With the incessant rise in redundancy, downsizing and ultimately, the loss of employment in the Nigerian oil and gas industry, it is quite understandable that regulators in the oil and gas industry would take active steps to ensure that the need for the development of indigenous skills and capacity required for the oil and gas industry are met. This is particularly the case, for regulators responsible for the preservation of local content especially in terms of human resources. In a bid to preserve local content in the Nigerian oil and gas industry, regulators have often waded into matters which should 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 principles of sanctity of employer-employee contractual relations. These have raised salient questions as to the legality of some of these regulations.
On October 17, 2019, the Department of Petroleum Resources (“DPR”) issued the Guidelines and Procedures for the Release of Staff in the Nigerian Oil and Gas Industry (the “Guidelines”) with the main objective of establishing procedures for obtaining the prior consent of the Minister of Petroleum Resources (the “Minister”) for the release of Nigerian workers in the oil and gas industry. The Guidelines were issued pursuant to the provisions of 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 seeks to consider the provisions of the Guidelines viz a viz, the current status of employment law regime in Nigeria.
It is important to note that the DPR had previously introduced similar guidelines titled the ‘Release of Nigerian workers from Employment in the Petroleum Industry and Utilization of Expatriate Quota’ in Circular No. PR5061/B/V.2/181 (the “1997 Circular”) and Guideline No. 1 2015, titled ‘the Release of Staff in the Nigerian Oil and Gas Industry’. The 1997 Circular, similar to its successor, mandated all oil producing, oil marketing and oil servicing companies to apply for the Minister’s consent before the release of any Nigerian worker from their employment. Unfortunately, the 1997 Circular suffered continuous breach with impunity by the oil and gas companies mainly due to the absence of any form of penalty for breach. This was however corrected by subsequent Guidelines. The current Guidelines makes provision for penalty including fines not exceeding US$ 250,000.00 (Two Hundred and Fifty Thousand United States Dollars), together with a possible withdrawal or cancellation of the employer’s lease, licence or permit.
The Guidelines impose various conditions and prescribe requirements and processes for obtaining the Minister’s consent prior to the release of a worker in the oil and gas industry. The Guidelines defines “worker” as any Nigerian national who is employed by the holder of an oil prospecting licence, oil mining lease, or any licence or a permit issued under the Petroleum Act or under regulations made thereunder”. “Release” is also defined in paragraph 3.1 of the Guidelines as the removal of a worker that permanently separates the said worker from the employer in any of the following ways: Dismissal, retirement, termination, redundancy, release on medical grounds, resignation, death and abandonment of duty post.
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 are mandated by the Guidelines to apply to the Director of Petroleum Resources in writing for the consent of the Minister in order to terminate the employment contract of any worker. The Guidelines further state that the application shall state the manner in which the employment contract has been brought to an end, the reasons, the compensation due to the worker and any proposed replacement for the worker.
It also states that the application shall further be accompanied by any document relevant to the worker’s employment, including the Employer’s conditions of service which includes collective bargaining agreements, letters of employment, employee handbooks, corporate policy and procedure guides etc; failure of which such application would be ineligible for the Minister’s consent. Amongst other obligations, employers are also required to file returns containing the name and designation of all its workers as well as numbers of workers employed and released during the period ending 31st March.
There are two instances where the Minister is either to be notified or his approval sought before a worker may be released. Paragraph 4.3 of the Guidelines provide for instances where the Minister has to merely be notified of the release of workers. These include instances where the worker’s release occurs by way of voluntary retirement, resignation, death or abandonment of duty post. From the wording of Paragraph 4.3, the obligation to merely notify the Minister does not cause any difficulty as the Guidelines do not mandate employers to notify the Minister before the workers are released neither is it capable of interfering with the release of workers.
Hence, employers may notify the Minister after the release of workers under the category provided for in Paragraph 4.3 without penalty. However, a sticky situation arises where a worker is released by involuntary retirement, dismissal, termination, redundancy or on medical grounds. Where this is the case, the approval of the Minister must be sought. The DPR shall also conduct an inquiry into the circumstances of the proposed staff release and make a decision on whether to convey the Minister’s approval or otherwise.
The Guidelines have been met with widespread criticism, mainly bordering on questions as to the legality of the DPR to issue regulations which not only interfere with, but ridicule the sanctity of employer- employee contractual relationships. It is also a long-standing principle that employment contracts are personal in nature and also in principle, subject to the contractual rules of common law hence, once parties have reduced the terms and conditions of service into writing, the conditions set out in that contract especially when it related to the termination of the contract, shall be observed as the courts have held on several occasions.
Position of the Law
In Chukwuma v. Shell Petroleum Development Company, the Supreme court in its decision 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 portray the idea that the Minister, through the DPR, is empowered to determine whether or not an employer can terminate the employment contract of its employee even though the terms and conditions for doing so as contained in the employment contract have been followed to the letter. Paragraphs 4.4. and 4.5 empowers the DPR to carry out an inquiry into the reason for the termination of employment contract after which they may decide to convey the Minister’s approval or not. In issuing this 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 to a claim of wrongful termination only. The courts in this instance cannot declare such dismissal null and void 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, the employee whose contract has been wrongfully terminated is only entitled to damages for wrongful termination as well as all entitlements due to him. In Babatunde Ajayi v Texaco Nigeria Ltd. & Ors, the Supreme Court per Obaseki JSC stated thus; “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. Also, In Francis Adesegun Katto v Central Bank of Nigeria, the Supreme Court held that in a purely master and servant relationship which is purely contractual, termination of employment by the employer cannot be wrongful, unless it is in breach of contract, notwithstanding that employer gave a totally untenable reason for termination, once he had complied with the reason for the termination, there would be no breach of contract of employment. It is evident that the powers granted to the DPR to conduct an inquiry into the proposed staff release goes against well laid down judicial decisions. One may argue that the power of the DPR to conduct an inquiry into the release of a staff is to ensure that indigenous staff are not released without any 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 bring the employment relationship to an end citing any reason or not, courts have gone ahead to take a more equitable stance where employers are required to give a valid reason for the termination of the employee’s contract. In Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) v. Schlumberger Anadrill Nigeria Limited, the National Industrial Court held that irrespective of the employer’s right to hire and fire for any or no reason, it is no longer globally fashionable in industrial relations law and practice to terminate an employment relationship without adducing any valid reason for such a termination. Also, in Ebere Aloysius v Diamond Bank the National Industrial Court per Kola Olalere held that the practice of terminating employment without stating any reason is contrary to international best practices and labour standards.
The law is, therefore, crystal clear on the nature of employer-employee relations as it has already laid down procedures for the dismissal of staff subject to the agreement between parties and the principle of provision of a valid reason(s) for termination. Hence, the DPR, lacks the capacity to issue guidelines which interfere with agreements to which they are not privy to. The Supreme court was also very clear in its decision in Shell Petroleum Development Company v Nwawka & The Director of Petroleum Resources, when it held, “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 employees within the context of the Guidelines seek the consent of the Minister before releasing an employee. It can be said that this is nothing but a flagrant disregard of the well established position of law and the decision of the courts.
The need to seek the Minister’s consent is not only time wasting but also economically unreasonable for employers in the oil and gas industry. It is surprising that swarms of lawsuits challenging the validity of the Guidelines are yet to start pouring in perhaps this may not be far from the reluctance of affected parties to be perceived as going against their primary regulator and risk intimidation by the DPR through cancellation or withdrawal of permits, licences or leases. It is hoped that more voices would rise up to challenge this arbitrary Guidelines lacking in any form of merit whatsoever.