TANZANIA LABOUR LAWS UPDATE: POWERS AND LIMITATIONS OF THE COMMISSION FOR MEDIATION AND ARBITRATION TO OFFER COMPENSATION

• The arbitrator may award compensation of less than twelve months remuneration on the finding of unfair termination.
• Weighing of the balance between finding unfair termination based on reason versus based on procedure.
• The remedy of reinstatement is awarded where termination is adjudged unfair both procedurally and substantively.
• The arbitrator cannot order reinstatement where the employee does not wish to be reinstated or continued employment is deemed intolerable.
• Whether the Mediation and Arbitration Guidelines Rules, 2007 contravenes the provisions of the Act in relation to the Arbitrator’s power to order compensation vis-a-vis the limitations thereto

1.0   Introduction.
There have been conflicting views as to whether the Arbitrator at the Commission for Mediation and Arbitration (CMA), on making a finding on unfair termination, may award compensation of less than twelve months. The controversy has been on the interpretation of the provisions of Section 40 (1) (c) of the Employment and Labour Relations Act, 2004 (‘the Act’) which literally empowers the arbitrator to order compensation of not less than twelve months.

It is important to note that in legal precepts, laws are more or less enforced as they are and as they are further interpreted through Case laws. Hence the principle is that past decisions of Courts are binding to such courts and others lower to them, if the facts are similar and applicable. Our Employment and Labour Law Department at Breakthrough Attorneys has closely examined the Labour Court’s decisions in interpreting the above provision and would like to notify the general public that in the purview of the decided cases by the Labour Court of Tanzania, the correct interpretation of Section 40 (1) (c) of the Act is that the Arbitrator at CMA may award compensation of less than twelve months at his own discretion.

2.0   Interpretation of the provisions of Section 40 (1) (c) of the Act.
The provisions of Section 40 (1) (c) of the Act provides:

“If an arbitrator or labour court finds termination is unfair the arbitrator or court may order the employer:
(a) to reinstate the employee from the date the employee was terminated without loss of remuneration during the period that the employee was absent from work duet to the unfair termination; or
(b) to re-engage the employee on any terms that the arbitrator or Court may decide; or
(c) to pay compensation to the employee of not less than twelve months remuneration.”

The plain interpretation of the above provision implies that the arbitrator is limited to award compensation of not less than twelve months remuneration. This would mean that the arbitrator who awards compensation of less than twelve months contravenes the above provision of the law. It is further argued that the provisions of Rule 32 (5) (a) – (f) of the Labour Institutions (Mediation and Arbitration Guidelines) Rules, 2007 (GN No. 67 of 2007) (‘Mediation and Arbitration Guidelines Rules, 2007’) are inconsistent with the provisions of the principal legislation, i.e. Section 40 (1) (c) of the Act. The provisions of Rule 32 (5) (a) – (f) of the Mediation and Arbitration Guidelines Rules, 2007 appear to provide discretionary powers to the arbitrator to award compensation based on circumstances of each case. It provides:

“(5) Subject to sub-rule (2), an Arbitrator may make an award of appropriate compensation based on circumstances of each case considering the following factors-
(a) any prescribed minima or maxima compensation;
(b) the extent to which the termination was unfair;
(c) the consequences of the unfair termination for the parties, including the extent to which the employee was able to secure alternative work or employment;
(d) the amount of employee’s remuneration;
(e) the amount of compensation granted in previous similar cases;
(f) the parties’ conduct during the proceedings; and Any other relevant factors.”

It is key to note that it is trite law that where the provisions of a subsidiary legislation (such as Mediation and Arbitration Guidelines, 2007) do not conform to the principal legislation (called “enabling law”) such as The Employment and Labour Relations Act the said subsidiary legislation becomes bad in law for it cannot override the provisions of the principal legislation, i.e. the Act. This has the basis on the provisions of Section 36 (1) of the Interpretation of the Interpretation of Laws Act, [CAP 1 R.E. 2002] which provides:

“(1) Subsidiary legislation shall not be inconsistent with the provisions of the written law under which it is made, or of any Act, and subsidiary legislation shall be void to the extent of any such inconsistency.”

The above position is also confirmed in the case of MKUNZO AND ANOTHER vs. REPUBLIC [2006] 1 EA 204 where it was held:

“Where a subsidiary legislation is in conflict with a substantive Act of Parliament, the Act must prevail over the subsidiary legislation.”

As it will be shown in this article, the Labour Court considered the above provisions and held that there is no conflict between the provisions of the Mediation and Arbitration Guidelines, 2007 and the Act with regard to the powers of the arbitrator in awarding compensation following a finding of unfair termination.

On the other hand, Section 40 (1) (c) of the Act is interpreted as conferring discretionary powers to the arbitrator to award compensation of less than twelve months. The reason given is that this provision uses the word ‘may’ instead of ‘shall’. It is submitted by that the usage of the word ‘may’ imports discretion in the purview of Section 53 (1) of the Interpretation of Laws Act, [CAP 1 R.E. 2002]. It is further argued that the provisions of Section 88 (8) of the Act empowers the arbitrator to make an appropriate award depending to circumstances, which implies that this Section confers discretionary powers to the Arbitrator to make an award even of less than twelve months.

