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Court of AppealPartially AllowedCivil Appeal No. 188 of 2014· [2016] KECA 97 (KLR)

Co-operative Bank of Kenya Ltd v Banking Insurance & Finance Union [2016] KECA 97 (KLR)

Court of Appeal
25 November 2016
3,547 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled that a bank couldn't fire an employee on the spot because its own union agreement required warnings first, and reinstatement is only a last resort.

What this practically means

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Executive summary

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The Court of Appeal allowed this appeal in part against the judgment of Marete J. of the Employment & Labour Relations Court, which had found that the Co-operative Bank of Kenya summarily and unlawfully dismissed its employee, Helen Nduta Ngugi, after a fraudulent payment of Kshs 2,481,586 was made on signatures she verified without opening all email attachments or making a callback. The Court held that although the claimant's careless performance could constitute gross misconduct under section 44(4)(c) of the Employment Act, the Bank was bound by clause A5 of its Collective Bargaining Agreement with the respondent union, which excluded negligence from the grounds warranting instant dismissal and instead required two prior written warnings. Having none, the claimant's summary dismissal was unlawful. The Court further held that reinstatement under section 49(3) is a discretionary, last-resort remedy, and the learned judge erred by failing to consider the mandatory catalogue of factors in section 49(4) before ordering reinstatement; that order was set aside. The award of all salaries and allowances lost from 2nd August 2011 to 24th April 2014 and 8 months' compensation was upheld as not excessive, save that the monthly basic salary figure was corrected from Kshs 84,822/- to the uncontroverted Kshs 81,822/-. The Court directed that each party bear their own costs. The judgment binds subordinate courts on the primacy of CBA terms over statutory dismissal grounds and the discretionary character of reinstatement.

Key legal issues

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01

Whether the summary dismissal was justified under the CBA despite satisfying section 44 of the Employment Act

Holding

The dismissal was unjustified because clause A5 of the CBA did not include negligence among the grounds for instant dismissal; negligence warranted dismissal only after two written warnings, which the claimant did not have.

Reasoning

The Court accepted that the claimant's conduct could amount to gross misconduct under section 44(4)(c) of the Employment Act. However, the CBA, incorporated into the employment contract under sections 57 and 59 of the Labour Relations Act, fettered the employer's statutory right to summarily dismiss. Clause A5(b) required two prior written warnings within twelve months before dismissal for careless performance of duty. It was common ground the claimant had no such warnings, so summary dismissal was unlawful.

p. 5
02

Whether the order for reinstatement was properly made

Holding

The reinstatement order was set aside because the learned judge failed to advert to the considerations in section 49(4) of the Employment Act before exercising his discretion.

Reasoning

Reinstatement under section 49(3) is discretionary, signalled by the word 'may', and section 49(4) sets out 13 considerations the court must weigh, including the employee's conduct, length of service, practicability of reinstatement, and the common law bar on specific performance of personal service contracts. The judge considered none of these. Had he done so, including the principle that reinstatement is a last-resort remedy, he would not have ordered it. This justified appellate interference with the discretion.

p. 6
03

Whether the compensation award was excessive or miscalculated

Holding

The award of lost salaries and allowances and 8 months' compensation was not excessive, but the monthly figure was corrected from Kshs 84,822/- to Kshs 81,822/-.

Reasoning

Having found the dismissal unlawful but reinstatement inappropriate, the remaining remedies were payment of all salaries and allowances lost from 2nd August 2011 to 24th April 2014 plus 8 months' compensation. The appellant's only substantiated complaint was the arithmetical error in the basic salary used, which was uncontroverted, and the Court corrected it accordingly.

p. 6

Legal principles established

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  • Where a collective bargaining agreement in force narrows the grounds for summary dismissal below those in the Employment Act, the employer is bound by the CBA and cannot invoke statutory grounds for summary dismissal outside it.
  • The remedies for unfair termination under section 49 of the Employment Act, including reinstatement, are discretionary, not mandatory, and the court must consider the factors in section 49(4) before choosing a remedy; reinstatement is a last-resort remedy for exceptional cases.
  • An appellate court will not interfere with the exercise of discretion by a trial court unless the decision was clearly wrong because the judge misdirected himself or considered, or failed to consider, relevant matters.

Court orders

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  1. 1.The order for the reinstatement of the claimant is set aside
  2. 2.The award of compensation shall be calculated on the basis of the basic salary of Kshs 81,822/- per month instead of Kshs 84,822/-
  3. 3.Each party shall bear their own costs

Authorities

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Legislation

  • Employment Actsection 44
  • Employment Actsection 44(4)
  • Employment Actsection 44(c)
  • Employment Actsection 41
  • Employment Actsection 47(5)
  • Employment Actsection 49
  • Employment Actsection 49(3)
  • Employment Actsection 49(4)
  • Employment Actsection 50
  • Labour Relations Actsection 57
  • Labour Relations Actsection 59
  • Trade Disputes Actsection 65

Cases cited (5)

  • CFC Stanbic Bank Ltd v. Danson Mwashako Mwakuwona
    CA. No. 3 of 2014
  • Earl v. Slatter & Wheeler (Airlyne) Ltd
    [1973] 1 All ER 145
  • Bamburi Cement Ltd v. Farid Aboud Mohammed
    CA No. 63 of 2015 (Malindi)
  • Thomas De La Rue (K) Ltd v. David Opondo Omutelema
    CA No 65 of 2012
  • Mbogo & Another v. Shah
    (1968) EA 93
On appeal from
Employment & Labour Relations Court at Nairobi
HCCC No. 641 of 2010
Jurisdiction invoked
First appellate jurisdiction over the Employment & Labour Relations Court under the Employment Act and the Court of Appeal's appellate framework

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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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, "Co-operative Bank of Kenya Ltd v Banking Insurance & Finance Union [2016] KECA 97 (KLR)", Case Analysis (2016). Civil Appeal No. 188 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/97/eng@2016-11-22

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