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ELRCPartially AllowedCause Number 1149 of 2011· [2014] KEELRC 319 (KLR)

Peterson Ndung’u & 5 others v Kenya Power and Lighting Company Limited [2014] KEELRC 319 (KLR)

Industrial Court of Kenya
23 July 2014
JRJames Rika
7,950 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~32 min to read original · ~4 min brief

The bottom line

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What this practically means

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Executive summary

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Six former employees of the Kenya Power and Lighting Company Limited claimed unfair and unlawful termination after they were retired early (or, in the case of the 5th Claimant, terminated under Clause 13 of their contracts) on 4th September 2009, following an Audit Report implicating their computer profiles in a fraud involving removal of electricity poles and conductor worth approximately Kshs. 60 million from the Respondent's Stores at Naivasha, Lanet and Kericho. They sought reinstatement, or alternatively service pay, notice pay, withheld salary, general damages, costs and interest. The Court framed three questions: whether the Respondent proved the reasons for termination under Section 43 of the Employment Act; whether the process was fair under Section 41; and what remedies were due. The Court found the Respondent proved valid reasons: the Claimants, experienced supervisory staff, negligently shared their DCS passwords with Casual Employees, facilitating the fraud, justifying discipline under Section 44(4). However, no formal disciplinary hearing was ever held after the show-cause responses; the Management Committee did not hear the Claimants, rendering the termination procedurally unfair under Sections 41 and 45. The Court also held that withholding salary during administrative suspension has no legal foundation, violating Part IV of the Employment Act and Article 41 of the Constitution. Reinstatement was refused as neither reasonable nor practicable. Each Claimant was awarded 6 months' gross salary as compensation for procedural unfairness, the withheld April to August 2009 salary, and, for the early retirees, balance of notice pay and 15 days' salary per completed year under the Staff Regulations and Procedures. Each party bears its own costs, with no interest.

Key legal issues

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01

Substantive justification for termination under Section 43 of the Employment Act

Holding

The Respondent proved valid and fair reasons for termination - fraud involving the Claimants' profiles and their negligence in sharing passwords, causing a loss of about Kshs. 60 million.

Reasoning

The existence of the fraud and the loss were not contested. The Claimants conceded entrusting their passwords to Casual Employees. As long-serving supervisory staff trained on the DCS system and subject to a well-dispersed password policy, they failed in their duty of care. Negligence under Section 44(4)(c) and (g) justified disciplinary action, so the reasons for termination were genuinely held and established.

p. 7
02

Procedural fairness of termination under Section 41 of the Employment Act

Holding

Termination was procedurally unfair because the Claimants were never afforded a formal disciplinary hearing.

Reasoning

The Claimants answered show-cause letters in December 2008, but no formal disciplinary hearing was held thereafter. The 8-person Management Committee mandated to consider the Audit Report was not convened to hear the Claimants. Investigations preceded suspension, and no post-suspension hearing took place, contrary to the Staff Regulations and Section 41 of the Employment Act.

p. 8
03

Entitlement to emoluments during administrative suspension

Holding

Withholding salary during administrative suspension is legally invalid; the Claimants were entitled to the withheld wages.

Reasoning

The only statutory circumstances permitting non-payment of wages are detention in custody or imprisonment under Section 18(6) of the Employment Act, or participation in an unprotected strike under Section 80(1)(b) of the Labour Relations Act. None applied. The practice of treating suspension as temporary termination violates Part IV of the Employment Act on protection of wages and Article 41 of the Constitution.

p. 10
04

Remedies for procedurally unfair termination

Holding

Each Claimant was awarded 6 months' gross salary as compensation; reinstatement was refused as neither reasonable nor practicable.

Reasoning

Given the finding of substantive justification, trust and confidence could not be restored, making reinstatement unreasonable. It was also impracticable for the early retirees who were close to the mandatory retirement age of 55 years. The Court instead awarded compensation and the benefits due under the Staff Regulations and Procedures for early retirement.

p. 11
05

Entitlement to early retirement benefits under the Staff Regulations and Procedures

Holding

The 5 early retirees were entitled to 3 months' notice pay (less the 1 month already paid) and 15 days' salary for each completed year of service, which the Respondent failed to pay per the Regulations.

