Coronavirus information and support

Coronavirus information and support in Uganda

With the COVID-19 pandemic spreading in Uganda, the country has been in lock down for severa weeks with restrictions including all schools being closed, no public transport, markets being closed except for selling food, and all businesses selling non-food items being closed.

Many private businesses have closed, leaving tens of thousands unemployed. The government is not offering compensation as there is no party to blame for this situation. So what can employers and employees do in this uncertain work environment?

CONTRACTUAL OBLIGATIONS

Owing to the travel, import, export, transport restrictions and other measures being taken by governments across the world, there is a high likelihood that contracts entered into by parties may either be temporarily or permanently impossible to perform. In general, non-performance of obligations under a contract amounts to a breach of contract under Uganda’s Contracts Act 2010. However, frustration is recognized as a plausible defense in an action for breach of contract.  Although statutorily recognized, it is essentially the extension of the ‘force majuere’ doctrine which permits parties to be discharged of respective contractual obligations owing to the independent occurrence of unforeseen, unpredictable and difficult-to-mitigate events that effectively make it impossible to perform contractual obligations.

Reliance on a force majeure clause does not necessarily mean termination of the contract altogether; depending on the drafting of the clause, the performance of the contract can be suspended or be otherwise postponed for a certain prescribed period. In addition, to frustrating a contract or suspending performance of obligations, issues around refunds of monies paid may arise.

Given the unpredictable and rapid manner in which COVID-19 has spread worldwide, and the general paucity of similar pandemics in the recent decades, it is unlikely that many contracts would contain, in their force majeure clauses anything in the magnitude of COVID-19. Consequently, it is important that contractual parties undertake various measures to mitigate potential contractual liabilities in the event that the effects of COVID19 makes the contracts temporarily or permanently impossible to perform.

Guidance for Contractual Parties

  • New Contracts: Depending on your contractual position (for example, as a supplier or a customer), ensure that your new contracts have a boilerplate clause on force majeure and consider whether the clause should include pandemics or curtailment of transportation services or utilities as a supervening event. Ensure that the clause provides for a notification requirement and deals with the issues that may arise if a force majeure event (such as COVID-19) occurs e.g. care of the project pending completion works. On the other hand, you may also rely on breach of contract where the contract does not contain a ‘force majeure clause’ and the counterparty does not or delays the performance of their contractual obligations.
  • Existing Contracts: Parties should review their existing contracts to identify whether their force majeure clause covers pandemics such as COVID-19 and the notification requirements and remedies agreed between parties. In the event that the contracts do not have provision for pandemics, parties should initiate mitigation measures such as amending/varying or entering into consensual agreements on potential liabilities that may arise. In addition, businesses should initiate the force majeure requirements under their existing contracts such as notifying their counterparties, in the event of delayed or impossibility of performance.
  • Commercial Mitigation: Parties should take pro-active steps to mitigate their commercial risks as a result of COVID-19 event and prepare for the interruption of their operations or those of their commercial counterparties arising from impossibility to perform existing contracts.

Note: It is impossible to propose a one-size-fits-all solution and every contract will have to be examined on a case-by-case basis.

LABOR RELATIONS: EMPLOYMENT/INDEPENDENT CONTRACTORS

We believe that COVID-19 will have various effects on the existing employment contracts/relationships, as well as on independent contractor arrangements. We highlight the various legal issues that are likely to arise amid the outbreak as follows:

