Defense Construction Enterprise Tarmaber Asphalt RoadProject v Yirga Getaneh and Asgelil Tesfaye (Case No 201692, 2016)

Introduction 

The relationship between employers and employees in Ethiopia has historically beenshaped by the tension between economic development and the protection of workers’ rights. Nowhere is this tension more visible than in the construction sector, anindustry characterized by temporary contracts, fluctuating labor demands, anduncertain job security. The case of Defense Construction Enterprise, Tarmaber Asphalt Road Project v Yirga Getaneh and Asgelil Tesfaye (2016) before the Federal Supreme Court Cassation Bench illustrates this tension in sharp relief. 

At its core, the case concerned whether construction workers employed on a project basis are entitled to severance pay once the project ends. The ruling represents alandmark moment in Ethiopian labor law as it clarified the extent to whichtheprotections guaranteed under the Ethiopian Employment Proclamation No 1156/2011apply to workers in temporary, project-based industries. Beyond its immediate impact on the parties, the decision has broader implications for the balance between labor flexibility for employers and the security of employees in an economy heavily reliant on construction and infrastructure development. 

This paper examines the case in detail, analyzing the facts, the legal issue, thearguments of both sides, the reasoning of the court, and the significance of thejudgment. It also situates the decision within the wider context of Ethiopian labor lawand offers a critical reflection on its implications. 

Background on the Ethiopian Labor Law and the Employment Proclamation

Ethiopia’s labor law framework has undergone significant reform over the last twodecades, with the aim of both encouraging investment and safeguarding basic worker protections. The Ethiopian Employment Proclamation No 1156/2011 was enactedas part of this reform effort, codifying the rights and obligations of employers andemployees across various industries.

Among its stated objectives, the Proclamation seeks to: 

• Provide minimum guarantees of protection for workers. 
• Ensure fair treatment of employees, including those engaged in temporaryandproject-based employment. 
• Balance the need for economic growth with the protection of fundamental labor rights. 

One of the recurring questions under this framework is how to treat workers employed in construction projects. Unlike permanent employees in manufacturingor service industries, construction workers are often hired for a finite period, tied totheduration of a specific project. Once the project is completed, their employment inevitably comes to an end. The legal challenge, however, is whether such endings constitute a “natural termination” of employment contracts, or whether they shouldbeconsidered dismissals that trigger redundancy protections, including the right toseverance pay. 

The present case provided the Cassation Bench with an opportunity to clarifythis critical distinction. 

Facts of the Case 

The applicant, Defense Construction Enterprise, is a state-owned entity involvedinlarge-scale infrastructure development. For the Tarmaber Asphalt Road Project, it hired the respondents, Ato Yirga Getaneh and Ato Asgelil Tesfaye, as constructionworkers. 

Upon completion of the road project, the respondents were dismissed fromemployment. The employer justified the termination on the basis that the project hadconcluded and, consequently, there was no further work requiring their services. Therespondents, however, challenged the termination before the labor courts, arguingthat the dismissal was unlawful and demanding either reinstatement or severance pay. 

The applicant maintained that the workers were daily laborers employed for a project with a clearly defined end date. In its view, the contract naturally expired whentheproject was completed, meaning the workers had no right to severance pay. Tosupport this, the applicant relied on Article 24(1), which recognizes termination upon expiry of a contract, and Article 30, which allows employers in construction projects to reduce their workforce when gradual completion reduces labor demand. 

The respondents, on the other hand, argued that the case was one of redundancywithin the meaning of the Proclamation, thereby entitling them to severance payunder Article 39(1)(c). The matter eventually reached the Federal Supreme Court Cassation Bench. 

Issue 

The central legal issue before the Cassation Bench was: 

Does a construction worker, dismissed due to the completion of a project, have theright to severance pay under Ethiopian labor law? 

Arguments of the Parties 

Applicant (Defense Construction Enterprise) 

1. The respondents were engaged as daily laborers for a temporary project, and their contracts expired naturally upon completion of the project. 
2. Article 24(1) of the Employment Proclamation recognizes terminationof employment upon the expiry of a fixed-term contract or upon completion of thework for which the employee was hired.1
3. Article 30 allows employers in construction projects to reduce their workforcewithout formal redundancy procedures when work gradually decreases duringproject completion.2
4. Since the employment ended by the natural operation of law, the concept of redundancy and by extension severance pay was inapplicable. 

Respondents (Yirga Getaneh and Asgelil Tesfaye) 

1. Their dismissal was effectively a case of redundancy because their services wereno longer required once the project ended. 
2. Article 39(1)(c) provides that employees terminated due to redundancyareentitled to severance pay, and the Proclamation contains no exceptionfor construction workers.3
3. Severance pay is a fundamental labor protection under Ethiopian law, intendedtocushion employees against sudden unemployment. 
4. To deny construction workers severance benefits would undermine the protectivespirit of the Proclamation and expose an already vulnerable class of workers tofurther insecurity. 

Judgment 

The Cassation Bench ruled in favour of the respondents. It held that constructionworkers dismissed due to redundancy are entitled to severance pay under Ethiopianlabor law. The applicant’s argument that the contracts naturally expired was rejected. The court clarified that termination at project completion still qualifies as redundancy, and therefore, the workers must be compensated through severance pay. 

Legal Reasoning 

Majority Opinion 

The majority of the Cassation Bench adopted a purposive interpretation of theEmployment Proclamation. It noted that Article 30 permits employers in constructionprojects to reduce their workforce without following formal redundancy procedures. 

