By James Kalokoni – LLM (Employment), LLM (Energy) (UK) LLB (UNZA) AHCZ Managing Partner at Kalokoni and Company.
INTRODUCTION
The Supreme Court of Zambia has consistently held that an employer who permits an employee to continue working after the end of the fixed term contract of employment is deemed to have renewed the contract on the same terms and conditions for the like period. Road Transport and Safety Agency (RTSA) employed Mr. Zindaba Soko as its Director and Chief Executive Officer on two consecutive tours of fixed term contracts of employment. Before the expiry of the second tour, Mr Soko applied for its renewal but there was no response from RTSA. Instead, RTSA allowed Mr Soko to continue working for nine (9) months after the expiry of the second tour of the fixed term contract. Was Mr Soko’s contract deemed to have been renewed on the same terms and conditions for the like period? Does freedom of contract (FOC) take precedence over common Law? This comment seeks to address these questions.
1.1. THE FACTS OF THE CASE
The brief facts of this case are that the Road Transport and Safety Agency (RTSA) employed Mr. Zindaba Soko as its Director and Chief Executive Officer.[1] This was on a fixed-term contract of three years’ duration from 4th January, 2013 to 3rd January 2016. The contract was renewed on 4th March 2016 for another three years expiring on 3rd January 2019.[2] On 6th December, 2018, Mr Soko expressed his intention to renew his contract but received no response[3]. After the contract expired, Mr. Soko continued working and was even appointed to the RTSA Board on 24th January, 2019[4]. On the 11th of September 2019 RTSA terminated Mr. Soko’s Contract effective the 12th of September 2019.[5] This termination was effected nine (9) months after the expiry of the second contract and while Mr. Soko was on leave.[6] Subsequently, RTSA paid Mr. Soko gratuity on pro-rata basis for the period 3rd January, 2019 to 11th September, 2019.[7]
1.2. COMMENCEMENT OF ACTION IN THE HIGH COURT
Mr. Soko sued RTSA in the High Court (HC) claiming for, among others,
(i) Full gratuity
(ii) Pay in lieu of notice
(iii) An offer to purchase the personal to holder car
(iv) Damages for breach of contract.[8]
It was pleaded in the HC that his contract had been renewed based on the following grounds:
(i) RTSA allowed him to continue working beyond the 3rd of January, 2019 under the same terms and conditions while receiving a salary and benefits without a formal renewal.
(ii) He made a formal request for the renewal of his contract sent to the Ministry of Transport and Communications which was not responded to.
(iii) The Ministry did not issue any renewal agreement to be signed by him thus re-enforcing the fact that it was renewed on the same terms and conditions.
(iv) He was appointed to the RTSA Board on 24th January 2024, for a three-year term which implied a renewal.[9]
1.3. THE EMPLOYER’S ARGUMENTS IN THE HIGH COURT
The employer admitted the following facts:
(i) Mr. Soko continued in office beyond the expiration of his contract on 3rd January, 2019
(ii) That indeed Mr. Soko was appointed to the RTSA Board
(iii) That he was paid gratuity on pro-rata basis[10]
Whilst RTSA readily admitted the existence of the above incontrovertible facts, it forcefully contended that:
(i) Mr Soko’s appointment to RTSA Board was an error.
