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ELRCPartially AllowedCause No. 1645 of 2011· [2014] KEELRC 919 (KLR)

Josphat Bundi Murithi v Pasico Eastern Africa Ltd [2014] KEELRC 919 (KLR)

Industrial Court of Kenya
6 February 2014
MMMonica Mbaru
2,687 words in judgment
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The bottom line

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Kenya's Industrial Court ruled an employer's 'restructuring' dismissal unlawful because mandatory redundancy steps under section 40 of the Employment Act were skipped.

What this practically means

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Executive summary

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The claimant, employed on 1st May 2010 as a Service Technician at a gross salary of Kshs.32,000, was dismissed by letter dated 15th August 2011 on the ground that the respondent's business was not doing well, with effect from 17th September 2011. He claimed the dismissal was a cover-up, sought reinstatement or 12 months' compensation, notice pay and 15 days' leave. The respondent defended the termination as a restructuring exercise in response to reduced business, asserting several positions were declared redundant and that the claimant was given notice and paid his dues, which it deposited in his account after he refused a cheque. The respondent failed to attend the hearing despite service, and the matter proceeded ex parte. The court identified two issues: whether there was a basis for the termination and the applicable remedies. Both parties agreed the reason was restructuring on account of reduced business, engaging section 40 of the Employment Act. The court held the statutory conditions precedent to redundancy are mandatory; the general staff memo of March 2011 did not constitute notice to the labour officer, no fair selection criteria or records were produced, and the employer had pre-determined the decision. The termination was found procedurally and substantively unfair. Under section 49, the court awarded compensation of six months' gross salary (Kshs.192,000), notice pay of Kshs.32,000, and 50% costs of the suit. Judgment was entered for the claimant on 6th February 2014.

Key legal issues

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01

Whether the termination was a fair redundancy

Holding

The termination was procedurally and substantively unfair because the mandatory conditions precedent under section 40 of the Employment Act were not followed.

Reasoning

Both parties agreed the reason was restructuring due to reduced business, so section 40 of the Employment Act applied. The court found the 28th March 2011 memo merely communicated a pre-determined decision; no notice was given to the labour officer, no fair selection criteria or records of the exercise were produced, and no evidence showed compliance with the statutory guidelines. The decision to terminate was therefore both procedurally and substantively unfair.

p. 5
02

What remedies flow from the unfair termination

Holding

Compensation of six months' gross salary and one month's notice pay under sections 40 and 49 of the Employment Act.

Reasoning

Having found unfair termination, the court applied section 49 of the Employment Act. It noted the claimant had already received Kshs.45,116.00 deposited in his account for salary due, leave days and notice, but found the notice given was not commensurate with notice under section 40 and awarded one month's notice pay and six months' salary as compensation.

p. 5
03

Whether employer's reasons for redundancy are open to judicial scrutiny

Holding

Yes - the court must be satisfied that the employer's decision was reasonable; re-organisation done solely to get rid of an employee is superfluous.

Reasoning

Relying on Brighouse Limited v Bilderbeck, the court accepted that employers have a prerogative to restructure, but reasons given for redundancies are open to judicial interpretation and the court must be satisfied the decision was reasonable in all the circumstances.

p. 3

Legal principles established

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  • The conditions precedent to a lawful redundancy under section 40 of the Employment Act are mandatory and not left to the choice of the employer, including notice to the labour officer, a fair selection criterion, payment of leave days, notice pay and severance pay.
  • An employer cannot simply cite re-organisation and, without documentation or fair procedure, single out an individual employee for termination.

Court orders

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  1. 1.Compensation for unfair termination amounting to Kshs.192,000.00
  2. 2.Notice pay Kshs.32,000.00
  3. 3.50% costs of the suit

Authorities

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Legislation

  • Employment Actsection 2
  • Employment Actsection 40
  • Employment Actsection 49

Cases cited (1)

  • Brighouse Limited v. Bilderbeck
    [1994] 2 ERNZ 243 [CA]
Jurisdiction invoked
Employment and labour relations jurisdiction of the Industrial Court (claim for unfair termination and terminal dues)

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, "Josphat Bundi Murithi v Pasico Eastern Africa Ltd [2014] KEELRC 919 (KLR)", Case Analysis (2014). Cause No. 1645 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/919/eng@2014-02-06

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