LABOUR LAWS AND TERMINATION OF THE EMPLOYMENT CONTRACT

UNIT 2 SECTION
INDUSTRIAL 6
RELATIONS Unit 2, section 6: Termination of the employment contract

The passing of the new Labour Act, 2003 (Act 651), has brought relief to
the employee; the right to terminate employment does not depend on the
whims of the employer any more. In the past, though employers maintained
that their workers or human resources were their most valuable assets, they
held unto the very principles which allowed them to throw out an employee
at any whim and caprice, and at any time during the employment
relationship without provocation, reason, explanation or legitimate ground.
The Issue of termination of employment is as important as employment
itself. Consequently, the Labour Act has made provisions for the
termination of employment as in the following section.

At the end of this section, students should be able to:

 identify the grounds for the termination of an employment contract;
 differentiate between fair and unfair termination in Ghana.
 discuss the appropriate remedies for unfair termination;
 Advice people who are affected by unfair termination.
 recognise the difference between voluntary, involuntary and mutual
termination of employment.

Termination of employment
Termination of employment occurs when an employee’s contract of
employment with an employer ends or is cancelled. It is an action taken by
the employer to end the employer/employee relationship. Employers have a
basic right to terminate the employment of an employee, but along with that
right come his responsibilities. Consequently, employers are required to
comply with the provisions in the Labour Act, and particularly those related
to the termination of the employment contract.

Grounds for termination of employment

A contract of employment may be terminated;
 By mutual agreement between the employer and the worker;
 By the worker on grounds of ill-treatment or sexual harassment;
 By the employer on the death of the worker before the expiration of the
period of employment.
 By the employer if the worker is found on mental examination to be
unfit for employment;
 By the employer because of the inability of the worker to carry out his
or her work due to
− Sickness or accident; or
− The incompetence of the worker; or
− Proven misconduct of the worker.

Notice of termination of employment

A notice is the amount of time between which an employee is informed in
writing that he or she will be terminated and the date upon which the

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termination will take effect. An employee should never be completely

surprised by a termination. Even where an employee seriously misconducts
himself, the employer has no right to terminate the employee within a period
that is less than the minimum notice requirement as provided for in the
Labour Act. In other words the employer must handle the termination
process in a more professional way that preserves the dignity of the
employee. Nevertheless, a contract of employment determinable at will by
either party may be terminated at the close of any day without notice in
Ghana. All other contracts of employment may be terminated at anytime by
either party giving to the other party in writing;
 In the case of a contract of three years or more, one month’s notice or
one month’s pay in lieu of notice;
 In the case of a contract of less than three years, two weeks’ notice or
two weeks’ pay in lieu of notice; or
 In the case of contract from week to week, seven days’ notice.

The day on which the noticed is given shall be included in the period of the
notice.

Fair and unfair termination of employment

A contract of employment may be terminated lawfully by the employer or
the employee. In this case, there is said to be fair termination. Lawful
termination is important because it can be crucial in determining, for
instance, the right of an employee to sue the company or access unfair
dismissal laws. An employment contract may also be terminated unlawfully
by either party. In this other case, there is said to be an unfair termination of
employment. What constitute fair and unfair termination of employment in
Ghana have been provided for in Sections 62 and 63 of the Labour Act,
2003 (Act 651) as in the section below.

 Fair termination of employment

A termination of a worker’s employment is fair if the contract of
employment is terminated by the employer on any of the following grounds:
− That the worker is incompetent or lacks the qualification in relation
to the work for which the worker is employed;
− The proven misconduct of the worker;
− Redundancy under section 65;
− Due to legal restriction imposed on the worker prohibiting the
worker from performing the work for which he or she is employed.
 Unfair termination of employment
The employment of a worker shall not be unfairly terminated by the
worker’s employer. A worker’s employment is terminated unfairly if the
only reason for the termination is:
− That the worker has joined, intends to join or has ceased to be a
member of a trade union or intends to take part in the activities of a
trade union.

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− That the worker seeks office as, or is acting or has acted in the
capacity of, a workers’ representative.
− That the worker has filed a complaint or participated in proceedings
against the employer involving alleged violation of this Act or any
other enactment;
− The worker’s gender, race, colour, ethnicity, origin, religion, creed,
social, political or economic status;
− In the case of a woman worker, due to the pregnancy of the worker
or the absence of the worker from work during maternity leave;
− In the case of a worker with a disability, due to the worker’s
disability;
− That the worker is temporarily ill or injured and this is certified by a
recognized medical practitioner;
− That the worker does not possess the current level of qualification
required in relation to the work for which the worker was employed
which is different from the level of qualification required at the
commencement of his or her employment; or
− That the worker refused or indicated an intention to refuse to do any
work normally done by a worker who at the time was taking part in a
lawful strike unless the work is necessary to prevent actual danger to
life, personal safety or health or the maintenance of plant and
equipment.

On the other hand, a worker’s employment is deemed to be unfairly

terminated if with or without notice to the employer, the worker terminates
the contract of employment:
 Because of ill-treatment of the worker by the employer, having regard to
the circumstances of the case; or
 Because the employer has failed to take action on repeated complaints of
sexual harassment of the worker at the work place.

