), require that severance pay be calculated only for the period an employee has served outside of a “work leader” (managerial) position. This reflects the policy that managerial periods are governed differently.
- Costs and Legal Fees: The lower courts’ decision to award costs and legal fees simply based on the agreement between the employee and his lawyer, rather than considering the complexity, duration of the case, and the final awarded amount, was also found to be a fundamental legal error.
Final Decision: The Oromia Regional Supreme Court Cassation Bench’s decision was modified.
- The confirmation that the employee was not a “work leader” and that the termination was illegal (leading to compensation and delayed payment based on his USD 7,000 salary) was upheld.
- The parts of the decision related to severance pay and costs/legal fees were overturned.
- The case was remanded to the lower court to recalculate the appropriate severance pay (considering only the time worked outside of a “work leader” position) and costs/legal fees (considering the case’s overall content, complexity, and time taken).
This case reinforces the strict interpretation of “Managerial employee” based on actual current authority and demonstrates the Supreme Court’s commitment to ensuring correct application of statutory payment calculations, even when upholding the core finding of unlawful termination. It highlights that an employee’s status can change, and benefits must be calculated accordingly.
Conclusion
The Supreme Court Cassation Bench rulings discussed in this chapter are indispensable for a precise understanding of the “Managerial employee” distinction in Ethiopian labour law.
They collectively emphasize:
- Substance Over Form: The true test for classifying an individual as a “Managerial employee” lies in their actual authority to issue policies or make independent, high-level decisions concerning core human resource functions (hiring, firing, transfer, etc.), not merely their job title or general supervisory duties.
- Dynamic Status: An individual’s status can change within an organization, and the classification for Labour Proclamation applicability must reflect their current actual role and authority.
These decisions are crucial for ensuring that the protective umbrella of the Labour Proclamation effectively covers all individuals for whom it was intended, preventing circumvention through misclassification. They promote legal certainty and fairness, providing clear guidance for employers and a robust basis for employees to assert their rights within the unique framework of Ethiopian labour law.