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Court of AppealPartially AllowedCivil Appeal 86 of 2006· [2007] KECA 44 (KLR)

Court of Appeal At Mombasa v Baiba Dhidha Mjidho

Court of Appeal of Kenya
29 June 2007
5,284 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~21 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal cut a retrenched manager's award from Kshs 7.7 million to Kshs 103,480, ruling collective agreements don't cover non-union staff.

What this practically means

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Executive summary

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This was a first appeal to the Court of Appeal (Tunoi, Onyango Otieno and Deverell, JJA) against the judgment of the High Court at Mombasa (Khaminwa, J) awarding a former commercial and logistics manager terminal dues of Kshs. 7,685,420.85 after his employment was terminated on 30th April 2003 on account of worldwide structural and management reorganisation. The trial court had applied the redundancy provisions of a Collective Bargaining Agreement between the Engineering and Allied Industries Employers Association and the Kenya Engineering Workers Union, reasoning that confining compensation to unionisable employees would be discriminatory. The Court of Appeal allowed the appeal in substantial part. It held that the CBA was not binding on the employer in respect of an employee who was not a union member and not a party to the agreement, and that in any event an unpleaded agreement could not be relied upon. Section 16A(1)(e) of the Employment Act applies to all employees irrespective of management status. 'Salary' and 'wages' mean basic salary and exclude allowances and provident fund arrangements. Severance pay accrues at the statutory rate of 15 days pay per completed year of service, not the 23 days under the CBA. The award of Kshs. 3,379,440/- under the non-competition clause was set aside as erroneous in liability and quantum because the employee had not proved unreasonable refusal or the resulting loss. The leave claim could not be revived absent a cross-appeal. The High Court judgment was set aside and substituted with judgment for Kshs. 103,480/=, after crediting Kshs. 1,683,548/= already paid under the preliminary decree.

Key legal issues

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01

Enforceability of a CBA against a non-union management employee

Holding

The CBA's redundancy provisions do not apply to the respondent, who was neither a union member nor shown to be represented by the union, and the CBA was not pleaded.

Reasoning

The CBA defined 'employee' as covering employees represented by the union. It was not pleaded that the respondent was represented by the union or a member of it. The Court held it was not open to a party to rely on an agreement to which it was not a party and which had not been pleaded as applicable.

p. 5
02

Applicability of section 16A(1)(e) Employment Act to management employees

Holding

Section 16A(1)(e) applies to all employees; management status is irrelevant.

Reasoning

The Court examined the wording of section 16A(1)(e) of Cap 226 and found nothing in it or elsewhere in the Act restricting its application to non-management employees. The subsection's notice entitlement therefore applies equally to a management-grade employee declared redundant.

p. 5
03

Meaning of 'salary' and 'wages' for computing terminal dues

Holding

Salary means basic salary only; allowances and provident fund arrangements are excluded from the computation.

Reasoning

The Court held that the correct basis of calculation was the basic monthly salary on the last pay slip (Kshs. 139,253/=), not a gross figure. Provident fund payments by or to an employee are irrelevant to the ascertainment of amounts due under section 16A(1)(e), which relates to 'wages'.

p. 3
04

Rate of severance pay on redundancy

Holding

Severance pay is at 15 days pay per completed year of service under the Act, not the 23 days provided in the unenforceable CBA.

Reasoning

Since the CBA could not be relied upon, the statutory formula in section 16A(1)(f) governed. The Court recalculated severance as 15 days pay for each of the 14 completed years of service, based on the basic salary, yielding Kshs. 974,769.60.

p. 8
05

Damages for breach of the non-competition clause

Holding

The award of Kshs. 3,379,440/- was erroneous in liability and quantum; the employee bore the burden of proving unreasonable refusal and resulting loss.

Reasoning

The competition clause imposed on the employee the burden of proving damages from an unreasonable refusal to release him from the restrictive undertaking. The trial Judge made no finding of unreasonableness, led no evidence of the salary the competitor would have paid, and quantified the loss on the wrong basis (the appellant's own salary figures).

p. 9
06

Effect of absence of cross-appeal

Holding

The Court could not disturb the trial Judge's disallowance of the leave claim in the absence of a cross-appeal, though it signalled the finding was arguably wrong.

Reasoning

The respondent did not cross-appeal against the disallowance of the 85 days accrued leave claim, which the trial Judge had treated as a general damages claim. The Court stated it would otherwise have been inclined to reverse, since a statutory claim is not a claim for general damages for breach of contract.

p. 11
07

Whether termination on reorganisation amounted to redundancy though not pleaded as such

Holding

The facts pleaded in paragraph 6 of the plaint adequately pleaded a redundancy as defined in section 16A(2), so the trial Judge was right to treat the dismissal as redundancy.

Reasoning

Although the plaint did not use the word 'redundancy' or cite section 16A, the admitted paragraph 6 pleaded termination on account of worldwide structural and management reorganisation and abolition of the plaintiff's position, which are the elements of redundancy as defined in section 2 of the Trade Disputes Act as applied by section 16A(2).

p. 7

Legal principles established

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  • A Collective Bargaining Agreement between an employers' association and a trade union does not bind an employer in relation to a management employee who is not a member of the union and who was not a party to the agreement.
  • A party cannot rely on an agreement whose existence and applicability has not been pleaded.
  • Section 16A of the Employment Act applies to all employees irrespective of management status.
  • In their ordinary meaning, the words 'wages' and 'salary' do not include allowances, provident fund arrangements or other additional payments.
  • Severance pay for redundancy under section 16A(1)(f) of the Employment Act is at the statutory rate of 15 days pay for each completed year of service, not the higher CBA rate.
  • To recover under a non-competition clause providing an indemnity, an employee must prove that the employer's refusal to waive the clause was unreasonable, that damage was suffered as a result, and the quantum of that damage.

Court orders

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  1. 1.The High Court judgment awarding the respondent Kshs. 7,685,420.85 plus interest and costs is set aside
  2. 2.Judgment is substituted with judgment in favour of the respondent for Kshs. 103,480/=, being Kshs. 1,787,078/= less Kshs. 1,683,548/= already paid pursuant to the preliminary decree dated 14th October 2003
On appeal from
High Court of Kenya at Mombasa
HCCC No. 159 of 2003
Jurisdiction invoked
First appeal to the Court of Appeal against the judgment and decree of the High Court (statutory appellate jurisdiction; no constitutional article cited in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Court of Appeal At Mombasa v Baiba Dhidha Mjidho", Case Analysis (2007). Civil Appeal 86 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2007/44/eng@2007-06-29

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.