Image source hereBY: EDWIN MBEWE
Introduction
This article discusses the interpretation
and structural challenges of severance pay provisions under the Employment Code
Act (the "Code").[1]
The article exposes the inherent legislative flaw in section 54 of the Code and
proposes legislative reform.
Definition of severance pay
Section 3 of the Code defines severance
pay to mean the wages and benefits paid to an employee whose contract of
employment is terminated in accordance with section 54.
The said section 54 provides a closed and
exhaustive formulation on who is entitled to severance pay and under specific
circumstances. This has generated significant interpretation difficulties as
demonstrated by conflicting decisions of the Zambian Court of Appeal on the
entitlement to severance pay for permanent contract employees.[2]
The position now appears settled by the Court of Appeal's decision in Kingfred Phiri v Life Master Limited,[3]
which held that dismissed employees are
not entitled to severance pay. The case also disentitled permanent contract
employees from enjoying severance pay except in the case of medical discharge,
redundancy or death in service.
The inherent legislative flaw
in section 54
Section 54 is the principal severance pay provision. The section confines severance pay to expressly listed circumstances. These are: medical discharge, expiry or termination of fixed-duration contracts, redundancy, and death in service. The Court of Appeal has reaffirmed that severance pay is a statutory benefit whose scope is defined exclusively by section 54, and that courts may not import severance entitlements from other provisions of the Act. On this basis, the Court held that severance pay is generally unavailable to dismissed employees and to employees on permanent and pensionable contracts, except in cases of medical discharge, redundancy or death.[4]
The difficulty arises from section 29,
which mandates severance pay where an employee’s contract (of any type) is
terminated as a result of an employee's refusal to be transferred to another
employer. Unlike section 54, section 29 is contract type-neutral and bases
entitlement on the cause of termination (being the employee’s refusal to be
transferred to another employer) rather than on the form of the contract or the
reason for the transfer. Yet, this type of termination is not included among
the exhaustive severance pay qualifying circumstances set out in section 54,
the Code’s principal severance pay provision.
This creates a structural inconsistency
within the statute. If section 54 is treated as exhaustive, as the Court of
Appeal has held, then the section 29 severance pay entitlement which is
contract type-neutral cannot be enforced in the context of section 54 unless
the section 29 termination can be deemed as a termination of a short-term
contract under section 54 (1)(b)-(c) or a redundancy under section 54 (1)(d) of
the Code.
The problem is that if the subject
contract under section 29 was a permanent one, the employee would not enjoy the
benefits of section 54 (1)(b)-(c) since the Court of Appeal has held those
provisions inapplicable to a permanent contract.[5] The
section 29 termination may also only qualify as a redundancy if the employer
ceases or intends to cease its business; reduces or expects to reduce the need
for employees to perform particular work at the place of engagement; or the
transfer amounts to a unilateral and adverse alteration of an employee’s
conditions of service without consent.
The Kingfred,[6]
judgment resolves the severance pay applicability issue by emphasizing textual
clarity and certainty, but in doing so exposes section 29 as a provision that
prescribes severance pay without being properly integrated into the severance
pay framework of section 54 especially for permanent contract employees or
those declining a transfer to another employer not amounting to an adverse
alteration of their conditions of service. The result is a gap that generates
uncertainty for employees and employers alike and weakens the coherence of the
Code. There is need for legislative reform to ensure section 54 envisages the
severance pay arising from a section 29 type of termination.
Conclusion
The incoherence between sections 54 and 29
of the Code reflects a legislative flaw rather than a purely interpretation
problem. There is need for an amendment or a purposive reconciliation without
which the Code will continue to provide
unequal and contested protection in cases where termination arises
outside section 54’s narrow categories of severance pay.
[1]
Charter 268 of the Laws of Zambia.
[2] Stanbic Bank Zambia Limited v Natasha Patel [2024] ZMCA 190,
different outcome in Zubao Harry Juma v First Quantum Mining and
Operations Limited-Road Division [2024] ZMCA 232.
[3] [2024] ZMCA 335.
Overruling Juma v First Quantum Mining
and Operations Limited- Road Division
[2024] ZMCA 232.
[4]
Ibid.
[5]
Ibid.
[6]
Ibid.
