Peter Mbugua Kanoi & 5 Others v Coffee Board Of Kenya [2013] KEELRC 749 (KLR)

The term retrenchment is not used in the Employment Act but is one of the circumstances falling within the statutory definition of redundancy - involuntary loss of employment at the employer's initiative where services are superfluous. The Respondent itself conceded the terminations flowed from a restructuring following removal of its marketing mandate, triggering the mandatory conditions in section 40(1), including severance pay at not less than fifteen days pay per completed year of service.

Section 3 of the Employment Act applies the Act to all employees under a contract of service and binds the Government. The Respondent produced no instrument exempting it from section 40, and the tripartite committee (Ministry of Finance, Inspectorate of State Corporations, Directorate of Personnel Management) had no power to grant such exemption. Moreover, section 3(6) renders void any agreement to relinquish or vary the minimum terms. The Pensions Act was inapplicable because the claimants' pensions were governed by the Respondent's Retirement Benefits Scheme under the Retirement Benefits Act.

The Respondent admitted in cross-examination that payment under the Employment Act formula (15 days per year worked) would have yielded more than the amounts actually paid. The criterion of years remaining to retirement was alien to the legislation cited. No severance pay was in fact paid to the claimants; the payment made was less favourable than what the Act required, establishing discrimination among similarly circumstanced employees.

While the court found the claimants entitled to the balance of severance pay with interest at court rates from the filing date, the enhanced 20% interest from the retrenchment date was refused because no legal basis for it was proved. Costs were nonetheless awarded to the claimants, to be taxed by the Deputy Registrar.