Corporate Risk Management Considerations For Labour-related Risks In Manufacturing Operations

Introduction

Manufacturing operations form the backbone of Nigeria's industrial economy.

Whilst factory production drives profitability and employment, it simultaneously exposes corporate employers to significant labour - related risks that can result in substantial financial liability, operational disruption, and reputational damage .

This article provides manufacturers with a strategic framework for mitigating labour law risks, particularly those arising from workplace accidents, injuries, and fatalities, to engender workplace safety and ensure business continuity.

Understanding the Statutory Framework: Limiting Corporate Exposure

Workplace safety in Nigeria is regulated under two principal pieces of legislation: the Factories Act Cap. F1 LFN 2004 and the Employees' Compensation Act 2010. Understanding the precise scope and limitations of these statutes is essential for manufacturers to minimise corporate liability.

The Factories Act requires factory owners to maintain clean premises, ensure proper ventilation and lighting, safeguard machinery, and provide protective equipment for hazardous processes. However, the penalties for non - compliance are relatively low due to the outdated legislation, sometimes making the cost of strict adherence higher than the fines. Despite this, corporations should prioritize compliance as a risk management strategy, since regulatory violations can lead to tortious liability, production interruptions, and reputational damage that affects market position and stakeholder confidence.

The more significant corporate exposure arises under the Employees' Compensation Act 2010. Section 2(1) of the Act establishes a no - fault compensation scheme applicable to all employers in the public and private sectors. Under Section 56(1), employers must contribute to the Employees' Compensation Fund.

For corporate planning purposes, the key advantage of the statutory compensation scheme is its predictability and limitation. Compensation under the Act is calculated according to fixed schedules based on the nature and degree of injury, providing employers with actuarially assessable risk. However, the Act does not eliminate common law liability. Employers may still face tort claims if employee injuries result from corporate fault, negligence, or breach of statutory duty

Workplace Accidents: Strategic Approaches to Minimising Tort Liability

Whilst statutory compensation under the Employees' Compensation Act operates on a no - fault basis, tortious liability for workplace accidents requires proof of the employer's negligence.

As held in AZIKE v. NBC (2017) LPELR - 50420(CA) , to claim damages outside the statutory compensation, an injured employee must establish a duty of care owed by the employer, breach of that duty, causation, and resulting damages.

There is undeniably a high risk of injuries occurring in manufacturing operations due to the high interface of workers and machinery, and the physicality of most manufacturing processes, hence, the need for employers to establish some mitigation strategies include the following

Comprehensive Documentation of Safety Policies:

Manufacturers can significantly reduce negligence exposure through systematic documentation. Written safety policies create evidentiary records and demonstrate corporate diligence. When accidents occur, documented safety protocols can shift liability away from corporate negligence toward employee misconduct or unforeseeable circumstances. Companies operating machinery involving moving parts, high temperatures, chemical processes, or electrical hazards should thus prepare detailed policies covering equipment operation, mandatory safety procedures, toolkit training procedures and clear protocols for handling dangerous materials and processes.

Documented Periodic Trainings :

Rigorous training records serve as critical defensive evidence. Section 23 of the Factories Act prohibits the employment of inexperienced workers on dangerous machinery or processes without adequate training and supervision. Corporations should maintain detailed logs of all safety training, including dates, content, trainer qualifications, employee acknowledgements and attendance records. In litigation, such records can demonstrate that injuries resulted not from a corporate failure to train, but from an employee's deviation from properly communicated safety procedures .

Establish incident reporting, investigation, and corrective action systems:

ystems: Prompt incident investigation and documentation are essential. When workplace accidents occur, corporations should immediately conduct thorough internal investigations, document the incident scene through photographs and witness statements, and prepare comprehensive incident reports. These contemporaneous records often prove invaluable in defending against negligence claims filed months or years after the incident, when memories have faded, and physical evidence has disappeared.

Managing Compensation Obligations: Limiting Financial Exposure

The mandatory 1% monthly payroll contribution under Section 33(1) of the Employees' Compensation Act represents a fixed, predictable cost that corporations can budget into their operating expenses. However, strategic human resources planning can optimise this obligation. Since the contribution is calculated as a percentage of total payroll, corporations may reduce their aggregate contribution burden through careful workforce structuring by balancing the use of direct employees, independent contractors, and outsourced service providers to manage the composition of their payroll base, subject to the levy

Section 5(1) of the Act requires employers to report workplace injuries to the Nigeria Social Insurance Trust Fund Board within seven days, and deaths must be reported immediately. Strict compliance with these notification obligations is essential. Failure to report, does not only constitutes a statutory offence under Section 71, but also undermines the corporation's ability to manage compensation claims effectively. Early notification allows corporate legal counsel to engage with the claims process, ensure accurate documentation, and contest inflated or fraudulent claims before they become entrenched.

Corporations should also be cognisant of Section 44(1) of the Act, which imposes joint liability on principal employers and independent contractors for workplace injuries. This provision poses a significant risk to manufacturers that engage third - party contractors. To mitigate this exposure, corporations should require contractors to maintain adequate insurance coverage, structure contractual indemnification clauses, and implement contractor safety management systems that ensure third - party compliance with corporate safety standards.

Chemical Hazards and Occupational Disease: Long -Term Risk Managemen

Manufacturing necessarily involves the use of various chemicals, including preservatives, flavourings , cleaning agents, packaging materials, and industrial solvents. Employees' Compensation Act extends beyond injuries but includes compensation rights to occupational diseases. Section 8 specifically extends its applicability to mental stress arising from employment conditions. Unlike acute workplace injuries, occupational diseases often manifest years after exposure, creating latent liability that can emerge long after an employee has left the corporation's employ.

To manage this long - term risk, corporations should implement comprehensive workplace health monitoring programmes . Regular medical examinations of workers exposed to chemical processes serve dual purposes: they demonstrate corporate diligence in protecting employee health, ¹ and they create medical records that can rebut future claims by establishing baseline health conditions and tracking changes over time. When properly structured, these health monitoring programmes can provide corporations with evidence that the alleged occupational diseases pre - existed employment or arose from non - occupational causes

Additionally, strict adherence to the National Policy on Occupational Safety and Health, which requires manufacturers to ensure products and equipment are safe for use and to provide adequate safety information, helps establish corporate compliance with industry standards. In defending against occupational disease claims, demonstrating that the corporation met or exceeded prevailing industry safety practices can significantly limit or totally extinguish liability exposure

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.