Current trends in employment

disputes in Kenya –

A Disturbing trAjectory

** ******* ****** ** ********** Disputes in Kenya Presented by:

WiLLiAM MAeMA, Advocate

senior Partner – iseme, Kamau & Maema Advocates

to

strathmore Law school

on

14th september, 2016

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contents

1. introDuction 4 2. LegAL FounDAtions 5 i) the constitution of Kenya, 2010 5 ii) employment Act, 2007 (no. 11 of 2007) 5 iii) employment and Labour relations court Act, 2011 (no. 20 of 2011) 5 iv) Labour relations Act (no. 14 of 2007) 5 v) Labour institutions Act (no. 12 of 2007 5 vi) occupational safety and Health Act, (no.15 of 2007) 5 3. toP ten triggers oF eMPLoyMent DisPutes 6 i) termination/summary Dismissal 6 ii) breach of employment contract terms 6 iii) conflicts with trade unions 6 iv) Work injury 6 v) Discrimination 7 vi) sexual Harassment 7 vii) service Pay 7 viii) termination for cause: reasons or no reasons? 9 ix) suspension 10 x) Waiver of claims 11 4. terMinAtion oPtions 12 a) resignation 12 b) termination by employer 13 c) summary Dismissal 13 d) redundancy 14 e) end of Probation/confirmation of employment 15 f) Mutual separation 16 g) expiry of Fixed term contracts 16 h) retirement 17 5. reMeDies 18 6. concLusions & recoMMenDAtions 19 04 Current Trends in Employment Disputes in Kenya Kenya has had “new ’labour laws since 2007. As we approach the end of a decade since the enactment of the legislation, it is perhaps an opportune moment to look at how these laws have been interpreted by the courts and to what extent they have served the country.

to be precise, the current labour laws were enacted in December 2007, a most significant period in the history of Kenya. therefore, an appreciation of the historical and political context in which the laws were passed provides an essential key to a contextualized understanding of the laws under discussion.

the laws were enacted a few days to the general election and were among the last batch of laws to be signed by President Kibaki at the end of his first term in office. the ruling Pnu party was keen to win the election and secure a second term in office despite very stiff competition from the opposition which, going by all the opinion polls at the time, were poised to win the election. indeed, the contest was so hot that following the declaration of the results, the country entered into one of its darkest chapters in history

– the 2007/2008 post election violence which almost degenerated into a civil war. it is therefore fair to say that every vote counted in this election.

the central organisation of trade unions (Cotu)

had for many years been pushing for the passage of more

“employee-friendly” labour laws without much success due to sustained opposition from the Federation of Kenyan employers (FKe). the high stakes posed by the general election provided cotu with a perfect opportunity to arm-twist both the legislature and the executive to pass the controversial laws. indeed, cotu had issued an ultimatum to the government that it would mobilize its membership-(read all Kenyan workers) to vote against the ruling party unless the laws were passed before the election date. it did not help that during this time, most Members of Parliament were busy campaigning out in the countryside when the bills were tabled for debate in Parliament. As expected, the laws were passed almost in the same form in which they had been proposed by cotu without much debate or scrutiny and swiftly signed into law by a president who was desperately seeking a second and last term in office.

the other historical fact to bear in mind is that the industrial court which was later renamed the employment and Labour relations court (“elrC”) has, since its inception, regarded itself as the custodian and watchdog of employee rights, much like cotu. going by the majority of the judgments issued by the court, one would be forgiven for concluding that the court’s unwritten ideology is: “the employee is always right unless the employer proves otherwise beyond reasonable doubt”.

Finally, following the adoption of the 2010 constitution, Kenyans have become more enlightened on their legal rights and, not unexpectedly, more litigious than they have ever been since independence.

the upshot of the above context is that:

a) we have laws that were largely drafted by employees

(cotu) and vehemently opposed by employers (FKe);

b) the laws were passed at a most inappropriate time in the history of the country, shrouded in political blackmail and without much scrutiny; and

c) the laws provide the eLrc with its most potent weapon yet for furtherance of its ‘pro-employee” ideology. 1. introduCtion

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Kenyan labour laws are founded on 3 sources, namely, the Constitution; statute and contract. i) the Constitution oF Kenya, 2010

the bill of rights includes “Labour relations” under Article 41 of the constitution. it provides that every person has “the right to fair labour practices” as well as the right to:

a) fair remuneration

b) reasonable working conditions

c) joining and participating in trade unions;

d) to go on strike.

