PRO BONO LEGAL ADVICE – IN RESPECT TO WHETHER A PARTY (EMPLOYER OR EMPLOYEE) CAN BE EXCUSED FROM ANY LEGAL OBLIGATION DUE TO THE CURRENT PANDEMIC?

Dear Pro-bono Partner,

My name is Ada Emmanuel. I work as a Sales Clerk in a Food & Beverage company with various outlets in the State. Sometimes in March, following the stay-at-home directive by the Government as a result of the pandemic, one of our major outlets was shut down and the staff asked to go home. Shortly afterwards, my colleagues were informed by the Company through its management of their intention to get members of staff to sign an agreement to the effect of a forfeiture of their salaries for the period of the pandemic.

I was also told that those of us yet unaffected were to also to sign the same agreement as well, even though our outlet has not been shut down. This got me very uneasy and anxious. I am not very comfortable with this arrangement as I don’t think it is fair on us, having put in our best in the company. I want to know if the law permits the company to do this and what my fate is. Should I sign the agreement and forfeit my salaries or should I resign and then sue the company for damages?

Please I need your advice.

Thank you.

ANSWER

Dear Ada,

Thank you for reaching out to me on this issue. I can understand your concerns and fears over this unfortunate turn of events as a result of this terrible pandemic. From the scenario above, a few questions come to my mind to aid our resolving this issue, as follows:

  1. Can an Employer, in this case your employer, equitably resolve existing legal obligations which could not be met as a result of the pandemic?
  2. How does an Employer negotiate a fair settlement without incurring consequential damages?
  3. Should a party be excused from any legal or commercial obligation not performed due to the pandemic?
  4. What is your fate and that of your other colleagues in this regards?

Firstly, I can tell you that most commercial contracts contain protection, limitation or exclusion clauses such as Force Majeure, Frustration or Quantum Meruit Clauses. These clauses are designed and intended to protect parties from losses and damages which should ordinarily accrue where the strict performance of the contract becomes extremely difficult or impossible due to circumstances known as an ‘Act of God’.

Force Majeure means an unforeseeable circumstance that prevents someone from fulfilling a contract.

It is a common clause in Commercial Agreements that essentially free both parties from liability or obligation in an extraordinary event such as war, strike, riot, crime, plague, virus etc.

In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspends it for the duration of the force majeure. In any given situation, this clause is controlled by the law governing the contract rather than the general concepts of force majeure.

The law of the contract often specifies the choice of law clause in the contract and if not, is decided by a statute or principle of general law which apply to the contract.

Going by the submissions above and in law, the company can actually rely and even succeed on the force majeure principles as the current pandemic falls within the purview of an Act of God. Because “cost follows effect”, the temporary shutting down of some of the company’s outlets as a result is enough to constitute hardship and foist a most unfortunate situation on the company.

You can then agree with me that it will almost be humanly impracticable to pay staff salaries. So, the question then is: what next?

SUGGESTIONS

  • Firstly, I suggest you look at what your contract of employment has any force majeure clause and what it says.
  • Since both parties are affected, you can write them a letter requesting them to reconsider their stance. They can do this by agreeing and suggesting an adjustment and renegotiation of their contract with you by apportioning risks arising from the outbreak.
  • Parties can explore temporary negotiated settlements with regards to salaries, even if it is on a smaller scale. Even though the company can rely on the force majeure clause can to avoid liability, both parties interests must be taken into consideration to avoid each other losing out. There should also be a human face to it considering that you also will suffer some loss.
  • Suggest to them that an appeal can be made to the CBN to come up with economic palliatives and relief packages to save many businesses on the brink of collapse as a result of the pandemic. The CBN can take a cue from the Malaysian Central Bank which announced a 6months moratorium on all loans. Also the US Federal Reserve and Bank of England have slashed interest rates in a bid to strengthen their economies.

I am of the firm opinion that in spite of the impact of the deadly outbreak on economic transactions, the situation can still be salvaged with the effect that both parties can come out reasonably relieved.

I wish you the best of luck.


NDIDI NED-NWOGU (Pro Bono Partner)

08036723496

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