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Court of AppealPartially AllowedCivil Appeal No. 37 of 2016· [2017] KECA 432 (KLR)

Mukiria Farmers Co-operative Society Ltd v Jacob Rukaria & 5 others [2017] KECA 432 (KLR)

Court of Appeal of Kenya
7 June 2017
PWP. N. WakiAVAlnashir VisramGKG. B. M. Kariuki
3,944 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 an expired fixed-term collective bargaining agreement no longer binds employers, and that redundancy selection may balance skills against seniority.

What this practically means

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Executive summary

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This was a first appeal to the Court of Appeal at Nyeri against the judgment of Byram Ongaya, J of the Employment and Labour Relations Court, which had held that a 2009 CBA between Mukiria Farmers Co-operative Society Ltd and the Kenya Union of Commercial Food and Allied Workers, though expired in December 2010, continued to apply through its incorporation into individual employment contracts, and that the society's 2015 redundancy of six workers flouted the first-in-last-out principle and entitled the workers to elect more advantageous retirement benefits. The Court of Appeal allowed the appeal on both main issues. First, applying Section 59 of the Labour Relations Act, it held that a collective agreement binds only 'for the period of the agreement'; the CBA had a sunrise date and a sunset date and, like a fixed-term employment contract, expired on the sunset day absent an express intention that it continue after expiry. Second, it rejected the argument that Ministerial directives raising the retirement age rendered the CBA a nullity, holding that circulars are no substitute for the law. Third, on redundancy, it held that Section 40(1)(c) of the Employment Act requires seniority to be balanced with skill, ability and reliability, and that uncontroverted evidence of the special skills of two retained employees meant the trial court's finding of breach had no proper basis in fact. The Court set aside the ELRC orders and dismissed the respondents' claim, with each party bearing its own costs given the wider significance of the CBA construction question.

Key legal issues

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01

Whether the terms of a fixed-term CBA continue to apply after its expiry

Holding

No. The CBA bound the parties only for the two-year period agreed and expired on its sunset date; the terms incorporated into individual contracts applied only for as long as the CBA lasted.

Reasoning

Section 59(1) of the LRA provides that a collective agreement binds 'for the period of the agreement'. The CBA had a sunrise date of 1 January 2009 and a sunset date of 31 December 2010 with no expressed intention to extend its operation after expiry. The role of the court in contractual matters is to enforce the intentions of the parties. The parties could have framed the duration clause to continue the agreement after expiry but did not. There was no vacuum since general employment law continued to protect the workers.

p. 6
02

Whether a CBA registered contrary to Ministerial directives on retirement age is unenforceable ab initio

Holding

No. The Minister's circulars had no force of law superior to the CBA, and Section 61 of the LRA covering sectors without collective bargaining did not apply where bargaining had occurred and the CBA was lawfully registered.

Reasoning

The court agreed with the trial court that the circulars were no substitute for the law. Section 60(6)(b) of the LRA concerns directives concerning wages, salary levels and other conditions, but the CBA in this case was lawfully registered. Section 61 of the LRA covers the public sector where there is no collective bargaining, whereas there was collective bargaining in this matter. Workers continue to be protected under the Constitution and labour laws even after expiry of a CBA.

p. 7
03

Whether the employer complied with Section 40 of the Employment Act in declaring redundancy

Holding

Yes. Section 40(1)(c) requires seniority to be balanced with skill, ability and reliability; the society's evidence of the special skills of the two exempted employees was uncontroverted, so the finding of breach had no proper basis in fact.

Reasoning

The trial court had considered only the first-in-last-out principle under Section 40(1)(c), ignoring evidence that the watchman retained had clerical skills and doubled as a cherry-picking clerk, and the machine operator doubled as a mechanic. The respondents' witness did not counter that evidence and had no skills inventory to discredit the selection process. On a first appeal the Court re-evaluated the evidence and found the trial court's finding of breach without proper basis in fact.

p. 8
04

Whether the choice between retirement and redundancy benefits remained relevant

Holding

The question was rendered otiose once the Court held the CBA had expired four years before the redundancy; the applicable law was Section 40 of the Employment Act.

Reasoning

The trial court had held that where an employee faces two or more modes of separation, the employee may elect the more advantageous option, and chose retirement under the CBA. Having found the CBA expired in 2010, the Court found the retirement-versus-redundancy choice academic and assessed the redundancy purely against the statutory requirements of Section 40 of the Employment Act, with which the employer had largely complied.

p. 7

Legal principles established

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  • A fixed-term CBA binds only for the period of the agreement as provided in Section 59(1) of the LRA, and expires on its sunset date unless the parties express an intention that it continue in force after expiry
  • A CBA with a sunset date, like an employment contract with a time limit, expires on that date; parties may however expressly frame the duration clause to continue the agreement after expiry until a new one is signed
  • Under Section 40(1)(c) of the Employment Act, seniority in a redundancy selection must be balanced with the skill, ability and reliability of each employee; the principle of first in last out is not the sole criterion
  • Government circulars or policy directives are no substitute for the law and cannot render a lawfully registered CBA a nullity

Court orders

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  1. 1.Appeal allowed
  2. 2.Orders made by the Employment and Labour Relations Court on 18th December, 2015 set aside
  3. 3.Substituted therefor an order dismissing the respondents' claim filed on 5th May, 2015
  4. 4.Each party to bear its own costs of the appeal and of the lower court

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 41(5)
  • Labour Relations Act (No. 14 of 2007)Section 59(1), 59(2), 59(3), 59(5), 60(6)(b), 61
  • Employment Act, 2007Section 40(1)(a), 40(1)(c), 40(1)(e), 40(1)(f), 40(1)(g)

Cases cited (2)

  • Jabane vs Olenja
    [1986] KLR 661
  • Ephantus Mwangi v Duncan Mwangi Wambugu
    (1982-88) 1 KAR 278
On appeal from
Employment and Labour Relations Court of Kenya at Nyeri
ELRC No. 69 of 2015
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate statutory framework (not expressly stated in the judgment); the appeal is from a judgment of the ELRC

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (8)

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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, "Mukiria Farmers Co-operative Society Ltd v Jacob Rukaria & 5 others [2017] KECA 432 (KLR)", Case Analysis (2017). Civil Appeal No. 37 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/432/eng@2017-06-07

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