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The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

The primary legislation that regulates the employment of persons in Nigeria is the Labour Act. Other laws that are of importance are the Constitution of the Federal Republic of Nigeria (Promulgation) Act (Chapter C23, Laws of the Federation of Nigeria 2004, as amended) and the National Industrial Court of Nigeria Act 2006, which prescribes the jurisdiction of the National Industrial Court of Nigeria (NICN). In addition, the following also apply:

  • the Pension Reform Act 2014, which regulates the contributory pension scheme;
  • the Personal Income Tax Act (Chapter P8 LFN 2004, as amended by the Personal Income Tax (Amendment) Act 2011), which regulates the taxation of employees’ remuneration;
  • the Employees’ Compensation Act 2010, which regulates the payment of compensation to employees who suffer occupational diseases or sustain injuries arising from accidents in the workplace or during employment;
  • the Industrial Training Fund Act (Chapter I9 LFN 2004, as amended), which requires employers to contribute 1% of their annual payroll to the Industrial Training Fund created by the act;
  • the Immigration Act 2015, which regulates the employment of foreign nationals;
  • the National Health Insurance Scheme Act (Chapter N42 LFN 2004), which established the national health insurance scheme; and
  • the Trade Unions Act (Chapter T14 LFN 2004, as amended), which regulates the organisation of trade unions and their activities.

Who do these cover, including categories of worker?

Unlike the Labour Act, which is limited in its scope of application as it regulates only the employment of ‘workers’ – defined in the act as employees who perform manual labour or clerical work – the Constitution, the NICN Act, the Trade Unions Act and the Personal Income Tax Act apply to all categories of employee, with some exceptions. 

The Pension Reform Act 2014 applies to all employees in the public and private sectors other than judges, members of the armed forces and the intelligent and secret services, while the Employees’ Compensation Act applies to all employers and employees other than members of the armed forces (although it does apply to members of the armed forces employed in a civilian capacity).

The Industrial Training Fund Act applies to every employer in Nigeria which employs more than five persons, or which employs fewer than five persons but has an annual turnover of up to N50 million. The National Health Insurance Scheme Act applies to employers which have a minimum of 10 employees, while the Immigration Act 2015 applies to employers which employ foreign nationals and to expatriate employees.

Misclassification

Are there specific rules regarding employee/contractor classification?

Other than the Labour Act, no specific law sets out what factors would be considered in ascertaining whether an individual is an employee or an independent contractor. However, in SS Co Ltd v Afropak (Nig) Ltd ((2008) 18 NWLR 77 at p82) the Supreme Court prescribed the following criteria to provide guidance in making this determination:

  • the mode of payment;
  • ownership of the equipment, tools or instruments used in providing the services;
  • the ability to delegate duty;
  • the hours of work;
  • the place where the work is carried out; and
  • the provision of office accommodation and a secretary.

Contracts

Must an employment contract be in writing?

Yes. Section 7(1) of the Labour Act requires employers to provide a contract to employees within three months of commencement of the employment relationship.

Are any terms implied into employment contracts?

Yes, terms established by conduct such as the payment of bonuses can be implied into an employment contract. In addition, the statutory provisions set out in the Labour Act, if not expressly reflected in the contract between an employer and an employee, are implied into the employment contract.

Are mandatory arbitration/dispute resolution agreements enforceable?

No law requires parties to an employment contract to submit to mandatory arbitration. Parties, however, must arbitrate any dispute arising from the terms of an employment contract, if the contract contains a valid arbitration clause.

How can employers make changes to existing employment agreements?

This is subject to the nature of the proposed change but, generally, employers must obtain the consent of each individual employee in order to vary the terms of an employment contract.

Foreign workers

Is a distinction drawn between local and foreign workers?

Yes. An employer which wishes to employ foreign nationals must obtain a specific authorisation that approves the maximum number of expatriates the employer can engage, their job designations and the duration of such employment. Employers must show that there are no suitably qualified Nigerian employees for the positions to be occupied by expatriates and, where approval is granted, Nigerians are expected to be trained to fill the positions over time. These requirements do not apply to the employment of Nigerian nationals and nationals of member states of the Economic Community of West African States (ECOWAS).

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