3.0   Labour Court’s Interpretation of Section 40 (1) (c) of the Act
In the case of DEUS WAMBURA vs. MTIBWA SUGAR ESTATES LIMITED (Revision No. 3 of 2014) at page 3 Madam Judge Rweyemamu (as she then was) held:

“Under the law (the ELRA), an arbitrator has discretion to award or not to award any of the remedies provided under Section 40 (1) (a) or (b) or (c) following a finding of unfair termination. It is my view that, with such discretion, an arbitrator can award compensation which is more or less than 12 months, provided that he has justifiable grounds for doing so, grounds such as those enumerated under rule 32 (5) (a) to (f) of the GN 67/2007”

The above extract confirms that the Labour Court is of the view that the arbitrator, on exercise of discretionary powers, may award compensation which is more or less than 12 months. This means that under Section 40 (1) (c) of the Act, the arbitrator can and may award compensation of more or less than 12 months. This widens the interpretation of this Section which was initially limited to the minimum of 12 moths’ compensation.

The above position was also confirmed in the case of MICHAEL KIROBE MWITA vs. AAA DRILLING MANAGER (Revision No. 194 of 2013) (Unreported) where His Lordship Mipawa, J (as he then was) at page 17 held:

“In my opinion the learned arbitrator trekked in the correct avenue when he ordered the compensation of six months, he had discretion to order compensation of less than twelve months remuneration where appropriate”.

It is apparent from the above position that the Labour Court’s interpretation of Section 40 (1) (c) is that the arbitrator may award compensation of less than twelve months depending on the circumstances of each case.

3.1   Factors for consideration in the award of compensation
As already stated, the arbitrator is not bound to award compensation of not less than 12 months only instead the arbitrator may award more or less than 12 months remuneration depending on the circumstances of each case. This is on the basis on the provisions of Section 88 (8) of the Act which empowers the arbitrator to award appropriate compensation depending on the circumstances of each case. Furthermore, Rule 32 (5) (a) – (f) of the Mediation and Arbitration Guidelines Rules, 2007 which require the arbitrator to consider the following in the award of compensation:

(a) Any prescribed minima or maxima compensation.
(b) The extent to which termination was unfair.
(c) The consequences of unfair termination for the parties including the extent to which the employee was able to secure alternative work or employment.
(d) The amount of employee’s remuneration.
(e) The amount of compensation granted in the previous similar cases.
(f) The parties conduct during proceedings and other relevant factors.

It is obvious from the above that the arbitrator in awarding compensation for unfair termination is not bound by the prescribed minimum alone instead he has to consider a number of factors depending on the circumstances of each case.

3.2 An order of reinstatement and/or re-engagement.
Section 40 (1) (a) & (b) of the Act empowers the arbitrator to order reinstatement and/or re-engagement after a finding on unfair termination. The remedy of reinstatement is given when termination is found to be unfair both substantively and procedurally. This was stated in the case of NATIONAL BANK OF COMMERCE vs. ALIAMIN MBEO (Revision No. 55 of 2013) at page 4 where it was held:

“In practice, a remedy of reinstatement is awarded where terminated is adjudged unfair both procedurally and substantively”

The above position was further confirmed in the case of VEDASTUS S. NTULANYENKA & 6 OTHERS vs. MOHAMED TRANS LTD (Revision No. 4 of 2014) where it was held at page 23 as follows:

“…a reading from the other Section of the Act gives a distinct impression that the law abhors substantive unfairness more than procedural unfairness, and if compensation is for redressing a wrong done to the employee, the remedy for the former attracts heavier penalty than the latter… the arbitrator is mandated not to order reinstatement “where termination is unfair because the employer did not follow a fair procedure”…”

The above excerpt means that procedural unfairness attracts a lesser penalty compared to substantive penalty. Therefore, an order of reinstatement cannot be issued when the impugned termination is faulted on procedure alone but it should be both substantive and procedural unfairness. Furthermore, an order of reinstatement cannot be issued where the employer does not wish to be reinstated or continued employment is deemed intolerable. This is per the case of NATIONAL BANK OF COMMERCE (Supra).

3.3   Power of the High Court to vary compensation.
The Labour Court is vested with powers under Section 91 (1) and (2) (a) – (c) of the Act to revise the award by the arbitrators at the Commission of Mediation and Arbitration. It is important to note that the award of compensation is a matter of exercise of discretion by the arbitrator. The circumstances which would justify the higher court to interfere with the exercise of discretion of the trial court were listed in the case of SELCOM GAMING LIMITED vs. GAMING MANAGEMENT (T) AND GAMING BOARD OF TANZANIA (2006) TLR to include the following:

(i) That it was based on a misunderstanding of the law or evidence before that court, or.
(ii) Upon an inference that particular facts existed or did not exist, or
(iii) Upon the ground that there has been a change in circumstances which would have justified the court to vary the order; and
(iv) An order given contrary to the cardinal principles of natural justice.

4.0   Conclusion
In our opinion, the proper interpretation of Section 40 (1) (c) of the Act is that the arbitrator may award compensation of more or less than 12 months remuneration on a finding of unfair termination. This interpretation is confirmed by the above cited cases of the Labour Court. In that regard, it is correct that the arbitrator has to consider the circumstances of each case in the award of compensation. In this article, the employment and labour law department at Breakthrough Attorneys would like to notify the general public, employers and employees alike, of the various interpretations of Section 40 (1) (c) of the Act vis-à-vis Rule 32 (5) (a) – (f) of the Mediation and Arbitration Guidelines Rules, 2007 as given by the Labour Court.

Important notice
This publication has been prepared for information purposes only, and it does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.