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ELRCPartially AllowedCause Number 281 of 2014 (formerly Mombasa High Court Civil Suit Number 187 of 2003)· [2015] KEELRC 34 (KLR)

Phillip Ateng Oguk & 27 others v Westmont Power [Kenya] Limited & another [2015] KEELRC 34 (KLR)

Industrial Court of Kenya (Employment and Labour Relations Court)
9 December 2015
5,223 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~21 min to read original · ~4 min brief

The bottom line

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Kenya's Industrial Court pierced the corporate veil and ordered an employer to pay 28 workers 12 months' salary each for unlawful termination.

What this practically means

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Executive summary

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This is an award of the Industrial Court at Mombasa (Rika J) in an employment dispute transferred from the High Court, where 28 employees sued Westmont Power (Kenya) Limited and East African Power Management Limited for unlawful termination. The claim against Westmont was withdrawn in 2004 after the High Court ordered the employees to deposit Kshs. 5 million as security for costs. The court framed four issues: continuity of employment, attribution of termination, entitlement to remedies, and the applicability of the Employment Act 2007. It held that Westmont and E.A. Power Management were a single economic unit, the latter being a façade company; corporate separateness was a barrier to employees' rights and courts should disregard it. The interposition of Cergas Senja SDN BHD (CSSB) in 2002 was inconsequential, since control and custody of the workplace, the employees and the employment never changed, so the employees served continuously from March 1997 to February 2003. Termination occurred when the Respondent demanded employees reapply for jobs they still held and called in police to remove them; it was employer-instigated. The Employment Act 2007 did not apply retrospectively, but the applicable Terms and Conditions required a hearing before dismissal, which was not given, making the termination unlawful. The court awarded each of the 28 Claimants damages for unlawful termination of 12 months' salary, notice pay of 6 months' salary, and service pay at 15 days' salary per completed year of service, with interest at 14% and costs to the Claimants. Other terminal dues claims and the Respondent's counterclaim were rejected.

Key legal issues

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01

Whether the corporate separateness of Westmont and E.A. Power Management Limited should be disregarded

Holding

Yes. The two companies were a single economic unit and E.A. Power Management was a façade company; separateness was a barrier to employees' rights.

Reasoning

The court found shared human resources, common directors, same workplace, identity cards and appointment letters issued variously in the names of both companies, and assurances that they were sister companies. Relying on the approach in Symon Wairobi Gituma and the academic view of Davidov, it held courts should look at business structure rather than legal structure to defeat arrangements designed to evade labour regulation.

p. 5
02

Whether there was continuous employment from March 1997 to February 2003 despite the interposition of CSSB

Holding

Yes. The CSSB interlude was inconsequential; control and custody of the employees never changed.

Reasoning

The Management Agreements were made without the employees' participation; the status quo order preserved the Respondent's control; employees performed the same duties from the same premises under the same management; CSSB letters of offer are to be treated as though they never happened, so continuity of service was preserved.

p. 7
03

Who terminated the employment and on what terms

Holding

The termination was attributable to Westmont and E.A. Power Management Limited, with liability borne by E.A. Power Management Limited; employees did not abscond or voluntarily terminate.

Reasoning

Employees were ordered to reapply for jobs they still held in continuity, which was illogical; contracts had not been terminated; police were called to remove them forcibly and port passes were exchanged for salaries. The demand to reapply and the forcible removal constituted employer-instigated termination.

p. 8
04

Whether the Employment Act 2007 governed the contracts

Holding

No. Grievances arose in 2003 before the Act; it cannot apply retrospectively. The pre-2007 common law position under Employment Act Cap 226 imposed no duty of fair termination, but contractual/human resource manual obligations did.

Reasoning

The Trade Disputes Act Cap 234 had granted unfair termination remedies only within the trade disputes regime. Clause 25.1 of the applicable Terms and Conditions required an opportunity to be heard before dismissal, which was not afforded, so termination was unlawful, attracting damages rather than statutory compensation under Section 49 of the 2007 Act.

p. 8
05

Whether the Respondent's counterclaim for damages should succeed

Holding

No. It was rejected for want of evidence and because termination was employer-instigated.

Reasoning

The Respondent closed its case without calling any witness; its Accountant's statement was accorded little evidential weight; the allegation that the Claimants absconded and breached contracts was inconsistent with the finding that control and custody never changed and that the reapplication demand was baseless.

p. 9

Legal principles established

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  • Where group/sister companies craft corporate structures that place barriers in the way of employees' rights, courts may disregard corporate separateness and treat the entities as a single economic unit
  • The term 'Employer' includes any person in the control or custody of the place of work, the Employees, and the employment
  • Inter-company management arrangements unknown to employees do not affect the continuity of their employment contracts
  • The Employment Act 2007 does not apply retrospectively to terminations that occurred before its commencement
  • Prior to the Employment Act 2007, an employer's duty to accord substantive and procedural justice could arise from the contract of employment or a human resource manual, breach of which sounds in damages for unlawful termination

Court orders

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  1. 1.It is declared the Respondent E.A. Power Management Limited acted in breach of the Claimants' contracts of employment
  2. 2.The Respondent shall pay to each of the 28 Claimants, within 45 days of the delivery of this Award, damages for unlawful termination at 12 months' salary, notice pay at 6 months' salary and service pay at 15 days' salary for each year completed in service, all based on the last salaries earned by the Claimants
  3. 3.The Counterclaim is rejected
  4. 4.Costs to the Claimants
  5. 5.Interest allowed at 14% from date of delivery of this Award

Authorities

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Legislation

  • Constitution of KenyaArticle 162(2)
  • Industrial Court Procedure Rules 2010Rule 27(1)(a)
  • Employment Act 2007Sections 41, 43(1), 45, 49
  • Employment Act Cap 226 (Laws of Kenya)Not specified
  • Trade Disputes Act Cap 234 (Laws of Kenya)Section 15
  • Regulation of Wages and Conditions of Employment Act Cap 229 (Laws of Kenya)Not specified

Cases cited (6)

  • Elizabeth Waceke & 62 Ors v. Airtel Networks Kenya Limited & Another
    [2013] e-KLR
  • Kenya Petroleum Oil Workers Union v. Giefcon Limited & Another
    [2015] e-KLR
  • Symon Wairobi Gituma v. East African Breweries Limited & 3 others
    Cause Number 1011 of 2010
  • Child Welfare Society of Kenya v. Margaret Bwire & Another
    Cause Number 684 of 2011
  • Kenya Ports Authority
    [2014] e-KLR
  • Major Wilfred Kyallo Kangulyu v. Tetrapak Limited
    [2014] e-KLR
On appeal from
High Court of Kenya at Mombasa
High Court Civil Case Number 187 of 2003 (referred to in the body as Number 184 of 2003)
Jurisdiction invoked
Article 162(2) of the Constitution of Kenya; transfer from the High Court under the Industrial Court's employment and labour relations jurisdiction

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, "Phillip Ateng Oguk & 27 others v Westmont Power [Kenya] Limited & another [2015] KEELRC 34 (KLR)", Case Analysis (2015). Cause Number 281 of 2014 (formerly Mombasa High Court Civil Suit Number 187 of 2003). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/34/eng@2015-12-09

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