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Court of AppealPartially AllowedNot stated in judgment (arising from Industrial Court Cause No. 1616 of 2012; interim Civil Application No. Nai 310 of 2012)

Kenya Airways Ltd v Aviation & Allied Workers Union Kenya & 3 others (Civil Appeal 46 of 2013) [2014] KECA 404 (KLR)

Court of Appeal of Kenya
11 July 2014
EGE.M. GithinjiDavid Kenani MaragaD.K. MaragaAMA.K. Murgor
25,693 words in judgment
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The bottom line

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Kenya's Court of Appeal upheld Kenya Airways' right to retrench 447 staff but ruled the selection process unfair, replacing reinstatement with six months' salary damages each.

What this practically means

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Executive summary

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Kenya Airways appealed an Industrial Court award (Rika J, 3rd December 2012) declaring the retrenchment of 447 unionisable employees unjustified, procedurally unfair, and ordering reinstatement with back pay. The Court of Appeal, restricted by section 17(3) of the Industrial Court Act to matters of law, unanimously held the redundancy substantively justified: the airline's five-year profit decline and unsustainable wage bill established a genuine redundancy, and the court cannot substitute its business judgment for the employer's, nor import Article 10 national values into a private company's commercial decisions. On procedure, the court divided. By majority (Maraga and Murgor JJA; Githinji JA dissenting), the appellant failed to prove a fair, objective and transparent selection process under section 40(1)(c) - no assessment results were produced and the injunction had suspended the assessment exercise - so the termination was procedurally unfair on that ground. The majority also found consultation imperative, implicit in section 40(1) read with the ILO Termination of Employment Convention under Article 2(6) of the Constitution, though they differed on who caused its breakdown. LIFO was held not to be the sole mandatory criterion. Unanimously, the court set aside reinstatement with back pay as punitive and impracticable, holding the normal remedy for genuine redundancy is compensation. Each of the 447 employees was awarded six months' gross salary damages in addition to three months' salary in lieu of notice, severance at 20 days per completed year and other dues, all subject to statutory deductions. There was no order as to costs.

Key legal issues

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01

Substantive justification of redundancy

Holding

The redundancy of the 447 employees was substantively justified. The employer genuinely believed, on the audited and unaudited accounts and corroborating evidence, that declining revenue and an unsustainable wage bill rendered the services superfluous, and the court could not substitute its own commercial judgment for that of the employer.

Reasoning

Both Githinji and Maraga JJA found a five-year downward profit trend, a swelling wage bill and abolition of 205 roles, satisfying the statutory definition of redundancy as abolition of office or loss of employment through no fault of the employee. The Industrial Court erred by testing commercial necessity and treating the national carrier as subject to Article 10 and to government oversight, when Kenya Airways is a private listed company with the Government holding only 29.8%. The reasonableness of the decision must be judged at the time it was made.

p. 11
02

Notice and consultation under section 40(1) of the Employment Act

Holding

By majority, the notice of 1st August 2012 was a valid general notice, but consultation is an imperative requirement implicit in section 40(1) read with the ILO Termination of Employment Convention as domesticated by Article 2(6) of the Constitution; consultations must be real and not cosmetic, and the employees were not given a reasonable opportunity to respond.

Reasoning

Maraga JA held that the initial notice need not name affected employees, but its purpose is to elicit genuine consultation on measures to avert or minimise terminations. Giving the union only two days before negotiations, and issuing termination letters days after the injunction lapsed, meant no meaningful consultation was possible. Githinji JA found substantial compliance, holding the Union could not complain after obtaining an injunction that frustrated consultation, while Murgor JA found the Union responsible for the breakdown. The majority result upheld the finding of procedural unfairness.

p. 25
03

Selection criteria under section 40(1)(c)

Holding

By majority (Githinji JA dissenting), the appellant failed to prove application of a fair, objective and transparent selection process, and the termination of the 447 employees was procedurally unfair on this ground alone.

