Litigation of Employee Loans as a Labour Dispute: Comparing the Law and Practice in Nigeria with other Jurisdictions
By: Michael Dugeri
Tags: Law, Nigeria, Employment, Labour

Litigation of Employee Loans as a Labour Dispute: Comparing the Law and Practice in Nigeria with other Jurisdictions Michael Dugeri Jan 1, 2020·33 min read

Abstract

The constitutional provision[1]that confers jurisdiction on the National Industrial Court of Nigeria (NIC) appears to be so wide that it is easy to assume that all employment disputes such as workplace sexual harassment, discrimination, recovery of employee loans, tax deductions, workplace assault or bullying, all fall under the jurisdiction of the Court.However, like the proverbial wise chicken who on arriving at a new environment first stands on one leg and if the inhabitants of the town in question stand on two legs then sets down the other leg, the NIC has treated its jurisdiction over recovery of employee loans in a manner that does not engender certainty in the law. An examination of the cases that have been decided by the Court in this area of Nigerian labour law shows a mixed bag of both progressive and regressive judicial interpretation. This paper compares the law and practice in Nigeria on this common employment dispute with what obtains in other jurisdictions,such as South Africa and Kenya. It is argued that resolution of disputes on the recovery of employee loans is a matter within the exclusive competence of the NIC as is the case with other employment disputes. It is further argued that even as labour law is unabashedly biased in favour of workers over employers, real economic growth through industrial harmony is only possible where the interest of both workers and employers are balanced and protected.

Introduction

What is a Labour Dispute?

Labour disputes, as used in this paper, refers to disputes between an employer and its employees regarding the terms and conditions of employment. These disputes border on such matters like wages, time or hours of work, work conditions, tenure, termination, e.t.c. In this sense therefore, the term labour dispute is to be distinguished from trade dispute, which has a wider connotation.[2] In the old English case of Bredan Dunne Ltd v. Fitzpatrick[3] Budd J. explained that conditions of work seem to refer to the physical conditions under which the employee is made to work such as appertain to matters of safety and physical comfort and convenience, while terms of employment may cover all matters covered by the contract of employment like wages, overtime pay, holiday, sick leave, hours of work, etc.

Jurisdiction is defined as the power and authority constitutionally conferred upon (or constitutionally recognized as existing in) a court or judge to pronounce the sentence of the law, or to award the remedies provided by law, upon a state of facts, proved or admitted, referred to the tribunal for decision, and authorized by law to be the subject of investigation or action by that tribunal, and in favor of or against persons (or a res) who present themselves, or who are brought, before the court in some manner sanctioned by law as proper and sufficient.[4]

Globally, jurisdiction is the basis on which the power of the court is premised. It is a threshold issue in the process of judicial adjudication. It is therefore a fundamental principle of law that any decision reached by a court of law without jurisdiction is null, void and of no legal effect whatsoever.[5]Certainty of the court’s jurisdiction over a particular matter is of fundamental importance to the litigating public. Parties who go to court presumably do so because they do not have any other option and they want their matter to be disposed of as firmly as possible.[6] When controversy on which court has jurisdiction over a particular subject-matter takes the centre stage, the possibility of parties incurring unnecessary expenses and getting frustrated with the judicial system heightens. Loss of confidence in the judicial system can lead to a collapse of the system.

The National Industrial Court was established in 1976 under the Trade Dispute Decree[7]. Further legislative action led to the enactment of the National Industrial Court Act 2006, which re-established the Court and vested it with jurisdiction over all causes and matters relating to or connected with any labour, employment, trade unions, industrial relations and matters arising from workplace, the conditions of service, including health, safety, welfare of labour, employee, worker and matters incidental thereto or connected therewith.

The Court, as presently constituted, was re-established as the National Industrial Court of Nigeria by the Constitution of the Federal Republic of Nigeria (Third Alteration) Act, 2010.[8]Section 6 of the 1999 Constitution was altered to include the NIC in the list of superior courts of record, meaning that it can now exercise all the powers of a superior court of record.[9] Just like its counterpart in other jurisdictions, the main functions of the NIC is to prevent and settle employment, industrial relations, and trade disputes in Nigeria in order to enable the economy run smoothly.

The objective behind establishing the Court is to create a specialized court to handle special matters which are connected with the economic growth, industrial relations development, peaceful co-existence between and among labour and employers of labour as well as labour policy formulator, that is, the government.[10] This is like the situation in other jurisdictions such as Kenya, South Africa, Great Britain, etc where the establishment of specialised labour courts have aided industrial growth, peace and tranquillity.[11]

In the case of Skye Bank Plc v. Victor Anaemem Iwu[12] the Supreme noted as follows:

‘Specialised Courts of limited and exclusive jurisdiction are seen as fulfilling a growing need for expertise in increasingly complex areas of law. The resolution of labour and employment disputes is guided by informality, simplicity, flexibility and speed. Specialized business Courts will no doubt play an important role in the economic development of the country.’

What are Employee Loans?

For the purpose of this paper, employee loan means a loan given by an employer to an employee for specific reasons with the expectation that such loan will be repaid to the employer in part of full and usually by periodic deductions from the employee’s salary/wages.[13]The rationale for employee loans is that financial insecurity can be a productivity killer.[14] Financial stress increases absenteeism, tardiness, and disengagement. Hence employers who offer empathy toward employees in need of financial assistance can boost employee loyalty and retention and overall workplace engagement.

The rate of poverty in Nigeria[15] means it is not uncommon for persons that are working to occasionally face financial concerns and to immediately turn to their employers for help in the form of loans. Seeking loans from an employer is usually a better option, as the employer may offer more favourable terms than a bank and will be able to line up repayment dates with salary payment dates. If an employee is concerned about children’s school fees, overdue rent, or other financial concerns,[16] it can make it difficult to focus on work.

