Prideinn Hotels & Investment Limited v Madzungu
The bottom line
#Kenya's Court of Appeal confirmed a hotel unfairly terminated an employee's redundancy but cut his compensation from twelve months' salary to six.
What this practically means
#Executive summary
#Key legal issues
#Whether the letter of 1st May 2015 was a valid notice of termination on account of redundancy under Section 40(1)(b)
It was not. It made no reference to redundancy, was a direct notice of termination, and no separate notice of intended redundancy was served on the Labour Officer 30 days before the redundancy.
Section 40(1)(b) requires an employer, where the employee is not a union member, to notify the employee personally in writing and the labour officer of the reasons for and extent of the intended redundancy not less than a month before termination. The letter was titled 'Service Termination Notice', never mentioned redundancy, and was merely copied to the Labour Office after the decision was made. Following Kenya Airways v Aviation & Allied Workers Union, this amounted to procedural unfairness.
Whether the appellant complied with the selection criteria requirement under Section 40(1)(c)
No criteria for selecting the respondent for redundancy were demonstrated; being the only person in the job category is no excuse for flouting the mandatory requirement.
Section 40(1)(c) requires due regard to seniority in time and to the skill, ability and reliability of each employee in the affected class. The respondent testified he had worked 12 years as a gardener cum cleaner, there were 13 cleaners, the appellant had other establishments where he could have been transferred, and it employed another person to do the same job after termination. No selection process was shown, so the requirement was flouted.
Whether the termination was fair under Sections 43 and 45
The appellant may have had a valid reason (hard economic times) but failed on procedure; the termination was unfair both substantially and procedurally.
The employer bears the burden of justifying the termination and proving a valid and fair reason based on operational requirements and fair procedure. Failure to give the Section 40(1) notice, failure to show a selection process, and failure to involve the Labour Office before termination proved the appellant did not follow due process.
Whether the award of twelve months' salary as compensation was excessive
Yes. The ELRC gave the maximum under Section 49(1)(c) without reasoning; the Court substituted six months' pay.
Section 49(1)(c) permits compensation not exceeding twelve months' gross monthly wage. The ELRC awarded the maximum without explaining the exercise of discretion. Relying on Ol Pejeta Ranching v Muhoro, failure to explain entitlement to the maximum award made the Court's intervention necessary. Considering the respondent's 12 years of service, clean record, and that redundancy was no fault of his, six months' pay was reasonable.
Whether the terminal dues were paid and on what salary the awards should be pegged
The Kshs. 30,203/- paid did not meet the Section 40(g) severance requirement; it was presumed to be the respondent's salary for May 2015, with the excess deducted from the award. Awards were re-calculated on the payroll salary of Kshs. 10,548/-.
The appellant did not challenge the ELRC's finding that severance pay, notice pay and pay for work done were payable; only the calculation was in issue. The payroll exhibit for May 2015 showed a salary of Kshs. 10,548/-, which the ELRC should have used. The Kshs. 30,000/- paid was presumed to be the May 2015 salary, with the amount above it deducted from the final award.
Legal principles established
#- On a first appeal the Court of Appeal must re-evaluate, re-assess and re-analyze the evidence and draw its own conclusions, while making due allowance for not having seen or heard the witnesses.
- For redundancy to be lawful it must be both substantially justified and procedurally fair; the employer bears the burden of justifying the termination.
- An employer must serve a notice of intended redundancy on the employee personally and the Labour Officer before the termination takes effect; copying a termination notice to the Labour Office does not comply with Section 40(1)(b).
- Even where the affected employee is the only person in the affected category, the employer must still show the criteria used in selecting that employee for redundancy under Section 40(1)(c).
- An appellate court will not interfere with the exercise of discretion by a lower court unless the decision is clearly wrong, based on misdirection, or on a failure to consider relevant matters.
- A trial court must give reasoning to justify awarding the maximum compensation of twelve months' salary under Section 49(1)(c); absent such reasoning the award is excessive and will be interfered with.
Court orders
#- 1.Set aside the award of twelve months' salary as compensation for unfair termination and in its place award the equivalent of six months' pay at Kshs. 10,548/-, totalling Kshs. 63,288/-
- 2.Vary the award of one month's salary in lieu of notice from Kshs. 12,248/- to Kshs. 10,598/-
- 3.Vary the award of severance pay based on 15 days' salary for each complete year of service using the monthly salary of Kshs. 10,598/-
- 4.Reduce the amount payable to the respondent by Kshs. 19,605/-, being the amount paid to him upon termination
- 5.The award is subject to statutory deductions
- 6.The order on interest is not disturbed
- 7.Each party to bear its own costs of the appeal
- On appeal from
- Employment and Labour Relations Court at Mombasa
- Industrial Cause No. 457 of 2015
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (first appeal from the ELRC)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Deloraine Estates Limited v Shikuku (Employment and Labour Relations Appeal E020 of 2022) [2025] KEELRC 342 (KLR)[2025] KEELRC 342 (KLR)12 Feb 2025
- Abere v Mini Bakeries (Nairobi) Limited (Cause E004 of 2024) [2024] KEELRC 2207 (KLR)[2024] KEELRC 2207 (KLR)19 Sept 2024
- Longhorn Publishers Kenya also known as Longhorn Kenya Limited v Njuguna (Civil Appeal E413 of 2020) [2023] KECA 316 (KLR)[2023] KECA 316 (KLR)17 Mar 2023followed
Cite this brief
#Cite this brief
Caselaw, "Prideinn Hotels & Investment Limited v Madzungu", Case Analysis (2022). Civil Appeal 88 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/764/eng@2022-06-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.