Talking Law with Ivie: When Oil & Gas Companies Start Letting Go of Staff

Many people would be aware of the general crash in the price of a barrel of crude oil (at one point, even Hennessy cost pass am); although the oil and gas sector has a history of boom and busts, this would have been the lowest slump since the early 90’s. Unfortunately, even industry experts did not see it coming.

Companies involved in upstream activities, especially deep offshore, have been forced to simply stop, with an estimated two-thirds of all rigs being decommissioned; the implication of this is that, oil companies who previously enjoyed a booming business have had to readjust their business operations, with many sustaining substantial losses. Around the world numerous oil companies have gone bankrupt, resulting in over 250,000 redundancies.

Nigeria has not been left out of this ripple effect which has shaken the industry to its core. Many oil and gas workers involved in upstream activities have been weak at the sight of industry wide job cuts. The few who have managed to keep their jobs have faced nonnegotiable pay cuts as an alternative to total job losses.

How Low Can You Go?
A friend of mine was the general counsel for a reasonably sized oil company, life was good. She had great company benefits, and could afford to pay for her son’s UK boarding school fees. When the Oil Glut first started, as a senior member of staff, she was given ample notice of the imminent changes and was advised to accept the 15% pay cut. Obviously she was upset about it, but she didn’t complain too much; she knew that even with the 15% pay cut she was still making a lot more than most people of equivalent years of experience. Life went on as normal.

Things got to melting point when, after 8 months, the company informed her that there would be further firm wide pay cuts, resulting in a total of 45% reduction in salaries. It was made clear to all members of staff that, should they not accept the further reduction of salaries, their contracts of employment would be terminated with immediate effect.

Ooh boi… this, coupled with the fall in the value of the Naira, was simply too much to bear. She immediately found a job in the UK and took a 1 year sabbatical. The way she calculated it, rather than work for half of her initially agreed salary, which had significantly reduced in value when compared to other currencies, she might as well work in the UK for a year, earning an equivalent of almost 3 years of the reduced salary. Then, she will decide about her future with that company.

Termination and the Law
Generally the way most employment contracts are drafted, the employer has the right to amend or even terminate the contact; as stated in one of my previous articles, they usually sneak in omnibus clauses under which, to a large extent, they can do what they like. It is established law that the master servant relationships created by the employee contract is, in most instances, governed and ultimately determined by the terms of that agreement.

However, as regards the Nigerian oil and gas sector, in an attempt to mitigate against prolific cases of unfair dismissal as well as further support the hiring of Nigerians in the sector, the Department of Petroleum Resources (“DPR”) on the 5^th March 2015 issued the “Guidelines and Procedures for the release of Staff in the Nigerian Oil and Gas Industry” (the “2015 Guidelines”).

The 2015 Guidelines
The main objective of the 2015 Guidelines is the establishment of procedures for obtaining the prior consent of the Minister of Petroleum prior to the release of Nigerians working in the Nigerian oil and gas sector. Ironically, this is not the DPR’s first attempt at controlling the unfair dismissal of Nigerian content in the sector, a similar guideline was issued in 1997 (which was mostly disregarded). However, the 2015 Guidelines provide more comprehensive provisions and processes for obtaining the consent of the minister before the “release” of workers, as well as prescribing stringent consequences for disobedience.

The 2015 Guidelines define “release” of a worker as meaning:-

“the removal of a worker from the employment in a manner that permanently separates the worker from the company whether such removal is by “dismissal; retirement ‐ whether voluntary or forced; termination; redundancy; release on medical grounds; resignation; death or abandonment of duty post”

Among the stringent consequences for disobedience are:-

1. Fines ranging from N5,000,000.00 (Five Million Naira) to N10,000,000.00 (Ten Million Naira);
2. The recall of the released worker(s); and
3. Suspension or cancellation of the lease, licence or permit belonging to the employer.

By the provisions of the 2015 Guidelines, it is only where the employee retires voluntarily, resigns, dies or abandons his duty post that a “mere notification” to the DPR will suffice, in all other instances consent of the DPR would be required in the prescribed form.

Is This Gonna Work?
Some people are of the view that as with many other ingenious ideas, arguably sporadically, developed by the Government, monitoring and proper policing of the 2015 Guidelines will be difficult to almost impossible. This leads one to question the number of instances where these guidelines are being diligently adhered to, and where not adhered to, how would the DPR ultimately find out anyway? I’m guessing that the DPR will only find out where a disgruntled employee reports the company for not following due process in the termination of their employment contract.

Some argue that the DPR are going beyond the scope of their powers in trying to enforce such guidelines as, as mentioned above, the master servant relationship created by the employee contract is governed by that contract and the Government should leave parties to have freedom to contract as they wish.

Conclusion
When I told my friend of the 2015 Guidelines, she informed me that she was very aware of them, and confirmed that her company definitely did not have DPR approval before sacking dozens of employees. She said upon informing the company of the need to seek DPR approval before releasing staff, the response was “Abeg, na DPR go pay salaries”; after seeing the MD’s bulging eyes, and because she knew she was on her way out anyway, she promptly dropped the matter.

However, most people are not aware of the 2015 Guidelines and it sounds crazy that such important information has not been brought to the attention of the general public, I am sure there are hundreds of Nigerian oil and gas workers who, in light of the recent issues with the sector, are not aware of the due process required by law before the termination of their employment contract.

However, in saying that, the legality of the provisions of these guidelines have not been tested, and until that day no clear conclusion can really be reached.