BUSINESS ESSENTIALS Vol. 4. No 5
Dear Esteemed Member,
Several of our members have enquired about the Economic Partnership Agreement (EPA): what it is all about, its implications for the economy and businesses; and your Association’s position on the subject. We have, therefore, devoted ample space in this edition to reflect on the Economic Partnership Agreement (EPA). It is probably the most far-reaching and contentious trade agreement in recent history between developed and developing countries. The EPA negotiations were concluded in 2014 after ten years of talk. However, the fate of the agreement still hangs in the balance, with its ratification very uncertain, because of Nigeria’s opposition to the deal.
We also highlighted key points on managing redundancies in the wake of economic challenges facing businesses globally. Our regular Labour and Employment Law Review and Upcoming Training Programmes were not left out.
Have a pleasant reading.
In this Issue:
- Understanding the Economic Partnership Agreement (EPA) between the EU & West Africa: EU Perspectives
- Managing Redundancies
- Human Resource Nugget: Thoroughness, Attention to Details and Going the Extra Mile.
- Labour & Employment Law: Doctrine of Res Judicata (Muhammed Kawu Modi & 3 Ors vs. Abdullahi Yanko & 5 Ors) (2014) 45 N.L.L.R. Pt 146, P. 708 NIC
- Upcoming Training Programmes
Understanding the Economic Partnership Agreement (EPA) between the EU & West Africa: EU Perspectives
- Who? The EPA involves the EU and its 28 Member States, ECOWAS and its 15 Member States plus Mauritania, and WAEMU (UEMOA).
- Why? A legal reason: the prior system of unilateral preferential access to the EU was deemed incompatible with World Trade Organisation (WTO) rules because of its discriminatory nature (vis-à-vis the non-ACP developing countries). An economic reason: 50 years of various multilateral GATT rounds on tariff disarmament and of multiple preferential regimes have led to the phenomenon of ‘preference erosion’ and have not translated in any substantial development of trade flows from ACP countries to the EU.
- When? Negotiations between EU and West Africa took off in August 2004, but the most important milestone was the adoption by ECOWAS of a Common External Tariff (CET) on 25 October 2013; after 1 round only of post-CET discussions, negotiations were concluded in February 2014. All ECOWAS Heads of State decided to sign the EPA at the ECOWAS Summit of July 2014 in Ghana. All 28 EU Member States and 13 of the 16 West African states signed the EPA in December 2014. The Gambia, Mauritania and Nigeria have not yet signed. All countries must sign before ratification can begin. Only with ratification (not signature) will the EPA enter into force. If the deal is not ratified by October 2016, Ghana and Côte d’Ivoire will face losing their temporary free access to the EU.
- Main features of the EPA:
- The EPA establishes a partnership based on common objectives and asymmetrical obligations – in West Africa’s favour.
- All West African exports are granted immediate duty-free access to the EU
- In turn, West Africa will gradually reduce duties on 75% of EU imports over a long transition period of 20 years.
- The EPA is aligned with EU development assistance to support implementation – including at least €6.5 billion from 2015-2019.This support will continue beyond 2019, during the whole transition of 20 years (2035).
- There are many safeguards to support domestic production, infant industry and food security, and the EU will not use subsidies on agriculture exports to West Africa.
- Enhanced cooperation on issues such as standards, trade in services, agriculture, fisheries, investment, business environment, custom cooperation.
- Joint monitoring institutions including an EPA Council, an Implementation Committee, a Parliamentary Committee and a Civil Society Forum.
Benefit of EPA to Nigeria: EU Perspectives
- The deal for Nigeria. A September 2014 World Bank study showed overall positive effects on Nigerian consumers and producers, with very limited fiscal losses. The vast majority of manufacturing firms actually stand to gain from the deal. 95% of Nigerian firms will benefit from lower input prices under the EPA. Helping Nigerian firms’ competitiveness will far offset any negative impacts of the EPA.
