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Labour – Employment - Severance award
– Redundantcy – Whether or not
the Appellant and his colleagues
had at any time lost their
employment with the Defendant,
Ghana Cocoa Board or Produce
Buying Company Limited - Whether
or not the defendants are liable
to pay to the plaintiff and each
of the persons on whose behalf
the plaintiff brings this action
severance pay for loss of
employment. -Whether or not
costs awarded against the
Plaintiffs is unjustified in the
circumstances – Whether or not
Appellants did n suffer any
diminution in the terms and
conditions of employment.
HEADNOTES
The High Court held that Plaintiff/
Respondent/ Appellant, who sued
on behalf of 683 persons, herein
referred to as Appellants, lost
their employment with the
Produce Buying Company Ltd and
for that matter entitled to
severance award under the Labour
Act. The Court of Appeal sitting
at Kumasi in its judgment under
appeal had reversed the decision
of the trial High Court, Kumasi
which held that Appellants were
entitled to severance award. The
Appellants are therefore urging
this Court to set aside the
decision of the Court of Appeal
HELD
STATUTES REFERRED TO IN JUDGMENT
Labour Act, 1967
(NLCD 157)
Labour (Amendment)
Act, 1969 (NLCD 342),
Labour Act, 2003, Act
651
Companies Act, 1963
(Act 179)
CASES REFERRED TO IN JUDGMENT
Salomon v Salomon
[1897] AC 22,
Morkor v. Kuma(East
Coast Fisheries Case) {1998-99}
SCGLR 620.
BOOKS REFERRED TO IN JUDGMENT
DELIVERING THE LEADING JUDGMENT
MARFUL-SAU, JSC: -
COUNSEL
DICK ANYADI FOR THE
PLAINTIFF/RESPONDENT/APPELLANT
WITH HIM JOHN BREFO AND EDWARD
BREKU BOADU.
GEORGE LAING FOR
DEFENDANT/APPELLANT/RESPONDENT.
MARFUL-SAU, JSC:
-
In this appeal we are called
upon to determine whether the
Plaintiff/ Respondent/
Appellant, who sued on behalf of
683 persons, herein referred to
as Appellants, lost their
employment with the Produce
Buying Company Ltd and for that
matter entitled to severance
award under the Labour Act.
The Court of Appeal sitting at
Kumasi in its judgment under
appeal had reversed the decision
of the trial High Court, Kumasi
which held that Appellants were
entitled to severance award. The
Appellants are therefore urging
this Court to set aside the
decision of the Court of Appeal
on six grounds formulated in
their Notice of Appeal as
follows:-
“i. The judgment is
against the weight of evidence
on record.
ii. The Court of Appeal fell into error
when they held that relief (i)
endorsed on the Writ of Summons
was without merit because the
Plaintiff/ Respondent/Appellant
and his colleagues had not at
any time lost their employment
with the Defendant/
Appellant/Respondent, Ghana
Cocoa Board or Produce Buying
Company Limited.
iii. The Court of Appeal erred in faulting
the Plaintiffs/Respondents/
Appellants for failing to call
evidence to prove the negative
that is to say, their denial
that they did not receive any
entitlement, end of service
benefits or redundancy payments
apart from their Provident Fund
Contributions.
iv. The Court of Appeal erred in pronouncing
that the Plaintiff/
Respondent/Appellant and his
colleagues’ action was not
brought bona fide.
v. The Court of Appeal erred in reversing
the judgment of the trial High
Court and upholding the appeal
of the
Defendant/Appellant/Respondent.
vi. The costs awarded against the
Plaintiffs/Respondents/Appellants
is unjustified in the
circumstances.’’
Before proceeding to address the
grounds of appeal, we deem it
necessary to state the facts of
the case albeit briefly. One
Martin Atuahene for himself and
on behalf of 683 former
employees of the Produce Buying
Company Ltd took out a Writ of
Summons in the High Court,
Kumasi claiming three reliefs
namely:-
‘’i. a declaration that the defendants are
liable to pay to the plaintiff
and each of the persons on whose
behalf the plaintiff brings this
action severance pay for loss of
employment.
ii. an order that the defendant shall duly
calculate and pay to the
plaintiff and each other person
for whom the plaintiff has sued
the amount due to them by way of
severance pay.
iii. interest on the sums
so found.’’