(ii) His continued work did not imply a renewal of the contract
(iv) That clause 2(c) of the signed contract irrevocably stood as a colossus in the gateway to the success of Mr Soko’s case because it clearly provided:
“Should circumstances arise that require or otherwise result in the employee continuing in office beyond the expiration date of the contract, such circumstances shall not constitute a renewal of contract and the employee shall be remunerated on a pro-rata basis for the period worked.”[11]
1.4. JUDGMENT OF THE HIGH COURT
The High Court agreed with the employer that the contract was not renewed. The Court observed that the starting point was always the contract itself[12]. The Court referred to clause 2(c) of the signed contract of employment dated 4th March, 2016 which explicitly stated that continued service beyond the contract’s expiry would not inevitably stamp the employee’s passport for the renewal of his contract[13]. On reasonable expectation of renewal of contract, the Court held that the contract clearly stipulated that work performed after the expiry of the contract would not constitute renewal.[14]
1.5. The Court further held that this clause reflected the parties’ agreed intention, adding that in the absence of evidence to the contrary, the contract was entered into voluntarily and should be upheld[15]. On the failure by the employer to communicate its response to the employee’s application for renewal, the Court held that Clause of the signed contract already addressed situations where work continued beyond the contract term: it did not amount to renewal.[16] And there was no obligation placed on the employer to provide further communication.[17] Therefore, the High Court dismissed all the employee’s claims except one on purchase of the personal to holder motor vehicle which it held that the employer did not dispute.[18]
1.6. THE CASE IN THE COURT OF APPEAL
The employer appealed to the Court of Appeal (CA) on the issue of the personal to holder motor vehicle. The gist of the argument was that since the Court had already found that the contract was not renewed, there was no substratum for conferring on Mr. Soko the benefit of buying the motor vehicle.[19] In any case, RTSA argued Mr. Soko had already bought the personal to holder motor vehicle under an earlier contract.[20]
1.7. CROSS-APPEAL
The employee also cross-appealed against the finding by the High Court that there was no renewal of the employee’s contract of employment beyond January 2019 after the expiry of the existing contract on 3rd January, 2019. This was against the backdrop that Mr. Soko worked for nine (9) months after the expiry of the previous contract. Further, the employee argued that the Trial Judge erred in law and fact by holding that clause 2(c) of the employment contract dated 14th January, 2016 was valid and enforceable.[21]
1.8. ARGUMENTS OF THE PARTIES IN THE COURT OF APPEAL
Basically, the parties repeated almost the same arguments which they had deployed before the High Court.
1.9. JUDGMENT OF THE COURT OF APPEAL ON ALLEGED RENEWAL OF THE EMPLOYEE’S CONTRACT OF EMPLOYMENT
The CA gravitated towards the view expressed by the Trial Court that the central issue gyrated on the interpretation of the employment contract between RTSA and Mr Soko. Specifically, whether Mr Soko’s continued employment after 3rd January 2019, amounted to a renewal, thus entitling him to the associated benefits.[22]
Declining to consign Clause 2 of the signed contract which forbade implied renewal of contract to the apologetic footnotes of contractual history, the Court held:
“Our interpretation of the above provision is that the contract automatically expires at the end of the three year period”[23]
2.0. Was the employer obligated to respond to the employee’s application for renewal?
The Court answered this question in the negative by guiding as follows:
“However, if the employee expresses an interest in renewal, the employer is under no obligation to renew it; the decision rests solely at the employer’s discretion.”[24]
2.1. Crucially important for this conversation, the CA held that continuing to work beyond the expiry date did not and does not, amount to implied renewal of the contract. The CA held:
“Furthermore, if the employee continues working beyond the expiration date, this does not constitute a renewal of the contract. Instead, such continued work is regarded as a temporary arrangement, not an extension of the original contract. [25] (Underlined for emphasis)
2.2. On the forensic materiality of the three post-expiry events - being appointed to RTSA Board for a three-year term, continuing to work beyond the expiry date, and failure to reply to his application for renewal, the CA guided as follows:
“It is settled law that parties are bound by the terms of their contracts and Courts must not rewrite them”[26]
The CA continued:
“Applying these principles to the present case, [the employee’s”] claim for a contract renewal is unsustainable, given that clause 2 (c) explicitly excludes any implied renewal. Although the [employee] continued working beyond 3rd January, 2019, without a formal renewed agreement, the contractual terms clearly establish that continued service would only result in pro-rata remuneration, not renewal.[27] (Stress ours)
2.3. On the legal effect of clause 2 (c) of the signed contract of employment, the Court of Appeal held:
“Clause 2 (c) of the contract is, in our view, unambiguous in its wording. The use of the term “shall” denotes an absolute obligation, eliminating any room for discretion or alternative interpretation. Consequently, the clause prevented any automatic or implied renewal resulting from continued employment.”[28]
2.4. On FOC, the CA stated:
“Public policy reinforces the principle that contracts freely entered must be upheld strictly by the Courts according to its terms.”[29]
In sum, the CA held that Mr. Soko’s contract was not renewed, and that without a renewal, there was no legal basis for any entitlement to even purchase the personal to holder motor vehicle.
