With the incessant rise in redundancy and downsizing and, ultimately, the loss of employment in the Nigerian oil and gas industry, regulators are taking steps to meet the need for indigenous skills and capacity. This is particularly the case for regulators responsible for the preservation of local workers. Thus, in a bid to preserve local workers in the Nigerian oil and gas industry, regulators have often waded into matters which would ordinarily be contractually regulated between an employer and an employee, thereby crossing the thin line bordering the realms of protectionism and unwarranted meddlesomeness and interfering with the long-established common law principle of the sanctity of employer-employee contractual relations. This has raised salient questions as to the legality of some of these regulations.
On 17 October 2019 the Department of Petroleum Resources (DPR) issued the Guidelines and Procedures for the Release of Staff in the Nigerian Oil and Gas Industry in order to establish procedures for obtaining the consent of the minister of petroleum resources before releasing Nigerian workers in the oil and gas industry. The guidelines were issued pursuant to Regulation 15A of the Petroleum (Drilling and Production) Regulations 1969 (as amended), which states as follows:
The holder of an oil mining lease, license or permit issued under the Petroleum Act 1969 or under regulations made thereunder or any other person registered to provide any services in relation thereto, shall not remove any worker from his employment except in accordance with guidelines that may be specified from time to time by the Minister.
This article examines the guidelines with regard to Nigeria's employment law regime.
The DPR had previously introduced similar guidelines entitled the "Release of Nigerian workers from Employment in the Petroleum Industry and Utilisation of Expatriate Quota" (Circular PR5061/B/V2/181 (the 1997 circular)) and the "Release of Staff in the Nigerian Oil and Gas Industry" (Guideline 1/2015). Similar to its successor, the 1997 circular mandated all oil producing, marketing and servicing companies to obtain the minister's consent before releasing any Nigerian worker from their employment. Unfortunately, oil and gas companies continuously breached the 1997 circular, most likely due to the lack of penalties for doing so. However, this was corrected by subsequent guidelines. The current guidelines provide for penalties, including:
- fines of up to $250,000; and
- the possible withdrawal or cancellation of an employer's lease, licence or permit.
Release of workers
The guidelines impose various conditions and prescribe the process for obtaining the minister's consent prior to the release of a worker in the oil and gas industry. The guidelines define a 'worker' as any Nigerian national who is employed by the holder of an oil prospecting licence, oil mining lease or any licence or permit issued under the Petroleum Act or regulations made thereunder. 'Release' is also defined in Paragraph 3.1 of the guidelines as the removal of a worker which permanently separates them from the employer through:
- release on medical grounds;
- death; and
- abandonment of duty post.
Pursuant to the guidelines, holders of oil mining leases, oil prospecting leases or any other licence or permit issued by the DPR or any person or company registered to provide any services thereto must apply in writing to the director of petroleum resources for the minister's consent to terminate the employment contract of a worker. The guidelines further state that the application must state:
- the manner in which the employment contract has been brought to an end;
- the reasons for the termination;
- the compensation due to the worker; and
- any proposed replacement for the worker.
The guidelines also state that the application must be accompanied by any documents relevant to the worker's employment, such as their conditions of service, which include:
- collective bargaining agreements;
- letters of employment;
- employee handbooks;
- corporate policies; and
- procedural guides.
A failure to provide such documents could result in the application being ineligible for the minister's consent. Among other obligations, employers must file returns containing the name and designation of all of their workers and the numbers of workers employed and released during the period ending on 31 March.
The individual circumstances of a case will determine whether the minister must be notified or grant their approval before a worker may be released. Paragraph 4.3 of the guidelines provides for instances where the minister must merely be notified of the release of workers. These include instances where the worker's release occurs by way of:
- voluntary retirement;
- death; or
- abandonment of duty post.
From the wording of Paragraph 4.3, the obligation to merely notify the minister will not cause any issues as the guidelines do not mandate employers to notify the minister before the workers are released.
Hence, employers may notify the minister after releasing workers in accordance with Paragraph 4.3 without penalty. However, issues arise where a worker is released by way of:
- involuntary retirement;
- redundancy; or
- medical grounds.
Where this is the case, the minister's approval must be sought. The DPR will also conduct an inquiry into the circumstances of the proposed staff release and decide whether to convey the minister's approval.