The case of Martin Atuahene who
testified for himself and all
the other 683 persons is that he
was employed by the Defendant/
Appellant/ Respondent, herein
referred to as Respondent, in
1974 as a driver. In 1983,
Martin Atuahene and the 683
persons were transferred to the
Produce Buying Agency (PBA), a
Department of the Respondent
Company. From the record, in or
before 1999, the Respondent
converted PBA into a Limited
Liability Company but remained a
subsidiary of the Respondent.
The new subsidiary was the
Produce Buying Company Limited
(PBC Ltd). Martin Atuahene and
his colleagues continued to work
with PBC Ltd, as a subsidiary of
the Respondent, until the year
2000, when the Respondent wholly
privatised PBC Ltd, by
off-loading its shares and got
it listed on the Stock Exchange.
Martin Atuahene and his
colleagues continued to work
with the PBC Ltd until he
retired as a Chief Driver in May
2005.
The claim of Martin Atuahene
and the 683 persons is that when
the PBC Ltd was wholly
privatised to a third party and
was listed on the Stock
Exchange, they severed all
connection with the Respondent
and therefore entitled to
severance award. They further
alleged that their condition of
service was adversely affected
by the privatisation of PBC Ltd.
In particular they pleaded that
they were no longer entitled to
apply for Scholarship and
Bursary for their children; they
were charged fees for attending
Respondent’s clinics and that
they had lesser remuneration
than their colleagues in the
service of Respondent.
The Respondent denied Appellants
claims and contended that by the
privatisation exercise about
2,255 of the staff were made
redundant. These workers were
laid off and their entitlements
paid, in accordance with, an
Agreement reached by the Joint
Negotiating Committee between
the PBC Ltd and the Respondent
on one side and the Industrial
and Commercial Workers Union
(ICU) and the General
Agricultural Workers Union
(GAWU), on the other hand.
According to the Respondent
those workers who were retained,
per the Agreement, were to enjoy
continuous service from the
first date of employment with
PBC or the Respondent. From the
evidence on record the
Appellants fell into the
category of staff retained and
therefore were to enjoy
continuous service as agreed.
The Respondent posited that in
order to adequately compensate
the affected staff of PBC Ltd
the salaries of all staff of the
Respondent and PBC Ltd were
re-aligned and their annual
increments updated in June and
October 1999 to be at par.
According to the Respondent in
view of the salary re-alignment
the retained staff in PBC Ltd
did not experience any loss in
their conditions of service, as
compared to workers of the
Respondent.
From the pleadings of the
Appellants and the evidence of
Martin Atuahene, it is clear
that their claim for severance
award is based on the fact that
PBC Ltd was wholly privatised to
a third party. In other words,
Appellants are claiming that
since the Respondent had
off-loaded its entire shares in
PBC Ltd to third parties, they
had severed industrial
relationship with the Respondent
and therefore entitled to
severance award.
Now, having established the
basis of Appellants claim, we
will proceed to address the
grounds of this appeal. We
observed that the grounds
formulated against the Judgment
of the Court of Appeal stated
above are interrelated, since
the import of all the grounds is
that the Court of Appeal, was
wrong in holding that the
Appellants did not lose their
employment and were not entitled
to severance award. The real
issue therefore in this Appeal
is whether or not the Appellants
by the privatisation of PBC Ltd
on the Stock Exchange lost their
employment and thus entitled to
severance pay. We therefore
intend to address ground (i),
which is that the judgment of
the Court of Appeal was against
the weight of evidence on
record.
The import of this ground of
appeal is trite. By that ground
this Court is enabled to review
the entire record of appeal to
ascertain whether or not the
decision of the first appellate
court, is justified in law or
not.
The law that regulated the
relationship between the
Appellants and their employer at
the time Appellants alleged that
their employment was severed in
the year 2000, was the Labour
Act, 1967 (NLCD 157) as
amended by the Labour
(Amendment) Act, 1969 (NLCD
342), section 34 (1) and (2)
of which provided as follows:-
‘’ 34 (1) When an organization
is closed down or when an
organization undergoes an
arrangement or amalgamation and
the closedown, arrangement or
amalgamation causes a severance
of the legal relationship of the
employer and employee between
any person and the organization
as it existed immediately before
the close down, arrangement or
amalgamation, then, if as a
result of and in addition to
such severance that person
becomes unemployed or suffers
any diminution in his terms and
conditions of employment, he
shall be entitled to be paid by
the organization in whose
employment he was immediately
prior to the close down,
arrangement or amalgamation,
compensation, in this Act
referred to as Severance Pay.