- The EPA will remove all EU tariffs on Nigerian exports. Nigeria currently does not benefit from this, but neighbours such as Ghana and Côte d’Ivoire do. This will present opportunities for increasing exports from Nigeria to the EU, and with a wider range of products granted duty free EU access this should also encourage greater diversification of Nigerian exports.
- Generous rules of origin for sourcing inputs means Nigerian businesses can also more easily incorporate parts or process goods from other countries without their exports losing the benefit of duty free EU access. This will improve Nigeria’s ability to benefit from opportunities to export to EU and further increase capacity to participate in global value chains.
- Tariffs on importations from the EU will be progressively (5 to 20 years) eliminated on goods such as equipment and other industrial inputs (machinery, spare parts…). These products will contribute to the industrialisation of Nigeria and Nigerian firms’ competitiveness. Reduction in agro-machinery and equipment tariffs should help to support diversification and agriculture efficiency.
- The EPA protects Nigeria’s domestic industries and sensitive agricultural and other consumer products. Indeed, the EPA does not eliminate tariffs at all on sensitive West African agricultural products and consumer goods. There are also safeguards to protect domestic industry and food security. Furthermore, the EU has agreed not to subsidise any of its agricultural exports to West Africa under an EPA
- The EU is Africa’s main market for agricultural products and transformed goods, well beyond other partners like the US and China. Nigeria would increase its competitiveness in its main export market for agricultural products and transformed goods, favouring product diversification.
- Many African states like South Africa and Kenya have already declared their intention to sign EPAs rapidly at the end of 2015 as a way to help increase their trade with the EU.
- Progressive lifting of 75% tariff lines on imports from the EU over a period of 20 years will not damage Nigerian firms. West Africa has negotiated a progressive abolishment of tariff on 75% category of products imported from Europe over a period of 20 years, compared to approximately 85% for Southern Africa. West Africa decided internally which products to exclude from liberalisation, providing protection for sensitive products.
- Nigeria loss of tariff revenue (fiscal losses) under the EPA will be minimal and gradual; its impact can easily be mitigated. The World Bank predicts a loss of 0.8% of total fiscal revenue or 3.3% of non-oil revenue. The full reductions of West African tariffs will only be realized at the end of the 20 year period – so not until 2036. This long timeframe gives ample time to move to a tax system independent from tariffs, like all modern economies do.
- The EPA will not harm development. Even though West Africa’s sensitive products, including almost all agricultural products, are not subject to any reduction of tariffs, the EPA still provides a wide range of safeguards to protect West African products from EU competition. If there are threats to domestic production, for fledging / infant industries, or for food security, West Africa can: suspend tariff reductions; increase tariffs; or introduce tariff quotas.
- The EPA will contribute to regional integration. The EPA is a common ECOWAS position. Nigeria’s support is crucial to maintaining regional cohesion, which would be at risk without their signature to this EPA. Without Nigeria, the region’s efforts to build a customs union and a coherent market of more than 330 million people would be undermined. The EPA will introduce one single trade regime. Ghana and Côte d’Ivoire will appreciate Nigeria’s contribution to West African regional cohesion as they need the EPA to retain their EU access after October 2016.
- The EPA provides for enhanced cooperation in agriculture and fisheries. It will establish a high-level dialogue on agricultural policies creating transparency and improving coherence on agricultural matters within West Africa and with the EU. The EU also agreed not to subsidise exports of EU farm products to the region.
- The EPA commits the EU to cooperation with a view to limit technical barriers to trade. More widely, to help West African farmers meet the EU’s sanitary and phyto-sanitary standards, financial and technical support is provided. EU Food and Veterinary experts will be available to help solve export problems.
- The EPA contains provisions on customs and trade facilitation that aim to make customs procedures easier and more efficient and the EPA offers EU assistance to improve governance in West African customs administrations.