In comprehensive terms, employee loans include salary advances and employee share ownership schemes. They also include schemes for employees to acquire properties[17] or undertake personal projects, like educational advancement. Depending on the agreement between the parties or the employer’s extant policy on the issue, some of these loans may be with or without interest. It is to be noted, however, that granting employee loans with interest may subject the transaction to some regulatory approval or oversight, which neither party may intend.[18]

Examining The Jurisdiction of the NIC over Disputes on the Recovery of Employee Loans

A plethora of cases on recovery of employee loans, whether as substantive or ancillary claims, have been instituted at the NIC but without predictable pattern in the decisions of the Court in the cases. In some cases, the Court has simply declined jurisdiction on the recovery of employee loans on the ground that it lacks jurisdiction to hear ‘commercial disputes’, while in other cases, the Court has assumed jurisdiction but applied the extant legal principles in a manner that is not very clear. For the purpose of this paper, the two cases of Zenith Bank Plc v. Mr Obaro Odeghe[19] and Mrs Vivien Folayemi Asana v. First Bank of Nigeria Ltd[20]will be examined.

Zenith Bank Plc v. Mr Obaro Odeghe

The Claimant, a financial institution, sued one of its former employees, the Defendant, and claimed against him certain sums of money as ‘mortgage loans’ and ‘employee personal loan’. The Defendant, in turn, counter-claimed against the Bank for certain sums of money as unpaid severance entitlement.The Court, suo moto, raised the issue of jurisdiction and invited Counsel to address it on whether it is competent, in view of the facts, to hear and determine the case.

The Claimant argued that the subject matter of the case is its right as an employer to be paid back monies given to its employee, the Defendant, as loans which became due by reason of termination of the employment contract, thereby falling within section 254C (1) (a) of the 1999 Constitution as amended. It therefore concluded that the Court had jurisdiction to entertain and determine the case as constituted.

The Defendant, on the other hand, asked the Court to decline jurisdiction in the case on the ground that the case was for recovery of an alleged mortgage sum and accrued interest arising from a simple mortgage contract between a mortgagor (the Claimant) and a mortgagee (the Defendant). He relied on earlier cases[21] decided by the NIC and contended that the grant of loans by the Claimant to employees or otherwise is part of the Claimant’s business of banking and is not an employment matter. He concluded that it is the State High Court that has jurisdiction to entertain an action founded on banker/customer relationship. He referred to Section 254C (1) of the 1999 Constitution, which he said does not confer jurisdiction on the NIC to determine matters arising from banker/customer relationships.

The Court considered the arguments of both parties and noted as follows:

‘The claims are in respect of mortgage and personal loans the Claimant granted the Defendant whilst he was still in its employment… A look at the statement of facts reveals that the averments are not related to or connected with any dispute arising from payment or non-payment of salary, pension, gratuity, allowances, benefits, other entitlements or employment. The averments in the claimant’s statement of facts are in respect of the loans the defendant was given while in employment and his alleged indebtedness.’[22]

As a result of the foregoing, the Court held that:

‘This court is not empowered to entertain suits relating to loans and commercial transactions as they are not within the scope of section 254C (1) (a) & (k) of the 1999 Constitution as amended. I find that the claims of the claimant do not come within the jurisdiction conferred on this court by section 254C (1) (a) & (k) of the 1999 Constitution as amended. I therefore decline jurisdiction to entertain this matter.’[23]

It is curious that the transaction between the parties in this case was categorized by the Court as broadly falling under ‘loans and commercial transactions’. This is notwithstanding that the mortgage loan was granted to the Defendant as an employee of the Claimant and in the course of the employment relationship, pursuant to the conditions of service of the Defendant as an employee of the Claimant. It is therefore hard to see how the Court failed to see it as a matter over which it has jurisdiction.As noted earlier, employee loans are loans given by an employer to an employee for specific reasons with the expectation that such loans will be repaid to the employer in part of full and usually by periodic deductions from the employee’s salary/wages. The fact that the loan in this case was termed ‘mortgage loan’ does not make it any more unique than a car loan, salary advance or share ownership scheme, which all qualify as employee loans.

Also, in view of the fact that such ‘mortgage loans’ are usually granted pursuant to the conditions of service of the employee, the transaction is regulated, at least in part, by the contract of employment between the parties, rather than the mortgage agreement. Hence their repayment is usually tied to crucial aspects of the employment contracts such as payment of salary/wages and termination.[24] The Court, in this case, appears to have missed this fact in holding that the transaction between the parties was a matter falling outside its jurisdiction.

The most definite position of the NIC on its jurisdiction in the recovery of employee loans was stated in the case of Jideofor Justin Akunne v Ecobank Nigeria Plc[25]where the Court held thus:

‘Section 254C(1) of the 1999 Constitution bestows on this Court exclusive jurisdiction over ALL and ANY labour/employment matter, and matters connected with or incidental thereto. See Coca-Cola Nigeria Limited & Ors v. Mrs. Titilayo Akisanya (2013) 18 NWLR (Pt. 1386) 255. Is the recovery of a loan and advances granted an employee while in employment, which thereby becomes a debt, one that is a matter connected with or incidental to labour and employment? I think so. In James Adekunle Owulade v. Nigerian Agip Oil Co. Ltd unreported Suit No. NICN/LA/41/2012, the judgment of which was delivered on 12th July 2016, for instance, the defendant employer counterclaimed against the claimant for N38,052,678.40 being the total outstanding and unpaid sum due to and retained by the claimant in respect of various unamortized allowances, loans, costs and indebtedness …This Court assumed jurisdiction, heard and determined the counterclaim.’[26]

Mrs Vivien Folayemi Asana v. First Bank of Nigeria Ltd

The relevant facts of this case are that the Claimant contended that the Defendant frustrated[27] the repayment plan of the “the staff welfare loan” advanced to her by constructively dismissing her, and hence the Defendant could not, by counter-claim, demand repayment of the loan, and at a rate of interest different from the agreement of the parties.