OUR COMMENT
2.5 The CA seems to have taken an iconoclastic stance against the settled position of the Law in Zambia on the point of renewal of fixed term contracts . The trite position is that an employer who allows an employee to continue working after the expiry of the fixed term contract is deemed to have renewed the contract on the same terms and conditions for the like period. We stand on the shoulders of the guidance given by the Supreme Court of Zambia (SCZ) in the case of Moses Choonga V Zesco Recreation Club Itezhi Tezhi[30]. In this case, Zesco Recreation Club initially employed Mr. Choonga as a Cleaner/Gardener on permanent contract of employment. He was later placed on fixed-term contract, which ran from 1st July 2010 to 31st July 2012. But Zesco allowed Mr. Chonga to continue working beyond the 31st of July 2012 until 31st August 2012.
2.6. A month after its expiry, Zesco Club wrote to Mr Choonga that his application for employment as a sales person was unsuccessful. One of the issues which arose in this case was whether allowing the employee to continue working beyond the expiry of the contract on 31st July 2012 amounted to renewal of his contract of employment. Justice Wood as he then was, held:
“Since the respondent [Zesco] allowed the Appellant [employee] to continue his duties for one month after the contract expired due to effluxion of time - 31st July 2012, it can be implied and properly so that the contract of employment was extended for the same period and on the same conditions as those contained in the expired fixed term contract of employment”[31]
2.7. Further, the SCZ unhesitatingly affirmed the Judgement of the High Court delivered in the case of Edward Mwango and Two Others V Zesco[32] Limited in which it was held;
“The defendant having continued to employ the plaintiff on the same terms and conditions when their contract expired, the defendant is deemed to have renewed the plaintiff’s temporary contract” for a like period for the ones that had expired by effluxion of time and this periodic renewal is deemed to have continued until the contracts were terminated. This view is fortified by the fact that the plaintiff continued to work on the same terms and conditions”[33]
2.8. Therefore, the guidance from the Apex Court in Zambia is that when a fixed-term contract of employment expires but the employer allows an employee to continue working on the same terms and conditions, then by operation of law, the expired contract is deemed to have been renewed on the same terms and conditions of service for the same period.
2.9. Therefore, the holding by the CA that permitting Mr. Soko to continue working beyond the expiry of the fixed term contract, amounted only to a “temporary arrangement” and not an “extension” of the original contract does not seem to reverberate with the melody of the settled law on the point. It in an iconoclastic position: a position which disturbs the symmetry of established jurisprudence on the point. The Choonga principle is that such continued work beyond the expiry date amounted to a renewal of the expired contract on the same terms and conditions of service and for the same period.
3.0. Therefore, since the contract was renewed at law, if the employer did not give reasons for its termination, that constituted breach of section 52 (3) of the current Employment Code (ECA which requires employers to give reasons for terminating an employee’s contract of employment. This issue was also not taken up in the CA.
