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ELRCPartially AllowedCause Number 816 of 2012· [2014] KEELRC 622 (KLR)

Kenya Chemical and Allied Workers Union v Leather Life EPZ Limited [2014] KEELRC 622 (KLR)

Industrial Court of Kenya
25 February 2014
2,382 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Industrial Court awarded workers 18% and 21% wage rises, confirming employers can never pay below the statutory minimum wage.

What this practically means

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Executive summary

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This is an economic dispute referred to the Industrial Court at Nairobi by the Kenya Chemical and Allied Workers Union against Leather Life EPZ Limited over wage increment for the CBA period 1st April 2011 to 31st March 2013. After conciliation failed and a certificate of disagreement was issued under Section 69 of the Labour Relations Act, the parties presented rival positions: the Claimant sought 25% increment in each of the two years, while the Respondent offered 6% in the first year and 10% in the second, citing heavy indebtedness to PTA Bank, inherited liabilities from Kenya Vegetex (EPZ) Limited in receivership, and difficulty sourcing raw materials from Tanzania. A CPMU Report showed the Respondent had 28 unionisable employees, healthy net profits from 2009 to 2011, and that the CPI for the Nairobi Lower Income Group rose 16.4% over the period. The Court, per Rika J, held that Wage Orders fix the wage floor which parties cannot contract below, and that collective bargaining aims to fix the cost of labour above that benchmark guided by compensable factors. Weighing cost of living and improved productivity against business sustainability, the Court awarded 18% increment in the first year and 21% in the second year, on figures first adjusted to meet the statutory minimum wage, and ordered payment of any shortfall against prevailing Wage Orders for the period. The claim succeeded partially; neither party's proposal was adopted in full. No costs order was recorded.

Key legal issues

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01

Determination of a fair wage increment in an economic dispute

Holding

The Court awarded 18% in the first year and 21% in the second year, below the Claimant's 25% demand but above the Respondent's 16% total offer, after adjusting wages to the statutory minimum wage floor

Reasoning

The Court applied the major compensable factors: rise in the cost of living, measured by the CPI for the Nairobi Lower Income Group at 16.4% over the two years, and improved labour productivity, evidenced by the Respondent's healthy net profits over 2009-2011. It balanced these against the Respondent's business challenges to avoid forcing the cost of labour above the market benchmark and risking collapse of the business and job losses.

p. 4
02

Statutory minimum wage as an inviolable wage floor

Holding

Parties cannot contract below the wage floor, and any wages paid below the prevailing Wage Orders must be made up

Reasoning

Under Section 48 of the Labour Institutions Act, minimum rates in Wages Orders are statutory terms of employment that cannot be varied by agreement. The Respondent's suggestion that minimal disparity with the minimum wage was acceptable was rejected; the Court held there should be no disparity at all, and ordered payment of the difference for workers paid below the statutory floor during the CBA period.

p. 4

Legal principles established

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  • Minimum wages established under Wages Orders constitute terms of employment that may not be varied by agreement and cannot be contracted below
  • Where a contract provides less favourable terms than a Wages Regulation Order, the statutory terms are substituted into the contract
  • Wage Orders fix the wage floor; collective bargaining aims at fixing the cost of labour above that benchmark, guided by compensable factors and economic indicators

Court orders

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  1. 1.The Respondent shall in the first instance, pay the Claimant's Members who may have received wages below the minimum wage, any difference in wages, between what was actually paid to the Workers and what was prescribed in the prevailing Wage Orders for the period 1st April 2011 to 31st March 2013
  2. 2.Having adjusted the wages to meet the requirement of the statutory minimum wage, the Respondent shall pay the Claimant's Members wage increment based on adjusted figures in [a], at the rate of 18% in the first year, and 21% in the second year, effective from 1st April 2011 to 31st March 2013

Authorities

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Legislation

  • Labour Relations ActSection 62
  • Labour Relations ActSection 69
  • Labour Institutions ActSection 48
Jurisdiction invoked
Labour Relations Act and Labour Institutions Act - trade dispute referred under Section 69 of the Labour Relations Act after failed conciliation

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 Chemical and Allied Workers Union v Leather Life EPZ Limited [2014] KEELRC 622 (KLR)", Case Analysis (2014). Cause Number 816 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/622/eng@2014-02-25

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