The Court found that the case of the Claimant amounted to constructive dismissal, for which she was deserving of compensation in the sum of Two Million Naira. Regarding the Defendant’s counter-claim for the recovery of the employee loan, the Court held that based on the facts of the case, the Claimant was not entitled to repay the loan as to hold otherwise will be to allow the Defendant benefit from its wrongfulness, which legal policy frowns upon.[28]

The Court in this case relied on the case of Lewis v. UBA Plc[29]where the Supreme Court laid down the yardstick for determining whether the repayment of a loan taken by an employee is frustrated as a result of termination of the employee’s employment, especially where the repayment of the loan is tied to the employee’s salary. In the said case of Lewis v. UBA Plc[30] the Supreme Court held thus:

‘The stance of the appellant that his continued retention in the employment of the respondent is a condition precedent to his repayment of the personal loans and his employment having been terminated by the respondent, the enforcement of the personal loans had been frustrated is not sustainable either in the context of the facts of this case or the prevailing law. This is because the contract of employment and personal loans between the appellant and the respondent are two distinct contracts having distinct subject-matters and their duration not co-existent nor can it be said one is dependent on the other or that the right to terminate the contract of employment by either party could operate as a condition precedent to the repayment or the personal loan or balance thereof.A refresher to the situation is that the respondent had fully preferment his obligation under the contract for the personal loan by making available the said sums and the next cease because his employment has ended. This is because mere hardship, inconvenience or other unexpected turn of events which have created difficulties though not contemplated cannot constitute frustration to release appellant from that obligation, a situation which not even the death of the appellant, grave as that might be, would not alter the course of events of the repayment as his estate would bear the liability. I anchor on the case of Davis Contractors Ltd. v. Fareham U.D.C. (1956) AC 696.’

What is instructive about the case of Mrs Vivien Folayemi Asanav. First Bank of Nigeria Ltd is that, unlike the case of Zenith Bank Plc v. Mr Obaro Odeghe, the Court did not have difficulty in appreciating the nature of the claim as one for recovery of employee loan, and that it is a matter that falls within its jurisdiction. Regrettably, however, the Court also made clear, by its holding, the uncertainty surrounding the application of the legal principles on recovery of employee loans. In its consideration of the Supreme Court decision in Lewis v. UBA Plc[31] the Court said

‘Lewis v. UBA Plc talked of “the context of the facts of this case or the prevailing law”. This means that the Supreme Court stressed the primacy of the context of the case and the prevailing law in coming to the conclusion it did. This means that any application of Lewis v. UBA ought to be based on the context of each case.’[32]

It is also instructive that the Court noted the ‘unfair terms’ of the loan agreement between the parties, when it stated that:

‘…the goal of labour law is to ensure that no employer can be allowed to impose — and no worker can be allowed to accept — conditions of work which fall below what is understood to be a decent threshold in a given society at a given time.[33] The defendant should not, indeed cannot, be allowed to impose on the claimant a fait accompli — entice the claimant with an employment loan at a low rate, then turn around and constructively dismiss her and convert the low rate loan to one of a higher rate. Head or tail, the employer benefits much against the interest of the claimant. This cannot be.’[34]

It is curious that while the Court, in protecting the Claimant from the ‘double jeopardy’ of being constructively dismissed by the Defendant, while also having to repay the extant loan owed to the Defendant, unwittingly visited on the Defendant the very double jeopardy that it considered to be unjust for the Claimant: the Defendant was made to pay the Claimant compensation for the constructive dismissal and to also forgo the benefit of its loan agreement with the Claimant.[35] On the flip side of the principle that the court will not allow any party to benefit from his own wrong is the principle that the court will not allow a successful litigant to receive double compensation. The law frowns at double compensation either in contract or in tort.[36]In the case of Oshinjinrin&Ors v. Alhaji Elias &Ors[37] the Supreme Court held that:

‘It is wrong to award damages twice over and where a plaintiff has been compensated under one head of damages for a particular injury, it is improper to ward him damages in respect of the same injury under another head’.[38]

It is to be noted that the basis for the principle that employee loans survive the employment contract is that the contract of employment and personal loans between the parties are two distinct contracts having distinct subject-matters. This principle was aptly captured by the Supreme Court in the case ofLewis v. UBA Plc.[39]

‘The contract of employment and personal loans between the appellant and the respondent are two distinct contracts having distinct subject-matters and their duration not co-existent nor can it be said one is dependent on the other or that the right to terminate the contract of employment by either party could operate as a condition precedent to the repayment or the personal loan or balance thereof.’

There is therefore no basis for holding that ‘frustration’ of the employment contract, which is caused by the constructive dismissal of the employee by the employer will operate to frustrate the employee loan repayment. To hold otherwise will be to unduly tie the loan agreement to the employment agreement, which is contrary to the principle in Lewis v. UBA Plc. It is argued therefore that the NIC has jurisdiction to hear and determine matters relating to recovery of employee loans, in whatever form that the employee loan is termed. It is also argued that employee loan agreements and employment agreements between the same parties should be regarded and treated separately in order to avoid the temptation of reading into one the frustration of other.