3.1. PRIMACY OF COMMON LAW OVER FREEDOM OF CONTRACT
The CA also dismissed the employee’s claims for relief on ground of FOC. For our lay readers, FOC simply means that once you negotiate and voluntarily sign a contract with another person, you are legally bound by its terms and conditions. On FOC, the Court focused on clause 2 (c) of the signed contract which provided:
“Should circumstances arise that require or otherwise result in the employee continuing in office beyond the expiration date of the contract, such circumstances shall not constitute a renewal of contract and the employee shall be remunerated on a pro-rata basis for the period.”[34] (Underlining ours)
3.2. The CA enforced FOC by stating that “parties are bound by the terms of their contracts and Courts must not rewrite them.”[35]
At paragraph 10.9, the Court hermetically sealed its position on the legal importance of FOC by stating:
“Public Policy reinforces the principle that contracts freely entered into must be upheld strictly according to their terms”[36]
3.3. The critical question on FOC is: Where there is a conflict between FOC and the settled position of common law, does the former (FOC) prevail over the latter? (common law). The CA seems to suggest that FOC drowns out the euphonic voice of settled common law. We so opine because the CA privileged clause 2 (c) of the signed contract of employment over the settled position of the law that allowing an employee to continue working amounts to a renewal of contract. Granted, neither party cited the supreme court authorities. Nevertheless, a conspectus of past SCZ Judgments clearly demonstrates that the settled position of common law on any legal issue prevails over FOC. These are:
3.4.1 NATIONAL AIRPORTS CORPORATION LIMITED V REGGIES EPHRAIM ZIMBA AND SAVIOUR KONIE[37]
In this case, Mr. Zimba was employed as the Managing Director of National Airports Corporation on a fixed-term contract of two-years from 1st September 1996 t0 30th August 1998. The signed contract contained the following clause:
“If the employer terminates the contract prematurely for reasons other than incompetence or willful neglect of duty, all the benefits under the contract shall be paid as if the contract had run the full term …“[38].
Four months into the contract, National Airports Corporation prematurely terminated Mr. Zimba’s contract. It is submitted that the above clause was a product of FOC between the employer and the employee kindred to clause 2 (c) in Mr. Soko’s contract of employment. The crucial question is whether the SCZ privileged FOC over common law by enforcing the clause on payment of full benefits up to the end of the contract. The Apex Court in Zambia declined to elevate FOC over the settled position of Common Law. Ngulube CJ as he then was held:
” We find and hold the phrase invoked so as to pay damages as if the contract had run its full course offends the rules which were first propounded as propositions by Lord Dunedin in Dunlop Pneumatic Tyre Company Limited V New Garage and Motor Company limited (8), especially that the resulting sum stipulated for is in effect bound to be extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach”[39]
The Apex Court in Zambia re-affirmed this legal position in the case of Zambia Privatisation Agency v Suriah Munamwaze Maanza[40] in which a similar clause was included in the signed contract and the Apex Court in Zambia also declined to enforce it . In the context of this comment, it is clear that the Supreme Court of Zambia declined to allow FOC to prevail over the settled position of Common Law on penalties and unconscionability in both cases.
3.4.2 KITWE CITY COUNCIL V WILLIAM NGUNI[41]
Fast forward to 2005. In the William Nguni Case, the SCZ enunciated the common law principle that it is unlawful to award a salary or pension benefit for a period not worked because such an award has not been earned and might be properly termed as unjust enrichment. This has been the legal position even if there is provision in the signed contract of employment that an employee will be paid full benefits up to the end of contract in the event of premature termination. Both the SCZ and the CA have declined to privilege FOC over this settled position of Common Law as the following cases demonstrate.
3.4.3 THE BANK OF ZAMBIA V MARTIN SIMUMBA[42]
In this case, the employee was the Head of a World Bank Project. He was Suspended from performance of the contract of employment pending investigations. The signed contract provided for payment of half salary to suspended employees. Mr Simumba was thus placed on half salary. One of the issues which arose in the Supreme Court was whether or not the employee was entitled to half pay while on suspension as per signed contract. Mwanamwambwa J as he then was held:
“It is clear that the Respondent’s [employees’] contract of employment with the appellant [The Bank] was suspended. The [employee] was not entitled to the half salary that he was given. It was given to him ex-gratia.”[43]
The provision for payment of half salary enshrined in the signed contract was a product of FOC. Nonetheless, the SCZ declined once more to allow FOC to preponderate over the settled position of Common Law.
3.4.4 ZESCO LIMITED V ALEXIS MATALE [44]
In this case, Mr. Matale was on fixed term contract of three years’ duration from 8th August 2002 to 7th August 2005. The Managing Director verbally terminated his contract of employment on ground of alleged breach of the applicable conditions of service.