(2) In determining whether a
person has suffered any
diminution in his terms and
conditions of employment under
sub section (1) of this section,
account shall be taken of the
past services and accumulated
benefits (if any) of such person
in or in respect of his
employment with the organization
before it was closed down or
before the occurrence of the
arrangement or amalgamation.’’
It is important to state that in
2003 the Labour (Amendment) Act,
1969 (NLCD 324) was repealed by
the Labour Act, 2003, Act 651.
The new Labour Act, Act 651 had
in its section 65, provisions
very similar to section 34 of
the repealed Labour (Amendment)
Act, 1969, (NLCD 324). The said
section 65(2) to (5)
of the Labour Act, 2003, Act
651, which is the current
law regulating severance of
labour relations provides as
follows:-
‘’2. Without prejudice to
subsection (1), where an
undertaking is closed down or
undergoes an arrangement or
amalgamation and the close down,
arrangement or amalgamation
causes:
a. severance of the legal
relationship of worker and
employer as it existed
immediately before the close
down, arrangement or
amalgamation; and
b. as a result of and in
addition to the severance that
worker becomes unemployed or
suffers any diminution in the
terms and conditions of employment,
the worker is entitled to be
paid by the undertaking at which
that worker was immediately
employed prior to the close
down, arrangement or
amalgamation, compensation, in
this section referred to as
redundancy pay.
3. In determining whether
a worker has suffered any
diminution in his or terms and
conditions of employment,
account shall be taken of the
past services and accumulated
benefits, if any, of the worker
in respect of the employment
with the undertaking before the
changes were carried out.
4. The amount of
redundancy pay and the terms and
conditions of payment are
matters which are subject to
negotiation between the employer
or a representative of the
employer on the one hand and the
worker or the trade union
concerned on the other.
5. Any dispute that
concerns the redundancy pay and
the terms and conditions of
payment may be referred to the
Commission by the aggrieved
party for settlement, and the
decision of the Commission shall
subject to any other law be
final’’.
We note however that the law
applicable to this appeal was
the Labour (Amendment) Act, 1969
(NLCD 324) whose section 34 has
been quoted above. We are of the
opinion that section 34 of the
Labour (Amendment) Act, 1969;
(NLCD 324) is clear and must be
given its ordinary meaning.
Our understanding of the said
provision is that for a worker
to be entitled to severance or
redundancy pay it is not only
enough that, the legal
relationship between the worker
and the employer as existed be
severed, as a result of a closed
down, arrangement or
amalgamation of the entity; but
the worker must also have become
unemployed or suffer diminution
in his conditions of service, as
a result of the severance. The
close down, arrangement or
amalgamation of the entity must
trigger the two conditions
before severance could be paid.
So what happened in this case?
As discussed above the
Appellants were originally
employed by the Cocobod and
transferred to the Produce
Buying Agency (PBA), a unit
under Cocobod. Later in the
course of their employment, the
Respondent transformed PBA by
incorporating the unit into a
Limited Liability Company and
called it Produce Buying Company
Limited, but remained a
subsidiary of the Respondent and
as such wholly owned by the
Respondent. As at that point,
Respondent ceased to be the
employer of the Appellants. By
virtue of the incorporation, PBC
Ltd became the new employer of
the Appellants and not Cocobod.
The reason simply is that even
though at the time, Cocobod was
the sole shareholder of PBC Ltd,
by virtue of the principle in
Salomon v Salomon [1897] AC 22,
PBC Ltd had acquired a separate
legal personality from its
shareholders and could sue and
be sued. It follows that if any
of the Appellants had a cause of
action against the employer at
that point, the action will be
against PBC Ltd and not Cocobod,
even though it was the sole
shareholder.
The law is clear that
shareholders of a Limited
Liability Company are not the
employers of the staff; rather
the employer is the company as
distinct from the shareholders.
