KAMPALA – The Industrial Court has delivered a landmark judgment clarifying the legal consequences of outsourcing employees in Uganda, ordering the Registered Trustees of the Church of Uganda to compensate five former All Saints’ Cathedral employees after finding that they were rendered redundant when the cathedral outsourced its security and cleaning services during the COVID-19 pandemic.
Although the court upheld the Church’s decision to restructure its operations, it ruled that the institution failed to honour its own Human Resource Manual, which guaranteed affected employees three months’ salary in lieu of notice whenever termination resulted from redundancy.
In a judgment delivered by Head Judge Justice Linda Lillian Tumusiime Mugisha, together with panelists Rose Gidongo, Beatrice Achiro and Charles Wacha Angulo, the court dismissed claims running into hundreds of millions of shillings for overtime, general damages and severance pay but awarded redundancy compensation, leave pay and gratuity to several former workers.
The decision is expected to have far-reaching implications for employers across Uganda that increasingly rely on outsourced labour.
Pandemic Cost-Cutting Sparked Court Battle
The dispute traces its roots to the COVID-19 lockdown in 2020 when All Saints’ Cathedral resolved to outsource its security and cleaning departments as part of efforts to reduce operational costs amid declining revenues.
Eleven former employees led by Geoffrey Ndyabahika challenged the decision before the Labour Officer before eventually taking the matter to the Industrial Court.
The workers argued that they had faithfully served the cathedral, some for more than a decade, but were abruptly pushed out after management handed their jobs to private outsourcing companies.
They maintained that the outsourcing exercise amounted to redundancy and that the Church failed to pay benefits guaranteed under its own Human Resource Manual.
Besides redundancy compensation, they sought over Shs446 million in overtime claims, annual leave, gratuity, send-off packages, repatriation allowances, general damages and costs.
The Church rejected the allegations.
Its lawyers argued that most of the claimants’ employment contracts had already expired before the outsourcing exercise and that those with running contracts had been lawfully terminated after receiving proper notice.
The cathedral further maintained that all terminal benefits had already been paid and insisted that workers had failed to prove claims of unpaid overtime.
Court Makes Key Finding on Outsourcing
Perhaps the most significant aspect of the judgment is the court’s extensive discussion on outsourcing and redundancy.
The judges observed that although Uganda’s Employment Act does not expressly define redundancy, outsourcing services effectively removes jobs previously performed by in-house employees.
According to the court, once an employer transfers entire departments to independent contractors, employees occupying those positions are rendered redundant unless they are absorbed by the outsourcing company.
The judges emphasized that employers have every right to reorganize their businesses and outsource services where necessary.
However, they stressed that this managerial discretion must always be exercised fairly and in accordance with both the law and contractual obligations.
The ruling therefore establishes that outsourcing itself is not unlawful.
Instead, the legal dispute turns on whether employers fulfil all obligations owed to workers whose positions disappear because of the restructuring.
Only Five Employees Qualified
One of the biggest setbacks for the claimants came after the court scrutinized each employment contract individually.
The judges established that six workers’ contracts had already expired before the outsourcing exercise.
Because fixed-term contracts naturally expire by operation of law, the court ruled that the Church had no obligation to renew them.
As a result, those workers could not successfully claim redundancy compensation.
However, the court found that five employees still had valid contracts when the outsourcing decision took effect.
These included Geoffrey Ndyabahika, Nathan Ekadu, Florence Nabuzaale, Issau Adeyngachwiny and Faustin Oriongan.
Their employment ended specifically because the cathedral abolished the departments in which they worked.
The court therefore concluded that these five employees had genuinely been declared redundant.
Church Breached Its Own HR Manual
While the Employment Act ordinarily requires employers to give one month’s notice depending on years of service, the judges found that the Church had voluntarily adopted a more generous policy in its Human Resource Manual.
Clause 13.6.2 expressly promised employees three months’ salary in lieu of notice whenever termination resulted from redundancy.
The judges ruled that internal employment policies form part of an employee’s contract and become legally enforceable where they offer benefits more favourable than statutory minimums.