4.0. In impugning the termination of employment, Mr. Matale contended for payment of benefits in line with clause 9 of the signed contract which provided:
“In the event that the company prematurely terminates this contract for any cause other than dismissal for misconduct, the company will pay the employee all his benefits as contained in clause 9 above up to the end of the contract”[45]
4.1. It was argued , with magnetic forensic eloquence, that by enshrining the above clause 9 in the contract, parties were unanimous that Zesco was buying off Mr Matale’s contract for the remaining years. Incontestably, the above clause 9 of the signed contract was a product of FOC. The HC enforced FOC by awarding Mr. Matale benefits up to the end of contract. On Zesco’s Appeal to the Apex Court in Zambia, the Court set aside this Award. Did the SCZ allow clause 9 above to prevail over settled position of Common Law on the issue?
On the contrary, the late Mambilima CJ held:
“We have held in a number of cases that an employee cannot be paid salaries or allowances for a period he or she has not worked.[46]”
4.2. The SCZ was consternated by the order of the HC which awarded the employee benefits equivalent to the retirement benefits.
4.3. GUIDANCE FROM THE COURT OF APPEAL
The CA for Zambia has also guided that any provision of a contract which strikes a discordant note with settled common law is illegal. In the case of Zubao Harry Juma and First Quantum Mining Operations[47]the court held:
“A contract is illegal if it contravenes a piece of Zambian legislation or the common law”.[48]
Undoubtedly, clause 2 (c) in Mr Soko’s contract was illegal for contravening the settled position of Common Law in Zambia that permitting an employee to continue working after the expiry of the fixed term contract of employment amounts to a renewal of the contract on the same terms and conditions for the like period.
One might contend that the above-cited Choonga, Matale and Simumba cases did not contain the equivalent of clause 2(c) which one finds in Mr Soko’s Contract which specifically provided that working beyond the expiry date did not amount to renewal of the contract. Admittedly, the meretricious allure of this argument is irresistible! However, the thesis is that the inclusion of clause 2(c) in Mr Soko’s Contract was intended to brilliantly contract out of the Choonga principle of law namely, that permitting an employee to continue working after the expiry of a fixed term contract amounts to its renewal. It was meant to render invalid this settled position of common law using FOC as both RTSA and the courts did. As demonstrated above, the robust edifice of settled common law cannot be demolished by FOC. Simply put, parties to any contract are not at liberty to contract out of settled common law in Zambia. This is a universal principle of Zambian common law which applies even in commercial contracts. For instance, , in a commercial case of Diego Casilli v Access Bank Zambia Limited Four Others,[49] a case which touched on , inter alia, the charging of interest, the CA categorically stated that FOC cannot be enforced in case of “severe unfairness, lopsided bargaining power, unconscionable terms, undue influence or where the lender preys on the vulnerability of the borrower.” In short, the CA declined to deify FOC over settled principles of common law.
4.4. In conclusion, the trite position of the Law is that an employer who allows an employee to continue working beyond the expiry of a fixed term contract of employment will be deemed to have extended or renewed the contract on the same terms and conditions for the same period.
4.5. In this case, both the HC and the CA found that Mr. Soko was allowed to work nine (9) months after the expiry of his contract and was even appointed to the RTSA Board. In the optics of the current law, it is submitted that the employee’s contract was deemed to have been renewed on the same terms and conditions for the like period. It is further suggested that if it was terminated contrary to its terms, then it gave rise to a claim for Wrongful and unfair dismissal. In the case of the Attorney-General v Delson Chibaya and Others[50] , the SCZ guided that for an employee on a fixed-term contract of employment, if the contract is wrongfully terminated before it ends by effluxion of time, the employee may be entitled to damages for breach of contract. By inexorable inference, the premature termination of the contract entitled Mr Soko to damages at law if the reasons for termination were not given. The reasons which employers can currently furnish for terminating an employee’s contract of employment are not eclectic, but have been severely squeezed into narrow compass by the current ECA. These legitimate statutory reasons for termination are conduct, capacity or operational requirements. Any termination effected out of this legal orbit- unless consented to by an employee such as mutual termination or by a more favourable mode of termination contained in any other written law - is illegal.