- Development Assistance background. On 17 March 2014, the EU Foreign Affairs Council confirmed EU support of at least €6.5 billion for the EPA Development Programme (PAPED) in West Africa during 2015-2019. From 2010-2014 the Council’s commitment of €6.5bn was exceeded and reached more than €8.2bn in funding. PAPED will play a crucial role in ensuring the EPA promotes trade and attracts investment to West African countries. It will provide funding for projects linked to trade, industry, energy and transport infrastructure in the region, as well as through support to civil society. This will contribute to development, sustainable growth and reducing poverty. The EU agreed to continue helping West Africa throughout the whole implementation process, so the EU support will continue beyond the expiration of the Cotonou Agreement in 2020.
- Definition: Redundancy is defined in Section (20) paragraph (3) of the Labour Act, as “an involuntary and permanent loss of employment caused by an excess of manpower”. Modern Business practice now recognises two types of Redundancy- Temporary and Permanent Redundancy.
- Temporary Redundancy: This takes the form of lay-off, which may arise as a result of shortage of production inputs, poor market for finished products or some unfavourable business constraints. This is a short term redundancy which can be ameliorated if the situation improves such that it is possible to recall the employees. Benefits are determined (some affecting fringe benefits).
- Permanent Redundancy: This occurs mainly by a desire for a total change stretching from adverse economic or business climate to technological changes.
With this distinction, redundancy may therefore be defined as “an involuntary (but either temporary or permanent) loss of employment caused by an excess of manpower”.
- It is not the wish of the organisation to declare redundancy.
- Each organisation recognises the importance of job security and will do all within its capability to ensure continuity of employment.
- Causes of redundancy are usually extraneous factors which are beyond the control of Management.
Economic and trading conditions fluctuate and thereby generate conditions of which the Organisation has little or no control; since it is impossible to guarantee job security at all times, most companies’ Employee Handbooks now contain a clause on redundancy
Causes of Redundancy
Whether temporary or permanent, redundancy may be caused by the following factors:
- The employer has ceased to carry on the business.
- The employer has ceased to carry on the business in the place where the employee was employed.
- The requirements of the business for employees to carry out work of a particular kind have ceased or diminished
- Government fiscal measures which restrict or prohibit importation – i.e
- Lack of essential raw materials
- Lack of spare parts
- Inability to obtain confirmed letter of credit with which to import essential materials within approved period
- Absence of opportunities for business transaction
- Unavailability of foreign exchange to process importation of raw materials
- Reorganisation or rationalization
- Technological changes e.g automation and computerization of some functions
Redundancy as the Last Resort
The declaration of redundancy must be applied as the last resort when all other alternative measures have failed. The following alternatives have been suggested:
- Advance planning of personnel requirements
- Possibility of alternative employment either by transfer, retaining or redeployment
- Laying off of temporary staff.
- Embargo on new Appointments
- Cost control measures, i.e
- Cut in overtime or complete abolition of overtime
- Cut in staff welfare services and sports
- Reduction of number of shifts
- Compulsory leave system
These measures may be imposed simply to ‘buy-time’ especially when redundancy becomes inevitable. Though some of the measures are difficult to enforce, they have been applied to prepare the minds of the employees towards redundancy.
Labour Act, Section (20), paragraph (1) and (2) provide as follows:-
- In the event of redundancy-
- The employer shall inform the trade Union or Workers Representative concerned of the reasons for and the extent of the anticipated redundancy;
- The principle of “last in, first out” shall be adopted in the discharge of the particular category of workers affected, subject to all factors of relative merit, including skill, ability and reliability; and
- The employer shall use his best endeavours to negotiate redundancy payments to any discharged workers who are not protected by regulations made under subsection (2) of this section.
- The Minister may make regulations providing, generally or in particular cases, for the compulsory payment of redundancy allowances on the termination of a worker’s employment because of his redundancy.
This Section of the Labour Act imposes a duty on the employers to :-
- Inform the Trade Unions or Workers’ Representative of the reasons and extent of the Redundancy
- Negotiate the redundancy benefits
- Empowers the Minister of Labour to make regulations for compulsory payments of redundancy benefits
- Adopts the principle of first in, last out subject to listed criteria.