Because the Church relied only on the Employment Act and ignored its own Human Resource Manual, it breached the contractual rights of the affected workers.
The court consequently ordered Geoffrey Ndyabahika and Florence Nabuzaale, who had already received one month’s salary, to receive an additional two months’ salary each.
Nathan Ekadu, Issau Adeyngachwiny and Faustin Oriongan were awarded the full three months’ salary in lieu of notice.
Massive Overtime Claim Crashes
The workers had also asked the court to award them over Shs446 million in overtime.
They alleged they routinely worked 12-hour shifts and, during the COVID-19 lockdown, sometimes worked up to 16 hours daily without receiving additional pay.
They further claimed supervisors promised overtime would be paid once they eventually left employment.
However, the Industrial Court found the evidence insufficient.
Although the workers produced attendance registers and testified that they routinely exceeded normal working hours, the judges said they failed to specify exact dates and hours worked.
The court observed that while employers maintain employment records, employees must still provide sufficient particulars to support monetary claims.
Without evidence showing the specific excess hours worked, the court ruled that it could not calculate overtime.
The entire overtime claim was therefore dismissed.
Leave Claims Also Largely Rejected
Another major portion of the lawsuit involved claims for accumulated annual leave stretching back to 1999.
The judges were highly critical of these claims.
They observed that some claimants were not even employed by the Church in 1999.
The court described the claims as unsupported and noted that the Human Resource Manual only permitted annual leave to accumulate for a maximum of two years under exceptional circumstances.
The judges further remarked that the employees had presented no evidence showing they ever requested leave or agreed with management to carry it forward for extended periods.
Although most leave claims failed, the court awarded one month’s salary in lieu of untaken leave for the five workers who had been declared redundant in 2020.
Gratuity Claim Succeeds
Unlike overtime and leave, the gratuity claim proved successful.
After examining employment contracts and payroll records, the judges concluded that gratuity formed part of the workers’ contractual benefits.
While the Church argued gratuity had already been settled through payroll and National Social Security Fund contributions, the court found insufficient evidence that all contractual gratuity had actually been paid.
The Registered Trustees of the Church of Uganda were therefore ordered to pay gratuity to all claimants according to the contractual computations presented during the trial.
No General Damages
Despite finding breaches of the Human Resource Manual, the court declined to award general damages.
It reasoned that the redundancy itself was lawful because the employer was entitled to reorganize its operations during the pandemic.
The only legal fault lay in the Church’s failure to comply with its own redundancy compensation policy.
Similarly, claims for severance pay were dismissed because the workers had not been unfairly dismissed.
Instead, the court held that their employment lawfully ended through redundancy arising from business restructuring.
A Significant Employment Law Precedent
Beyond the compensation awarded, labour lawyers are likely to view the judgment as one of the Industrial Court’s clearest statements on outsourcing and redundancy.
The court confirmed that employers retain broad managerial powers to restructure operations, including outsourcing entire departments.
However, those powers come with corresponding obligations.
Employers cannot ignore contractual benefits contained in staff manuals simply because the Employment Act provides lower minimum standards.
The ruling also reinforces the principle that Human Resource Manuals are not merely administrative documents but can become binding contractual obligations where they provide employees with superior terms.
For organisations increasingly turning to outsourcing to reduce costs, particularly after economic shocks such as COVID-19, the judgment serves as a reminder that restructuring decisions must be accompanied by strict compliance with contractual redundancy provisions.
Final Orders
The Industrial Court declared that the claimants were lawfully terminated but ordered the Church to:
- Pay additional redundancy compensation to five employees whose contracts were still running when outsourcing occurred.
- Pay one month’s salary in lieu of untaken leave to those same employees.
- Pay gratuity due under the employment contracts.
- Grant repatriation benefits only to Issau Adeyngachwiny.
- Reject claims for overtime, general damages, severance pay and additional send-off packages.
- Bear no order as to costs.
The ruling closes a legal battle that has lasted nearly five years since the pandemic-triggered restructuring at All Saints’ Cathedral, while establishing an important precedent on how Ugandan employers must handle outsourcing exercises that eliminate existing jobs.