4.6. REFUSAL TO SELL THE EMPLOYEE THE PERSONAL TO HOLDER CAR.
The CA further declined to grant the employee the right to buy the car on ground that:
“without a renewed contract, there is no legal basis for entitlement to a second vehicle “.[51]
Nevertheless, the SCZ guidance cited above contradicts this holding by the CA. The Choonga principle patently demonstrates that there was a renewal of the employee’s contract thus entitling him to buy the car if he was so entitled under the applicable conditions of service. Perhaps, RTSA’s position would have been that selling the personal to holder car to Mr. Soko would have offended the current government policy abolishing the sale of personal- to- holder motor vehicles to senior officers in Government Ministries and Statutory Bodies. The guidance from the Supreme Court is that Courts cannot ignore Government Policy. The issue of Government Policy however, was not pleaded by RTSA at all.
4.7. On the second question, namely, whether in the case of conflict, FOC prevails over the settled position of common law, the existing litany of Supreme Court authorities lucidly demonstrate that common law prevails over FOC. The CA elevated clause 2 (c) of the signed contract of employment being the product of FOC over the settled position of common law on the point. This is contrary to the guidance given by the Apex Court in Zambia and by the CA itself . A perusal of the List of Authorities filed in the CA by Mr. Soko clearly shows that the Supreme Court guidance was not cited at all. We have no penumbra of doubt in our mind that both the HC and the CA would have examined this case differently if these authorities from the SCZ on renewal of contract by operation of law were cited. As justice Henry Lamm clearly stated, “when the Sun of certainty rises and shines in one Court, it may be allowed to somewhat dispel the shadows of doubt in the other.”[52]
Against the backdrop of judicial precedent, the sun of certainty definitely rose and irradiated its luminous light on the critical issue before court over a decade ago. Sheltering under its shade would have certainly blunted the asperity of the premature termination of employment by somewhat dispelling any shadows of doubt in the CA.
END NOTES
1. See Para. 2.2 of the Judgement
2. Ibid
3. Ibid
4. Ibid
5. See Para. 2.3 of the Judgement
6. Ibid
7. Ibid
8. See para. 2.1 of the Judgement
9. See Para. 2.4 of the Judgement
10. Ibid
11. Ibid
12. See para. 3.1 of the Judgement
13. See Para 3.2 of the Judgement
14. Ibid
15. Ibid
16. See Para. 3.3 of the Judgement
17. Ibid
18. See Para. 3.4 of the Judgement
19. See Para. 4.1 of the Judgement
20. Ibid
21. See Para. 7.0 of the Judgement
22. See Para. 10.1 of the Judgement copy
23. See para 10.3 of the Judgement
24. Ibid
25. Ibid
26. See Para. 10.5
27. See para. 10.7 of the Judgement
28. See para 10.8
29. See para. 10.9
30. Appeal 168/2013 (Unreported)
31. Ibid
32. See footnote 30 supra
33. Ibid
34. See para 10.2 of the Judgement
35. See footnote 29 supra.
36. Ibid
37. 2000 ( ZR) p. 154
38. See page 155 lines 25-29
39. See page 158 lines 26-34
40. ZPA V Suriah Munamwaaze Maanza( Unreported).
41. (2005) ZR p 57
42. Appeal no. 50/2010 (Unreported)
43. Ibid
44. Appeal No. 227/2013
45. See pages J.21 – 24 of the Judgement Copy
46. Ibid
47. Appeal No. 102/2022
48. See para. 11.6 of this Judgement
49. Appeal No. 259/2022
50. See para 9.27 of this Judgement
51. See para 10.10 oof the Soko Judgement
52. Henry Lamm and Fred C Mullininx, Legal Philology, (1923)