Litigation – Litigator Moz

When Things Get Harsh – Challenging Labour Inspectorate Decisions

litigatormoz — Sun, 25 Oct 2020 09:50:45 +0000

One unavoidable scenario for companies in Mozambique are labour inspection visits. Although labour inspectors visit companies to verify compliance from an educational perspective, their visits may still raise tension. Normally, labour inspectors focus on compliance of common labour and social security obligations, but one specific area that attracts their attention is the employment of foreign citizens. This is as such because it seems to be likely for companies not to follow all the details when managing foreign employees’ contracts.¹ Also, some companies may have a foreign employee working in their premises without proper work permit and stamped employment contract. In other cases the work permit application is still being processed by the labour department while the foreign employee is working already. Irrespective of the scenarios, experience shows that if a company is non-conforming with matters regarding employment of foreign citizens, the labour inspectors will be stricter. In such cases a violations report (“auto de notícia”) containing huge fines is likely to be issued. What now?

There are two probable scenarios: (i) pay the fines and fix what is non-conforming, or (ii) challenge the violations report.

But how one challenges in these circumstances? Firstly, there is the possibility of presenting a formal complaint (“reclamação”)² to the competent hierarchical superior who confirmed the violations report.³ In this case the complaint must be submitted within fifteen days from the date the violations report was notified. In the complaint the company has the opportunity to expose its legitimate grounds to challenge and request that the fine is cancelled or reduced. For instance, the company may provide a broader context to show that the labour inspectors may have misjudged the real company’s situation by imposing unfair and disproportionate fines. Also, the company may provide material evidence. At this stage verbal interaction with labour authorities is less effective – conflict has knocked the company’s door, it is time to fight.

Submitting a formal complaint suspends the legal period for payment of fines. The suspension prevails until the notification of the labour inspector-general’s decision. This decision must be taken within twenty days from the date of complaint submission. If there is no formal response from the labour inspector-general, within the legal period, the decision is deemed unfavourable, i.e., tacit rejection. On the other hand, if there is a favourable decision, i.e., the fine is cancelled, then the violations report is archived. Moreover, if the decision consists in reduction of the fine amount, the violations report is adjusted accordingly.

Yet, the company may still want to go further and keep challenging. In such case, it may submit a hierarchical appeal (“recurso hierárquico”) to the Minister of Labour or take the case to the courts.⁴ Once the hierarchical appeal is submitted to the Minister of Labour a response is expected within fifteen days, and if there is no response, again, tacit rejection occurs. In this case the company may request the Minister to issue a formal decision or confirm the occurrence of tacit rejection. If the decision is issued in unfavourable terms, or, if tacit rejection is confirmed, or, if the Minister just remains silent, then the company can proceed to the courts by submitting a litigious appeal (“recurso contencioso”).⁵

It is evident that challenging labour inspectorate decisions can be a time consuming process. Fortunately, there are legal remedies the company can use to defend its rights, provide accurate context to the labour authorities, and hopefully have the fines cancelled or reduced. Notwithstanding the above, safety in the details is the best course to follow in order to prevent stressful situations.⁶ Also measurements to identify, prevent and mitigate risks⁷in management of foreign employee’s contracts can make a difference between tension and free cooperation in the next labour inspection visit, and, above all, lead to a more successful outcome when things get harsh.

The Best Way to Win Legal Disputes

litigatormoz — Mon, 19 Oct 2020 18:03:00 +0000

“Better a bad settlement than a great trial.” This may sound a bit strange as it is mentioned by a litigator. Litigators are sometimes portrayed as conflict seeking, warmongers whose thirst is legal battles in the courts. However, it bears note that the above is one of the very first lessons law students get in law procedure classes. In fact, we are first taught to be peacemakers, to avoid conflict, and only resort to litigation as the utmost and last call. And as we climb the professional ladder, we get to understand the pragmatism of this lesson. Legal disputes are time consuming. Huge amounts of money are spent during a court or arbitration case. In the specific case of Mozambique, court costs are of unsurmountable amounts. Mozambique is among the countries where justice is expensive, whether for individuals or for companies.¹

Consequently, that first lesson law students are taught in civil procedure classes seems to make sense. Legal disputes can cost time, emotions and…money!

However, no matter the approach, conflict is likely to come its way. Whether by submitting a lawsuit, or by being sued, a company will eventually have to face a legal dispute. It is part of business, it is part of life! And in such situations, one may ask how best to win a legal dispute. The approach to this matter does not differ from one specific rule of life: “Prevention is better than cure.”

Some examples of the pragmatism of this rule in litigation can be highlighted. In the business environment, most conflicts arise in contracts, and prevention can be ensured by including specific clauses that can lead to peaceful dispute resolution. In my practice I notice that in most situations, parties “forget” to include key clauses such as termination clause, force majeure clause, reciprocal obligations clauses, dispute resolution clause, governing law clause, etc.² Failure to include key contractual terms may lead to unfair situations such as lion share clauses. Seeking contractual clarity is key to a better settlement of potential disputes.

Another example is labour litigation, where, in most cases employees may sue the company alleging unlawful dismissal or unfair contract termination. The case is won if a disciplinary hearing has been conducted and all the formalities followed with precision, or if contract termination has strictly followed the legal requirements. In such cases, litigation will be less problematic and peaceful settlement is a huge possibility.

In the same sequence I can say that tax litigation is won by the company paying taxes timely, complying strictly with its periodic obligations, avoiding interests and fines. If the Tax Authority proceeds to the courts the chances for a company to prove its case are more likely to be successful.

All the above is common sense in litigation, but it is always worth repeating since it is easy to take things for granted when the sea is quiet.

This takes us to consider the importance of a company doing its homework by timely identifying, preventing, or mitigating risks. Periodic legal due diligences on company’s different areas of activity are pivotal. Most companies think about legal due diligence when a possible deal is on the horizon. One may intend to sell shares, purchase assets, or transfer a title or license. But legal due diligence should not only be confined to M&As known for their complexity. One may want to check if its periodic labour law, immigration law, or corporate law obligations are conforming and up to date. One may intend to see if its contracts with suppliers and clients are conforming. One may intend to ensure that any litigation current or past is or was conducted properly. These measurements to identify, prevent and mitigate risks, can make a difference between winning a court or arbitral case and suffering its setbacks.

Legal disputes vary in complexity and, of course, there is no one-size-fits-all rule on the best way to win. But that common-sense rule of life, i.e., prevention better than cure, is always recommendable and up to date. Timely identifying, preventing and mitigating risks is likely to bring far better results in a legal dispute. Legal due diligence is an effective tool for it!