Further, Article 162 (2)(a) provides for the

establishment of the eLrc with exclusive jurisdiction to determine and settle all labour disputes in Kenya. ii) employment aCt, 2007 (no. 11 oF 2007)

this Act is the primary law on employment in Kenya. it replaced the previous employment Act (cap. 226). iii) employment and labour relations

Court aCt, 2011 (no. 20 oF 2011)

this Act establishes the eLrc and sets out its

objectives, composition, jurisdiction and procedure. it was previously referred to as the industrial court Act but was later renamed the eLrc pursuant to

the Statute Law (Miscellaneous Amendments

Act, 2014 published in the Special Gazette

Supplement No. 160 (Acts No. 18 of 2014).

iv) labour relations aCt (no. 14 oF

2007)

this Act provides for the registration, regulation, management of trade unions, employers and

organizations or federations. it replaced the Trade Unions Act, (cap.233) and the Trade Disputes Act,

(cap. 234).

v) labour institutions aCt (no. 12 oF

2007

this Act establishes the various labour institutions – The National Labour Board, Committee of Inquiry,

Wages Council, and Employment Agencies etc. it

replaced the Regulation of Wages and Conditions

of Employment Act, (cap. 229).

vi) oCCupational saFety and health

aCt, (no.15 oF 2007)

this Act provides for the safety and welfare of

employees and all persons lawfully present at

workplaces.it also establishes the National Council for Occupational Safety and Health. it replaced

the Factories and Other Places of Work Act,

(cap. 514).

2. leGal Foundations

06 Current Trends in Employment Disputes in Kenya employment disputes are normally triggered by one or more of the following events: i) termination/summary dismissal

this is by far the most common cause of

employment disputes in Kenya. Disputes in this area arise from 2 fundamental aspects, namely, i) validity of the underlying circumstances and b) procedural

irregularity/unfairness.

there is a substantial difference between

termination of employment and summary dismissal.

termination can be effected by either party giving to the other the required notice or paying in lieu thereof. the employee is paid all his benefits. on the other hand, summary dismissal arises where the employee has committed an act of gross misconduct

and is literally fired without notice but subject of course to a disciplinary hearing. in that case his only entitlement is salary up to the date of dismissal and pay for any accrued leave. generally, no other benefits are payable.

ii) breaCh oF employment ContraCt

terms

even where termination has been properly done or

the contract is still in force, a party can still maintain a claim based on the breach of a material term of

the contract by the other party e.g. failure to pay/ increase salary or bonuses as required under the

contract.

in SBI International Holdings Ag (Kenya) v Amos

Hadar [2015] eKLR a clause in the employment

contract prohibited the respondent from engaging in any other work or business during his employment

with the claimant. the court held that the

respondent had knowingly breached an express term

of his employment contract and reliefs sought by the employer were granted.

iii) ConFliCts with trade unions

generally, unionized employees are represented

by their unions in labour disputes. these disputes normally continue in court concurrently with the

employment relationship e.g. teachers, doctors, etc. the disputes usually relate to the refusal by the

employer to negotiate/renew collective bargaining

Agreements (cbAs) or to implement some of its

terms e.g. increase of salary.

in Kenya hotels & allied workers union v

new Victoria hotel [2013] eKlr, the

respondents’ management had refused to sign

a recognition agreement with the claimants, to

deduct and remit union dues and had victimized

the claimants’ members for engaging in trade union activities. the court ordered the respondents to

recognize the union and start negotiations leading to the signing of a collective bargaining Agreement within 90 days and immediately start paying the

union dues to the claimants in respect of employees who had given their indication to join the union.

