Industrial Court Declares That Employers Cannot Avoid Responsibility for Salary Arrears by Concealing Behind Unregistered Business Names

Waboga David
Jul 10
6 min read

Industrial Court Clarifies the Scope of Employer Definition, Contract Validity, and Salary Arrears Claims in Labour Disputes

Brief of Oringo John v Dede Farming Tractors (U) Ltd

Court: Industrial Court of Uganda, Gulu

Coram: Hon. Justice Anthony Wabwiira

Labour Dispute Reference No: 08 of 2023

Date Heard: 5 June 2025

Date Delivered: 7 July 2025

Representation:

Claimant: Mr. Joseph Etoma, From the Uganda Law Society Legal Aid Project

Respondent: Mr. Mayende Stephen Dede

Introduction

Generally, under company law and legal procedure, a suit cannot be sustained against a non-legal entity, as established in Registered Trustees of Rubaga Miracle Centre v. Mulangira Ssimbwa and reiterated in Mulangira Ssimbwa a.k.a Afidra Milton v. The Board of Trustees, Miracle Centre & Anor, Misc. Apps. No. 576 of 2006 and 655 of 2005.

In Uganda, the law is settled that a company which is not duly incorporated under the Companies Act lacks the legal personality to sue or be sued. A claim instituted against such an entity is incurably defective and must be struck out.

Courts have consistently emphasized that the burden of proving the legal capacity of a party lies with the party asserting it. In the above case, the court observed:

"With such averments as part of the Written Statement of Defence, the burden of proof shifted to the plaintiff to establish the proper capacity of the defendant to sue and to be sued... This burden has not been discharged by the plaintiff in the suit."

The Civil Procedure Rules, under Order 30 Rule 10 and Order 1 Rule 10, offer limited procedural leeway to sue individuals or unincorporated entities carrying on business in a name or style different from their own, as if it were a firm name.

This was highlighted in Kyaninga Royal Cottages Ltd v. Kyaninga Lodge Ltd, Misc. App. No. 551 of 2018, where the Court stressed that procedural rules must yield to substantive justice only where the entity exists in fact and law.

However, the Industrial Court’s recent decision in Oringo John v Dede Farming Tractors (U) Ltd, LDR No. 08 of 2023, signals a significant clarification in the employment context: where an employer has benefitted from the labour of an individual under an employment arrangement, it may not escape liability by pleading technical non-existence or lack of incorporation.

In this case, the Court applied a substantive approach to employment justice, prioritizing the reality of the employment relationship over rigid corporate formalism.

📝 Background Facts

On 12 December 2019, the Respondent appointed the Claimant, Mr. Oringo John, as Workshop Manager with a basic monthly salary of UGX 2,000,000/=. The Claimant alleged that after receiving partial payment in September 2020, the Respondent ceased salary payments.

Mediation efforts before the Amuru District Labour Officer failed, prompting the filing of this claim on 5 September 2024. The Claimant sought UGX 39,000,000/= in salary arrears and general damages.

The Respondent, represented by its Director Mr. Mayende Stephen Dede, raised a preliminary objection that it was a non-existent entity incapable of being sued. Substantively, it alleged that the Claimant had absconded from work in September 2020 and was only sporadically engaged thereafter on a piece-rate basis.

⚖️ Issues for Determination

Whether the claim was a nullity for being brought against a non-existent legal entity.
Whether there existed a valid and enforceable employment contract.
Whether the Claimant was entitled to UGX 39,000,000/= in salary arrears.
What remedies were available to the parties.

📚 Submissions

Claimant's Counsel (Mr. Joseph Etoma, From the Uganda Law Society Legal Aid Project)

Argued that CEX1, the appointment letter signed by the Respondent’s Director, confirmed an employment relationship.

Emphasized that the Claimant had only received UGX 9,150,000/= in total, with no written particulars or payslips provided.

Submitted that the Respondent never terminated the contract or took disciplinary action, thus rendering the abscondment allegation baseless.

Urged the Court to uphold the substance of the employment relationship over rigid corporate formalism.

Respondent’s Submissions (Mr. Mayende Stephen Dede)

Claimed that the Respondent company was not legally incorporated and could not, therefore, contract.

Asserted that the Claimant worked only until August 2020, absconded thereafter, and was only paid for intermittent work.

Submitted that the claim should fail on the grounds of corporate non-existence, lack of proof of full-time service, and unjust enrichment.