However, this provision does not exempt employers from the obligation to provideseverance pay. 

When read together with Article 39(1)(c), the court held that the lawenvisages severance pay for all cases of redundancy, regardless of the nature of employment. Severance pay was characterized as a fundamental protection under the labor lawframework, designed to provide employees with financial security when theyaredisplaced from work. 

The absence of any explicit exclusion for construction workers was decisive. Themajority concluded that denying severance pay to construction workers simplybecause their employment was project-based would contradict the protective spirit of the Proclamation. 

Dissenting Opinion 

Two judges dissented, presenting a narrower interpretation. They argued that therespondents were hired specifically for the duration of the Tarmaber Asphalt RoadProject, and both parties knew from the outset that the employment would end uponcompletion of the project. Therefore, their termination was not a redundancy but thenatural conclusion of a fixed-term arrangement. 

The dissent warned that extending severance pay to such cases could imposedisproportionate burdens on employers in temporary, project-based industries. Insectors such as construction, where short-term contracts are the norm, employers could face substantial financial liabilities if severance pay were mandated at the endof every project. Such a precedent, they argued, might discourage investment andemployment in industries heavily reliant on project-based work. 

Precedents Cited

The court referred to earlier cassation decisions, including Case Nos 25511, 99799, 105620 and 138054, 4which had considered the scope of redundancy andtheapplicability of severance pay. These precedents collectively underscoredtheprinciple that severance pay is a universal entitlement unless explicitly excluded. 

Comparative Perspective 

The issue of severance pay for project-based workers is not unique to Ethiopia. Inmany jurisdictions, courts have grappled with whether temporary or seasonal workers should receive redundancy benefits. 

For instance, in South Africa, the Labour Relations Act entitles even fixed-termemployees to severance pay when their contracts are terminated due to operational requirements, unless the termination coincides exactly with the expiry of the contract term. In India, by contrast, severance pay provisions generally exclude workers employed for specific projects, reflecting a more restrictive approach. 

By aligning itself with the more protective model, the Ethiopian Cassation Benchemphasized worker security over employer flexibility. This places Ethiopia withinaglobal trend of strengthening protections for vulnerable categories of workers, particularly in industries known for precarious employment. 

Policy Implications 

The ruling has significant implications for Ethiopia’s labor market, particularly intheconstruction sector: 

For Employers: The decision compels employers in project-based industries to planfor severance liabilities, increasing labor costs. Enterprises may need to set asidefinancial reserves to cover severance payments, which could affect bidding strategies in public infrastructure projects. 

For Employees: The ruling strengthens the safety net for construction workers, whoare often the most vulnerable to job instability. By ensuring access to severance pay, the decision mitigates the economic shock of sudden unemployment. 

For Policy Makers: The case highlights the need for legislative clarity. If thelegislature intends to exclude certain categories of workers from severance protections, such exclusions must be expressly stated. Otherwise, courts are likely to continueinterpreting the law in favour of employee protection. 

Critical Reflection 

The Cassation Bench’s ruling is commendable for its emphasis on the protectivepurpose of Ethiopian labor law. By extending severance pay to construction workers, the decision promotes fairness and recognises the inherent vulnerability of workers intemporary industries. In a country where infrastructure projects are a major driver of employment, the judgment ensures that economic development does not come at theexpense of basic labor protections. 

Nevertheless, the dissenting opinion raises a legitimate concern. Project-basedindustries operate on tight financial margins, and the obligation to pay severance at the conclusion of every project could discourage employers fromhiring largenumbers of workers. In the long run, this may reduce opportunities for casual employment in construction. 

A possible middle ground could be for the legislature to introduce differentiatedseverance schemes for project-based employment, perhaps providing a lower severance rate for temporary workers or encouraging employers to contribute toapooled severance fund. Such measures would strike a balance between worker protection and economic practicality. 

Conclusion 

The decision in Defense Construction Enterprise v Yirga Getaneh and Asgelil Tesfayeis a landmark in Ethiopian labor jurisprudence. By affirming the right of project-based construction workers to severance pay, the Cassation Bench reinforced the protectiveethos of the Employment Proclamation. The ruling enhances job security inanindustry notorious for its instability while reminding employers of their obligations toplan responsibly for workforce reductions. 

At the same time, the concerns raised in the dissenting opinion cannot be ignored. Thechallenge for Ethiopia moving forward will be to reconcile the twin imperatives of protecting vulnerable workers and maintaining a flexible, investment-friendly labor market. This case thus serves as a pivotal reference point in ongoing debates about thefuture of Ethiopian labor law. 

Bibliography 

• Legislation 
• Ethiopian Employment Proclamation No 1156/2011. 

Cases 

• Defense Construction Enterprise, Tarmaber Asphalt Road Project v YirgaGetaneh and Asgelil Tesfaye (Federal Supreme Court Cassation Bench, Case No201692, 2016). 
• Federal Supreme Court Cassation Bench, Case No 25511.
• Federal Supreme Court Cassation Bench, Case No 99799.
• Federal Supreme Court Cassation Bench, Case No 105620.
•  Federal Supreme Court Cassation Bench, Case No 138054.

1 Ethiopian Employment Proclamation No 1156/2011, art 24(1). 

2 ibid, art 30.

3 ibid, art 39(1)(c).

4 Federal Supreme Court Cassation Bench, Case Nos 25511, 99799, 105620, 138054.