Apart from the provisions of the Labour Act, Federal Government policy on redundancy also requires:
- That employer intending to lay off surplus labour should inform the Minister of Labour & Employment before embarking on such an exercise.
- This does not mean that they have to seek the prior approval of the Minister.
- The purpose is to enable the Minister to examine with the employers, any possible ways of preventing the occurrence.
It is also of paramount importance during the redundancy exercise for employers to respect the following provisions:
- Provisions of the various Procedural Agreements:
- Between the Employers Association and the respective Trade Unions signed at the NJIC (National Joint Industrial Council).
- Between the Employers Association and National Secretariat of the Senior Staff Association signed at the NJIC.
- Provisions of all the standing Collective Agreements on Redundancy
- Provisions of the Employees Handbook on Redundancy in respective Companies.
Faced with a real situation of redundancy the Human Resource Manager must confront the following issues:
- The number of employees to be affected
- The areas affected most or least in the company
- The effective date so as to plan time for informing Union and issue notices
- What structural re-organisation is envisaged
- Are the redundancy benefits already negotiated, what obtains in the Industry.
- Stage at which the Unions are informed
- How are the negotiations to be carried out if no Agreement exists
The precise order of events in carrying out a redundancy exercise will vary with local circumstances. The procedure outlines below will therefore be a guide:-
- Management to agree on the need to declare redundancy and determine its scope. This will involve structural re-organisation mapping out important jobs and those to be merged or scrapped with a view to ascertaining the number of employees to be affected.
- Complying with Labour Act and Procedural Agreement: Informing the following Institutions of the reasons and extent of the Redundancy:-
- The Federal Ministry of Labour & Employment
- The Trade Union, i.e National (and State Secretariats)
- The Association of Employers of your particular Trade Group
- The Senior Staff Association
- The In- House Union (Branch Union)
It is necessary for the sake of good industrial relations, morale and the avoidance of a feeling of insecurity to let the staff and Union know in good time about the impeding redundancy. It will be dangerous to allow wild rumours to circulate among employees.
- Discussion/Negotiation of Redundancy:
- If no previous redundancy agreement exists:
- Negotiate redundancy benefits separately with
- Branch Union first and later
- Senior Staff Association
- if there are standing Redundancy Agreements for both the Senior Staff Association and Branch Union, inform the two groups separately that the provisions of their respective Redundancy Agreements would be applied. This was the case with the Junior Staff within the Trade Group.
- Negotiate redundancy benefits separately with
- Remember that redundant employees are entitled to compensation:
- To compensate for loss of security
- Encourage employees to accept redundancy without damaging industrial relations practice in the organisation
- Ameliorate the psychological impact of the exercise
The negotiation may be prolonged and agreement may never be reached, prepare contingency plans which must be approved by your management.
Names of affected staff should not be disclosed to the Union.
- Agree on Effective Date of the Exercise with management
- Voluntary Redundancy will be considered for people of retirement age who will be encouraged to leave.
- Issuance of letters of Retrenchment
- Whether agreement is reached or not, proceed with issuance of letters to the affected employees on the agreed date. Maintain absolute confidentiality in handling the letters of redundancy.
- Make adequate security arrangements with the Police and Company’s security officers
- Publish the list of affected staff on the Notice Boards
- Payment of Redundancy Benefits
- Redundancy benefits should be calculated and paid within two weeks from the date of issuing the termination letters
- Deferment of payment is advised here because the names of affected staff may leak if benefits and indebtedness are calculated before letters are issued.
- Handling of Disputes that may arise: This will be in accordance with the laid down legal procedures.
Important Points to Note:
- The purpose of redundancy is to maintain the system and ensure survival of the organisation. In executing a redundancy exercise, the principle of last in, first out should be adopted subject to all factors of relative merit agreed by management such as skill, ability, reliability, loyalty, honesty, dedication, etc.