Reasoning

Having adopted early retirement as the disciplinary outcome, the Respondent was obliged to pay all benefits under the Staff Regulations and Procedures relating to early retirement. It instead paid outside the Regulations without explanation. The 5th Claimant, terminated under Clause 13 and subscribed to the N.S.S.S.F, merited neither service pay nor 3 months' notice pay.

p. 11

Legal principles established

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  • Under Section 43 of the Employment Act, the employer bears the burden of proving the reason or reasons for termination, failing which the termination is deemed unfair under Section 45.
  • An employee's participation in investigations and an answer to a show-cause letter does not amount to a hearing under Section 41 of the Employment Act; a formal disciplinary hearing is required.
  • Withholding an employee's salary during administrative (preventive) suspension pending disciplinary outcome has no foundation in the Employment Act and violates Part IV of the Act and Article 41 of the Constitution.
  • An employee's negligence in safeguarding computer passwords, causing the employer loss, constitutes a disciplinary offence justifying summary dismissal under Section 44(4)(c) of the Employment Act.
  • Reinstatement requires restoration of trust and confidence and must be practicable; it is inappropriate where the employee is near mandatory retirement age and is credibly alleged to have breached the employer's trust.

Court orders

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  1. 1.A declaration that termination of the Claimants' contracts of employment was based on fair and valid grounds, but unfair on procedure
  2. 2.The prayer for reinstatement is declined
  3. 3.Respondent to pay, within 30 days of delivery of the Award, 6 months' gross salary in compensation for unfair termination to each Claimant (1st: Kshs. 589,392; 2nd: Kshs. 835,800; 3rd: Kshs. 612,348; 4th: Kshs. 610,332; 5th: Kshs. 438,444; 6th: Kshs. 621,204)
  4. 4.Respondent to pay each Claimant half salary for April and May 2009 and full salary for June, July and August 2009 (1st: Kshs. 392,298; 2nd: Kshs. 557,200; 3rd: Kshs. 408,232; 4th: Kshs. 406,888; 5th: Kshs. 292,296; 6th: Kshs. 414,136)
  5. 5.2 months' gross salary as the balance of notice pay to the 1st, 3rd, 4th and 6th Claimants (Kshs. 196,464; Kshs. 204,116; Kshs. 203,444; Kshs. 207,068 respectively)
  6. 6.15 days' salary for each completed year of service to the 1st, 2nd, 3rd, 4th and 6th Claimants in accordance with the Staff Regulations and Procedures (1st: Kshs. 1,530,152; 2nd: Kshs. 2,169,865; 3rd: Kshs. 1,707,508; 4th: Kshs. 1,701,188; 6th: Kshs. 1,433,547)
  7. 7.Totals awarded: 1st Claimant Kshs. 2,708,306; 2nd Claimant Kshs. 3,562,865; 3rd Claimant Kshs. 2,932,204; 4th Claimant Kshs. 2,921,852; 5th Claimant Kshs. 730,740; 6th Claimant Kshs. 2,675,955
  8. 8.Each party to bear their own costs; no interest on the amounts granted

Authorities

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Legislation

  • Employment Act 2007Section 43
  • Employment Act 2007Section 45
  • Employment Act 2007Section 45 [2][b][ii]
  • Employment Act 2007Section 41
  • Employment Act 2007Section 44 [4], [4][c] and [4][g]
  • Employment Act 2007Section 49
  • Employment Act 2007Section 35 [6]
  • Employment Act 2007Section 18 (6) and Section 18 (4)
  • Employment Act 2007Section 19
  • Employment Act 2007Part IV (protection of wages)
  • Labour Relations Act 2007Section 80 (1)(b)
  • Labour Institutions Act 2007Section 15
  • Constitution of Kenya 2010Article 41 (right to fair labour practices)
  • KPLC Staff Regulations and ProceduresPart IV (early retirement); suspension clause
  • Claimants' individual contracts of employmentClauses 11, 13 and 14
Jurisdiction invoked
Employment and labour relations dispute under the Employment Act 2007 and Labour Institutions Act 2007 (first-instance reference as 'Issue in Dispute: Unfair and Unlawful Termination')

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (8)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Peterson Ndung’u & 5 others v Kenya Power and Lighting Company Limited [2014] KEELRC 319 (KLR)", Case Analysis (2014). Cause Number 1149 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/319/eng@2014-07-23

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