in Kenya Union of Domestic, Hotels, Education

Institutions and Hospital Workers [Kudheiha] v

North Coast Beach Hotel [2015] eKLR, the court

held that the respondent had acted in breach of the cbA by dismissing employees after issuing them with fixed term contracts to avoid the provisions of the cbA which required that all employees who had

worked for an aggregate period exceeding one year

were deemed to be employed on permanent basis.

iv) worK injury

the occupational safety and health act,

2007 (the “osha”), imposes a duty on the

employer to protect the health, safety and welfare of his employees and other people who might be

affected by their business. breach of this statutory duty may lead to labour disputes.

in European Committee for Agriculture Training

Rural Development (C.E.F.A) Kenya v Moses

Muriuki Matiri [2015] eKLR, the appellate court

held that the legislation confers upon employees the right to proper protection in terms of health and

safety at work and also imposes a corresponding

duty on the employer to protect employees from

risks and injury.

3. top ten triGGers oF employment disputes

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Disputes of this nature are usually filed as the

employment relationship subsists. An employer who

terminates the services of an employee on account

of such employee having filed a claim against the

employer would be held liable for unfair termination. in justus Katana Charo v ready Consultancy

Company limited [2015] eKlr, the claimant

alleged that his employment was terminated

on account of filing a suit against the employer

for compensation for injuries suffered while in

employment. the court held that had the facts

alleged by the claimant been supported by evidence, his termination would have been declared unfair.

v) disCrimination

both article 27 of the constitution and section 5

of the Act prohibit discrimination on the basis of race, colour, sex, language, religion, political or other opinion, nationality, ethnic or social origin, disability, pregnancy, marital status or HIV status.

section 5(7) of the Act provides that when

discrimination has been alleged by an employee,

the burden of proof shifts to the employer who

must show that it did not take place. this is a

queer provision because it runs counter to the well known principle in the law of evidence that ‘he who asserts proves”. Where the law is tilted in favour of the employee in this manner what chance does the

employer have to convince the court that in fact the alleged discrimination did not take place?

in Koki muia v samsung electronics east

africa limited [2015] eKlr, evidence adduced

in court showed that the respondent did not permit the ascension of Kenyans to high offices but “instead hired incompetent Korean nationals to supervise and oversee more qualified Kenyans”. the court found

the dismissal of the claimant to be unfair and

unlawful in the circumstances and further that she was subjected to racial and sexual discrimination. the court awarded the claimant, among others,

12 months’ salary compensation on account of

sexual and racial discrimination as well as the sum of Ksh. 7,152,000/- on account of unlawful termination. in VMK v Catholic University of Eastern Africa

[2013] eKLR, the claimant was awarded damages

of Ksh. 5 Million on account of discrimination based on her HiV positive status. it was alleged that the university had a policy that people who were HiV

positive could not be employed on permanent basis. the court said: “The testing of HIV status without her consent and the disclosure of her status to 3rd persons without her authority demonstrates the seriousness of the violations and the need to compensate the claimant for the hurt feelings and eventual loss of employment due to HIV status.”

vi) sexual harassment

An employee (of either gender) who has been

subjected to sexual harassment may maintain a claim against the employer.

under section 6 (2) of the employment Act, every

employer is required to have sexual harassment

policy setting out the procedure that an employee

who has been subjected to sexual should follow in

filing the complaint and pursuing a remedy.

Most employers are found liable not because the

act of sexual harassment occurred but because they did not have such a policy. in C a s v C s limited

[2016] eKlr – the employer was found to be in

breach of the employment Act for failure to have a sexual harassment policy.

sexual harassment claims are usually raised within a claim for unfair termination. rarely do employees make such claims while still in employment.

vii) serViCe pay

this term ‘service’ pay is not to be confused with

‘severance’ pay which is payable on account of a

redundancy.

section 35 (5) of the act provides that an

employee whose contract of employment is

terminated upon the issuance of a termination

notice is entitled to service pay for every year

worked “at such rate as shall be fixed”. this inelegant language has resulted in a great deal of confusion in the interpretation of the provisions relating to service pay.