- The list of those to be declared redundant should be prepared by the respective Divisional Managers and defended before the Managing Director. Human Resource Managers should act as watchdogs to ensure that the records are correct, and not as the prime mover of redundancy.
- Redundancy benefits should be negotiated well ahead of time and not when it is already steering at the face. This makes the job of renegotiation relatively easy one. Management must be fair and firm. The announcement must clearly be made without delay by Management.
- Thoughts should be given to the following fundamentals issues:-
- What is the nature of the Redundancy Package? What is its cost implication? Will the redundancy benefits be mutually exclusive of the contractual termination benefits such as Gratuity?
- What post-redundancy resettlement plans should be evolved to assist discharged employees:
- Appointing them as distributors to the Company?
- Encouraging them to go into Agriculture?
- Assisting them in obtaining Bank loans for investment projects
- Appointing them as contractors/suppliers to the company?
- Providing counselling on job opportunities
- What re-employment policy should be evolved to recall discharged employees:
- Pay back all benefits and be re-absorbed?
- Treat all benefits received as loans and re-absorbed them?
- Treat each case as an entirely new contract with some considerations?
- Treat each case as an entirely new contract without any consideration?
- In all, the importance of an effective internal communication should not be over-emphasised. Management should continue to communicate the present status of Company business from time to time, to reduce the tension and uncertainty that characterise the redundancy exercises.
- Determine whether your advice to Management is consistent with community practice and/or has the backing of the Secretariat of your Employers Trade Group/ Association.
- Are you aware that all the information/advice you need can be obtained from the Secretariat of your Association.
08033435439, 08055170579, 08069187180
HUMAN RESOURCE NUGGET: Thoroughness, Attention to Details and Going the Extra Mile.
Ezra and Thomas joined a company together a few months after their graduation from university. After a few years of work, their Manager promoted Ezra to a position of Senior Sales Manager, but Thomas remained in his entry level Junior Sales Officer position. Thomas developed a sense of jealousy and disgruntlement, but continued working anyway. One day Thomas felt that he could not work with Ezra anymore. He wrote his resignation letter, but before he submitted it to the Manager, he complained that Management did not value hard working staff, but only promoted only the favoured!
The Manager knew that Ezra worked very hard for the years he had spent at the company; even harder than Thomas and therefore he deserved the promotion. So in order to help Thomas to realize this, the Manager gave Thomas a task. “Go and find out if anyone is selling water melons in town?” Thomas returned and said, “yes there is someone!” The Manager asked, “How much per kg?” Thomas drove back to town to ask and then returned to inform the Manager; “they are N13.50 per kg!”
The Manager told Thomas, “I will give Ezra the same task that I gave you. Please pay close attention to his response!” So the Manager said to Ezra, in the presence of Thomas; “Go and find out if anyone is selling water melons in town?”
Ezra went to find out and on his return he said:
“Manager, there is only one person selling water melons in the whole town. The cost is N49.00 each water melon and N32,50 for a half melon. He sells them at N13.50 per kg when sliced. He has in his stock 93 melons, each one weighing about 7kg. He has a farm and can supply us with melons for the next 4 months at a rate of 102 melons per day at N27.00 per melon; this includes delivery. The melons appear fresh and red with good quality, and they taste better than the ones we sold last year. He has his own slicing machine and is willing to slice for us free of charge.
We need to strike a deal with him before 10am tomorrow and we will be sure of beating last year’s profits in melons by N223 000.00. This will contribute positively to our overall performance as it will add a minimum of 3.78% to our current overall sales target. I have put this information down in writing and is available on spreadsheet. Please let me know if you need it as I can send it to you in fifteen minutes.”
Thomas was very impressed and realized the difference between himself and Ezra. He decided not to resign but to learn from Ezra.
