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ELRCPartially AllowedCause No 371 of 2013· [2014] KEELRC 1088 (KLR)

Shashikant Chandubhai Patel v Oriental Commercial Bank Ltd [2014] KEELRC 1088 (KLR)

Industrial Court (Employment and Labour Relations Court)
30 May 2014
RSRadido Stephen
3,856 words in judgment
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The bottom line

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Kenya's Industrial Court ruled a bank senior employee was terminated without notice and awarded him three months' pay because the bank's staff manual applied to his contract.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent (formerly Delphis Bank Ltd) from 1993 on a series of renewable two-year fixed contracts, sued for terminal dues and damages for breach of contract after his employment ended in May 2005. His final substantive contract (contract 4, signed 3 April 2001) was renewed by letter of 7 June 2003 (contract 5) and expired around 8 May 2004. In August 2004 the Respondent offered a further one-year renewal at a reduced consolidated salary (contract 6). The Claimant protested the unilateral reduction and sought confirmation it would not be implemented. The Board gave no guidance, the Claimant continued working at the old salary, and on 30 March 2005 he was told his contract would expire on 7 May 2005 and not be renewed. The court held that the Bank Operation Manual/Human Resources Policy Manual was applicable to the Claimant, being expressly incorporated into the contracts from 1996 and confirmed by the Respondent's witness to apply to all staff. Because the Claimant rejected the essential term of remuneration, the proposed tenure fell with it and the relationship became employment at will subject to the Manual. The court found the services were terminated without proper notice and awarded three months' pay in lieu of notice of Kshs 1,276,956/-. Claims for severance pay of Kshs 3,960,705/- (the Claimant was not declared redundant and did not plead redundancy) and Kshs 900,000/- for loss of a vehicle and driver (no evidence of hiring; the vehicle was facilitative and for official use) were refused. Costs were awarded to the Claimant.

Key legal issues

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01

Applicability of the Bank Operation Manual/Human Resources Policy Manual

Holding

The Manual applied to the Claimant; it could not be dismissed as a draft because contracts from 1996 expressly referred to Staff Manuals and the Respondent's witness conceded it applied to all staff without exception

Reasoning

Clauses 2 and 4 of contract 2 and clause 4 of contract 4 expressly bound the employee to the Bank's Standing Instructions, Manuals and Staff Manuals. The Manual must therefore have existed by 1996. The Respondent's witness testified the Manual applied to all staff without exception, undermining the defence that it was a draft. The terms of the Manual were expressly incorporated, subject to the contract prevailing in case of conflict.

p. 4
02

Termination versus expiry by effluxion of time

Holding

The contract did not expire by effluxion of time; the Claimant's services were terminated without notice as provided in the Manual, entitling him to notice pay

Reasoning

Contract 5 expired in May 2004; the proposed renewal (contract 6) with reduced salary was rejected by the Claimant, so no agreement of minds on remuneration existed. The Respondent nevertheless allowed him to continue working at the old salary, giving an implied agreement of employment at will subject to the Manual. Rejection of the essential term of remuneration left the tenure at large, and termination required clear and unambiguous notice, which was not given.

03

Severance pay under clause 8.3.10(d) of the Manual

Holding

Refused; severance pay is payable only to employees declared redundant, and the Claimant was neither declared redundant nor pleaded redundancy

Reasoning

Clause 8.3.10(d) provides additional termination compensation for employees declared redundant. The Claimant admitted in cross-examination he was not declared redundant, and the pleadings did not raise redundancy as a cause of action. Severance pay has never been given a general meaning beyond redundancy contexts.

p. 6
04

Loss of use of vehicle and driver

Holding

Refused; no evidence of hiring a replacement vehicle and the benefit was facilitative for official use

Reasoning

The Claimant was instructed to proceed on leave from 1 April 2005, and the contract ended around 7 May 2005, giving at most two (not three) months of terminal leave. He produced no evidence of hiring a car, and the vehicle was for official use, with no suggestion of official duties while on leave.

p. 6

Legal principles established

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  • Where a written employment contract expressly incorporates a staff manual, the manual binds the employee save where it conflicts with the contract, which prevails
  • After expiry of a fixed-term contract, either party may propose new terms on renewal, and the employee is free to accept or reject them
  • Where an employee rejects an essential term (remuneration) of a proposed renewal but continues working and is paid the old salary, the prior terms are implied by management practice and custom, and termination requires notice
  • Rejection of the essential term of remuneration cannot be severed from the tenure, leaving the duration of the relationship at large and entitling the employee to reasonable notice

Court orders

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  1. 1.Judgment that the Respondent's Bank Operation Manual/Human Resources Policy Manual was applicable to the Claimant and that the Claimant was terminated without proper notice
  2. 2.Award to the Claimant of Kshs 1,276,956/- being three months' pay in lieu of notice based on Kshs 425,652/- per month
  3. 3.Claimant to have costs

Authorities

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Legislation

  • Employment Act, 2007section 45
  • Employment Act, cap 226 (repealed)section 16A

Cases cited (2)

  • Margaret A Ochieng v National Water Conservation & Pipeline Corporation
    (2014) eKLR
  • Sammy Japheth Kavuku v Equity Bank Ltd & another
    (2014) eKLR
Jurisdiction invoked
Jurisdiction of the Industrial Court over employment disputes (suit transferred from the High Court to the Industrial Court)

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, "Shashikant Chandubhai Patel v Oriental Commercial Bank Ltd [2014] KEELRC 1088 (KLR)", Case Analysis (2014). Cause No 371 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/1088/eng@2014-05-30

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