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ELRCPartially AllowedCause No 925 of 2013· [2014] KEELRC 1378 (KLR)

Farida Shaeen v Highlands Mineral Water Company Ltd [2014] KEELRC 1378 (KLR)

Industrial Court of Kenya
29 October 2014
2,524 words in judgment
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The bottom line

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A Kenyan court ruled that closing a business position is a redundancy, and skipping the Employment Act's redundancy steps makes the dismissal unfair and costly.

What this practically means

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Executive summary

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Farida Shaeen, employed by Highlands Mineral Water Company Ltd as an accountant from 3rd January 2011, had her employment terminated by letter dated 6th December 2012 on account of the closure of the Nairobi Depot effective 31st December 2012. She claimed compensation for unfair termination, notice pay, service/gratuity, leave pay and December 2012 salary. The Respondent defended the termination as a genuine restructuring and counterclaimed for Kshs. 6,779,726 in un-banked cash and missing stock, attributing the loss to the Claimant on the basis of an independent audit. The court framed three issues: lawfulness and fairness of the termination, entitlement to reliefs, and the counterclaim. The court found the termination letter made no mention of any loss or misconduct and was in substance a redundancy. The Respondent had not adhered to any of the Section 40 Employment Act conditions for redundancy, so the termination was unfair, and six months' salary was awarded in compensation. Relying on Thomas De La Rue, the court held two notices are required in redundancy, and that a termination notice must be specific and in writing; notice therefore ran from 6th December 2012, entitling the Claimant to one month's pay in lieu. Leave pay and December salary were admitted and payable; service/gratuity was not proved. The counterclaim failed because the Claimant was not involved in the investigations and the audit findings were untested. Final award: Kshs. 1,288,083, with costs to the Claimant and interest from the date of the award.

Key legal issues

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01

Whether the termination of the Claimant's employment was lawful and fair

Holding

The termination was in substance a redundancy, but the Respondent did not adhere to any of the conditions in Section 40 of the Employment Act; the termination was therefore unfair.

Reasoning

The termination letter dated 6th December 2012 made no mention of misconduct or loss; it stated the Nairobi Depot was closing. The court read the termination as redundancy. Section 40 of the Employment Act sets conditions for redundancy, including notification to the employee personally in writing and the labour officer, payment in lieu of notice and severance pay. The court found the Respondent did not adhere to any of these conditions, rendering the termination unfair, and awarded six months' salary in compensation taking into account length of service and the withholding of terminal dues.

p. 5
02

Whether the Claimant is entitled to the reliefs sought

Holding

The Claimant was entitled to one month's salary in lieu of notice, leave pay and salary for December 2012; the claim for service/gratuity was dismissed as unproved.

Reasoning

The court held that the effective notice ran from 6th December 2012 when the written termination letter was issued, not from the 30th November conversation, because a termination notice must be issued specifically and in writing. The notice therefore fell below Section 35(1) of the Employment Act and the contract, entitling the Claimant to one month's pay in lieu. Leave pay and December 2012 salary were admitted and payable. The service/gratuity claim was not proved.

p. 5
03

Whether the Respondent made out its counterclaim of Kshs. 6,779,726

Holding

The counterclaim failed because the Claimant was not involved in the investigations leading to the adverse audit findings, so the evidence was untested.

Reasoning

The Respondent relied on an audit report by Delyde Associates attributing losses of Kshs. 6,779,726 to the Claimant. The court read the auditors' conclusion as showing losses arising from both systemic weaknesses and human intervention, making it impossible to assign any portion of the loss solely to the Claimant. Since the Claimant was never involved in the investigations and could not respond to the adverse findings, the report's veracity was untested and could not support the counterclaim, which was dismissed.

p. 5

Legal principles established

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  • An employer who issues a termination letter with no mention of any pending disciplinary issue cannot later require the employee to answer charges not put to them during or at the end of employment.
  • Where an employer fails to observe the conditions set out in Section 40 of the Employment Act when declaring a redundancy, the termination becomes unfair within the meaning of Section 45.
  • In redundancy, two notices are required: a general declaration of redundancy and a specific notice of not less than one month to each affected employee.
  • A termination notice heralding loss of employment cannot be issued casually in a general conversation; it must be issued specifically and in writing.
  • An adverse audit report compiled without involving the employee cannot be used as a basis to deny terminal dues.

Court orders

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  1. 1.Award of 6 months' salary in compensation for unfair termination of Kshs. 870,000
  2. 2.Award of 1 month's salary in lieu of notice of Kshs. 145,000
  3. 3.Award of leave pay of Kshs. 128,083
  4. 4.Award of salary for December 2012 of Kshs. 145,000
  5. 5.Total award of Kshs. 1,288,083
  6. 6.The Respondent will meet the costs of the case
  7. 7.The award amount to attract interest at court rates from the date of the award until payment in full

Authorities

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Legislation

  • Employment ActSection 43
  • Employment ActSection 45
  • Employment ActSection 2
  • Employment ActSection 40
  • Employment ActSection 35(1)
  • Labour Relations Actcorresponding section on definition of redundancy

Cases cited (3)

  • Saleh Kiplagat Chebii Vs Centre for African Family Studies (CAFS)
    [2014] eKLR
  • Francis Maina Kamau Vs Lee Construction
    [2014] eKLR
  • Thomas De La Rue (K) Ltd Vs David Opondo Omutelema
    [2013] eKLR
Jurisdiction invoked
Jurisdiction over an employment dispute under the Industrial Court of Kenya's mandate under Article 162(2) of the Constitution and the Industrial Court Act (claim for unfair termination 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, "Farida Shaeen v Highlands Mineral Water Company Ltd [2014] KEELRC 1378 (KLR)", Case Analysis (2014). Cause No 925 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/1378/eng@2014-10-29

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