This story helps us keep in mind the importance of going the extra mile in all our endeavours. You won’t be rewarded for doing what you’re meant to do; you only get a salary for that! You’re only rewarded for going the extra mile; performing beyond expectations. To be successful in life you must be observant, proactive and willing to do more, think more, a more holistic perspective and go beyond the call of duty.
LABOUR & EMPLOYMENT LAW: Doctrine of Res Judicata (Muhammed Kawu Modi & 3 Ors vs. Abdullahi Yanko & 5 Ors) (2014) 45 N.L.L.R. Pt 146, P. 708 NIC
By their Originating Summons, the claimants seek the following seek the following reliefs amongst others:
- A declaration that the Academic Staff Union of Secondary Schools, Bauchi State (ASUSS) formerly called Conference of Secondary School Tutors, Bauchi State is not a registered Trade Union under the Trade Union Laws of Nigeria
- A declaration that the Academic Staff Union of Secondary Schools (ASUSS) Bauchi State not being a registered Trade Union is not eligible to enjoy the privileges of recognition by Bauchi State Government and enjoyment of check off dues from its members and other benefits and privileges of registration and recognition.
- An injunction restraining the 1st and 2nd respondents from arrogating to themselves and the members of the Association ASUSS the status and privileges of a registered Trade Union and enjoyment of all benefit and privileges of a registered and recognised Trade Union
- An injunction restraining the 3rd to 6th respondents from according the 1st and 2nd respondents or ASUSS Bauchi State any form of recognition or privileges of a registered Trade Union
The respondents filed a motion on notice, seeking the following reliefs:
- An order striking out the suit for being incompetent in that it was caught up by the principle of estoppels per res judicata
- An order striking out the suit for being an abuse of judicial process
- Whether the claimants/respondents’ suit was caught by the principle of estoppels per res judicata and can be competently determined by the court
- Whether the suit was an abuse of judicial process
On requirements of doctrine of res judicata:-
The rule of res judicata requires that where a final decision is given by a court of competent jurisdiction, the parties cannot be heard to contradict that decision in any subsequent litigation between them in respect of the same subject matter. For the doctrine to be applicable in a suit, it must be shown that the parties, issues and subject matter in the previous suit are the same as those in the suit which the plea of res judicata is raised. See: Aro vs. Aro (2000)3 NWLR pt. 649, p443, AIB Ltd vs. Purification Tech. Ltd (2000) 10 NWLR pt. 676 p. 552
On what court will do to determine whether or not claims are same in two different suits:-
In determining whether or not the claims raised in two suits are the same, it is necessary for the court to refer to the nature of claims made by the parties in their pleadings. A cursory look at the subject matters if Suit No. BA/116/2000 and the instant suit clearly reveals that they are at sharp variance with each other. The issues and subject matter in the two cases are clearly different. Therefore, the principle of res judicata will not apply in this case. See: CBN vs. Ahmed (2001) 11 NWLR pt. 172 p 36
On when abuse of process of court is said to exist:-
An abuse of the process of the court is said to exist when a party improperly uses the uses of the judicial process to the irritation and annoyance of his opponents, such as instituting multiplicity of actions on the same subject matter against the same opponent on the same issue. In the instant case, having held that the issues and subject matter in Suit No. BA/116/2000 and the present suit are not the same, there was no abuse of court process. See: ACB Plc vs. Nwaigwe (2000) 1 NWLR pt. 640 p. 201
The Court dismissed the preliminary objection and held that the suit was competent and it was not an abuse of court process.
It is in the interest of society as a whole, that litigation must come to an end.
Learning & Development Experts Forum
Date: 9 February 2017
Duration: ½ Day
Venue: NECA Learning Centre
Course Fee: Members: Free Non- Members: N5,500
Management Skills Development for New Managers
Date: 16 – 17 March 2017
Duration: 2 Days
Venue: NECA Learning Centre
Course Fee: Members: N82,500; Non- Members: N87,500
Date: 24 – 25 March 2017
Duration: 2 days
Course Fee: Members: N95,000; Non- Members: N100,000
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