  • Sick Leave: WHO and Government agencies have been recommending 14-day quarantine periods for people likely/suspected of having been in contact with the virus. Uganda’s Employment Act 2006 stipulates that only employees who have been in employment for two consecutive months are entitled to sick leave. It further provides for a 30-day sick leave with full pay and a further 30 days with half pay, each year. Termination is permissible when this sick leave period is exhausted. If the Act is followed, employees who are taken ill are kept in employment for at least 60 days before separation occurs.  For half of that period, they would be paid and for the other, paid only at half-pay.  Thereafter, such employee would have no earnings.
  • Workplace Safety: The Occupational Health and Safety Act 2006 imposes a duty on employers to ensure the safety, health and welfare at work for all persons working at the workplace. The Act therefore imposes a legal obligation on employers to take various measures to protect their employees from the spread of COVID-19. Failure to observe the obligation could lead to a claim for workers compensation.
  • Salary Reductions: An employer cannot unilaterally change the terms and conditions of an employee’s engagement where such a change is detrimental to the employee. If an employer wishes to implement salary reductions, it would need to obtain the employee’s written consent. Where an employer unilaterally implements such changes, the employee may succeed in a claim for constructive dismissal.
  • Redundancy: If the effect of the pandemic is long-lasting, it is likely that a number of employers will need to declare redundancies. The Employment Act 2006 contains specific provisions on the procedure that must be followed.
  • Place of Work: The Employment Act 2006 requires that employment contracts should state the place of work and it is likely that many existing employment contracts have place of work provisions. Where employees opt to or are required to work from home or remotely from work because of the outbreak, such options may result in lack of productivity in the absence of supervision and a total breakdown in the ability to render any external services. Data safety is also likely to be compromised where all work is done offsite, and technology deployed or relied on to create a semblance of a normal working day.
  • Performance: Certain employment contracts may require their employees to travel for work and we anticipate that such employees may be unable or find it impossible to perform their employment obligations due to the travel restrictions and territorial lock downs across the world. Alternatively, cases of insubordination are likely to increase.
  • Independent Contractors: No statutory requirements for contracts with independent contractors exist. General contract laws will be applicable.

Guidance for Employers:

  • Sick Leave: Employers may enter into addendum contracts temporarily waiving the sick-leave provision and providing a fully paid 60-day sick leave for employees who may require to be in self-quarantine. We note that although this may affect employers’ cash flow, it is a necessary step to ensure that affected employees enter into self-quarantine for both their safety and that of the workplace.
  • Place of Work: Employers should waive their rights under employment contracts by entering into temporary agreements/addendums allowing employees to work at home to mitigate the risk of spread of COVID-19 at the workplace. In addition, as far as it is practical, employers should deploy online means of conducting business between its employees, and clients. However, we recognize that this guiding point may be difficult for employees who may not be able to work remotely such as industrial employees.
  • Workplace Safety: Employers should conduct trainings, prepare information charts and regularly circulate safety/health information to its employees with respect to COVID-19. Employers should also provide health and safety materials at the workplace such as sanitizers, for use by employees to be legally compliant with workplace safety laws.
  • Redundancy: Employers must ensure that they follow the specific provisions outlined in law in effecting a redundancy. The most important part of a redundancy exercise is ensuring transparency throughout the process. Employers should bear in mind when considering declaring employees redundant that there are 2 distinct notices that must be issued. Where employees are members of a trade union, a slightly varied procedure applies.
  • Salary Reviews: To the extent possible, we would recommend no changes to a salary structure. If the employer has no option, the employer must obtain the employees’ consent to legally reduce their salary.
  • Reduction in Hours of Work: To the extent such a reduction in working hours will be associated with a salary reduction, the employer must obtain the consent of its employees.
  • Forced Leave: Depending on the employer’s policies and employment contracts, it may be possible to require employees to take annual leave at a specific time.

SECTOR-WIDE EFFECTS

Going by the disruptive path COVID-19 has left where it has struck, it is not inconceivable that the negative effects to the economy and social life in Uganda could be devastating.  It is anticipated that there will be significant effects on the airline industry; the hotel, hospitality and tourism industry; exports of produce to various destinations; foreign exchange rates etc.  Many of the effects cannot be mitigated without concerted engagements between the public and private sectors, including the quick and deliberate exchange of relevant information on preventive actions, relevant support and recovery efforts.  

Information sourced from Bowmans Law Firm, Uganda

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