Lessons from other Jurisdictions

Globally, wage regulation laws place restrictions on the manner of deductions that may be made from an employee’s salary/wages, and thereby put in perspective repayment of employee loans through such deductions.[40]The laws are also usually clear on what court has jurisdiction to hear and determine disputes arising from such employee loan transactions. The law and practice in South Africa and Kenya are examined below.

South Africa

The Labour Court in South Africa handles labour disputes, that is, disputes arising from the relationship between employer, employee and trade unions. The Court was established by the Labour Relations Act 1995 (LRA), and has a status similar to that of a division of the High Court. The main purpose of the court is to provide a speedy resolution of labour disputes in the interests of contributing to industrial peace. The principal feature of the jurisdiction of the Labour Court is its exclusivity. It is either given exclusive jurisdiction or a limited amount of concurrent jurisdiction with the High Court regarding the state as employer and issues relating to the constitutionality of executive action.[41]

The Labour Court has exclusive jurisdiction over cases arising from the LRA, which deals with collective bargaining, trade unions, strikes and lockouts, unfair dismissal and unfair labour practices; the Basic Conditions of Employment Act 2002, which deals with working hours, leave and remuneration; the Employment Equity Act 1998, which deals with discrimination and affirmative action; and the Unemployment Insurance Ac, 2001.[42] These matters are removed from the jurisdiction of the ordinary High Courts. Judgments of the Labour Court can be appealed to the Labour Appeal Court or the Supreme Court of Appeals which in turn can be appealed to the Constitutional Court of South Africa.[43]

By its very nature, employment loans clearly fall within matters that the Labour Court is competent to exclusively handle. Section 77 of the Basic Conditions of Employment Act confers on the Labour Court ‘exclusive jurisdiction in respect of all matters in terms of the Act’. Section 34 (1) of the Act is most applicable to disputes relating to employee loans. The section provides as follows:

34 (1) An employer may not make any deduction from an employee’s remuneration unless —

(a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or

(b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.

The provisions of section 34(1) of the Basic Conditions of Employment Act were recently examined by the Labour Court in the case of Sekhute & Others v Ekurhuleni Housing Company[44]where some employees challenged the lawfulness of their employer’s deduction from their remuneration of overpayments made to them in error.The Labour Court accepted that the employer had made a genuine overpayment in error. As a result, the employer could cease making the overpayment in future. The question which the court then had to determine was whether the employer was entitled to recover the overpayments by way of deduction from the employees’ remuneration, in the absence of employees’ consent to the deductions. The employer relied on section 34(5) of the Basic Conditions of Employment Act[45]as the basis for the deduction and the lawfulness thereof.

The Labour Court considered section 34 of the BCEA and held that section 34(1) identifies two classes of deductions that can be made by an employer from an employee’s remuneration. The first is a deduction which may be made in respect of an acknowledged debt and which would require the employee’s consent in writing. The second is a deduction which does not require the employee’s written consent. The deduction may, for example, be authorised by law or a court order. The court then considered section 34(5) of the BCEA which states:

‘(5) An employer may not require or permit an employee to:

(a) repay any remuneration except for overpayments resulting from an error in calculating the employee’s remuneration…’

The Labour Court found that the repayment of overpaid remuneration is a unique category of money that is lawfully recoverable by an employer from an employee. It held that section 34(5) was intended to permit a deduction for amounts due to an employer and the employees’ consent is not required. The legislature’s intention with this section was to specifically authorise deductions for overpayment of remuneration. Insofar as the employer’s policy was concerned and the employees’ allegation that the policy prohibited the deduction given that it was not made in terms of a “legal instruction”, the court found that section 34(5) is a provision of a law. In the circumstances, the policy did not prohibit the deduction.[46]

Kenyan

The Employment and Labour Relations Court is established pursuant to Article 162 (2) (a) of the Constitution of Kenya[47], for the purpose of settling employment and industrial relations disputes and the furtherance, securing and maintenance of good employment and labour relations in Kenya.[48]The Court has exclusive original and appellate jurisdiction to hear and determine all disputes referred to it in accordance with Article 162 (2) of the Constitution and the provisions of the Industrial Court Act or any other written Law, which extends jurisdiction to the Court relating to employment and Labour relations, including ‘disputes relating to or arising out of employment between an employer and an employee’.[49]

Section 87 of the Employment Act[50] confers on the Industrial Court exclusive jurisdiction in cases of dispute between employers and employees relating to the following:

a. an employer or employee neglects or refuses to fulfil a contract of service; or

b. any question, difference or dispute arises as to the rights or liabilities of either party; or

c. touching any misconduct, neglect or ill-treatment of either party or any injury to the person or property of either party, under any contract of service.

Instructively, sub-section (3) provides that ‘This section shall not apply in a suit where the dispute over a contract of service or any other matter referred to in subsection (1) is similar or secondary to the main issue in dispute.’ This takes away any doubt that the Court may, in appropriate cases, assume jurisdiction on matters that are not strictly labour disputes.

