BETWEEN
L PHAMBA AND THREE OTHERS…………

…………………

…………APPLICANTS
-AND-
COUNCIL OF THE UNIVERSITY OF MALAWI………………………RESPONDENT
Coram
J Nriva Deputy Chairperson
P Mpaka Applicants' legal representative (present)
D Kanyenda Respondent's legal representative (absent)
M Mbobe Court Clerk

RULING

This is a motion to dispose the matter on a question of law. The applicants commenced this action against the respondent, the Council for the University of Malawi. The applicants served the respondent in various capacities and for various periods. The

applicants'

services were terminated in 2009 in terms of the conditions of service on the basis of attaining the mandatory retirement ages. The respondents started processing the

applicants'

severance pay. However, the respondents did not proceed processing the allowances.

The

applicants therefore claim the

payment of the severance allowance.

The respondents

contest the claim arguing that

the applicants having reached retirement

age

s

were not entitled to

get

severance pay.

However, counsel for the applicants submits that retirement is termination of employment by mutual agreemen

t thereby entitling employees to receive

severance allowance on the

ground

of termination by mutual agreement.

The

question at this hearing

, therefore

, is

whether employees who retire normally are entitled to severance pay. The narrow question is whether normal retirement is mutual termination of the employment. Counsel cites cases of

B

a

kasi v SUCOMA

[2008] MLLR 112

as well

as

National Bank of Malawi v Phanga

Civil Appeal Number 23 of 2009

. These

decisions

have different

conceptual

approaches to the issue of severance allowance on retirement. The former is of the view that severance allowance is payable when an employee retires. The latter holds the contrary view.

It holds that severance allowance is not payable on normal retirement. It is

only

payable if the retirement is rather premature.

Counsel for the applicant is in support of the

Bakasi v SUCOMA

approach. Counsel argues that the decision he is supporting is concomitant with the modern labour jurisprudence of

fairness

and equity and also that it acknowledges the employees services to the employer. Counsel further argues that the decision has support of other decisions from the very High Court Bench

DHL v Nkhata; Bakasi v SUCOMA

. Counsel further argues

that as a question of logic,

severance allowance should also apply to

retiring

employees. The premise

on which

counsel lays

t

his

argument

is that

if the allowance is payable to one whose services have been cut short and you add the reasoning that it is also payable as a token of appreciation then it would make no sense not to apply the same to retiring employees. The retiring employee is even more deserving. Counsel therefore asks the court to distinguish the

Phanga

decision and apply the

Bakasi

reasoning. Counsel further criticizes the

Phanga

decision as taking into consideration factors not present in section 35 of the Employment Act. Counsel argues that plain reading of section 35 does not distinguish whether termination is by pension or not. Counsel further argues that retirement is a mutual agreement to terminate employment. It is mutual

agreement to terminate the employment in

that although the employee might find the retirement already put in place

by the employer

, by signing it, he/she mutually accepts the pension as a factor terminating the employment. Thereby, pension becomes a mutually agreed factor with which to terminate the employment.

Counsel

for the respondent did not appear. Though, according to counsel for the

applicant, counsel

for the respondent is in support of

the

Phanga

reasoning.

It is not in dispute that the labour jurisprudence has for a considerable space in history been that severance allowance is

payable

when

an employee is retiring.

The case

National Bank of Malawi v Sosten Phanga and Others

however made some clarifications on the issue.

In

National Bank of Malawi v Sosten Phanga and Others

the Court held the view that there ought to be drawn a distinction between normal retirement and early retirement.

The court stated that o

n

an

early retirement

,

severance allowance is payable

but

it is not payable on a normal retirement. The court held the view that mutuality of termination of the contract has to do with the cutting short of the contract otherwise than normal retirement as would be anticipated at the commencement of the contract:

It is important to note that all the cases which took a stand that over and above pension, severance allowance was payable dealt with cases where employment was cut short by mutual agreement (e.g. by early retirement or by retrenchment, or by dismissal at the instance of the employer) [and not on normal retirement].

The Judge held the view that where an employer invites employees to go on early retirement and the employees so opt, they (the employees) would be entitled to severance allowance.

As was the case in the case of Mwalwanda

However, went on the Judge, where the services are terminated due to normal retirement as agreed

,

the employees ought not to be entitled to severance allowance. This decision seems to suggest that normal retirement is not mutual termination in the sense the word is used. The word is used in terms of termination other than the foreseeable termination.

It connotes cutting short of the employment term.

No wonder, the allowance is not

payable

where a contact effluxes by time or by the performance of the task

which was the subject of the contract

. What the provision fell short of saying was that it was inapplicable in cases of normal retirement. That is to say that when this court is met with a situation of an employee going on normal retirement, the question of severance pay should not arise.

In short the legal position that the

National Bank of Malawi v Sosten Phanga and Others

is propounding is that severance allowance

is not applicable in cases of normal retirement.

