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Court of AppealDismissedCivil Appeal No. 70 of 2014· [2015] KECA 202 (KLR)

Chemelil Sugar Company v Ebrahim Ochieng Otuon & 2 others [2015] KECA 202 (KLR)

Court of Appeal of Kenya
20 November 2015
DMD. K. MusingaSKS. Gatembu KairuAMA. K. Murgor
2,100 words in judgment
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The bottom line

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The Court of Appeal confirmed that Kenyan casual workers automatically gain full employee rights after a month, and employers must prove salaries include house allowance.

What this practically means

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Executive summary

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This was an appeal by Chemelil Sugar Company against a judgment of the Industrial Court (H. Wasilwa, J.) delivered on 30 April 2014, awarding 48 former employees varying amounts of house allowance totalling Kshs. 5,896,617.48. The respondents had claimed that the appellant unlawfully terminated their employment in August 2011; the dispute was largely resolved through conciliation referred by the trial Judge under Section 15(4) of the Industrial Court Act, leaving only the house allowance issue for determination by consent. The trial Judge found the claimants entitled to house allowance at 15% of monthly wages for all the years worked, holding that their contracts did not provide a consolidated wage inclusive of rent. The appellant advanced three principal arguments: that the respondents were casual employees not entitled to house allowance; that wages above the statutory minimum were consolidated wages; and that the Judge adopted unilateral figures. The Court of Appeal, in a unanimous judgment, dismissed the appeal. It held that under Section 37 of the Employment Act, the respondents' casual employment was automatically converted into term contracts by operation of law, given their service of one to fifteen years. The burden of demonstrating that salaries were consolidated lay with the employer, which failed to discharge it; moreover, the Regulation of Wages (General) Order excluded agricultural industry workers and contained no basis for the appellant's inference. The figures used to compute house allowance were drawn from the appellant's own records. The Court affirmed the judgment of the Industrial Court and awarded costs to the respondents.

Key legal issues

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01

Whether the respondents remained casual employees disentitled to house allowance

Holding

Even if employment commenced on a casual basis, it converted to term contracts by operation of law under Section 37 of the Employment Act, entitling the respondents to house allowance.

Reasoning

Section 37 of the Employment Act deems the contract of a casual employee who works for not less than one month, or whose work cannot be completed within three months, to be one where wages are paid monthly. The respondents worked between one and fifteen years. The parties' consent order also acknowledged them as bona fide employees whose termination occurred on 10 August 2011, defeating the appellant's contention.

p. 3
02

Whether wages above the statutory minimum are consolidated wages inclusive of house allowance

Holding

No. The employer bears the burden of proving consolidation, and the Regulation of Wages (General) Order did not apply to agricultural industry workers.

Reasoning

The court held that payment above the minimum wage prescribed under the Regulation of Wages (General) Order does not necessarily mean the salary incorporates a house allowance element. That Order in any event excluded workers in the agricultural industry, such as the respondents, and contained no provision supporting the appellant's argument.

p. 4
03

Whether the Judge erred in adopting unilateral figures supplied by the respondents

Holding

No. Terminal benefits and house allowance were computed on figures obtained from the appellant as employer.

Reasoning

The record showed that all terminal benefits were computed on the basis of figures obtained from the appellant. Since there was no dispute about the monthly wages of each employee, house allowance at 15% of monthly wages could be computed without difficulty. The appellant's only contention had been that records need only be kept for three years.

p. 4

Legal principles established

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  • Where a casual employee works for a period equivalent to not less than one month or performs work not completable within three months, the contract of service is deemed by operation of law to be one where wages are paid monthly, and the employee becomes entitled to statutory terms and conditions of service including house allowance.
  • The burden of demonstrating that wages paid were consolidated salaries inclusive of a house allowance component lies with the employer; payment above the minimum statutory wage does not, of itself, establish consolidation.

Court orders

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  1. 1.The appeal is dismissed with costs to the respondents

Authorities

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Legislation

  • Industrial Court ActSection 15(4)
  • Labour Relations ActSection 48(2)
  • Employment ActSection 31
  • Employment ActSection 37
  • Employment ActSection 35(1)(c)
  • Regulation of Wages (General) Order
  • Regulation of Wages and Conditions of Employment Act
On appeal from
Industrial Court (High Court of Kenya) at Kisumu
Industrial Cause No. 15 of 2013 (formerly Industrial Case No. 1579 of 2011)
Jurisdiction invoked
First appellate jurisdiction over an appeal from the Industrial Court (High Court) judgment

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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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, "Chemelil Sugar Company v Ebrahim Ochieng Otuon & 2 others [2015] KECA 202 (KLR)", Case Analysis (2015). Civil Appeal No. 70 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/202/eng@2015-11-20

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