Section 19 of the Act permits deductions from employees’ wages in regard to situations, which include ‘a loan repayment due to the employer under a written agreement, not exceeding 50% of the wages after any other deductions set out above’.[51]Without prejudice to any right to recover a debt due from an employee and notwithstanding any other written law, Section 19 of the Employment Act provides that the total amount of all deductions should not exceed two-thirds of an employee’s wages.[52]The foregoing wage regulation provisions under the law in Kenya is contrasted with the law and practice in Nigeria, which leaves much to be desired, and which has contributed greatly to the present uncertainty in this area of labour dispute resolution. The Labour Act[53]provides that the wages of a worker shall in all contracts be made payable in legal tender and not otherwise.[54]

The manifest effect of the Labour Act provisions is to make the payment of wages mandatory for employers under Nigerian law. The Labour Act is however silent on matters of deduction of wages, by which repayment of employee loans by periodic deduction from salary/wages might be legally defensible. It is to be noted however, that the courts have held, in the cases of Abayomi Adesunbo Adetoro v. Access Bank Plc[55], and Alhaji A. R. Animashaun v. UCH[56] that, in appropriate circumstances[57], the employer is allowed to make deductions from an employee’s salary or entitlements, for reasons such as repayment of debts or reimbursements for damages caused through the negligence of the employee.[58]

Under the National Minimum Wage Act[59] it is the duty of every employer to pay a wage not less than the national minimum wage of N8,000.00 per month to every worker under his employ ‘clear of all deductions (except any deductions required by law or deductions in respect of contributions to provident or pension funds or schemes agreed to by the workers)’. It goes further to make null and void any agreement for the payment of wages less than the national minimum wage.[60]

Notwithstanding that the National Minimum Wage Act is of limited application[61], it provides the basis for wage regulation (deductions) for employees that are covered under the Act, and is therefore useful in the determination of disputes that may arise from employee loan repayments through the deduction of the employee salary/wages. Section 254C (1) (e) of the 1999 constitution (as amended) clothes the NIC with exclusive jurisdiction in civil causes and matters ‘relating to or connected with any dispute arising from national minimum wage for the Federation or any part thereof and matters connected therewith or arising therefrom’. There is therefore nothing that stands in the way of the NIC in adjudication of disputes over the recovery of employee loans.

Much like the case with recovery of employee loans, the NIC has also shown uncertainty about assuming jurisdiction over tax disputes in employment matters. Such tax disputes commonly revolve around issues such as over-deduction of tax from the salaries of employees or non-remittance of the tax deducted. There have also been cases in which an employee complains that his tax records are being withheld by the employer for one reason or another. In the case of Ogaga v. Jopa Energy Ltd[62] the NIC declined jurisdiction over a relief of the Claimant asking for an order directing the defendant company to provide her tax card or tax clearance certificate having deducted certain sums from the Claimant’s salaries as personal income tax.

Also, in the case of Deborah Olubusayo Akinade v. Coretrust And Investment Limited[63] the Claimant sued her former employer to ask, among other things, payment of outstanding salaries. She also asked for an order of the Court directing the Defendant to pay to the tax authorities on her account certain sums of money, which had been deducted from the Claimant’s salaries as income tax but was not remitted to the tax authority. The Court declined jurisdiction, stating that “This Court does not have jurisdiction respecting such matters”.However, in the case of Gbenga & Ors v. Total Data Ltd[64] the NIC held that it had jurisdiction because an issue of deduction of tax from an employee’s salary is necessarily incidental to labour and employment.

Conclusion and Recommendations

In this paper, it is argued that the constitutional provision that confers jurisdiction on the National Industrial Court of Nigeria (NIC) is wide enough to include jurisdiction of the Court over the recovery of employee loans. The law and practice in other jurisdictions like the South Africa and Kenya have been examined with the view to arguing that global best practice is to confer jurisdiction on the labour court in all employment disputes including the recovery of employment loans. It is therefore recommended that the NIC should not shy away from labour disputes relating to employee loans or approach the subject in an uncertain manner.

Certainty in this area of labour law will be to the advantage of both employers and employees. All parties to labour relations should be availed the advantage of resolution of their grievances by means of a specialized court such as the NIC. In the face of uncertainty on the appropriate court with jurisdiction over employee loans, employers may be discouraged from continuing with the time-honoured practice of assisting their employees, in moments of financial hardships, with loans. This will be to the disadvantage of employees, which the NIC is favourably disposed to protecting in labour relations.[65]

The NIC should adopt a progressive attitude towards disputes relating to employee loans, withstanding the scanty enabling legal provisions. The Court should take advantage of its expanded jurisdiction under section 254C (2) of the 1999 Constitution (as amended)[66] to apply, in these cases, global best practice, as is the case in other jurisdictions such as South Africa and Kenya. This is the best way to protect both the interest of the employers and employees involved in the disputes.

References:

[1] Section 154C (1) Constitution of the Federal Republic of Nigeria (as amended by the Third Alteration Act 2010)

[2] “Trade disputes” is defined by section 48(1) of the Trade Disputes Act, Chapter T8 Laws of the Federation of Nigeria (LFN) 2004 as “any dispute between employers and workers or between workers and workers, which is connected with the employment or non-employment, or the terms of employment and physical conditions of work of any person.” See also section 54 of the National Industrial Court Act 2006, which defines “trade dispute” as “any dispute between employers and employees, including disputes between their respective organizations and federations which is connected with (a) the employment or non-employment of any person, (b) terms of employment and physical conditions of work of any person, © the conclusion or variation of a collective agreement, and (d) an alleged dispute”. In the foregoing strict sense of the term therefore, a dispute between an individual worker and an employer may not qualify as a trade dispute. See the cases of Tidex (Nig) Ltd v. Maskew (1998) 3 NWLR (Pt. 542) and Udoh & Ors v. Orthopedic Hospitals management Board & Anor (1993) 7 SCNJ 436 at 443. It is to be noted that until recently the approach of the courts to the term trade dispute was nearly always with a view to determining the appropriate court that had jurisdiction over the dispute. Such approach may now seem academic in view of the present position of the law that the National Industrial Court has exclusive jurisdiction on virtually all labour related and employment disputes. See section 254C (1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended by the Third Alteration Act 2010).

[3] (1958) IR 29 at 37.

