Appeal Court Affirms Monetary Compensation Against MTN Over Restrictive Employment Clause

The Lagos division of the Appeal Court, has dismissed an appeal filed by the telecommunication giant, MTN Nigeria Communications Limited, against the judgment of the National Industrial Court, which awarded N5.1 million in compensation to a former employee, Mr. Theodore Nwabueze Ikpa, over what was held to be an unreasonable post-employment restraint of trade clause.

In a unanimous judgment was delivered by a- three-member panel comprising Justices Danlami Zama Senchi, Boloukuromo Moses Ugo and Paul Ahmed Bassi, upheld the decision of the National Industrial Court delivered on June 13, 2018.

The appeal arose from the termination of Ikpa’s employment as Procurement Manager in December 2008.

Ikpa through his lawyer, Adetunji Adedoyin-Adeniyi, who led Uju Amara Eliwelu and Olanrewaju Olaegbe, had challenged his dismissal, alleging that MTN failed to give him the required one-month notice or salary in lieu of notice and that a restrictive covenant in his employment contract prevented him from securing alternative employment until he reached retirement age.

Before the National Industrial Court, Ikpa sought declarations that his termination was unlawful, payment of salaries up to his retirement in October 2010, retirement benefits, or alternatively N10 million as damages for the restraint of trade clause.

Though, trial court dismissed most of his claims but awarded him N5,101,674 as compensation for the four-year restrictive covenant and N100,000 as costs.

Dissatisfied with the award, MTN through its lawyer, Solomon Mbadiwe, appealed the judgment, and argued that the lower court lacked jurisdiction to entertain the alternative claim.

MTN also claimed that the restraint clause was reasonable and enforceable, and that Ikpa failed to prove any actual loss, and that the compensation awarded was excessive.

The telecommunications company also contended that the restrictive covenant merely protected its legitimate business interests, including confidential information and trade secrets, and insisted that the former employee voluntarily chose to comply with the clause.

It also argued that there was no evidence showing the company prevented Ikpa from obtaining another job.

However, Ikpa maintained that the four-year restriction effectively denied him employment opportunities, pointing to evidence that MTN had previously sued former employees over similar clauses, thereby creating a genuine fear of litigation among prospective employers.

Justice Danlami Zama Senchi, in his lead judgment, rejected all four grounds of appeal formulated by the MTN, holding that the National Industrial Court properly exercised jurisdiction over the employment dispute and correctly evaluated the evidence before it.

The judge court also held that the trial court rightly found the restraint clause unreasonable and upheld the award of compensation. It also ruled that there was no basis to interfere with the costs awarded, emphasizing that costs are discretionary and ordinarily follow the event.

Describing the MTN’s appeal as lacking merit, the Court of Appeal affirmed the National Industrial Court’s judgment in its entirety and awarded an additional N500,000 in costs against MTN Nigeria Communications Limited in favour of Ikpa.

Other members of the panel, Justice Boloukuromo Moses Ugo and Justice Paul Hamed Bassi concurred with Justice reasoning of Justice Danlami.

In agreeing with Justice Danlami’s lead judgment, Justice Boloukuromo held that: “I had a of the leading judgment of my learned brother Danlami Zama Senchi, J.C.A. His lordship’s reasoning and conclusion reflects mine. I, therefore, have nothing useful to add. I adopt His lordship’s judgment as mine in also dismissing the appeal.

“I also subscribe to all the consequential orders, contained in the leading judgment, including as to costs”.

While justice Bassi held that: “I had the privilege of reading the illuminating lead judgment just delivered by my learned brother Danlami Zama Senchi JCA in draft form.

“I am in complete agreement with his lordship that this appeal is devoid of merit. I also dismiss same and affirm the judgment of the lower Court in Suit No: NICN/LA/05/2016 delivered on the 13 day of June, 2018.

“I also abide by the consequential orders made as to costs in favour of the Respondent in the lead judgment”.