The guidelines have been met with widespread criticism, mainly with regard to the DPR's legal right to issue regulations which not only interfere with, but also call into question, the sanctity of employer-employee contractual relationships. It is also a longstanding principle that employment contracts are personal in nature and principle and subject to the contractual rules of common law. Hence – as the courts have held on several occasions – once parties have reduced the terms and conditions of service into writing, the conditions set out in that contract (especially when they relate to the termination of the contract) must be observed.
In Chukwuma v Shell Petroleum Development Company,(1) the Supreme Court stated that "it is within the right of the employer to terminate the services of the employee, but where conditions for such terminations are terms of the contract of service exist, such conditions must be satisfied".
The guidelines imply that the minister, through the DPR, is empowered to determine whether an employer can terminate an employment contract even though the terms and conditions for doing so as contained in the contract have been followed to the letter. Paragraphs 4.4. and 4.5 empower the DPR to carry out an inquiry into the reason for the termination of employment contracts, after which it may decide whether to convey the minister's approval. In issuing the guidelines, the DPR has either wilfully or ignorantly overlooked the plethora of judicial decisions which have established that in cases governed only by agreement of parties and not by statute, removal by way of termination of appointment or dismissal will be in the form agreed to by the parties.
Any other form would give rise only to a claim of wrongful termination. The courts in this instance cannot declare such dismissal null and void and neither can the DPR. Hence, the only remedy is a claim for damages. This is based on the notion that no servant can be imposed by the court on an unwilling master, even where the master's behaviour is wrong. Hence, employees whose contracts have been wrongfully terminated are entitled only to damages for wrongful termination, as well as all entitlements due thereto. In Babatunde Ajayi v Texaco Nigeria Ltd,(2) the Supreme Court stated that "in the ordinary case of master and servant, the master can terminate the contract with his servant at any time for good or bad reasons or for none".
The motive for exercising this right does not render a valid exercise of this right ineffective. Further, in Francis Adesegun Katto v Central Bank of Nigeria,(3) the Supreme Court held that in a master and servant relationship that is purely contractual, termination of employment by the employer cannot be unjust, unless it is in breach of contract. Even if the employer gave an untenable reason for termination, once it had complied with such reason, there would be no breach of contract. It is evident that the powers granted to the DPR to conduct an inquiry into a proposed staff release goes against established judicial decisions. The DPR's power to conduct an inquiry into the release of staff is arguably to ensure that indigenous staff are not released without a tenable reason.
The argument of not adducing a good or valid reason appears to no longer hold because, although previous court decisions have held that parties to an employment contract may end an employment relationship with or without citing any reason, the courts have taken a more equitable stance where employers must give a valid reason for the termination of an employee's contract. In Petroleum and Natural Gas Senior Staff Association of Nigeria v Schlumberger Anadrill Nigeria Limited,(4) the National Industrial Court held that irrespective of employers' right to hire and fire for any or no reason, it is no longer globally acceptable in industrial relations law and practice to terminate an employment relationship without adducing a valid reason for such a termination. Further, in Ebere Aloysius v Diamond Bank,(5) the National Industrial Court held that the practice of terminating an employment relationship without stating a reason is contrary to international best practices and labour standards.
Therefore, the law is clear on the nature of employer-employee relationships as it already sets out procedures for the dismissal of staff subject to agreements between parties and the principle of providing a valid reason for termination. Hence, the DPR lacks the capacity to issue guidelines which interfere with agreements to which they are not privy. The Supreme Court was also clear when it held in Shell Petroleum Development Company v Nwawka(6) that:
a directive from a stranger or third party to a contract may not be construed to derogate from such contractual relationship and that the DPR cannot issue any directive that could have the effect of affecting that contractual relationship.
Despite the plethora of judicial decisions on the subject matter, it is of great concern that the DPR still insists that employers governed by the guidelines seek the minister's consent before releasing an employee. This is arguably nothing but a flagrant disregard of the well-established position of the law and the courts.
The need to seek the minister's consent not only wastes time, but is also economically unreasonable for employers in the oil and gas industry. It is surprising that swarms of lawsuits challenging the validity of the guidelines have not been filed, although this may be down to affected parties' reluctance to be perceived as going against their primary regulator and risk intimidation by the DPR through the cancellation or withdrawal of permits, licences or leases. It is hoped that more voices will rise up to challenge these arbitrary guidelines which lack any form of merit.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.