In Ethiopia, the Labor Proclamation No. 377/2003 is the primary legal document that governs employment contracts. This proclamation, along with supplementary regulations, categorizes employment agreements into two main types: indefinite period contracts and fixed-term and piecework contracts.

Indefinite Period Contracts

The indefinite period contract is the standard employment agreement in Ethiopia. This type of contract means the employment relationship continues for an unspecified duration unless legally terminated by either party.

Fixed-Term and Piecework Contracts

Although indefinite contracts are the norm, fixed-term and piecework agreements are also permissible under specific circumstances. These circumstances include:

• Specific Piece of Work: The contract is established to complete a clearly defined task or project.
• Temporary Replacement: A fixed-term contract can be used to fill in for an absent employee due to leave, sickness, or other justified reasons.
• Increased Workload: To address a temporary surge in workload, a fixed-term contract can be implemented.

It's important to note that Ethiopian law prohibits fixed-term contracts for permanent positions. The duration of the fixed-term agreement must be based on objective criteria, such as a specific end date, project completion, or a particular event.

A well-drafted employment agreement in Ethiopia fosters a clear understanding of expectations and obligations for both employer and employee. Here's a breakdown of essential clauses for an Ethiopian employment agreement:

Parties to the Agreement

The employer and employee should be clearly identified, including their full names and legal addresses.

Job Description and Duties

The employee's job title, primary responsibilities, and reporting structure should be outlined.

Commencement Date and Type of Contract

The start date of employment and whether it's an indefinite or fixed-term contract should be specified.

Remuneration and Benefits

The employee's salary/wages, payment frequency, and any allowances or bonuses should be clearly defined. Details on paid leave entitlements, such as annual leave, sick leave, and maternity leave, as mandated by law, should be included.

Working Hours and Overtime

The standard workweek, daily working hours, and any rest periods should be established. The payment terms for overtime work, as stipulated by law, should be outlined.

Termination

The grounds for termination by both employer and employee, following legal requirements for notice periods and severance pay, should be outlined.

Dispute Resolution

A mechanism for resolving any disagreements arising from the employment agreement, such as internal procedures or referral to relevant authorities, should be established.

Additional Considerations

It's recommended to include a governing law clause, specifying that the Ethiopian Labor Proclamation governs the interpretation and enforcement of the agreement. The agreement should be drafted in Amharic, the official working language of Ethiopia.

The Ethiopian Labor Proclamation No. 1156/2019 acknowledges the probationary period as a tool for employers to assess an employee's suitability for a position. However, its application is subject to specific regulations.

Key Points on Probation Periods

• Agreement and Duration: Probation requires a written agreement between employer and employee, with a maximum duration of 60 working days commencing from the first day of employment.
• Not Mandatory: Including a probationary period is optional. If not stipulated in the contract, a probationary period is not assumed.
• Re-employment Exemption: An employee re-hired by the same employer for the same position is not subject to another probation period.

Purpose and Termination During Probation

• The probationary period serves as an evaluation window for the employer to assess the employee's performance, skills, and fit within the organization.
• During this time, termination of the employment contract is permissible by either party without notice or severance pay, as long as the reason is related to the employee's performance or suitability for the role.

Legal Considerations

• Extending the 60-day maximum limit established by law is strictly prohibited.
• While shortening the probation period is not explicitly addressed in the Labor Proclamation, legal interpretations suggest it's permissible.

Best Practices

• Clearly outline the objectives and expectations for the probationary period within the employment agreement.
• Establish a performance evaluation process during the probation to provide constructive feedback to the employee.
• Ensure the termination decision during probation aligns with the employee's performance and documented evaluation.

In Ethiopian labor law, the protection of an employer's confidential information and client base is recognized. However, the legal landscape regarding non-compete clauses is still evolving.

Confidentiality Clauses

Confidentiality clauses in employment agreements are used by employers to safeguard sensitive information. This information can include trade secrets, customer lists, and proprietary data. These clauses typically define the confidential information and outline the employee's responsibility to maintain confidentiality. They may also restrict disclosure even after employment ends.

Non-Compete Clauses (Limited Scope)

Currently, Ethiopian law allows for non-compete clauses specifically for managerial positions. These clauses can restrict the employee from joining a competing company or starting a competing business for a limited period after termination. However, the specific limitations on duration and scope haven't been definitively established by case law.

Legal Considerations and Best Practices

While protecting legitimate business interests is essential, Ethiopian law emphasizes ensuring employee mobility and protecting livelihoods. Non-compete clauses deemed excessively broad geographically or temporally could be challenged as unreasonable and unenforceable in court.

Recommendations

For confidentiality clauses, it is recommended to clearly define the confidential information and the employee's obligations for handling and safeguarding it. For managerial positions, consider including narrowly tailored non-compete clauses focusing on protecting core business interests for a reasonable timeframe after termination.