[4] See Bryan Garner, ed., Black’s Law Dictionary, 7th edn, St. Paul, MINN: West Group, (1999) pp. 855–857, which defines the term jurisdiction in its various aspects. In the case of Ifeajuna v. Ifeajuna (2000) 9 NWLR (Pt. 671) 114 at 115 it was held that ‘Jurisdiction is a hard matter of law, which can only be determined in the light of the enabling statute and the claim before the court. Since jurisdiction of a court is donated by statute (and for this purpose, the Constitution is included) a court of law cannot add to or subtract from the provisions of a statute…’ See also the cases of Ugba v. Suswan (2014) 14 NWLR (Pt. 1427) Pp. 311–312, and AG. Lagos State v. AG Fed. (2014) 9 NWLR (Pt. 1412) 254.

[5] Fagbemi Sunday “Jurisdiction of the National Industrial Court of Nigeria: A Critical Analysis” in Journal of Law, Policy and Globalization Vol.28, 2014 pages 53–59 at page 53. It is to be noted that under Nigeria’s legal system the question of jurisdiction can be raised at any time during the trial of a case, including for the first time on appeal. See Madukolu & Ors. v. Nkemdilim (1962) 2 NSCC 374. The decision has been applied in a long line of cases on the question of jurisdiction, such as the case of CGG Nig. Ltd v. Aminu (2015) 3 MJSC (Pt.1) 1 at 16–17; Ukwu v. Bunge (1997) 8 NWLR (Pt. 518) 527; Leric Nig. Ltd. v. U.B.N. Plc. (2000) 12 SC (Pt. 11) 133; A-G, Lagos State v. Dosunmu (1989) 3 NWLR (Pt.111) 1 at 552; Nnonye v. Anyichi (2005) 2 NWLR (Pt. 910) pg. 623. The law is therefore settled that if a court is bereft of jurisdiction to hear and determine a matter before it, any steps taken in the matter is a nullity and of no legal effect. See Kotoye v. Saraki (2001) 48 WRN 1; Rhoda v. FRN(2015) 1–2 MJSC 1 at 21–22.

[6] Ibid, page 84.

[7] Section 19(1) of the Trade Dispute Decree №7 of 1976 (now known as Trade Disputes Act CAP. T8 Laws of the Federation of Nigeria, 2004.

[8]Section 254C (3) of the 1999 Constitution (as amended). The challenges of jurisdictional conflict which the Court suffered prior to the enactment of the 2010 Constitutional Amendment Act are well documented and bear no repeating. See Attorney General, Oyo State v. National Labour Congress (2003) 8 NWLR (Pt. 821) 1 at 35.Similarly, in the case of National Union of Electricity Employees & 1 Other v. Bureau of Public Enterprises(2010)7 NWLR (Pt.1194)538,the Supreme Court held that the NIC is not a superior court of record as it is not listed in section 6(5) of the 1999 Constitution.

[9]Section 6 (5) © © of the 1999 Constitution (as amended).

[10] B. Atilola and M. Dugeri, “Powers and Jurisdiction of the National Industrial Court of Nigeria under the Constitution of the Federal Republic of Nigeria (Third Alteration) Act 2010: A Case for Its Retention” (2012) 6 Labour Law Review, pp. 1–37 at 8

[11] Ibid, pp. 12–18

[12](2017) LPELR p. 425 Per Aka’ahs JSC at p. 495

[13] This is also the definition that is adopted by the Lagos State Internal Revenue Service by its public notice of 27th September, 2017, which states that ‘employee loans are loans given by an employer to an employee for specific reasons with the expectation that such loan will be repaid in full to the employer through a pre-agreed deduction from the employee’s net salary, with or without any interest.’

[14] DailyPay “Employee Loans and How they Work” available at <https://business.dailypay.com/blog/employee-loans> accessed 21 December 2019.

[15] Some statistics place Nigeria as the poverty capital of the world. See https://qz.com/africa/1313380/nigerias-has-the-highest-rate-of-extreme-poverty-globally/> accessed 05 December 2019.

[16] These are major life milestones, or essential costs, that impact many workers in Nigeria throughout different stages of their careers. In most cases, these loans are structured in a way that the principal and interest are periodically deducted from the employees’ salaries or entitlements until the loan is fully repaid. In other words, the loan facility is secured by the salaries of the employee and is largely premised on the employee remaining in the employment of the employer. Where the employer forces the employee to resign, thereby eliminating the means by which the employee was expected to repay the loan, can the employee still be obligated to repay the loan? See Perchstone & Graeys “Is a Terminated/Dismissed Worker Obliged to Repay Staff Loans?” available athttp://www.mondaq.com/Nigeria/x/760262/employment+litigation+tribunals/Is+A+TerminatedDismissed+Worker+Obliged+To+Repay+Staff+Loans.> accessed 21 December 2019.

[17] Like mortgage loans.

[18]It is interesting to note that Moneylenders laws, beyond regulating the activities of licensed money lenders, also regulate the activities of persons other than moneylenders who lend money on interest. This is evidenced by the provision of section 11(1) of the Lagos State Moneylenders Law which recognises the fact that “any person other than a moneylender” who gives out loan on interest is liable to comply with the law as to the requirement relating to interest chargeable. In the case of Ojikutu v. Agbonmagbe Bank Ltd (1966) NCLR 246, it was held that the expression “persons other than moneylenders” are human persons (not institutions such as banks) who do not make money lending their regular business, but who may be involved in a single or occasional transaction of money lending. In other words, these are not money lenders, but where they give out loans which are often regarded as friendly loans, and charge interest, they must be bound by the provisions of the Law relating to interest charging. See and compare the Nigerian cases of Eboni Finance and Securities Ltd. v. Wole-Ojo Technical Services Ltd. & 2 Ors (1996) 7 N.W.L.R. (Pt. 461), p.1 464 and Chidoka v First City Finance Co. Ltd (2013) All FWLR (Pt. 659)1024; and South African case of Vesagie No & Others v. Erwee No & Another (734/2013) [2014] ZASCA 121 (19 September 2014)

[19]Suit No. NICN/LA/342/2014, the judgment of which was delivered on 01 December2016.

