‘Justifiable cause’ necessary for contract termination

HASSAN SHAD –
hassan.shad@arab-law.om –

To recap, the previous article on the subject, under the Oman Labour Law Royal Decree No 35/2003 (RD 35/2003), limited grounds are available to employers to terminate services of employees, and as a general rule, termination of employment contracts must be for “justifiable cause”.
Although the term “justifiable cause” has not been defined in RD 35/2003, based on practice followed by Omani Courts, this term has been interpreted as “strong” and “compelling” reasons. If employer fails to establish “justifiable cause”, the termination will not withhold the test of judicial scrutiny and the employee can succeed in obtaining an award of compensation for wrongful termination.
The term “justifiable cause” is relevant not only from the perspective of RD 35/2003 but also in the context of disciplinary action against employees. This is clear from Ministerial Decision No 129/2005 (MD 129/2005) issued by the Ministry of Manpower and which lays down certain substantive and procedural rules that are to be followed by employers when imposing penalties on employees. MD 129/2005 is subject to RD 35/2003 however both laws are to be read in conjunction with one another.
Although MD 129/2005 is designed to confer an additional layering of protection on employees, there is general lack of awareness that MD 129/2005 works both ways. In other words, not only does MD 129/2005 lay minimum rules for benefit of employees, employers that follow these rules are better able to defend in a case for wrongful termination. An essential maxim of the law recognized in legal system around the world namely, “justice must not only be done but seen to be done”, therefore, assumes unique importance in the context of the RD 35/2003 and MD 129/2005.
MD 129/2005 requires employer who employ fifteen or more employees to formulate a Schedule of Penalties and Conditions. MD 129/2005 contains enclosed a standard Schedule of Penalties that may be used by employers for guidance purposes in formulating their own Schedule of Penalties. Once approved by the Ministry of Manpower, the Schedule of Penalties is to be displayed at a prominent place at the establishment in Arabic and English languages.
MD 129/2005 lists the penalties that may be imposed on employees. These penalties, subject to specified mandatory requirements, are: (i) written notice, (ii) fine or deduction from salary; suspension from duty; expulsion from service with gratuity; and (v) expulsion from service without prior notice and without gratuity.
MD 129/2005 allows employers to add violations and penalties not included in the standard Schedule of Penalties if mandated by the nature and kind of work. This provides leeway to employers to include additional penalties to suit the unique circumstances of their work.
MD 129/2005 makes it unlawful to impose a penalty unless employee has been notified of charges stemming from the violation, employee’s statement heard and the employee given an opportunity to defend and an endorsement made to this effect in the employee’s personal file. This principle underpins the minimum standard recognized in legal systems known as “audi alteram partum” (translation: hear the other side).
Based on this principle, even if an employer otherwise has genuine grounds to proceed against an employee for a violation, if the employee is not notified of the charges and given an opportunity to defend him/herself before a duly convened disciplinary body constituted by the employer, the employers’ otherwise well-founded right against the employee would lapse or extinguish. It is recommended that employers should follow the law to its letter and not to levy a penalty against an employee unless the above requirements have been met.
MD 129/2005 requires the employer to notify the employee in writing of the penalty imposed, the nature of the penalty and amount, and the penalty to be imposed in case of repetition of the violation. This stems from the requirement that the employee must be informed of the action recommended by the disciplinary body constituted for the disciplinary hearing after recording the evidence and hearing the parties.
Barring certain exemptions, MD 129/2005 requires that no penalty may not be imposed on an employee before the passage of at least three days from the date on which the employee is notified.
MD 129/2005 also permits an employer to impose a severer penalty if the same violation is repeated more than four times before the passage of six months from the commitment of the previous violation.
Whilst the Oman Labour Law, like its counterpart legislation in other countries around the world, is generally pro employee, the Oman Labour Law is just and fair in its disposition and protects employers who follow the law in letter and spirit and can demonstrate that the employee was treated fairly and justly in all respects before sanctioning the employee with a penalty or terminating the employees’ services.