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ELRCPartially AllowedIndustrial Court Cause Number 281 of 2014 (formerly Mombasa High Court Civil Suit Number 187 of 2003)· [2015] KEELRC 118 (KLR)

Phillip Ateng Oguk & 27 others v Westmont Power [Kenya] Limited & another [2015] KEELRC 118 (KLR)

Industrial Court of Kenya (Employment and Labour Relations Court)
9 December 2015
5,258 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 ruled that company structures cannot be used to dodge employee rights, awarding 28 workers heavy compensation for unlawful termination.

What this practically means

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Executive summary

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This is a first-instance award of the Industrial Court at Mombasa in a transferred High Court claim filed in 2003 by 28 former employees. The claim against the 1st Respondent, Westmont Power (Kenya) Limited, had been withdrawn after the High Court required the employees to deposit Kshs. 5 million as security for costs. The remaining Respondent, East African Power Management Limited, conceded employment but alleged the Claimants absconded to Cergas Senja SDN BHD (CSSB) in March 2002 and breached their contracts; it counterclaimed for damages. The Respondent closed its case without calling any witness. The court framed four issues: continuity of employment, attribution of termination, remedies, and applicability of the Employment Act 2007. It found that E.A. Power Management was a façade co-employer joined with Westmont as a single economic unit, that the CSSB interlude did not break continuity of service from March 1997 to February 2003, and that termination was attributable to the employers, who demanded employees reapply for jobs they still held and forcibly removed them with police assistance. The Employment Act 2007 was held inapplicable retrospectively, but the contractual Terms and Conditions required a hearing before dismissal, which was not given, making the terminations unlawful. The court awarded each Claimant 12 months' salary as damages for unlawful termination, 6 months' notice pay, and service pay at 15 days' salary per completed year, with costs to the Claimants and 14% interest. Other terminal dues claims and the Counterclaim failed. Judge Rika delivered the award on 9 December 2015.

Key legal issues

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01

Whether corporate separateness could shield E.A. Power Management Limited from liability

Holding

The separateness of E.A. Power Management was a façade; it and Westmont were the same economic unit and co-employers of the Claimants

Reasoning

The two companies shared the same Human Resources Manager, directors, staff, workplace and identity cards; management assured employees they were sister companies. The court accepted the approach in the cited Industrial Court authorities that arrangements crafted by employers to limit employees' rights should not be endorsed, and disregarded corporate separateness, apportioning liability to the centre of decision-making.

p. 6
02

Whether the Claimants served continuously from March 1997 to 2003 despite the CSSB interlude

Holding

Yes; the CSSB offers of employment were inconsequential and did not break continuity

Reasoning

The status quo order protected the Westmont–E.A. Power Management agreement; E.A. Power Management remained in control of the employees throughout; duties and premises were unchanged. Employees were not privy to the inter-company arrangements, which could not terminate their March 1997 contracts. Requiring them to reapply was illogical.

p. 7
03

Whether termination was attributable to the Respondent

Holding

Termination was attributable to Westmont and E.A. Power Management Limited, with liability borne by E.A. Power Management Limited

Reasoning

Employees did not voluntarily leave; the Employer demanded they reapply for jobs they still held and called in police to forcibly remove them. They cannot be said to have terminated their own contracts by following a shared management's instructions or by refusing to reapply for jobs they held in continuity.

p. 8
04

Which law governed the termination and what remedies follow

Holding

The Employment Act 2007 did not apply (no retrospectivity); but contractual Terms and Conditions requiring a hearing before dismissal were breached, entitling Claimants to damages for unlawful termination

Reasoning

Termination occurred in 2003, before the Employment Act 2007 came into force; the then Employment Act Cap 226 imposed no obligation of substantive or procedural justice. However Clause 25.1 of the contractual Terms and Conditions required an opportunity to be heard before dismissal, which was not given, making the terminations unlawful rather than merely unfair under statute.

p. 9
05

Entitlement to notice pay and service pay

Holding

6 months' notice pay (the reviewed termination notice period) and service pay at 15 days' salary per completed year for those with over 5 years' service were granted

Reasoning

The last review of terms changed the notice period to 6 months or salary in lieu; no termination notices were issued. The Terms and Conditions, consistent with the Regulation of Wages and Conditions of Employment Act Cap 229, rewarded years of service; Claimants served over 5 years in continuity and left without recognition of that service.

p. 9

Legal principles established

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  • Courts should look at the business structure, not the legal structure adopted by an enterprise, and may disregard corporate separateness where it is a façade used to defeat employees' rights
  • The term 'Employer' includes any person in the control or custody of the place of work, the Employees, and the employment
  • Interposed corporate arrangements to which employees were not party do not break continuity of employment
  • The Employment Act 2007 does not apply retrospectively to pre-2009 terminations

Court orders

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  1. 1.Declaration that the Respondent E.A. Power Management Limited acted in breach of the Claimants' contracts of employment
  2. 2.Respondent to pay each of the 28 Claimants, within 45 days of delivery of the 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, based on last salaries earned
  3. 3.Counterclaim rejected
  4. 4.Costs to the Claimants
  5. 5.Interest allowed at 14% from date of delivery of the Award

Authorities

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Legislation

  • Constitution of KenyaArticle 162(2)
  • Employment ActSections 41, 43(1), 45, 49 (2007 Act); Cap 226
  • Trade Disputes ActSection 15, Cap 234
  • Regulation of Wages and Conditions of Employment ActCap 229
  • Industrial Court (Procedure) RulesRule 27(1)(a)

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
Jurisdiction invoked
Article 162(2) of the Constitution of Kenya (transfer of the claim 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, "Phillip Ateng Oguk & 27 others v Westmont Power [Kenya] Limited & another [2015] KEELRC 118 (KLR)", Case Analysis (2015). Industrial Court Cause Number 281 of 2014 (formerly Mombasa High Court Civil Suit Number 187 of 2003). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/118/eng@2015-12-09

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