[20] Suit No. NICN/LA/184/2016, the judgment of which was delivered on 09 October 2018

[21] UBN Plc v. Integrated Timber & Plywood produces (2000) LPELR-10629 (CA), FBN v NTIA (2014) LPELR-24104.

[22] Paragraphs 11 & 12 of the Statement of Facts states as follows: (11) One of the conditions for all the loans is that the loan is immediately repayable should the defendant leave the service of the claimant for any reason other than normal retirement and interest may be charged at customer rate the date the defendant leaves the service. (12) The customer interest rate as at January 15, 2008, the date the defendant resigned his appointment from the bank was 21% per annum.

[23] The Court however, agreed that the Defendant’s counter-claim was a labour dispute that it could hear and determine, even though that aspect of the case was caught by the doctrine of res judicata.

[24] In the similar case of Mrs. Dena Rose Ajayi v. Ecobank Nigeria Limited & 2 Ors (Suit No: NICN/LA/655 /2012) the Court held that it was competent to adjudicate over the subject-matter loan because it was granted to the Claimant in line with her contract of employment and thus formed part of her contract of employment with the Defendant.

[25] Suit No. NIC/LA/213/2011, the judgment of which was delivered on 06 December 2017.

[26] The Court held that the decision in Lewis v. UBA Plc (which was being relied on in the argument that it lacks jurisdiction over employee loans) is distinguishable in that it was not decided within the context of section 254C (1) of the 1999 Constitution (as amended). The Court further relied on the cases of First Bank of Nigeria Limited v. Mr Abiodun Oladipo Olatunji unreported Suit No. NICN/LA/57/2017, the ruling of which was delivered on 11 July 2017, where the NIC ruled that it has jurisdiction over the recovery of a loan advanced to an employee by an employer in the course of employment.

[27] In Mazin Eng. Ltd v. Tower Aluminium(1993) 5 NWLR (Pt. 295) 526 at 534 it was held that frustration does not occur where (a) the intervening circumstance is one which the law would not regard as so fundamental as to destroy the basis of the agreement; (b) the terms of the agreement show that the parties contemplated the possibility of such an intervening circumstance arising; and © one of the parties had deliberately brought about the supervening event by his own choice. The Court in this case applied the above criteria and held that the since the frustrating event in the instant case was contemplated and was the deliberate act of the Defendant, the doctrine of frustration will not apply.

[28] See Brossette Manufacturing (Nig.) Ltd v. M/S Ola Ilemobola Ltd (2007) 14 NWLR (Pt. 1053) 109 SC, which referring to Solanke v. Abed [1962] 1 All NLR 230; (1962) NRNLR 92 and Re London Celluloid Y.O (1888) 3 Ch. D 206, held that ‘the court will not allow any person or party or body to benefit from his own wrong’.

[29] (2016) 6 NWLR (Pt. 1508) 329

[30] Ibid, at 346–347.

[31] Supra

[32] The Court cited earlier cases in which the NIC did not decline jurisdiction to hear and determine claims for recovery of employee loans, but applied the principles on a case by case basis: (1) Mr Adebayo Gbolahan Adepoju v. Coscharis Group (Suit No. NICN/LA/409/2014) the Claimant argued that since his appointment was terminated by the Defendant (his employer) a car loan repayment agreement between them was breached and frustrated by the defendant. The Court rejected the Claimant’s arguments given that “the context of the facts of the case or prevailing law” did not support such arguments. (2) Mrs Kikelomo Kola-Fasanu v. Prestige Assurance Plc (Suit No. NICN/LA/25/2016 the Court applied Lewis v. UBA (Supra) and held that the employee was obliged to repay a ‘housing loan’ advanced to her by her employer because ‘she took undue advantage of her position in securing the housing loan from the defendant factoring the fact that the claimant as an interested party side tracked some of the procedures enjoined for an applicant of the said loan in terms of the applicable defendant’s policy.’ (3) Mr Dandson O. Obi v. Access Bank Plc (Suit No. NICN/LA/406/2013 the claimant did not object to the share allocation to him and the deductions made in that regard; as such, the Court held that the claimant was estopped from claiming that the repayment was tied to his employment with the defendant.

[33] The Court quoted Arturo Bronstein, International and Comparative Labour Law: Current Challenges, Palgrave Macmillan (2009), pp. 1–2

[34] The Court refused to be persuaded by a term of the agreement that ‘The Bank reserves the right to vary the terms and conditions of the loan at any time during its life span’; rather preferring to consider such a condition as reinforcing ‘the undue advantage of the defendant over the claimant’.

[35] The Court ordered forfeiture of both the principal and interest.

[36] See Kusfa v. U.B.C. Ltd. (1994) 4 SCNJ 1 311 where the Supreme Court held that it is wrong to award damages twice over. See also Texaco Nigeria Plc v. Alfred G. Adegbile Kehinde (2001) 6 NWLR (Pt. 708) 224 at 242.

[37] (1970) NSCG 95

[38] See also the case of Lagos City Council Caretaker Committee & Anor v. Benjamin O. Unachukwu & Anor (1978) 3 SC 137 and Tsokwa Motors (Nig.) Ltd v. United Bank for Africa Plc (2008) 1 SC 323, and Arisons Trading & Engineering v. The Military Governor of Ogun State & 2 Ors (2009) SC 5–6 (Pt. 1) 131

[39] Supra, at 346.

