Ian Edwards v Bytes Technology Group Kenya Ltd [2018] KECA 428 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that employers, not employees, must pay PAYE, so Bytes Technology had to refund USD 55,607 deducted from a former employee's terminal dues.
What this practically means
#Executive summary
#Key legal issues
#Location of the statutory duty to deduct and remit PAYE
The duty lies on the employer, and deduction of PAYE from the appellant's terminal dues was contrary to the employment contract and the law.
Rule 4 of the Income Tax (PAYE) Rules obligates an employer to deduct tax from emoluments of a taxable employee and remit it to KRA, criminalising failure to comply. The contract clause 5.1 expressly excluded statutory contributions from the gross package. Applying the contra proferentem rule against the respondent as drafter, the deduction of USD 55,607 from terminal dues was unlawful and had to be reversed. The holding is consistent with Erastus Mureithi v Cooperative Bank of Kenya.
Entitlement to bonus and commission
The appellant had not earned commission or bonus as the business did not flourish or pick up.
Payment of commission and incentives depended on targets met and performance. The appellant himself pleaded he could not attain the projected sales targets, and the email that triggered termination sought a downgrade of targets. Although the trial court found two years a short time to establish profitability given inadequate resourcing, the bottom line was that the business did not flourish so as to entitle the appellant to commission and bonus.
Reimbursement of expenses (USD 83,138.26)
Claim rejected as unproved special damages.
The motor vehicle and local running expenses were refunded by the respondent. The remaining claim of USD 14,118.43 for the work permit was resisted by the respondent on the ground, upheld by the trial court, that the appellant failed to produce documentation justifying the expenditure. A claim in the nature of special damages must be specifically pleaded and proved, and the appellant failed to do so.
Costs of the suit below
The trial Judge's order that each party bear their own costs was not shown to be a wrong exercise of discretion.
Section 12(4) of the Employment and Labour Relations Court Act confers an unfettered discretion on the trial court, and costs in employment claims do not automatically follow the event as in other civil claims. Although the Judge gave no reasons, the appellant did not demonstrate the discretion was exercised wrongly or injudiciously, and the appellant did not entirely succeed in his suit.
Cross-appeal: counterclaim for loss of use and reduction of compensation
Cross-appeal dismissed; counterclaim was speculative and unproved and the seven months' compensation was a sound exercise of discretion.
The respondent exhibited only a quotation for daily car hire rates and led no evidence that the vehicles could have yielded the claimed income, nor that it attempted to repossess them. Loss of use being a special damage, the claim failed. On compensation, the Judge exercised discretion in awarding seven months' salary and there was no reason to believe the discretion was exercised injudiciously.
Legal principles established
#- The statutory duty to deduct and remit PAYE from an employee's emoluments lies on the employer, not the employee, and an employer may not lawfully deduct unpaid PAYE from an employee's terminal dues where the contract placed statutory contributions outside the gross package.
- Costs in employment claims do not automatically follow the event, unlike in other civil claims.
- A claim for loss of use, being a special damage, must be specifically pleaded and proved; a claim based on assumed hire rates without evidence is speculative and unproved.
Court orders
#- 1.The respondent to pay the appellant the illegally deducted PAYE amounting to USD 55,607.00
- 2.The cross-appeal dismissed
- 3.Each party to bear his and its costs of the appeal
- On appeal from
- Employment and Labour Relations Court at Nairobi
- ELRC No. 60 of 2014
- Jurisdiction invoked
- First appellate jurisdiction under the Court of Appeal Act over an appeal from the Employment and Labour Relations Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Ian Edwards v Bytes Technology Group Kenya Ltd [2018] KECA 428 (KLR)", Case Analysis (2018). Civil Appeal No. 314 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/428/eng@2018-07-27
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.