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ELRCPartially AllowedNot stated in the judgment· [2013] KEELRC 880 (KLR)

Kenya Petroleum Oil Workers Union v Makedi Investments & Paul Ohany & another [2013] KEELRC 880 (KLR)

Industrial Court of Kenya
8 November 2013
RSRadido Stephen
2,570 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled that when a fuel dealership ends, station staff are the dealer's employees, not the oil marketer's, and unfair redundancy still earns severance pay.

What this practically means

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Executive summary

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The Kenya Petroleum Oil Workers Union brought a claim on behalf of five Grievants (Innocent Mosota, Everlyne Mwinzi, Dan Okello, Thomas Nzioka and Daniel Mati), pump attendants at the Elf Likoni Station, whose services were terminated on 11 July 2012. The Union pleaded wrongful termination through redundancy contrary to section 40 of the Employment Act, seeking severance pay, notice pay, leave, underpayment arrears, days worked and compensation. The key contest was whether the employer was the 1st Respondent, Paul Ohany trading as Makedi Investments, a Young Dealer under a Marketing License with the 2nd Respondent oil marketer, or the 2nd Respondent itself. The Court held on the terms of clause 25 of the License that the Grievants were employees of the 1st Respondent, which solely paid their salaries, and that the 2nd Respondent bore no liability. The Court found the terminations were a classic case of redundancy, but unfair because none of the seven conditions in section 40 of the Employment Act was met - no one-month written notice to the union and labour officer, no leave cash payment, no notice pay and no severance - and the employer failed to prove valid and fair reasons under section 45(2). The Court awarded severance pay, one month's wages in lieu of notice and ten days' earned wages to each Grievant in varying totals, declined compensation under section 49, dismissed the claims for leave and underpayment arrears for want of evidential foundation, ordered the 1st Respondent to issue certificates of service, dismissed the claim against the 2nd Respondent, and made no order as to costs.

Key legal issues

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01

Identify the true employer between the oil marketer and the contracted dealer

Holding

The Grievants were employees of the 1st Respondent (dealer), not the 2nd Respondent (oil marketer), on the basis of the Young Dealer Marketing License.

Reasoning

The License required the 2nd Respondent to jointly interview and recruit employees and to train them, but clauses 25(c) and 25(e) expressly placed responsibility for payment of salaries on the Young Dealer and stipulated that station staff would be employees of the 1st Respondent with no liability for the 2nd Respondent. The Court therefore held the 2nd Respondent could not bear liability.

p. 3
02

Whether the terminations amounted to redundancy

Holding

The terminations were a classic case of redundancy.

Reasoning

The Grievants were terminated through no fault of their own on the same day the 2nd Respondent terminated the dealership license with the 1st Respondent. The Conciliator's report found the Grievants had been declared redundant. Redundancy as defined in section 2 of the Employment Act and the Labour Relations Act applied.

p. 3
03

Whether the redundancy was fair under section 40 of the Employment Act

Holding

The redundancy was unfair; none of the seven conditions in section 40 was complied with.

Reasoning

Section 40 requires notice in writing one month in advance to the union and local labour officer, payment of outstanding leave in cash, one month's wages in lieu of notice, and severance pay. None was done. The employer also failed to prove under section 45(2) that the reasons for termination were valid and fair.

p. 4
04

Identification of the Grievants and evidential sufficiency of pleadings

Holding

Although the pleadings and testimony were deficient in identifying four of the five Grievants, the Court accepted the annexure 'Redundancy Claims for former Staff of Makedi Investments Ltd' as embodying their claims, since courts are not strictly bound by rules of evidence and the Respondents raised no objection.

Reasoning

The Memorandum of Claim only named Innocent Mosota; the other names appeared only in a letter of 8 February 2013 and in annexure MK 9. The Court criticised the pleading practice but admitted the annexure to cure the defect.

p. 4
05

Formula for severance pay computation

Holding

Severance pay computed as basic pay plus house allowance divided by twenty-six to get the daily rate, multiplied by 15 days per year served (approximating 30 days for two years).

Reasoning

The Court applied the 'correct and accepted formula' to the unchallenged earnings in annexure MK 9, awarding Kshs 13,788 each to the Grievants with two years' service and Kshs 19,211 to Daniel Mati.

p. 4

Legal principles established

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  • Where a marketing license provides that the dealer's station staff are employees of the dealer and that the oil marketer has no liability towards them, the dealer bears employer liability.
  • Termination of employees when the dealership agreement under which they worked is terminated is redundancy.
  • Failure to notify the union and local labour officer in writing one month in advance and to pay leave, notice pay and severance renders a redundancy unfair under section 40 of the Employment Act.
  • An employer terminating on operational requirements must prove the reasons were valid and fair under section 45(2) of the Employment Act.

Court orders

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  1. 1.Award to Everlyne Mwinzi: severance pay Kshs 13,788, one month wages in lieu of notice Kshs 11,950, 10 days earned wages Kshs 4,599 - total Kshs 30,337
  2. 2.Award to Dan Okello: severance pay Kshs 13,788, one month wages in lieu of notice Kshs 11,950, 10 days earned wages Kshs 4,599 - total Kshs 30,337
  3. 3.Award to Thomas Nzioka: severance pay Kshs 13,788, one month wages in lieu of notice Kshs 11,950, 10 days earned wages Kshs 4,599 - total Kshs 30,337
  4. 4.Award to Innocent Mosota: one month wages in lieu of notice Kshs 11,950, 10 days earned wages Kshs 4,599 - total Kshs 16,549
  5. 5.Award to Daniel Mati: severance pay Kshs 19,211, one month wages in lieu of notice Kshs 16,650, 10 days earned wages Kshs 6,400 - total Kshs 42,261
  6. 6.The 1st Respondent to issue the Grievants with Certificates of service

Authorities

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Legislation

  • Labour Relations Actsection 69(a)
  • Labour Relations Actsection 2
  • Employment Actsection 2
  • Employment Actsection 40
  • Employment Actsection 40(1)(f)
  • Employment Actsection 45(2)
  • Employment Actsection 49(1)(c)
  • Employment Actsection 51
Jurisdiction invoked
Trade dispute referred under the Labour Relations Act following conciliation (first-instance industrial court jurisdiction; no specific constitutional provision cited)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Kenya Petroleum Oil Workers Union v Makedi Investments & Paul Ohany & another [2013] KEELRC 880 (KLR)", Case Analysis (2013). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2013/880/eng@2013-11-08

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