Prior to 2007, the concept of ‘service pay’ was

only found in collective bargaining agreements and applied only to unionised staff. the idea was to

provide employees who had served for a substantial 08 Current Trends in Employment Disputes in Kenya period of time with some lump-sum payment upon

the termination of their contracts by the employer, something akin to a gratuity or pension.

the provision, presumably drafted by cotu, did not fix the rate or provide a formula of how it is to be fixed.

interestingly, instead of a facing up to this lacuna and calling for legislative reform to clarify the provision or simply declaring it impracticable to implement, the court has, without any basis whatsoever,

proceeded to presume that the rate is to be fixed

by the employer. this does not make much sense

because a) the law does not say so and b) one party to a contract cannot unilaterally dictate the terms. What, for instance, would happen if the employer

fixed a rate that was unacceptable to the employee? Further, the eLrc has, again without any reasonable basis and quite erroneously in my view, taken the

view that in the absence of a defined rate in the

contract of employment, the rate applicable to

severance pay on account of redundancy also applies to service pay! What surely is the basis for drawing the analogy between service pay and severance pay? in Daniel Oluoch Oguta v the Hon. Attorney

General ad another, Industrial Cause No. 1223

of 2012, the court held that “ the claimant was

entitled to service pay for every year worked, the terms of which shall be fixed no evidence has been placed before the court on the rate of calculating severance pay... the court will however be guided by the provisions of the Employment Act with regard to redundancy and in particular Section 40 (a) and apply a similar rate to that applicable to employees terminated on account of redundancy at the rate “not less than fifteen days’ pay for each completed year of service”.

this case demonstrates the extent to which the

labour court is prepared to bend backwards to

reach a finding that is favourable to the employee. the logical implication of the court’s reasoning is to equate ordinary termination of employment to

a redundancy which is completely incorrect and

has huge financial implications on the employer.

it makes the termination of employment a very

costly affair and lends credence to FKe’s often-

repeated argument that the 2007 labour laws are

very expensive to implement.

Fortunately, section 35 (6) of the employment Act

attempts to water down the adverse implications

of the requirement for service pay by listing down some exceptions to the rule, namely, that service

pay would not be applicable where the employee is

a member of a:

a) registered pension scheme or provident fund;

b) gratuity or service pay scheme;

c) any other scheme established by the employer

whose terms are more favourable than the

scheme established under the employment Act

(none is established!); or

d) national social security fund.

the above exceptions, taken together, render the

requirement for service pay almost meaningless.

For instance, since nssF is a mandatory registration which applies to all employees, it follows that no employee would qualify for service pay so long as

the nssF membership subsists. However, despite

this very clear provision, the eLrc has again in my view misinterpreted the law and held that for this exception to apply, the employer must demonstrate

that he has been making regular contributions to

nssF on behalf of the employee.

in elijah Kipkoros tonui v ngara opticians

t/a bright eyes limited [2014] eKlr, the

respondent failed to pay the claimant part of his

terminal dues after working for 25 years and

further failed to remit the national social security Fund contributions consistently. evidence adduced

in court revealed that the respondent had not

remitted nssF payments for a consecutive period of 5 years. the court held “this law is intended to ensure employees do not enter into retirement without social security. At the same time, the interest of employers is safeguarded, through the restriction on employees being paid double social security benefits. Service pay is therefore payable under Section 35 [5] only to employees who are not covered under the different social security mechanisms elaborated under Section 35 [6]… The Claimant shall therefore be paid service pay, less any benefits made on the Claimant from the National Social Security Fund”.

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on the mode of computation of service pay, the

court applied the rate for severance pay, noting:

“Decisions of the Honourable Judges of the Industrial Court have in the recent past viewed the payment

of service pay as a bare statutory minimum, and

enforced the provision even in the absence of

express fixed terms of service pay, based on the

minimum 15 days’ salary for every completed year of service given under the redundancy law, and which

is also the floor in most industrial wage orders on severance, gratuity or service pay. Employees who

hold terms and conditions of employment

without fixed terms on the service pay

should not be discriminated, and the Court

fully embraces recent decisions which

have adopted the 15 days’ salary for each

completed year of service, whenever such

default is present.”

