Cassation Case No. 245927

Cassation Case No. 245927

Date: October 12, 2023 (Tikimt 02, 2016 E.C.)

Judges:

Birhanu Amenew

Reta Tolosa

Ewaket Belay

Kenea Kitata

Nuredin Kedir

Applicant: BA MET Energy Telecom Industry and Trade P.L.C.

Respondent: Mr. Moges Feyera Bulti

The case was scheduled for examination, and having reviewed the file during the judges’ recess, the following judgment has been rendered.

JUDGMENT

This cassation petition was initiated by an application filed on April 26, 2023 (Miyazia 18, 2015 E.C.), seeking to reverse the decision of the Oromia National Regional State, Sheger City High Court Appellate Bench in File No. 47039 dated March 30, 2023 (Megabit 21, 2015 E.C.), which affirmed the Sebeta City District Court decision in File No. 22285 dated January 31, 2023 (Tir 24, 2015 E.C.), and the Oromia Supreme Court Cassation Bench decision in File No. 422130 dated May 4, 2023 (Miyazia 26, 2015 E.C.), which modified and affirmed the same. The Applicant alleges that a fundamental error of law was committed in these proceedings. The Respondent appeared as Plaintiff in the lower court, while the Applicant was the Defendant.

The Respondent’s claim in the lower court, filed on August 26, 2022 (Nehase 20, 2014 E.C.), stated that he was hired by the Applicant company in 2014/15 (2007 E.C.) as a Consultant. He subsequently served as Mineral Exploration Manager in 2015/16 (2008 E.C.), Deputy Manager in 2016/17 (2009 E.C.), and Acting Manager in 2019/20 (2012 E.C.). He alleged that while he was working as a Consultant after being removed from the Managerial position, the Applicant unlawfully terminated his employment without cause. He sought payment of his salary, which was 7,000 (seven thousand) USD calculated at the bank’s selling rate, including service payments, severance pay, compensation, unpaid sales commissions, and annual leave payments, totaling 5,927,597.39 ETB (Five million nine hundred twenty-seven thousand five hundred ninety-seven Birr and thirty-nine cents).

The Applicant filed a statement of defense on October 5, 2022 (Meskerem 25, 2015 E.C.), raising a preliminary objection that the court lacked jurisdiction because the Respondent was a “Managerial Employee.” On the merits, the Applicant argued that since the Respondent served as a Manager, a position requiring special trust under Article 2577 of the Civil Code, and since the company had appointed a new head and had no other position for the Respondent, the termination was lawful. The Applicant further argued that as a Managerial Employee, the Respondent’s claims under Labour Proclamation No. 1156/2019 lacked legal basis. It was also argued that a two-month notice period was provided, annual leave was fully utilized, and the delay in payment was due to the Respondent’s failure to obtain clearance.

The trial court, after examining the arguments, ruled that since the Respondent had been removed from the Managerial position, the case is governed by the Labour Proclamation. The court found that the Applicant’s argument for termination based on the Civil Code was inapplicable. Under the Labour Proclamation, there is no provision allowing the dismissal of a high-earning employee solely because the employer cannot afford their salary; rather, the employer should have reassigned him to his regular role as a Geologist. Thus, the dismissal was ruled unlawful. The court accepted that the Respondent’s salary was 7,000 USD and, since the Applicant failed to prove it was paid at the buying rate, the court applied the selling rate. Finding that the Respondent had cleared his liabilities, the court awarded compensation for unlawful dismissal, severance pay, and payment for annual leave, totaling 5,012,485.70 ETB. Following a petition for correction of a clerical error under Article 208 of the Civil Procedure Code regarding the service payment calculation (which was corrected from 1,062,680.40 ETB to 1,188,194.99 ETB), the total award was adjusted to 5,837,986.45 ETB, plus 50,000 ETB in costs and 501,248.57 ETB in attorney fees.

The Sheger City High Court affirmed this decision on appeal. The Oromia Supreme Court Cassation Bench later modified the judgment, ruling that the trial court’s adjustment under Article 208 was procedural error as it was done without summoning the Applicant, and it also struck down the annual leave payment, finding the Respondent had utilized his leave.

The Applicant filed this petition to the Federal Cassation Bench on April 26, 2023, arguing:

1. The lower courts erred in concluding the Respondent was no longer a Manager based on a letter dated August 7, 2021 (Nehase 01, 2013 E.C.) which did not specifically name him.

2. There was no written or oral order reassigning him to his previous post.

3. If he were reassigned to his original post, his salary would have been 80,256.40 ETB, not 7,000 USD.

4. The court failed to frame the issue of whether he was a Manager and did not verify it through evidence.

5. The award of attorney fees and costs was disproportionate to the complexity and duration of the case and lacked evidentiary support.

The Respondent’s reply stated that after the company’s ownership transferred to new investors, the management was overhauled on June 3, 2021 (Sene 26, 2013 E.C.), and he was stripped of his Managerial authority, with a new General Manager appointed. He argued that managerial status is determined by duties, not salary. He further claimed that his original salary years ago was 4,000 USD and the 7,000 USD was his final salary, which must be the basis for compensation under Articles 40(2) and 41 of the Labour Proclamation.

This Bench has examined whether there was a fundamental error of law regarding the Respondent’s status as a Managerial Employee and the propriety of the awarded payments and costs.

Pursuant to Article 80(3)(a) of the FDRE Constitution and Article 10(1) of Proclamation No. 1234/2021, this Bench reviews decisions for fundamental errors of law based on facts established by lower courts. The lower courts established that the Respondent’s managerial authority was revoked following the company’s ownership transfer, a fact supported by a letter from Human Resources dated November 25, 2021 (Hidar 16, 2014 E.C.) confirming his assignment as a Geologist. We find no error in the lower courts’ conclusion that the Respondent was not a Managerial Employee at the time of termination. Consequently, his termination because “no other position was available” constitutes unlawful dismissal under the Labour Proclamation. The calculation of compensation based on the 6-month salary and the 7,000 USD final salary is upheld.

However, regarding severance pay, under Articles 39(1)(b) and 40(1) and (2) of the Proclamation, severance is only applicable to the period served as a non-managerial employee. The lower courts erred by calculating severance pay based on his total years of service, including his tenure as a Managerial Employee. Furthermore, the award of 10% of the judgment amount for attorney fees, based solely on a private agreement without considering the complexity of the case or the procedural time spent, constitutes a legal error.

DECISION

1. The decision of the Oromia Supreme Court Cassation Bench in File No. 422130 dated May 4, 2023, is hereby modified pursuant to Article 348(1) of the Civil Procedure Code.

2. The finding that the Respondent was not a Managerial Employee and that the termination was unlawful is AFFIRMED. The award for compensation (6 months’ salary) and payment for delayed sums is AFFIRMED.

3. The award for severance pay and the decision on costs and expenses (attorney fees) are REVERSED.

4. The case is REMANDED to the trial court pursuant to Article 343(1) of the Civil Procedure Code to:

   a) Recalculate severance pay by considering only the period the Respondent served in a non-managerial capacity, as per Articles 40(1) and (2) of Proclamation No. 1156/2019.

   b) Determine a reasonable amount for costs and attorney fees by taking into account the complexity of the litigation and the time spent, rather than a flat percentage of the judgment.

5. Each party shall bear its own costs for this cassation proceeding.

The case is closed. Return the file to the lower court.