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ELRCDismissedIndustrial Cause (application arising from award delivered 12 July 2013; notice of motion dated 23 July 2013)· [2014] KEELRC 951 (KLR)

Peter Mbugua Kanoi & 5 others v Coffee Board Of Kenya [2014] KEELRC 951 (KLR)

Industrial Court of Kenya
4 April 2014
2,370 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Industrial Court refused to pause a Kshs 14.5 million redundancy award, confirming Kenyan severance pay is calculated on gross salary, not basic pay.

What this practically means

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Executive summary

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This is a ruling of the Industrial Court (Maureen Onyango J) delivered on 4 April 2014 on the Respondent employer's notice of motion dated 23 July 2013 seeking a stay of execution of the Court's award of 12 July 2013 (Kshs 14,508,309) pending an intended appeal, with an offer of a bank guarantee as security. The Respondent argued the award was based on erroneous basic salary figures and on 30 days' rather than 15 days' severance pay per completed year of service, and that it lacked funds to satisfy the award. The Claimants opposed, contending there was no arguable appeal, no draft memorandum showing grounds, and that the 30-day rate issue was settled by the Court of Appeal in Telkom Kenya v John Ochanda. The court applied the twin tests for stay - arguable appeal and nugatory appeal. It found the basic-pay ground untenable because the Employment Act nowhere bases terminal benefits on basic pay, and appeals lie only on matters of law under section 17 of the Industrial Court Act, computation of benefits being a matter of fact for review. On the 15/30 days issue, section 40(1)(g) prescribes a minimum of 15 days' pay; the employer itself had set and paid 30 days, and paying less would be discriminatory, consistent with Telkom Kenya v Ochanda. The lack-of-funds argument failed absent any accounts, the retrenchment money having been sourced from Government. The application was dismissed with costs.

Key legal issues

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01

Whether severance pay should be computed on basic or gross salary

Holding

The Employment Act nowhere provides for terminal benefits based on basic pay; severance is payable on gross pay

Reasoning

Section 40(1)(g) refers only to 'days' pay' without limiting to basic pay. Sections 36, 38 and 49(1) of the Act base payments on remuneration and gross monthly wage or salary. Courts have generally granted terminal benefits based on gross pay, so the ground that the award should have used basic salary had no prospect of success on appeal.

p. 4
02

Whether the award of 30 days' pay per completed year, instead of 15, was erroneous

Holding

Section 40(1)(g) sets a minimum of 15 days; the employer itself set 30 days and paid other redundant employees at that rate, so it cannot fault the award

Reasoning

The statute prescribes 'not less than 15 days' pay', giving the employer discretion to pay more. The Respondent had paid employees released in the retrenchment at 30 days per year of service, and paying the Claimants less would be discriminatory, consistent with the Court of Appeal's holding in Telkom Kenya v John Ochanda that equality of treatment is key.

p. 4
03

Whether lack of funds justifies a stay

Holding

No; absence of funds is not a ground for stay, especially where the retrenchment funds were sourced from Government and no accounts were submitted

Reasoning

The Respondent submitted no accounts to demonstrate insolvency, and the record showed the retrenchment money came from the Government. Financial ability of a judgment debtor does not affect pronouncement of judgment and is relevant only to execution. This ground therefore failed.

p. 5

Legal principles established

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  • Appeals from the Industrial Court to the Court of Appeal lie only on matters of law; questions of computation of terminal benefits are matters of fact remediable by review, not appeal
  • Section 40(1)(g) of the Employment Act sets a floor of 15 days' pay per completed year of service; an employer may pay more, and paying less than what was paid to other redundant employees would be discriminatory
  • Severance pay under the Employment Act is computed on gross pay, not basic pay
  • Financial inability of a judgment debtor is not a consideration against pronouncing judgment; it is relevant only at execution

Court orders

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  1. 1.Application for stay of execution dismissed with costs

Authorities

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Legislation

  • Employment ActSection 40(1)(g)
  • Employment ActSections 36 and 38
  • Employment ActSection 49(1)
  • Industrial Court ActSection 12(3)
  • Industrial Court ActSection 17

Cases cited (9)

  • JOSEPHINE SERAPHINE WADEGU V KENYA POWER & LIGHTING COMPANY LTD [2013] eKLR (Industrial Cause No. 34 of 2013, Josephine Seraphine Magendi vs KPLC)
    [2013] eKLR
  • Cause No. 665 of 2011 Beatrice Achieng Osir vs Board of Trustees Teleposta Pension Scheme
  • Cause No. 621 of 2012 Jane Wairimu Machira vs Mugo Waweru and Associates
  • Cause No. 1123 of 2012 Edwin Kabogo Munene vs Equity Bank Limited
  • Patani & another versus Patani - Nairobi CA No. NAI 190 OF 2003 – (2003) KLR
    (2003) KLR
  • Johnstone Musengi versus Joseph Mwangi Mwangangi – Mombasa C.A. No. 223 of 2010 (2012) eKLR
    (2012) eKLR
  • HCCC No. 216 of 2007 John Ochanda versus Telkom Kenya Limited (Ruling)
  • HCCC No. 216 of 2007 John Ochanda versus Telkom Kenya Limited (Judgement)
  • CA No. 207 of 2012 Telkom Kenya Limited versus John Ochanda
Jurisdiction invoked
Section 12(3) of the Industrial Court Act (preservatory orders); Section 17 of the Industrial Court Act (appeals to the Court of Appeal lie on matters of law)

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, "Peter Mbugua Kanoi & 5 others v Coffee Board Of Kenya [2014] KEELRC 951 (KLR)", Case Analysis (2014). Industrial Cause (application arising from award delivered 12 July 2013; notice of motion dated 23 July 2013). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/951/eng@2014-04-04

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