Case No.: 235842
Date: January 31, 2023 (Tir 23, 2015 E.C.)
Legal Rule/Interpretation:
When an organization is permanently closed due to bankruptcy or any other reason (pursuant to Article 24(4) of Proclamation No. 1156/2019), the employment contract may be terminated. The fundamental point to be verified is whether the employer’s organization has permanently ceased operations; it is not necessary to investigate whether the reason for the closure was appropriate or justified.
Reasoning:
It is undisputed that the employment contracts were terminated at the instance of the Applicant. The record shows that relevant authorities confirmed the organization had indeed ceased operations.
The lower court had ruled the dismissal unlawful on the grounds that the Applicant failed to justify the reasons for closing the business.
However, as indicated in the binding legal interpretation of the Cassation Bench (File No. 143334, Vol. 22), the confirmation of the permanent closure of an organization is, by itself, sufficient grounds for termination of employment.
Under Article 24(4) of the Proclamation, once it is verified that the organization has permanently ceased operations, the dismissal cannot be deemed unlawful. Consequently, the Applicant is not obligated to pay compensation under Articles 42 and 43 of the Proclamation.
Therefore, the decisions of the lower courts contradict Article 24(4) of the Proclamation and the binding precedent of the Cassation Bench.
Ruling:
The decision of the Cassation Division of the Oromia Regional State Supreme Court under File No. 404696 is hereby reversed pursuant to Article 348(1) of the Civil Procedure Code.
It is hereby decided that the termination of the Respondents’ employment contracts was not unlawful; therefore, the Applicant is not liable to pay compensation.
Each party shall bear its own costs and expenses.