[40] In the American case of Barnhill v. Sanders (1981) 125 Cal.App.3d 1, a balloon payment on separation of employment to repay employee’s debt to employer is an unlawful deduction even where the employee authorized such payment in writing.

[41] Much like the situation in Nigeria, difficulties have been encountered in a number of cases in determining the precise lines of jurisdiction of the Labour Court.

[42] It is pertinent to note that the Labour Court also exercises jurisdiction over the Commission for Conciliation, Mediation and Arbitration (the CCMA), bargaining councils and government officials such as the Labour Relations Registrar. However, the bulk of the jurisdiction of the Labour Court stems from the LRA. These take almost exclusively three forms: applications, reviews and referrals. The review of CCMA conciliation and arbitration proceedings is an important part of the supervisory role which the Labour Court plays in ensuring that the CCMA applies the laws of natural justice and applies the law objectively.

[43] See section 166 of the Labour Relations Act 1995.

[44] SOC (J1862/17) [2017] ZALCJHB 318. A fuller analysis of this case is to be found at <https://www.lexology.com/library/detail.aspx?g=5b275b9c-3619-4f7c-bab9-b9dedb52a93a>accessed 27 December 2019

[45] No 75 of 1997 (BCEA)

[46] The provisions of section 34 of the BCEA and cases such as Sekhute & Others v Ekurhuleni Housing Company (Supra) provide clarity on resolution of disputes regarding the recovery of employee loans; a situation that is lacking in Nigeria.

[47] As amended in 2010

[48] Much like the NIC, the Employment and Labour Relations Court is a superior court of record with the status of the High Court that exercises jurisdiction throughout Kenya.

[49]Section 12 (1) (a) of the Industrial Court Act №20 of 2011

[50] Employment Act, Cap 226, No11 of 2007

[51] See section 19(1) (h). Other cases that an employer may lawfully deduct from an employee wages include deductions for an agreed contribution to a provident fund, superannuation scheme or any other approved scheme; for any damage to or loss of the employer’s property in custody of the employee, occasioned by wilful default of the employee; deduction that is authorised by legislation in force at the time, a collective agreement, wage determination, a court order; or an arbitration award; etc See section 19 (1) (a) –(i).

[52] Section 19 (3) of the Employment Act 2007

[53] Section 1(a) Labour Act, Cap L1 Laws of the Federation of Nigeria 2004.

[54] Sections 7(1), 7(6) and 15 of the Labour Act on wage regulation.

[55] Suit No. NICN/LA/293/2013

[56] (1996) 10 NWLR (Pt. 476) 65

[57] Such as with prior written agreement or where the law permits.

[58] However, in the case of United Bank for Africa Plc v. Gogo C. Anyanwu (Appeal No. CA/L/168/2011) the Court of Appeal held that the practice of withholding the salary of a bank employee to offset the recovery of non-performing credit facilities advanced to customers of the bank is an unfair labour practice, unwholesome and offensive to the Constitution and contrary to public policy and good conscience.

[59]Sections 1(1) and 3(1) National Minimum Wage Act, Cap. N61 Laws of the Federation of Nigeria 2004 (as amended by the National Minimum Wage (Amendment Act) Act of 2011.

[60] Section 1 (2)

[61] Section 2 of the Act exempts the following establishments from the obligation to pay the national minimum wage: (a) An establishment in which less than fifty (50) workers are employed; (b) An establishment in which workers are employed on a part time basis (part time work is defined by the Act as ‘work of a duration of less than forty (40) hours per week’; © An establishment at which workers are paid on commission or on piece rate basis; (d) Workers in seasonal employment; (e) Any person employed in a vessel or aircraft to which the laws regulating merchant shipping or civil aviation apply; and (f) Other category of workers that the Labour Minister may exempt from time to time.

[62] (2014) 47 NLLR (Pt. 154) 601. See also SK Babalola v. Lagos Inland Revenue Service & Ors (Suit No. NICN/LA/410/2017)

[63] Suit No: NICN/LA/508/2013, the judgement of which was delivered on 18 March 2016.

[64] (2014) 51 NLLR (Pt. 172) 696

[65] In Mr. Kurt Severinsen v. Emerging Markets Telecommunication Services Limited (2012) 27 NLLR (Pt. 78) 374 the NIC held that its jurisdiction is invoked not for the enforcement of mere contractual rights, but for preventing labour practices regarded as unfair; as such, the conditions of service, where ambiguous, and based on the contra proferentem rule, must be interpreted in favour of the employee. See also Agomo Agomo, Nigerian Employment and Labour Relations: Law and Practice, Concept Publications Limited, Lagos (2011), pp. 52–54.

[66] Section 254C (2) of the 1999 Constitution confers jurisdiction on the NIC for matters relating to the application of any international conventions, treaties or protocols relating to labour and employment that have been ratified by Nigeria, notwithstanding anything to the contrary in the Constitution. The NIC has often relied on its jurisdiction in this regard to apply the provisions of treaties, conventions and protocols relating to labour and employment, including the International Labour Organisation (ILO) jurisprudence that has developed from such instruments. See Aero Contractors Co. of Nigeria Limited v. National Association of Aircrafts Pilots and Engineers (NAAPE) & Ors (2014) 42 NLLR (Pt. 133) 664. See also B. Atilola and A. Morocco-Clarke“National Industrial Court and Jurisdiction over International Labour Treaties under the Third Alteration Act’ (2011) 5 Labour Law Review, pp. 1–6; and K. I. Amadi, Reflections on the Status of the National Industrial Court under The Constitution (Third Alteration) Act 2010, Vol. 5, №1 Labour Law Review, (2011) 1 –12.