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ELRCPartially AllowedCause No. 1088 of 2011 (Originally HCCC No. 92 of 2008)· [2014] KEELRC 1299 (KLR)

Daniel Githinji Waigano v Kenpipe Co-Operative Savings & Credit [2014] KEELRC 1299 (KLR)

Industrial Court of Kenya
30 September 2014
3,242 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled an employee's 'restructuring' dismissal was an unlawful redundancy, awarding him notice pay, leave, gratuity and severance worth millions.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent SACCO from 10th March 1992 on renewable three-year fixed-term contracts, rose to Assistant Manager and Accountant. After being sent on forced leave in 2002 and having his suspension lifted in August 2007, he proceeded on approved leave and, on its last day (17th September 2007), received a letter terminating his services on grounds of restructuring, coupled with his failure to submit his appointment letter or apply for re-advertised positions. The suit, originally filed in the High Court as HCCC No. 92 of 2008 and transferred by consent to the Industrial Court under Articles 162(2) and 165(5) of the Constitution, claimed a declaration of wrongful termination and various payments. The court held that termination on account of restructuring was a redundancy governed by section 16A of the repealed Employment Act, with which the Respondent had not complied, rendering the termination an unlawful redundancy. The Claimant's contract was found to have been continuously renewed by conduct, so he was awarded 3 months' salary in lieu of notice, unpaid salary to 18th September 2007, 206 unutilized leave days, accrued gratuity, and severance pay of 15 days' salary per year for 15 years. Claims for shares refund, general damages, and punitive, exemplary and aggravated damages were dismissed. Costs were awarded to the Claimant, with interest at court rates if not settled within 30 days. Judgment delivered by Hon. Lady Justice Maureen Onyango on 30th September 2014.

Key legal issues

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01

Whether termination on account of restructuring was an unfair/unlawful redundancy

Holding

The termination was an unlawful redundancy as the Respondent failed to comply with section 16A of the repealed Employment Act

Reasoning

The court held that termination by reason of restructuring is redundancy, not an ordinary termination. Section 16A of the repealed Employment Act prescribed mandatory conditions: notification of the union and Labour Officer, regard to seniority, skill and reliability, payment of leave, one month's notice and severance pay of at least 15 days' pay per completed year. The Respondent complied with none of these, rendering the termination an unlawful redundancy.

p. 5
02

Whether the fixed-term contract was still subsisting at termination

Holding

The contract was renewed continuously by the conduct of the parties through payment of gratuity, so the 3 months' notice clause applied

Reasoning

Although the Respondent did not issue renewal letters, it renewed the contract severally and honoured its terms, including payment of gratuity at expiry of each term. The court found implied renewal by conduct. Consequently the contractual entitlement to 3 months' notice or pay in lieu, never validly altered (the Employee Handbook of June 2007 not having been communicated), entitled the Claimant to 3 months' pay in lieu.

p. 6
03

Entitlement to unutilized leave days

Holding

The Claimant was entitled to 206 unutilized leave days as the Respondent failed to produce records to controvert the claim

Reasoning

The parties produced different versions of the same leave form, one showing outstanding days and one blank. The Respondent produced no evidence of leave taken or paid in lieu for previous years. The burden lay on the employer to keep and produce such records; its failure meant the Claimant's claim of 206 days was uncontroverted and was awarded at the daily rate of Kshs.2,627.16.

p. 6
04

Severance pay for redundancy

Holding

The Claimant was entitled to severance pay at 15 days' salary per completed year for 15 years of service

Reasoning

Section 16A of the repealed Employment Act entitled a declared redundant employee to severance pay at not less than 15 days' pay per completed year of service irrespective of the nature of employment. The Claimant worked continuously from March 1992 to September 2007. Computed at 15 days of the consolidated salary of Kshs.156,575, the court awarded Kshs.1,174,312.50 for 15 years.

p. 7
05

Entitlement to general and punitive damages

Holding

Neither general nor exemplary damages are recoverable for breach of an employment contract under the pre-2007 law

Reasoning

Relying on Kenya Revenue Authority v Menginya Salim Murgani (which relied on Central Bank v Nkabu), the court held the repealed Employment Act limited damages to the notice period. Exemplary or punitive damages are not payable in contract. The Claimant also made no submissions on punitive damages. Both heads were dismissed.

p. 7

Legal principles established

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  • Termination of employment on account of restructuring is a redundancy and must comply with the conditions in section 16A of the repealed Employment Act
  • An employer's handbook cannot vary contractual terms to an employee's detriment without express amendment and communication
  • Fixed-term contracts may be renewed by conduct, such as continued payment of contractual gratuity at expiry of each term
  • It is the employer's statutory duty to keep employment records; failure to produce them means uncontroverted allegations by the employee stand

Court orders

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  1. 1.Award of Kshs.469,725 being 3 months' salary in lieu of notice
  2. 2.Award of Kshs.93,945 being salary and allowances owed to 18th September 2007
  3. 3.Award of Kshs.541,196.30 in lieu of 206 unutilized leave days
  4. 4.Award of Kshs.86,134.13 as accrued gratuity
  5. 5.Award of Kshs.1,174,312.50 as severance pay at 15 days' salary per year for 15 years of service
  6. 6.Dismissal of the claim for personal savings (shares)
  7. 7.Dismissal of the claim for general damages for breach of contract
  8. 8.Dismissal of the claim for punitive, exemplary and aggravated damages
  9. 9.Claimant awarded costs of his case
  10. 10.Interest at court rates from date of judgment if the claim is not settled within 30 days from date of judgment

Authorities

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Legislation

  • Constitution of Kenya, 2010Articles 162(2) and 165(5)
  • Employment Act (repealed) (1976)section 16A
  • Industrial Court (Procedure) Rules 2010

Cases cited (4)

  • Benson Odhiambo Onyango vs. Instarect Company Limited
    (2013) eKLR
  • Samuel Chacha Mwita vs. Kenya Medical Research Institute
    (2014) eKLR
  • Kenya Revenue Authority vs. Menginya Salim Murgani
    [2010] eKLR
  • Central Bank vs. Nkabu
    [2002] EA 34
Jurisdiction invoked
Articles 162(2) and 165(5) of the Constitution of Kenya 2010, following consent transfer from the High Court (Nairobi HCCC No. 92 of 2008)

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, "Daniel Githinji Waigano v Kenpipe Co-Operative Savings & Credit [2014] KEELRC 1299 (KLR)", Case Analysis (2014). Cause No. 1088 of 2011 (Originally HCCC No. 92 of 2008). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/1299/eng@2014-09-30

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