Redundancy Under Ghanaian Labour Law: A Practical Overview

Introduction

Business restructuring, technological advancement, mergers, and economic pressures frequently cause significant changes in business operations. One common outcome of such changes is the termination of employment of workers, not due to their misconduct or poor performance, but because the workers' roles are no longer required. This form of termination, known as "redundancy", is expressly recognised under Ghanaian labour law as a lawful ground for terminating employment, provided that the employer complies strictly with the statutory procedure.

For employees, a lawful redundancy may come with substantial financial compensation from their employers. For employers, however, their decisions leading up to the redundancy could determine whether or not they will face liability for unfair termination. This article provides a practical overview of redundancy under Ghanaian law, the procedure for conducting a lawful redundancy exercise, the negotiation of redundancy pay, and the appropriate forum for resolving redundancy-related disputes.

Meaning of Redundancy under Ghanaian Law

Redundancy in Ghana is governed primarily by section 65 of the Labour Act, 2003 (Act 651). A redundancy occurs where the introduction of major changes in production, programme, organisation, structure, or technology results in the termination of employment of workers. Redundancy may also arise where an undertaking is closed down or where there is an arrangement or amalgamation that severs the legal relationship between the employer and employee, causing the employee to become unemployed or to suffer a diminution in terms and conditions of employment.

Redundancy is therefore not the consequence of the employee's actions. It is driven by operational or structural changes within the business that cause the end of an employer-employee relationship. In Kobi and Others v. Ghana Manganese Co. Ltd. [2007–2008] 2 SCGLR 771 at 789-790, the Supreme Court explained that redundancy arises where major changes in a company's mode of production, programmes or activities would likely result in excess labour and a reduction in the workforce.

Under section 62 of the Labour Act, 2003 (Act 651), redundancy is expressly recognised as one of the lawful grounds for termination of employment. In effect, it is a form of fair termination of employment.

Procedure for a Lawful Redundancy Exercise

The Labour Act, 2003 (Act 651) imposes mandatory conditions that must be complied with before a redundancy can lawfully take effect:

1. Prior Written Notice: An employer must, not less than three (3) months before the contemplated redundancy, give written notice to:
   
   1. the Chief Labour Officer, and
   2. the trade union concerned.
   The notice must disclose the reasons for any termination, the number and categories of workers likely to be affected, and the period within which the terminations are expected to occur.
2. Consultation: The employer must consult with the affected trade union or, where workers are not unionised, the workers themselves. The purpose of consultation is to explore measures to avert or minimise terminations, and ways to mitigate the adverse effects of redundancy, including finding alternative employment for the affected workers.
3. Negotiation of Redundancy Pay: "Redundancy pay" is the monetary compensation a worker receives from the employer when the worker's employment has been terminated as a result of redundancy. Where redundancy results in unemployment or a reduction or diminution in an employee's terms and conditions of employment, the employee becomes entitled to redundancy pay. Under section 65(4) of the Labour Act, 2003 (Act 651), the amount and terms of redundancy pay must be negotiated between the employer and the worker or their trade union.
   Ghanaian law does not prescribe a fixed formula for calculating redundancy pay. In practice, the quantum of redundancy pay is determined through negotiation, taking into account factors which include, but are not limited to the employee's length of service, the employee's salary, contractual terms, collective agreements, and the circumstances surrounding the redundancy.
   The importance of strict compliance with the statutory procedure was emphasised in Theodosia Antwi v. eProcess International (2016) JELR 107646 (HC), where the High Court held that the Defendant's redundancy exercise was unlawful because the statutory notice to the Chief Labour Officer was given less than three months before the termination of the Plaintiff's employment. The termination was accordingly declared wrongful and unfair.

Forum for Redundancy-Related Disputes

Employers and employees should therefore carefully assess the appropriate forum based on the nature of the dispute. Where parties fail to agree on redundancy pay, the parties may refer the matter to the National Labour Commission (NLC) for settlement. Under section 65(5) of the Labour Act, 2003 (Act 651), the NLC's mandate in redundancy matters is limited to disputes concerning the quantum and terms of payment of redundancy pay. The decision of the NLC is final, subject to any other law.

General redundancy-related disputes, which may involve but are not limited to the amount of redundancy pay and terms of payment, are brought before the High Court. In Republic v. High Court, Accra; Ex Parte Peter Sangber-Dery and ADB Bank Ltd. (Civil Motion No. JS/53/2017), the Supreme Court clarified that although the NLC has statutory jurisdiction over redundancy pay disputes, the High Court retains concurrent jurisdiction with the NLC, particularly in granting reliefs for unfair termination under section 63 of the Labour Act. Moreover, the High Court is clothed with jurisdiction in all civil and criminal matters by virtue of Article 140 of the Constitution of the Republic of Ghana (1992). Thus, the provisions in the Labour Act granting the NLC jurisdiction over certain matters do not oust the jurisdiction of the High Court in those matters.

Compromise Agreements and Redundancy

In some cases, employers and employees may enter into compromise or settlement agreements under which the employee accepts a redundancy package in full as the final settlement of all potential claims arising from the termination. Under general principles of contract law, an employee who voluntarily accepts such a package without protest may be deemed to have waived any further claims relating to the termination.

The Supreme Court's decision in Lt. Col. S. B. Ashun v. Accra Brewery Ltd. [Supreme Court] Civil Appeal No. J4/18/2007 illustrates this principle. The Court held that by accepting the redundancy package offered, the Plaintiff entered into a compromise agreement that extinguished any subsequent claims relating to the termination. Since his acceptance of the package was neither without prejudice nor under protest, the termination of his employment was by mutual agreement and therefore not unlawful or wrongful.

Exceptions: Workers Not Entitled to Redundancy Pay

Not all workers can be declared redundant. In effect, such workers are not entitled to redundancy pay. The provisions under Part VIII of the Labour Act, including those relating to redundancy, do not apply to the following categories of workers;

1. workers employed for a specified period or specified work,
2. workers on probation, and
3. casual workers.

Conclusion

Redundancy occupies a unique position in Ghanaian labour law as a legitimate form of fair termination that attracts strict procedural obligations. Employers who intend to undertake a redundancy exercise must comply fully with statutory notice, consultation, and negotiation requirements. Failure to do so may lead to significant liability for unfair termination. Employees, on the other hand, should understand their rights to consultation and compensation, as well as the legal implications of voluntarily accepting redundancy packages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.