20th January 2025, marks a pivotal moment in the history of global development, as it ushered in a significant change to the United States foreign aid landscape, led by an Executive Order from President Trump. This Executive Order aimed to reevaluate and realign the United States foreign assistance, with far reaching consequences not only for recipient countries but also for the employment climate in nations like Uganda. The effects of this decision will likely be felt across various sectors, particularly by those relying on aid from the United States of America for their livelihoods.
The Executive Order and Its Implications
At the core of the United States government’s new strategy is the belief that foreign aid should align more closely with American values and interests. According to President Trump, the existing foreign aid system has often supported causes and projects that, rather than fostering global peace, contribute to instability and division in recipient countries. As such, the United States government has moved to halt foreign aid until a review and realignment can be completed.
To enforce this, President Trump issued a 90 day pause on all foreign development assistance. During this period, United States agencies, including the United States Agency for International Development (USAID) and the United States African Development Foundation (USADF), issued directives to halt all projects and suspend disbursement of funds to organizations funded by the United States foreign aid. No new grants will be issued, and even funds previously disbursed cannot be used for ongoing projects during this period. The suspension is due to end in March, but the resumption of funding is not guaranteed. The decision to resume aid will rest with the Secretary of State, in consultation with the Office of Management and Budget, leaving open the possibility that some projects may be permanently shut down.
How This Affects Employment in Uganda
For Uganda, the effects of this 90 day suspension are significant. USAID and USADF are among the largest funders of development projects in the country, supporting a wide range of programs that address everything from health and education to infrastructure and governance. Many local organizations, both governmental and non-governmental, rely heavily on these funds to pay their employees, contractors, and project staff.
With the 90 day stop work order, employees and contractors who are paid through these grants are directly affected. Ongoing projects are suspended, and no new project activities or funds will be disbursed. This means that workers whose salaries are tied to United States aid funded projects will face delays or potential cessation of their income during this period. The freeze on existing funds will also impact operational expenses, making it impossible for affected organizations to continue work as usual.
The Employer-Employee Relationship Under the Employment Act
Under Uganda’s Employment Act, employers are generally required to provide work to their employees. If this obligation cannot be fulfilled due to an unforeseen event such as the suspension of foreign aid, this may constitute a situation of frustration. The doctrine of frustration in employment law applies when an external event makes it impossible or impracticable for one or both parties to fulfill the terms of a contract. In such cases, both the employer and employee are typically discharged from their obligations.
In the case of the USAID and USADF funded organizations in Uganda, the stop work order may be seen as an event of frustration. This could release employers from their duty to provide work, as well as from the obligation to pay wages, particularly if the suspension of work is beyond the control of both parties.
Employers facing this situation must carefully consider their options. One possible course of action would be to suspend contracts for the 90 day period without pay. However, for this to be legally valid, it must be explicitly stated in the employment contract. If the option is not already available in the current agreements, affected employees would need to consent to this suspension for it to be binding.
Alternatively, employers may choose to terminate contracts on the grounds of frustration. In such a case, the termination process must follow the procedures outlined in the Employment Act or the Contract of Employment. This would typically involve giving the affected employees notice of termination in accordance with the employment contract or the statutory requirements. In the case of the stop work order, however, the immediate and unavoidable nature of the directive may make it difficult to comply with the full termination procedure.
The Need for Legal Reform
The challenge posed by the current situation calls for a deeper examination of Uganda’s employment laws. The Employment Act, in its current form, does not fully address situations where external, unforeseen events such as a stop work order render it impossible for employers to continue providing work or paying wages. In light of the ongoing changes to foreign aid, Uganda’s legal framework must adapt to include provisions for the suspension of contracts without pay in such circumstances. A temporary suspension clause, limited to a maximum of 90 days, would help mitigate the financial strain on organizations and provide a clear path forward for both employers and employees.
The economic fallout from the COVID-19 pandemic highlighted the fragility of employment relationships when unexpected events disrupt business operations. Many employers were forced to terminate employees’ contracts, citing force majeure, leaving a legacy of unresolved disputes and unresolved claims in labor offices and courts across Uganda and Africa. To avoid similar complications in the future, it is essential for employers to have clear legal tools at their disposal to navigate situations like the current stop work order.
Conclusion
The United States’ Executive Order on foreign aid has far reaching consequences that extend beyond American borders, particularly affecting employment in Uganda. As organizations face a suspension of funding and project activities, employers must carefully navigate the implications of this 90 day stop work order. The key to managing this challenge lies in proactive legal and contractual reforms that would allow for a clear and fair approach to the suspension of contracts in the face of external disruptions. By amending Uganda’s Employment Act and revising the employment contracts to accommodate temporary suspensions, both employers and employees can be better equipped to handle unforeseen disruptions without resorting to contract terminations or protracted legal battles.