A termination may be unfair if the employer fails to prove that;

 The reason for the termination is fair; or
 The termination was made in accordance with a fair procedure or this
Act.

Remuneration on termination of employment

When a contract of employment is terminated in accordance with the
grounds for termination of employment as provided for under section 15 of
the Labour Act, the employer shall pay to the worker:
 Any remuneration earned by the worker before the termination;
 Any deferred pay due to the worker before the termination;
 Any compensation due to the worker in respect of sickness or accident;
and
 In the case of foreign contract, the expenses and necessaries for the
journey and repatriation expenses in respect of the worker and

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accompanying members of his or her family in addition to any or all of

the payments specified in paragraphs (a), (b) and (c).

The employer shall pay to the worker not later than the date of expiration of
the notice all remuneration due to the worker as at that date. Where no
notice is required, the payment of all remuneration due shall be made not
later than the next working day after the termination. It is worthy to note
however, that either party to a contract of employment in Ghana may
terminate the contract without notice if that party pays to the other party a
sum equal to the amount of remuneration which would have accrued to the
worker during the period of the notice.

Remedies for unfair termination

A worker who claims that his employment contract has been unfairly
terminated by the employer may present a complaint to the Commission. If
upon investigation the Commission finds that the termination of the
employment is unfair, it may:
 Order the employer to re-instate the worker from the date of the
termination of employment;
 Order the employer to re-employ the worker, either in the work for
which the worker was employed before the termination or in other
reasonably suitable work on the same terms and conditions enjoyed by
the worker before the termination; or
 Order the employer to pay compensation to the worker.

Voluntary, involuntary and mutual termination of employment

 Voluntary termination of employment
In a voluntary termination, an employee resigns from his or her current job.
Resignations occur for a variety of reasons that include: a new job, a
spouse's acceptance of a new job in a distant location, returning to school,
and retirement.
 Involuntary termination of employment
In an involuntary termination, an employer fires the employee or removes
the employee from his or her job. An involuntary termination is usually the
result of an employer's dissatisfaction with an employee or an economic
downturn. Reasons for involuntary termination range from poor
performance through attendance problems to violent behavior.
 Mutual termination of employment
Occasionally, an employer and employee may recognize that they are not a
good fit for whatever reason. They mutually may agree to part ways in a
manner that makes neither party culpable for the termination. This approach
to termination is called agreeing on an exit strategy. This is otherwise called
mutual termination of employment.

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Redundancy
To be declared redundant means that the services of the worker are no
longer needed since they are in excess of the organisational requirements.
Redundancy is usually contemplated when ‘there is the introduction of
major changes in production, programme, organisation, structure or
technology of an undertaking’. A worker in this situation will have his
employment terminated, especially in cases where the organisation is unable
to place the worker in an alternative position. The procedures set out by the

Labour Act for the employer are as follows:

 Provide in writing to the chief labour officer and the trade union
concerned, not later than three months prior to the contemplated
changes, all relevant information and reasons for the termination, the
number and categories of workers likely to be affected and the period
within which any termination is to be carried out.
 Consult the trade union concerned on measures to be taken to mitigate
any adverse effects of the termination.

Where the close down, arrangement or amalgamation cause severance of the

legal relationship between the worker and the employer or a diminution of
the worker’s terms and conditions, the worker is entitled to be paid prior to
the redundancy compensation referred to as ‘redundancy pay’. The amount
of redundancy pay and the terms and conditions of the payment are subject
to negotiation between the employer and the worker or their representatives.
Any dispute on the redundancy and the terms of payment shall be referred to
the commission whose decision subject to any other law is final. The
following are exempted from redundancy:

The amount of redundancy pay and the terms and conditions of the payment
are subject to negotiation between the employer and the worker or their
representatives. Any dispute on the redundancy and the terms of payment
shall be referred to the Commission whose decision subject to any other law
is final.

The following are exempted from redundancy:

 Workers engaged under a contract of employment for specified period of
time or specified work;
 Worker serving a period of probation or qualifying period of
employment of reasonable duration determined in advance; and
 Workers engaged on a casual basis.

Employers have a basic right to terminate the employment of an employee,

but along with that right comes some responsibilities. In order to be fair,
compassionate, professional and legally correct, the employers must use
proper employment termination and dismissal procedures by following the
rules about dismissal, notice and final pay. Employees who wish to

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terminate their contract must also do so in accordance with legal

requirements as maintained in the Labour Act. Given the specific
circumstance, each party may consult a lawyer for advice on the best way to
proceed with the termination.

Self-assessment questions
(1) Differentiate between fair and unfair termination of employment. An
employer may terminate the employment contract because of the
inability of the worker to carry out his or her work. On what grounds
will this be considered fair in Ghana?
(2) Discuss the conditions underlying remuneration on termination of
employment in Ghana
(3) What is mutual termination of employment? List the remedies for an
unfair termination of the employment contract in Ghana.

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