Reasoning

The employer bears the burden of proving compliance with section 40(1)(c). No assessment score sheets, psychometric test results or comparative productivity data were produced; some retrenched employees had scored highly in appraisals; and the injunction suspended the assessment exercise, leaving no evidence the criteria were systematically applied. However, LIFO is not mandatory in isolation. Githinji JA dissented, finding the criteria applied did not depart significantly from the statutory criteria and no individual employee was shown to have been unfairly selected.

p. 26
04

Reinstatement as a remedy

Holding

Unanimously, the order of reinstatement with back pay was set aside. Reinstatement is discretionary, must be guided by section 49(4) of the Employment Act, and was punitive and impracticable in a justified redundancy at a financially distressed employer.

Reasoning

The Industrial Court failed to apply the statutory factors, relied on unproven findings of bad faith, anti-union motive and foreign recruitment, and ordered en masse reinstatement without hearing the parties on practicability, breaching the right to be heard. Practicability requires a balancing of the parties' interests with regard to the future, including effects on the employer, other employees and third parties. The normal remedy for a genuine redundancy, even if procedurally flawed, is compensation.

p. 14
05

Applicability of Article 10 of the Constitution and the right to work

Holding

Article 10 binds State organs, State officers, public officers and persons making public policy decisions; it does not impose consultation obligations on a private employer's commercial redundancy decisions. Neither Article 41 nor the Employment Act secures an absolute right to work.

Reasoning

Kenya Airways is a private limited company listed on the Nairobi, Uganda and Tanzania exchanges, with the Government holding only 29.8%, and is not a parastatal under the State Corporations Act. Article 23 of the UDHR, part of Kenyan law via Article 2(6), recognises the right to work, but that must be read with Article 41 and the Employment Act, whose protection is against unfair termination, not job security. The Board and management retain the corporate latitude to balance stakeholder interests.

p. 19

Legal principles established

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  • For any termination of employment under redundancy to be lawful in Kenya it must be both substantially justified and procedurally fair; all the conditions in section 40(1) of the Employment Act are conjunctive and must all be satisfied.
  • Kenyan law does not prescribe pre-redundancy consultation as a statutory condition beyond what is implicit in section 40(1); the employer, not the court, holds the commercial judgment whether a redundancy situation exists, and the court may not substitute its own business decision.
  • Where the employee is a member of a trade union, the notice under section 40(1)(a) to the union and the labour officer is an alternative to, not cumulative with, personal notice under section 40(1)(b); the initial notice need not name the affected employees.
  • Last-in-first-out (LIFO) is not the sole mandatory selection criterion under section 40(1)(c); the employer may apply the statutory criteria of seniority in time, skill, ability and reliability, but must apply an objective, transparent and uniformly applied selection process.
  • Article 10 of the Constitution on national values binds State organs and public officers and has no, or at most limited, application to private commercial decisions of a private company such as redundancy in a labour dispute.
  • Reinstatement for unfair termination is discretionary, governed by section 49(4) of the Employment Act, including the practicability of reinstatement and the common law rule against specific performance of employment contracts except in very exceptional circumstances.
  • An appeal from the Industrial Court to the Court of Appeal lies only as a matter of law; even on such an appeal, allegations of misapprehension of evidence or reliance on extraneous material are points of law justifying review of the record.

Court orders

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  1. 1.The order of reinstatement together with back pay made by the Industrial Court was set aside
  2. 2.The appeal against the trial judge's finding of procedural unfairness relating to selection criteria was dismissed by majority
  3. 3.Each of the 447 employees whose services were unprocedurally terminated was awarded damages equivalent to six months gross salary, in addition to three months' salary in lieu of notice, severance pay of 20 days for every completed year of service and other unpaid dues
  4. 4.All payments made by the appellant to each of the 447 former employees were made subject to statutory deductions
  5. 5.No order as to costs of the appeal and the court below
On appeal from
Industrial Court of Kenya
Cause No. 1616 of 2012
Jurisdiction invoked
Section 17(3) of the Industrial Court Act, No. 20 of 2011 - appeal lies to the Court of Appeal only as a matter of law

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (19)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenya Airways Ltd v Aviation & Allied Workers Union Kenya & 3 others (Civil Appeal 46 of 2013) [2014] KECA 404 (KLR)", Case Analysis (2014). Not stated in judgment (arising from Industrial Court Cause No. 1616 of 2012; interim Civil Application No. Nai 310 of 2012). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/404/eng@2014-07-11

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