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ELRCPartially AllowedCause No 2040 of 2012· [2014] KEELRC 109 (KLR)

Kenya Union of Domestic, Hotels, Educational Institutions Hospitals and Allied Workers Union & 26 others v Gusii Mwalimu Co-operative Savings and Credit Society Limited [2014] KEELRC 109 (KLR)

Industrial Court of Kenya (Employment and Labour Relations Court)
21 November 2014
MNMATHEWS N. NDUMA
1,581 words in judgment
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The bottom line

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A Kisii hotel's redundancy was lawful, but skipping Ministry of Labour notification still cost the employer a costs penalty and interest on unpaid cheques.

What this practically means

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Executive summary

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The Claimant union sued on behalf of 24 Grievants, all former employees of the Respondent's hotel in Kisii, claiming compensation for termination on account of redundancy effected on 29 September 2012. The Grievants alleged the redundancy breached Section 40 of the Employment Act, 2007: no notice to the union or Ministry of Labour, no justification for the redundancy, and claims for three months' salary in lieu of notice, severance pay at 28 days per completed year, and damages for underpayments under the Regulation of Wages Order, 2005. The Respondent admitted the redundancy but asserted it was lawfully executed, all employees were laid off on total closure of the hotel, and terminal benefits exceeding the statutory minimum (25% of total salary earned, three months' notice pay, and one month's severance per year of service) were paid by cheque. The Court framed three issues: validity of reason, fairness of procedure, and computation and payment of terminal benefits. It held the closure for financial difficulties was a valid reason; the procedure was fair because notice pay and enhanced severance were paid, union notification was not required absent a Recognition Agreement, selection criteria did not arise on total closure, and failure to notify the Ministry of Labour caused no material prejudice. The Respondent was ordered to issue fresh cheques, with interest at court rates from 15 October 2012, for the 18 Grievants who had not collected their cheques, within 30 days. Each party was to bear its own costs since the Respondent had not fully complied with Section 40.

Key legal issues

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01

Validity of the reason for redundancy

Holding

Closure of the hotel due to financial difficulties constituted a valid reason under Section 40 read with Section 2 of the Employment Act.

Reasoning

The parties agreed the hotel closed due to financial difficulties and the Respondent could not sustain the Grievants' employment. This fell squarely within the statutory definition of redundancy as loss of employment at the employer's initiative where services are superfluous. The termination was therefore for a valid reason.

p. 4
02

Fairness of the redundancy procedure

Holding

Procedure was fair despite failure to notify the Ministry of Labour, since the Grievants were not materially prejudiced.

Reasoning

Section 40 requires notice/pay in lieu, notification of union and Ministry, fair selection criteria, and severance pay. The Respondent complied with notice and severance requirements (paying above the minimum). No union notification was required absent a Recognition Agreement, and selection criteria was inapplicable on total closure. The Ministry notification omission caused no material prejudice.

p. 5
03

Terminal benefits

Holding

The Respondent had discharged its obligation upon preparation of payment cheques; fresh cheques with interest to issue for uncollected cheques.

Reasoning

Cheques for terminal benefits were written to all retrenched employees; some collected them and others did not. The cheques evidenced intention to pay and constituted net payments after deduction of outstanding staff loans. Uncollected cheques had gone stale, so fresh cheques with interest at court rates from 15 October 2012 were ordered.

p. 5

Legal principles established

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  • An employer with no Recognition Agreement with a union is not obliged to notify the union of a redundancy, but must notify the Ministry responsible for Labour.
  • Where the entire business closes and all employees are laid off, no selection criteria arises.
  • Omission to notify the Ministry of Labour does not attract monetary awards absent material prejudice to employees.

Court orders

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  1. 1.The Respondent is directed to make fresh cheques for each of the 18 Grievants who did not collect their cheques, in the sums listed in the judgment
  2. 2.The newly written cheques to include payment of interest at Court rates from 15th October 2012 to date
  3. 3.Payment to be done within thirty (30) days from the date of judgment
  4. 4.Each party is to meet their cost of the suit

Authorities

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Legislation

  • Employment ActSection 40
  • Employment ActSection 2
  • Regulation of Wages Order2005
Jurisdiction invoked
Employment and labour relations dispute under the Employment Act, 2007 (Court's statutory jurisdiction over employment disputes)

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 Union of Domestic, Hotels, Educational Institutions Hospitals and Allied Workers Union & 26 others v Gusii Mwalimu Co-operative Savings and Credit Society Limited [2014] KEELRC 109 (KLR)", Case Analysis (2014). Cause No 2040 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/109/eng@2014-11-21

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