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ELRCPartially AllowedCause No 1910 of 2011· [2014] KEELRC 1174 (KLR)

Enoch Marita & 3 others v Maggies Restaurant Co Ltd & another [2014] KEELRC 1174 (KLR)

Industrial Court of Kenya
16 July 2014
2,049 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 ruled employers must give employees one month's redundancy notice separately, not just pay salary in lieu, making such redundancies unfair termination.

What this practically means

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Executive summary

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Four claimants sued Maggies Restaurant Co Ltd and its director, Roque Kamau Njau, seeking relief for unlawful redundancy following the closure of the restaurant business on 30th September 2011. They claimed notice pay, severance pay, leave pay, overtime, salary underpayment, house allowance and compensation for unfair termination. The 2nd Claimant abandoned his claim during trial. The court framed four issues: joinder of the director, procedural validity of the redundancy, payment of terminal dues, and entitlement to relief. On joinder, applying Salomon v Salomon and the Court's own decision in Aviation and Allied Workers Union v Kenya Aerotech, the court held the corporate veil could not be lifted absent proof it was used to defeat justice, and struck out the claim against the 2nd Respondent. On procedure, although the District Labour Officer was notified a month in advance, the employees themselves first learnt of the redundancy only three days before termination. Relying on Thomas De La Rue v Omutelema, the court held that the one month notification to employees is a legal requirement and that payment of one month's salary in lieu satisfied only the Section 35 termination notice, not the Section 40 redundancy notice; the redundancies were therefore unfair terminations under Section 45. On terminal dues, notice pay, severance pay and leave pay had been paid, and overtime and underpayment claims were unproved. However, since no written contracts existed and the vouchers showed basic salary only, the court found house allowance was not consolidated and allowed it at 15% of basic salary, plus compensation of three months' salary for the 1st Claimant and six months' for the 3rd and 4th Claimants. Each party was ordered to bear its own costs.

Key legal issues

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01

Joinder of the 2nd Respondent (director)

Holding

Claim against the director struck out

Reasoning

The 2nd Respondent was a director of the 1st Respondent, a limited liability company. Applying Salomon v Salomon, a company is separate from its directors. The veil may be lifted only where used to defeat the ends of justice, and no such evidence was led.

p. 2
02

Procedural validity of the redundancy

Holding

Redundancies were procedurally flawed and unfair

Reasoning

Although the labour officer was notified on 1st September 2011, employees first learnt of the redundancy on 27th September 2011, only three days before termination. The one month notice to affected employees is a legal requirement, and payment of one month's salary in lieu satisfied only the Section 35 termination notice, not the Section 40 redundancy notice.

p. 4
03

House allowance

Holding

Claim for house allowance allowed at 15% of basic salary

Reasoning

Salary vouchers and the muster roll showed basic salary with no separate house allowance figure or consolidated salary. No written contracts existed as required by Section 9, so the Court interpreted the terms and found no intention that salaries were inclusive of house allowance.

p. 5
04

Other terminal dues

Holding

Notice pay, severance pay, leave pay, overtime and underpayment claims dismissed

Reasoning

Vouchers showed the Claimants were paid basic pay, notice pay, severance pay and leave pay. Overtime and underpayment claims were not proved on the evidence.

p. 5

Legal principles established

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  • Failure to give the statutory one month redundancy notice renders the redundancy an unfair termination under Section 45 of the Employment Act
  • Payment in lieu of notice under Section 35 does not satisfy the one month redundancy notification requirement under Section 40
  • A company is a separate legal entity from its directors and the corporate veil is lifted only where used to defeat justice
  • Where an employer fails to document terms of employment, the Court interprets the terms from the evidence

Court orders

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  1. 1.Struck out the Claimants' claim as against the 2nd Respondent, Roque Kamau Njau
  2. 2.Awarded Enoch Marita Kshs. 64,350 (house allowance Kshs. 26,400 and 3 months' salary compensation of Kshs. 37,950)
  3. 3.Awarded James Wachira Kshs. 89,562 (house allowance Kshs. 39,312 and 6 months' salary compensation of Kshs. 50,250)
  4. 4.Awarded Sylvia Mweu Kshs. 93,375 (house allowance Kshs. 41,625 and 6 months' salary compensation of Kshs. 51,750)
  5. 5.Each party to bear their own costs

Authorities

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Legislation

  • Employment ActSection 40
  • Employment ActSection 45
  • Employment ActSection 2
  • Employment ActSection 35
  • Employment ActSection 31(1) and (2)
  • Employment ActSection 9
  • Labour Relations ActSection 2 (corresponding definition of redundancy)

Cases cited (3)

  • Salomon Vs Salomon & Co.
    [1897] AC 22
  • Aviation and Allied Workers Union Vs Kenya Aerotech Limited & Another
  • Thomas De La Rue (K) Ltd Vs David Opondo Omutelema
    [2013] eKLR
Jurisdiction invoked
Employment and labour relations jurisdiction of the Industrial Court (claim for unlawful redundancy under the Employment Act, 2007)

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, "Enoch Marita & 3 others v Maggies Restaurant Co Ltd & another [2014] KEELRC 1174 (KLR)", Case Analysis (2014). Cause No 1910 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/1174/eng@2014-07-16

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