In Morkor v. Kuma(East Coast
Fisheries Case) {1998-99} SCGLR
620. At page 632 of the report,
Sophia Akuffo, C.J (then JSC)
delivered as follows:-
‘’Save as otherwise restricted by
its regulations, a company,
after its registration, has all
the powers of a natural person
of full capacity to pursue its
authorised business. In this
capacity, a company is a
corporate being, which, within
the bounds of the Companies Act,
1963 (Act 179) and the
regulations of the company, may
do everything that a natural
person might do. In its own
name, it can sue and be sued and
it can owe and be owed legal
liabilities. A company is, thus,
a legal entity with a capacity
separate, independent and
distinct from the persons
constituting it or employed by
it.’’
From the record, at the time the
Respondent decided to off- load
its shares in PBC Ltd and wholly
privatised PBC Ltd on the Stock
Exchange, Appellants were
employees of PBC Ltd and not
Cocobod. The Appellants remained
employees of PBC Ltd even after
the privatisation of PBC Ltd and
its share off-loaded to third
parties on the Stock Exchange.
Now, applying the criteria set
by section 34 (1) of the
Labour(Amendment) Act, (NLCD
342) to the evidence on record
as discussed above the questions
below may be posed and the
answers, in our view will help
resolve the fundamental issue in
this appeal:-
Q. Who was the employer of Appellants
before the whole privatisation
of PBC Ltd, in year 2000?
A. From the evidence on record the employer
was PBC Ltd, but owned by
Cocobod.
Q. Who was the employer of the Appellants
after the whole privatisation of
PBC Ltd, with the off-loading of
Cocobod shares to third parties?
A. The answer again is that the employer
was PBC Ltd, but now owned by
third parties.
From the above answers
therefore, there was no
severance between the Appellants
and their employer as required
by section 34(1) of the Labour
(Amendment) Act, (NLCD 342).
Indeed, the employer that
existed before the arrangement
was PBC Ltd. and the employer
after the arrangement was still
PBC Ltd. As we have stated
earlier, shareholders of Limited
Liability Companies are not
employers of the staff or
workers of the company. We are
of the opinion that there was no
termination or severance of the
employer/ worker relationship
between the Appellants and their
employer PBC Ltd. The Appellants
from the evidence became
employees of PBC Ltd from 1999,
when the company was
incorporated. Accordingly we
hold that the Court of Appeal
was right when it found that the
Appellants employments were
never severed by the arrangement
in year 2000.
In this Appeal, even if there
was a severance of a Worker/
Employer relationship, the
Appellants would still not be
entitled to any severance award
due to the circumstances under
which the arrangement was
effected. It is on record that
before the privatisation was
effected, an Agreement was
reached between the respective
Unions of the workers on one
side and Cocobod / PBC Ltd on
the other hand. By clause 6 of
the said Agreement which was
tendered at the trial as Exhibit
1, all the workers who were
retained as a result of the
privatisation arrangement, were
to enjoy continuous service as
at the date they were employed
by Cocobod. The said Clause 6 of
Exhibit 1, the Agreement
provided thus:-
‘’Cocobod confirmed that the
number of years by PBC employees
being carried on to the new
company shall have all future
entitlements calculated on the
basis of their original date of
employment with PBC/Cocobod i.e.
service shall be deemed to be
continuous for all retained
employees from date of
appointment with PBC/Cocobod.’’
Appellants were among the
employees who were retained and
so were covered by the above
clause. Martin Atuahene who
testified for the Appellants in
his evidence stated at page 86
and 87 as follows:-
‘’Q. And do you know the month in which the
separation between Produce
Buying Co. Limited and Cocoa
Board took place?
A. Yes, I do. My Lord the separation came in
the year 2000 that is January
2000.
Q. When did you retire from the Produce Buying
Co. Limited, in which year and
month?
A. My Lord, I retired
from the service in the year
May, 2005.(sic)
Q. So for how long did you continue working
for Produce Buying Co. (PBC)
Limited after the separation?
A. My Lord, I worked for
PBC after separation for five
years, five months.
From the above evidence, it is
clear that the Appellants did
not lose their employment as
they enjoyed the provision under
Clause 6 of the Agreement
executed in furtherance of the
privatisation of PBC Ltd. By
this evidence Appellants could
still not have benefited from
section 34 (1) of the Labour
(Amendment) Act, (NLCD 342) as
they were never unemployed as a
result of the arrangement.