For the record, section 35(6) does not mention

anything about contributions to nssF or the

regularity of such contributions. it only refers to membership. Would it, perhaps, not have been more

logical for the court in the above case to hold the employer liable for all unpaid nssF dues, interest and penalties instead of imposing a more generous

but unjustified formula for the computation of

service pay?

viii) termination For Cause: reasons or

no reasons?

is the employer required to give reasons for any kind of termination?

the doctrine of freedom of contract dictates that

one may freely enter and exit a contract at will,

subject only to giving the proper contractual notice. this notwithstanding, the eLrc apparently thinks

otherwise and has categorically stated that Kenyan law no longer recognizes the concept of “employment at will”.

the law does not specifically require the employer to give reasons for termination in every case.

the relevant provision is section 43(1) of the

employment Act which provides as follows:

“In any claim arising out of termination of

a contract, the employer shall be required

to prove the reason or reasons for the

termination, and where the employer fails

to do so, the termination shall be deemed

to have been unfair within the meaning of

section 45.”

Firstly, the above provision illustrates the obvious influence of cotu in the formulation of the 2007

labour laws. Prior to 2007, no such provision existed in the laws and both the employer and employee

clearly understood that either of them could opt out of the contract at any point by either giving notice or paying in lieu thereof. this was indeed never a disputed issue. it is therefore not clear why it was inserted in the law.

secondly, the labour court has latched onto the

above provision to declare that while the employee is free to end the contract of employment at

any time by simply tendering his resignation, the

employer does not enjoy such a right. According to the court, unlike the employee, the employer has no right to terminate a contract of employment unless he has a valid reason for doing so. is this really the correct interpretation of the law?

the objective interpretation of the above provision is that reasons for termination are only required

when a claim for unfair termination has been lodged by an employee who presumably argues that there

existed some underlying reasons for the termination which, had they been disclosed to him, he would

have explained and probably saved his job. to the

extent that the employer acted on such undisclosed reasons without giving the employee an opportunity to respond to them, the termination is unfair.

i take the view that there are many situations

when an employer might want to get rid of an

employee without necessarily having any reasons

worth disclosing to the employee. For example the

employee might be an average performer, a mildly

bad influence, pathological gossiper, person of

loose morals, incorrigible bad human habits, non

conducive family situation or the employer might

simply have identified a better replacement. in such circumstances, to confront the employee with

10 Current Trends in Employment Disputes in Kenya

‘reasons’ of this kind would not be useful since he will most likely become defensive and dispute the

validity of the reasons.

the eLrc has, however, taken the view that not only must the employer give reasons in every case before terminating an employment contract, he must also

accord the employee an opportunity to be heard in

the manner contemplated under section 41(1). it is worth noting that this section requires a disciplinary hearing only in the cases of summary dismissal and termination based on misconduct, poor performance

or physical incapacity. However, as the cases below demonstrate, the eLrc has expanded the scope of

this section to include all cases of termination.

in Mary Chemweno Kiptui v Kenya Pipeline

Company Limited [2014] eKLR, the court held

that the reasons for termination must be given

prior to and not after termination. the judge said:

“Under subsection 43 (2) …However this reason or

reasons must be addressed before the termination notice is issued and subjected to a hearing to establish if the employee has a defence that is worth consideration. The reasons should never be given after the termination has taken effect. This would be an outright negation of the purpose, intent and validity of any reason or reasons an employer may have against the affected employee.” Where does the court infer the requirement

of giving reasons and holding a hearing in every

termination case from and why does it apply to the employee only?