Cited Makula International, Fort Hall Bakery Supply Co. v Muigai Wangoe, and other precedents on legal personality.

🧾 Findings

1. On Whether the Respondent Was a Non-existent Entity

The Court rejected the Respondent’s objection. It held that in labour matters, the doctrine of separate legal personality must give way to substantive justice. It found that the appointment letter (CEX1) and consistent testimonies by RW1 to RW4 confirmed the existence of an employer-employee relationship. The contract was signed by the Respondent’s Director himself.

“A contract can only expire if it exists. Similarly, an employee can only abscond if an employment relationship subsists.”

The Court held that employment law departs from the rigid application of corporate separateness. Citing Wabwire v Pachedo Foundation (2025), Byanju v St. Augustine College, and Mutisya v Madan, it emphasized that:

“Employment law is more concerned with the relational substance between the employer and employee than with the legal form of incorporation.”

The Court found that a contract (CEX1) signed by Mr. Mayende (Human Resource Manager) on behalf of "Dede Farming Tractors Uganda Ltd" had been admitted into evidence and acknowledged by all Respondent witnesses. The Court reasoned:

“A contract can only expire if it exists. Similarly, an employee can only abscond if an employment relationship subsists.”

Accordingly, the defence of a non-existent legal entity was dismissed.

2. Existence of Employment Relationship and Duty to Pay

Relying on Sections 2, 39, 40, and 61 of the Employment Act (Cap. 226), the Court held that the Respondent:

Failed to adduce credible evidence that full salary had been paid.
Could not prove that the Claimant had absconded.
Did not produce payroll records or proper receipts of payment.

The Court stressed that the burden rested on the employer to prove payment, especially where allegations of abscondment or outside work arise.

⚖️ 3. Entitlement to Salary Arrears

Under Section 49(1)–(5) of the Employment Act (EA), every employer is required to issue itemized pay statements and preserve salary records. The Claimant’s appointment letter entitled him to UGX 2,000,000/= per month, and it was undisputed that he worked from December 2019 to August 2020, a period of eight months.

Key findings:

The Claimant received UGX 9,400,000/= in total (including UGX 400,000 paid via mobile money).
He was entitled to UGX 16,000,000/= for the eight months worked.
Therefore, he was owed UGX 6,600,000/=.
RW4 also confirmed paying him UGX 1,000,000/= in September 2020, meaning total arrears amounted to UGX 7,600,000/=.

The Court observed that the absence of payslips and failure to produce written particulars or conduct a labour inspection further weakened the Respondent’s position.

3. On Abscondment and Credibility

While the Respondent alleged that the Claimant had worked for only eight months and then absconded, the Court found this assertion unsupported by any documentary or disciplinary record. Moreover, the lack of action taken against the Claimant at the time undermined the credibility of the Respondent's claim.

🏛️ Holding

The Court dismissed the preliminary objection based on corporate non-existence.
Found that an employment relationship existed and had not been lawfully terminated.
Held that the Claimant was entitled to unpaid salary arrears.

⚖️ 4. Award of General Damages

The Court awarded UGX 2,000,000/= in general damages, equivalent to one month’s salary, as compensation for the emotional and financial distress arising from delayed payment of wages. It emphasized that general damages in employment cases:

Are not tied to pecuniary loss;
Serve to compensate for mental anguish and reputational harm;
Should not exceed the fixed income or double the earnings (Standard Chartered Bank v Makoko [2025] UGCA 115).

⚖️ 5. Costs Awarded to the Claimant

The Court found that the Respondent’s failure to pay the full salary and the Claimant’s justified cause of action warranted an award of costs. Citing Makoko, Kalule v GIZ [2023] UGIC 89, and Kiggundu Yunus v Felister (U) Ltd, the Court confirmed:

“Costs follow the event unless the losing party did not act in bad faith or there was no misconduct. Here, the Respondent’s failure to meet salary obligations justifies the cost award.”

📜 Final Orders

UGX 7,600,000/= awarded as salary arrears.
UGX 2,000,000/= awarded as general damages.
Costs of the claim awarded to the Claimant.

💼 Legal Implications

This judgment confirms a worker-protective and purposive approach in interpreting employment contracts:

Unregistered entities cannot hide behind corporate veil to avoid obligations where employment relationships are proven.
Labour contracts are sui generis, not strictly governed by commercial doctrines.
Failure to maintain records, issue payslips, or provide written particulars exposes employers to liability.

Read the full case below