The court quoted section 35 of the Employment Act and went on to quote

Bakasi v SUCOMA

Civil Cause 559 of 2004

and

Blantyre Sports Club v Banda and another

.

Civil Cause nUmber 61 of 2003

These cases repeat the law in Section 35 of the Employment Act. In addition to that

t

hey go on to hold the view that retirement is a form of termination of employment by mutual agreement. To the extent of holding retirement as mutual agreement, the decisison of

Blantyre Sports Club v Banda and another

went on to quote the sentiments of Nyirenda J(as he then was) in

Japan International Co-operation Agency v Jere

that

Section 35(1) in effect compels employers to recognise the commitment and valuable contribution which the employees make to the work they do. Clearly, the provision protects employees from being told to go with one month's pay after working for an employer for considerable number of years. In the spirit of Section 35(1) of the Employment Act 2000 is meant to protect employees who have long served their masters and put a stop to exploitation.

The decision in

National Bank of Malawi v Sosten Phanga and Other

s

reverses all this thinking on

severance

allowance in relation to employees who retire normally. The court held the view that

,

(

I quote

in

extensio

):

The [Employment] Act does not define the term

`

termination.

'

But we are not without definition from o

ther legal

authorities

. Termination should mean that a contract of employment is continuing and for some reason it is brought to an end. In the context of Section 35(1) of the Employment Act such contract can be terminated by either... mutual agreement or

unilaterally by the employer, for the employee to be entitled to severance allowance.

Where an employee has invited employees who so wish, to opt for early retirement and an employee opts to retire early, it will be construed that his employment has been

terminated by mutual agreement. In this scenario, severance allowance would be claimable. This was the situation in

Nelson Mwalwanda v Stanbic Bank Ltd

Civil Cause Number 3256 of 2005.

Termination of an employment contract in s35(3) of the At goes along

very well with the meaning of

`

termination

'

which means ``

to cut short''

. For the sake of clarity it reads:-

``

The employment of an employment of an employee shall not be terminated for reasons connected with his

capacity or

conduct before the employee is provided an opportunity to defend himself against the allegation made, unless the employer cannot reasonably be expected to provide this opportunity''

I should add that this meaning encompasses ``

dismissal''

.

I would say the same

thing in

respect of subsection

(4) which reads:-

``For the purposes of subsection (1), termination includes termination by reason of the insolvency or death of the employer, but does not include--

(a)

termination of a contract of employment for a specified period of time where termination occurs at the expiration of the specified period; or

(b)

a contract of employment for a specified task where the termination occurs at the completion of the task.

The termination referred to in (a) and (b) above do not carry the meaning of ``cutting short'' or ``dismissal'' because the agreed contract task or period has come to effluxion.
Counsel for the respondent seems to agree that retirement after agreed mandatory age is the same as where one retires after a fixed contract in (a) above. I share the same view. So, in my, view, termination after attainment of mandatory age should be distinguished,

ju

st because it is expected and pre-planned termination. Otherwise the other termination occurs on the happening of an event and so disrupts the normal employment contract, such as by redundancy, early retirement or dismissal.

The

National Bank of Malawi v Sosten Phanga and Others

decision,

being the latest, in essence, overrules all the older decision on this aspect. By the doctrine of prece

dent this court is bound by the

holding in

National Bank of Malawi v Sosten Phanga and Others.

For that reason, this court is bound by the decision that severance pay is not payable to employees who have retired normally.

[Severance allowance] is compensation to an employee for the termination of his employment by the employer on grounds other than his misconduct, to facilitate his re-adjustment to the resulting loss of income.

As this definition shows, once an employee is dismissed or his employment is otherwise brought to an end other than by himself

, he is faced with immediate loss of income and benefits available to him by virtue of that employment. For that reason unless he is able to quickly get another job (which is not always possible) or stable source of income, he can easily descend into a very serious state of destitution. And the problem is compounded by the fact that there is no social security provision in this country. To minimise the impact of that problem, the Employment Act prescribes some minimum payment to an employee who loses his employment through unfair dismissal or such other causes as the death or insolvency

of his employer. Consequently, the payment is a form of `minimum social security provision'.
But as the allowance is payable to an employee

who has worked for at least a year

, it also serves as a recognition of his service to his ex-employer. As the Industrial Relations Court explained in

Banda v Blantyre Sports Club

, `Calculations [of] severance allowance [are] on the number of years that an employee continuously serves an employer. The effect of this is that the law demands that the employer recognises services rendered by its employee. The recognition is in the form of a lumpsum of money termed severance allowance. In layman's language this amount is a ``thank you'' to the employee for good service. This is why severance allowance is only paid to employees whose employment contracts are terminated for reasons not related to bad conduct.'

In the final analysis, the position of the law is that severance allowance is not payable on normal retirement.

I grant the right

for the applicants

to appeal against this decision

, as this is a decision based on a question of law

.

The appeal should be filed within the thirty days of this ruling as is the requirement under section 65 of the Labour Relations Act.