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Court of AppealPartially AllowedCivil Appeal No. 86A of 2016· [2018] KECA 160 (KLR)

Pure Circle (K) Ltd v Paul K. Koech & 12 others [2018] KECA 160 (KLR)

Court of Appeal of Kenya
18 July 2018
RNR. N. NambuyeFSF. SichaleSKS. ole Kantai
4,193 words in judgment
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The bottom line

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Kenya's Court of Appeal confirmed employers need not consult employees before redundancy, but must strictly follow section 40 notice rules of the Employment Act.

What this practically means

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Executive summary

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This was a first appeal to the Court of Appeal (Nambuye, Sichale and Kantai, JJ.A) against the judgment of Marete, J. of the High Court at Kericho (ELRC No. 241 of 2015) delivered on 19th July 2016, in which the claims of thirteen former employees of Pure Circle (K) Ltd for wrongful, unfair and unlawful termination on account of redundancy succeeded and damages totalling Kshs. 5,093,937 were awarded, with a direction that the Commissioner for Labour compute severance dues. The appellant challenged the finding of unfair termination and the referral to the Labour Commissioner; the respondents cross-appealed on notice entitlements, the 1st respondent's mileage and refund claims, and the 13th respondent's terminal dues. The Court re-analysed the evidence as on a first appeal and held that the employer was entitled to make the commercial decision to restructure, that Kenyan law does not require pre-redundancy consultation (following Kenya Airways Ltd v Aviation & Allied Workers Union), and that section 40(b) of the Employment Act applied because the respondents were not union members. It found that the respondents were not entitled to compensation for loss of employment and that the trial judge erred in awarding only one month's notice when the contracts provided for two. The Court set aside the judgment of 19th July 2016 and substituted orders that the respondents collect terminal dues as computed by the appellant, including two months' salary in lieu of termination notice, one month's salary in lieu of redundancy notice, fifteen days' salary, severance pay and unpaid leave days. Each party was ordered to bear its own costs of the appeal.

Key legal issues

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01

Compliance with section 40 of the Employment Act in declaring redundancy

Holding

Section 40 sets out mandatory conditions precedent to redundancy; the applicable notification depends on whether the employee is a union member, and under section 40(b) notice goes to the employee personally in writing and the Labour Officer.

Reasoning

The court examined section 40(1)(a)-(g) and adopted the Thomas De La Rue exposition that sections 40(a) and 40(b) provide two kinds of notification. The respondents were not union members, so notice was required to the employee and the Labour Officer. Evidence showed the Labour Office was notified by letters of 14th and 16th September 2015, and no minimum notice period is stipulated for section 40(b).

p. 5
02

Whether pre-redundancy consultation is required in Kenya

Holding

No; Kenyan law provides only for post-redundancy dispute resolution, not pre-redundancy consultation.

Reasoning

Relying on the Kenya Airways decision, the court noted that unlike South Africa and the Philippines, Kenya has not enacted a consultation requirement, and ILO Recommendation No. 166 has not been ratified by Kenya. Article 10 national values apply to private employment contracts, but the court agreed with the Kenya Airways holding that no pre-redundancy consultation is mandated.

p. 6
03

Entitlement to compensation for loss of employment upon procedurally questioned redundancy

Holding

The respondents were not entitled to compensation for loss of employment; they were entitled to their terminal dues including 2 months' salary in lieu of termination notice and 1 month's salary in lieu of redundancy notice.

Reasoning

The court held that an employer cannot be penalized for a commercial restructuring decision. Since the redundancy was not shown to be non-genuine and the terminal dues had been computed and offered, the trial judge erred in awarding compensation and in substituting 1 month's notice for the 2 months provided in the letters of appointment. The burden lay on the respondents to prove higher entitlements.

p. 4
04

First appellate court's duty on re-evaluation of evidence

Holding

A first appeal requires re-analysis and re-assessment of the evidence, respecting trial court findings of fact unless unsupported by evidence or perverse.

Reasoning

The court reiterated the standard from Selle v Associated Motor Boat Company: an appellate court reaches its own conclusions but must have regard to the fact that it did not see or hear the witnesses, and should not disturb trial findings of fact unless they are not backed by evidence or are perverse.

p. 3

Legal principles established

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  • Kenyan law does not require pre-redundancy consultation; the employer has a free hand to organize its business, subject to compliance with section 40 of the Employment Act.
  • An employee who is not a member of a union is entitled to a minimum of one month's salary in lieu of notice under section 40(b), just as a unionisable employee under section 40(a).
  • A party who alleges must prove; in the absence of proof of alternative computations, the employer's computation of terminal dues stands.

Court orders

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  1. 1.Set aside the judgment of the High Court dated 19th July 2016
  2. 2.Substituted orders that the respondents collect their terminal dues from the appellant, including 2 months' salary in lieu of notice of termination and 1 month's salary in lieu of redundancy notice, 15 days' salary for days worked, severance pay and unpaid leave days as computed by the appellant
  3. 3.Each party to bear its/his/her own costs of the appeal

Authorities

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Legislation

  • Employment ActSection 40(1) (a)-(g)
  • Employment ActSection 40(1)(b)
  • Employment ActSection 40(a) and 40(b)
  • Employment ActSection 41(1)(f) (as referred to in cross-appeal)
  • Employment Act 2007generally
  • Constitution of KenyaArticle 10
  • Labour Relations Act (South Africa)Section 189(1)

Cases cited (7)

  • Kenya Airways Limited vs. Aviation & Allied Workers Union of Kenya & 3 Others
    [2014] eKLR
  • Kenya Union of Domestic Hotels Educational Institutions and Hospital Workers (KUDHEIHA) vs Aga Khan University Hospital Nairobi
    [2015] eKLR
  • Selle vs. Associated Motor Boat Company
    [1968] E.A 123
  • Thomas De La Rue (K) Ltd. vs David Opondo Omutelema
    [2013] eKLR
  • Aoraki Corporations Limited vs. Collin Keith McGavin
    CA 2 of 1997 [1988] 2 NZLR
  • G.N. Hale & Son Ltd v. Wellington Caretakers IUA
    null
  • Fasap v Philippine Airlines
    GR No. 178083
On appeal from
High Court of Kenya at Kericho
ELRC No. 241 of 2015
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (Appeal from the Employment and Labour Relations Court); the judgment states 'The appeal before us is a first appeal hence our duty is to re-analyze and re-assess the evidence and the record'.

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, "Pure Circle (K) Ltd v Paul K. Koech & 12 others [2018] KECA 160 (KLR)", Case Analysis (2018). Civil Appeal No. 86A of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/160/eng@2018-07-18

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