Again, we find that the Court of
Appeal was right in so holding
that the Appellants never lost
their employment as they were
fully covered by clause 6 of the
Agreement.
The next issue we like to
address is whether the Court of
Appeal was wrong in its decision
that the Appellants did not
suffer any diminution in the
terms and conditions of
employment. Appellants pleaded
the diminution they allegedly
suffered at paragraph 9 of the
Statement of Claim as follows:-
‘’(i)
The plaintiff and his fellow
workers, as employees of Produce
Buying Company Limited, are no
longer entitled to apply for and
obtain Cocobod scholarship and
bursary for their wards; a right
they enjoyed as employees of the
Defendant company.
(ii)
The plaintiff and his colleagues
are now charged fees for
attendance at the Defendants’
clinics.
(iii)
The plaintiff and his fellow
workers, as employees of Produce
Buying Company Limited enjoy
lesser remuneration than their
counterparts in the service of
the Defendants.’’
We agree with the Court of
Appeal that Appellants failed to
prove that they suffered
diminution in their conditions
of service. As demonstrated
above, diminution of service was
a requirement for a worker to be
entitled to severance award
under section 34 (1) of the
Labour (Amendment) Act, (NLCD
342). The undisputed evidence on
record is that the award of
scholarship and bursary was a
privilege and not a right to be
enjoyed by all employees of
Cocobod. Martin Atuahene himself
admitted under cross examination
that Respondent’s scholarship
scheme is for brilliant children
of workers. If a worker had no
brilliant child, he does not
benefit from the scholarship. In
other words Respondent’s
scholarship scheme was not
automatic for workers’ children.
On the issue of the medical
fees, Martin Atuahene admitted
that their medical bills were
paid by Produce Buying Company
Ltd.
The fact as pleaded by the
Appellants that they were
charged fees for attendance at
the Respondent’s clinics was
thus false.
On the point that Appellants had
less remuneration, the Court of
Appeal found from the evidence
that before the privatisation in
2000, the salaries of all the
workers of PBC Ltd were re-
aligned to be at par with staff
of Respondent. Martin Atuahene
and PWI Francis Akpoh admitted
the re-alignment but testified
that after 2000, their salaries
lagged behind as compared to the
salaries of workers of the
Respondent. This however, was
attributed to the bargaining
power of the unions and their
respective management. After the
privatisation, PBC Ltd was under
a different Board or Management
from the Respondent and as such,
it was absurd for the Appellants
to still compare their
conditions of service to workers
of Respondent and complain that
they were taking lesser
remuneration. We understand the
Appellants to be suggesting that
whenever Respondent’s workers
received any salary increment,
then such increment should be
extended to workers of PBC Ltd.
The argument is flawed simply
because the two entities
operated differently and are
under different Management.
In conclusion, we are of the
opinion that there is enough
evidence on record to support
the decision of the Court of
Appeal. The first appellate
court was right in setting aside
the judgment of the trial High
Court, which entered Judgment
for the Appellants herein. For
the reasons stated in this
judgment, we hold that the
Appeal to this Court has no
basis in law and same is
accordingly dismissed.
S. K. MARFUL-SAU
(JUSTICE OF THE SUPREME COURT)
AKOTO-BAMFO (MRS.), JSC:-
I agree with the
conclusion and reasoning of my
brother Marful-Sau, JSC.
AKOTO-BAMFO (MRS.)
(JUSTICE OF THE SUPREME COURT)
BENIN, JSC:-
I agree with the
conclusion and reasoning of my
brother Marful-Sau, JSC.
A. A. BENIN
(JUSTICE OF THE SUPREME COURT)
APPAU, JSC:-
I agree with the
conclusion and reasoning of my
brother Marful-Sau, JSC.
Y. APPAU
(JUSTICE OF THE SUPREME COURT)
KOTEY, JSC:-
I agree with the
conclusion and reasoning of my
brother Marful-Sau, JSC.
PROF.
N. A. KOTEY
(JUSTICE OF THE SUPREME COURT)
COUNSEL
DICK ANYADI FOR THE
PLAINTIFF/RESPONDENT/APPELLANT
WITH HIM JOHN BREFO AND EDWARD
BREKU BOADU.
GEORGE LAING FOR
DEFENDANT/APPELLANT/RESPONDENT. |