Further, in James Kabengi Mugo V Syngenta East

Africa Limited [2013] eKLR, the court stated:

“The Kenyan Employment Law no longer accepts

that employers can fire employees at will, for any reason or no reason. …This at will doctrine was

the dominant termination law in Kenya prior to the advent of the Employment Act 2007… The Law has

now been made unambiguous, with the employment

protections that came with the enactment of the

Employment Act in 2007.”

is the law really “unambiguous” on this issue as the court claims? since the scope of section 41(1) is

limited to summary dismissal and termination based on poor performance or physical incapacity, where

does the eLrc infer the basis to extend the scope of this provision to all kinds of termination?

According to the court, the only exception where

reasons and a hearing are not required is the

termination of probationary contracts as provided

under section 42(1). However, the court overlooked the fact that section 42(1) does not apply generally but is limited to the subject of section 41(1)

i.e. summary dismissal and termination on account

of poor performance or physical incapacity.

the writer’s interpretation of section 42(1) is

that when summarily dismissing and employee or

terminating his employment during the probation

period, it is not necessary to hold the disciplinary hearing required under section 41(1).

in danish jalang’o & another v amicabre

travel services limited [2014] eKlr the court

stated: “There is no obligation under Section 43 and 45 for Employers to give valid and fair reasons for termination of probationary contracts, or to hear such Employees at all, little less in accordance with the rules of fairness, natural justice or equity. The only question the Court should ask, is whether the appropriate notice was given, or if not given, whether the Employee received pay in lieu of notice; and, whether the Employee was, during the probation period, treated in accordance with the terms and conditions of the probationary contract. The Employee has no expectation of substantive

justification, or fairness of procedure, outside what the probation clause and Section 42 of the Employment

Act 2007 grants. If the Employee has received notice of 7 days before termination, or is paid 7 days’ wages before termination, there can be no further demands made on the Employer. The Employer retains the

discretion whether to confirm, or not confirm an

Employee serving under probation. The law relating to unfair termination does not apply in probationary contracts.”

ix) suspension

this is a much misunderstood concept in Kenya.

the law does not provide for suspension of

employees. it can, however, be sanctioned by either the employment contract or Hr Manual (provided

the terms of the Hr Manual are incorporated by

reference into the employment contract).

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suspension is only lawful if:

■ it is allowed under the contract or Hr policies of the employer;

■ it is for a relatively short period sufficient for completion of investigations;

■ employee is paid his full pay for the duration of the suspension irrespective of the outcome of the

investigation; and

■ suspension is not an end in itself and should not be used as punishment.

in thomas sila nzivo v bamburi Cement

limited [2014] eKlr the court stated:

“Section 19 of the Employment Act outlines nine

occasions when the Employer may deduct from the

wages of an Employee. No provision under this law allows the employer to deny a suspended employee his monthly salary as ‘’a warning of the effect of losing his job and as a reminder to the Employee that he would lose his job if he continued being indisciplined.’’ Withholding of an Employee’s salary cannot be a disciplinary sanction. The salary remains protected under Part IV of the

Employment Act, even during suspension. The contract of employment is still in force. The suspension without pay, offended the principles of Fair Labour Practices and Protection of Wages.”

in Peterson Ndung’u & 5 Others v. KP&L

Company Limited [2014], the court held:

“The salary remains protected under Part IV of the Employment Act, even during suspension. The contract of employment is still in force. The suspension without pay, offended the principles of Fair Labour Practices and Protection of Wages. The Claimant is entitled

to the salary and allowances for the duration he was under suspension. To uphold the Respondent’s decision in withholding these would mean that the Claimant is punished twice, over the same employment wrong.”

in Paul Mwaura Mbugua V Kagwe Tea Factory

Ltd & Another [2012] eKLR the court held: “An

employee on suspension has a legitimate expectation that at the very least, they will be afforded an

opportunity to defend themselves against any adverse findings that may arise from investigations carried out during their suspension. To keep an employee on suspension, without pay for over 7 months, waiting for them to blink first is not only unlawful but also inhumane.”

x) waiVer oF Claims

in the context of a mutual separation it is not

uncommon for employers to require the employees

to sign a waiver or discharge confirming that subject only to the payment of the agreed terminal dues,

they have no other or further claims against the

employer.

this waiver/discharge is normally the

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