Court Upholds Employers' Right to Terminate Contracts of employee's Without Justifiable Reasons

In a recent ruling, the Court of Appeal has reinforced the rights of employers to terminate employment contracts at their discretion, with or without providing justifiable reasons. The unanimous decision, delivered by Justice Christopher Gashirabake, came in response to a case involving Nassanga Saphinah Kasule and Stanbic Bank.

The court clarified that, unless explicitly specified in the employment contract, employers are not obligated to provide reasons for termination. The case centered around Section 65(I)(a), where the court asserted that employers could terminate employment contracts for any reason or even without citing one. Furthermore, the court emphasized that there is no requirement for a hearing in cases of termination without reason.

The verdict also highlighted the significance of notice periods and payments in lieu of notice. According to the court, as long as the employer adheres to the notice period outlined in the Employment Act, the employment contract, or any governing documents, termination stands. If notice is not given, the employer must compensate the terminated employee with a payment in lieu, as stipulated by the law and the employment contract.

The case originated from Nassanga's termination by Stanbic Bank in 2012 without providing any reasons. The bank, however, paid her Shs 17 million as three months' salary in lieu of the notice. Dissatisfied with the termination, Nassanga filed a case with the Industrial Court, which initially ruled in her favor, stating that she had been wrongfully dismissed. The Industrial Court awarded her Shs 65 million for wrongful termination without reason and a hearing.

Stanbic Bank appealed the decision, contending that the law does not mandate them to provide reasons for terminating contracts as long as the stipulated notice or payment in lieu is given. The Court of Appeal ultimately sided with the bank's argument, reinforcing the principle that employers have the discretion to terminate contracts without justifiable reasons.

The decision, supported by Justices Richard Butera and Catherine Bamugemereire, sets a precedent for employment termination cases in the jurisdiction, emphasizing the importance of explicit contractual terms and adherence to notice periods.