Appeal Court Affirms N5.1m Compensation Awarded To Ex-MTN Employee Over Restrictive Employment Clause

The Lagos Division of the Court of Appeal has upheld the verdict of the National Industrial Court, which awarded N5.1 million in compensation to a former employee of MTN Nigeria Communications Plc, Theodore Ikpa, over a restrictive post-employment clause deemed unreasonable.

In a unanimous judgment delivered by a panel of three Justices, Danlami Zama Senchi, Boloukuromo Moses Ugo, and Paul Ahmed Bassi, the court dismissed MTN’s appeal for lacking in merit. It affirmed the initial judgment of June 13, 2018.

The dispute arose from the termination of Ikpa’s role as MTN’s Procurement Manager in December 2008.

He had challenged his dismissal, arguing that MTN failed to provide the mandated one-month notice or payment in lieu of notice.

Ikpa had also claimed that a restrictive covenant in his contract effectively prevented him from obtaining new employment until reaching retirement age.

At the National Industrial Court, Ikpa sought declarations that his dismissal was unlawful, payment of salaries up to his retirement in October 2010, retirement benefits, or, in the alternative, N10 million in damages for the restrictive covenant.

While the trial court dismissed most of his claims, it awarded him N5,101,674 as compensation for the four-year post-employment restraint clause and N100,000 in costs.

MTN, dissatisfied with the judgment, appealed, arguing that the court lacked jurisdiction over the alternative claim and asserting that the restraint clause was reasonable and enforceable, designed to safeguard legitimate business interests, including confidential information and trade secrets.

The appellant had further argued that Ikpa had not demonstrated any actual financial loss and claimed the damages awarded were excessive. It also maintained there was no evidence of conduct by the company preventing him from securing new employment, asserting he voluntarily complied with the covenant.

While Ikpa countered by arguing that the four-year restriction significantly hindered his employment prospects, he cited evidence of legal actions previously taken by MTN against former employees over similar clauses, which created a genuine fear among prospective employers of litigation.

Delivering the lead judgment, Justice Senchi rejected all four grounds of appeal, affirming that the National Industrial Court properly exercised its jurisdiction and correctly assessed the evidence.

The appellate court agreed that the lower court was correct in finding the restriction unreasonable and in awarding compensation. It also upheld the award of costs, noting such awards are discretionary and typically follow the case outcome.

Declaring MTN’s appeal unfounded, the Court of Appeal dismissed it in totality, affirmed the initial judgment, and awarded an additional N500,000 to Ikpa as costs.

Justices Boloukuromo Moses Ugo and Paul Ahmed Bassi concurred; Justice Ugo expressed full agreement with the lead judgment and its reasoning, while Justice Bassi found the appeal lacking in merit and upheld the judgment, including the costs award

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