Thousands Face Layoffs As State Bank, Commercial Nominees Scrap Opaque Outsourcing Deal

Labor union considering litigation

A labor union representing the workforce of a subsidiary of the state-owned Commercial Bank of Ethiopia (CBE) is threatening to take legal action as thousands of employees are being laid off across the country with little warning and without severance packages.

The Reporter has observed hundreds of Commercial Nominees (CN) employees gathering at Confederation of Ethiopian Trade Union (CETU) after receiving sudden termination notices over the last few weeks.

CN, a wholly-owned CBE subsidiary that serves as a recruitment firm for the bank and other businesses and institutions, recently began laying off thousands of its employees following a decision by CBE executives to recruit their own manpower.

Thousands of security personnel, clerks, messengers, gardeners, cleaning staff, and parking attendants have lost their jobs over the last few weeks, according to Bahru Melesse, chairperson of the CN Employees’ Union.

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“Nearly 7,000 employees have lost their jobs. It’s a much higher figure than we expected. The numbers are rising every day, and we’ll only know how many when it’s over,” Bahru told The Reporter.

Company reports indicate CN has recruited nearly 45,000 employees on behalf of its clients, with 34,000 serving in the workforce of the CBE.

Contract agreement documents obtained by The Reporter and carrying the signature of Abie Sano, CBE president, indicate the behemoth commercial bank uses CN to hire manpower for several job descriptions.

A notice from CBE executives to their counterparts from April this year states the bank is looking to void some of the contracts and begin filling some of these jobs through its own recruitment process. The job contracts the bank walked back include those for cleaning staff, security personnel, and non-clerk positions.

The CBE cited “problems with clarity on claims-based payments and other related issues” during the implementation of the principal contract for its decision.

“For implementation convenience and efficiency, some payment and collection activities have to be passed from the corporate level to CBE districts and service provision branches. It was also found necessary to shed light on the role confusion encountered in the process of implementing the principal contract,” reads the document obtained by The Reporter.

CN has begun laying off employees as a result of the bank’s decision.

Bahru says both the bank and CN have breached labor laws and procedures in this abrupt process of contract terminations and layoffs.

“CN is laying off employees in positions not mentioned in the document. The document states security, cleaning and non-clerical works but CN is firing workers in other lines of work, including messengers, lobby greeters, parking attendants, and gardeners,” said Bahru.

He told The Reporter the layoffs are taking place in Addis Ababa and elsewhere.

“We’re receiving reports of terminations every hour,” said Bahru.

The Chairperson says CN is not abiding by labor laws that oblige an employer to provide termination notices to employees at least three months ahead.

“CN notified its employees just one month ahead. The company notified us in early August; now it’s telling employees they are terminated effective August 30, 2024,” said Bahru.

He told The Reporter CN is also declining to provide severance packages to the employees losing their jobs.

“The company told us it would pay compensation only to employees who have worked for it for five years or more,” said Bahru.

He argues that although the employees only hold direct contracts with CN and not CBE, the bank must also be held responsible for its actions.

“We’re responsible for CBE’s success and CBE must also be responsible for us. It is a state enterprise and must discharge its social responsibility,” said Bahru. “According to the law, a company can lay off employees only in bankruptcy. CBE is definitely not bankrupt.”

He told The Reporter that the majority of those being laid off are women who migrated from rural areas, often with children to feed.

“Some are also pregnant. These people are going to be on the streets. Even while working under CN, they received meager salaries and were barely able to support their livelihoods. Most are forced to beg for food as their salaries can cover only their rent. Now they’re being laid off without compensation for the years they have served CBE and CN,” said Bahru.

He argues it is “immoral and illegal” for the CBE to terminate part of its contract with CN with the intention of filling the vacancies itself.

“These job positions are still there. CBE is firing these people and recruiting its own. There’s no justification for this. If it were removing the job positions entirely, maybe it would have been OK. But the positions are still there and it’s all about replacing people,” said Bahru.

He claims the people losing their jobs are being intimidated into foregoing their rights.

A letter addressed to CN from CBE executives last month attempts to clear up misunderstandings with the contract adjustment and ensuing layoffs.

“CBE will start implementing new standards for outsourced positions on lobby personnel and file operation positions beginning August 1, 2024. This does not mean CN has to start laying off the employees on August 1, 2024. We have observed confusion regarding the new standards. Based on the law, CN shall implement the selected exit strategy for employees to be laid off considering their contract end dates and laws, and by avoiding incurring additional costs to CBE,” reads the letter signed by Sura Saqeta, CBE’s deputy head of facilities administration.

However, the termination letters CN issued to its employees stated the layoffs were taking place because the CBE had terminated contracts for their job positions.

The letters state the bank terminated the contracts beginning June 2024.

Tilahun Tsegaye, director of CN, declined to comment on the issue.

“Why is The Reporter covering this?” he asked, before abruptly ending a telephone conversation.

CBE executives also declined to comment.

CN hires employees on a one-year contract basis, and the company’s contracts with clients such as CBE are also time bound. This means CN is unable to provide new contracts with other clients for the employees dropped by CBE.

But Bahru says the labor union he leads is trying.

“We’re negotiating with CN to find jobs at other companies for those who are laid off by CBE,” he said.

He hinted the union will take legal action to secure severance packages and compensation for its members.

“The courts will solve the issues with CN refusing to pay employees with less than five years at the company,” said Bahru. “But before going to court, we are begging CBE and CN to reconsider this unjust decision.”

The lengthy contract between CN and its Employees’ Union clearly states that an employee can only be laid off after all alternatives to retain the employee are exhausted. The contract obliges CN to provide termination notices three months ahead and pay out compensation packages.

However, another article included in the agreement states that employee contracts are rendered void without precondition if the employing client terminates its contract with CN.

Nonetheless, the agreement also specifies that employees have the right to compensation as per Article 39 of the 2019 Labor Proclamation, which states “a worker who has completed his probation period and who is not eligible for pension shall have the right to receive severance pay from the employer.”

CBE’s 2022/23 annual report indicates the bank had invested 3.1 billion birr in CN as of June 2023, up from 2.57 billion the year prior.

CN and Bole Printing Enterprise, another CBE subsidiary, generated a combined revenue of a little under three billion birr in 2022/23, with CN accounting for the bulk, according to the annual report.

Commercial Nominees was established in 1965.