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ELRCPartially AllowedCause No. 413 of 2014· [2015] KEELRC 122 (KLR)

Gladys Agayo v Somak Travel Ltd [2015] KEELRC 122 (KLR)

Employment and Labour Relations Court of Kenya at Nairobi
12 November 2015
4,842 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~19 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled that paying money cannot fix a badly handled redundancy — employers must follow the law's notice and hearing steps.

What this practically means

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Executive summary

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The Claimant, employed as a Customer Service Officer from 5th June 2001 and earning kshs.56,911.00 monthly, was terminated on 13th March 2012 ostensibly on grounds of redundancy arising from a downturn in the tourism business. She claimed unfair termination, unpaid and underpaid terminal benefits, and refunds of medical cover deductions made from 2009 when the Respondent outsourced medical cover to AAR. The Respondent admitted liability for March 2012 salary, two months' notice pay and service pay computed at 10.75 years (kshs.389,394.03 in total), which it deposited with the Claimant's advocates, but defended the medical deductions and denied wrongdoing. The court found the Respondent violated the mandatory provisions of section 40 of the Employment Act: no notice was issued to the employee, the union or the labour officer, and consultations were never held, despite the business decline having been evident since 2008. The belated reliance on poor performance also failed, as no warning letters were produced and no hearing was conducted, contrary to sections 41 and 45. The medical deductions were held unlawful because a contractual benefit cannot be unilaterally converted into a contributory scheme without the employee's consent. The court declared the termination unfair, awarded ten months' salary as compensation (kshs.569,110.00), notice pay of kshs.113,882.00, severance pay assessed at 15 days per year for 11 completed years (kshs.313,010.50), and refund of medical deductions of kshs.387,000.00, less amounts already received. The prorated leave claim was declined for want of evidence. The Claimant received 50% of costs and a certificate of service.

Key legal issues

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01

Compliance with section 40 redundancy procedure

Holding

The Respondent violated the mandatory notice and consultation requirements of section 40, rendering the redundancy unfair

Reasoning

The Respondent's business downturn dated from 2008 and the decision to terminate was taken in 2012, giving ample time to issue the notices required by section 40, including notification of the labour officer and consultation with affected employees. Willingness to pay more notice pay cannot cure procedural non-compliance. The abrupt issuance of a termination letter on the Claimant's return from leave caused trauma and is not legally acceptable.

p. 6
02

Termination for poor performance

Holding

No evidence of notice, hearing or warning letters was produced; imputing poor performance as a reason was unfair under section 45

Reasoning

The termination letter cited only the business downturn, not poor performance. The alleged warning letters were not produced in court and the reasons for them were not stated. Where poor performance is alleged, section 41 demands that the employee be informed, given a chance to defend herself and heard before a decision is taken. None of that occurred, so the reason cannot stand.

p. 6
03

Lawfulness of medical cover deductions

Holding

The unilateral conversion of a fully employer-funded medical benefit into a contributory scheme and deduction from salary without consent was unlawful

Reasoning

Section 10(2) of the Employment Act requires employment contracts to spell out all benefits, including medical cover. Once outlined, benefits cannot be negatively varied without the employee's consent. The Respondent relied on a memo posted on a notice board while the Claimant was on leave, and produced no policy document or audited accounts showing the scheme was contributory or what the employer contributed. The Claimant's personal payments must be refunded.

p. 7
04

Severance pay quantum

Holding

Severance pay assessed at 15 days' pay for each of 11 complete years served, at kshs.313,010.50

Reasoning

The Claimant served from 5th June 2001 to 1st April 2012, completing 11 years. In the absence of any document showing a higher entitlement, such as a negotiated union package which the Claimant bore the duty to produce, the statutory rate of 15 days' pay per year under section 40 applies. The higher amount offered by the Respondent was not disturbed as to receipt but the assessed entitlement is as stated.

p. 8

Legal principles established

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  • Section 40 of the Employment Act is mandatory in redundancy; failure to give the required notices renders the termination an unfair labour practice
  • Benefits granted under a written contract of employment cannot be unilaterally reviewed to the employee's disadvantage without consent
  • Where an employer alleges poor performance, section 41 requires notice and a hearing before termination

Court orders

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  1. 1.A declaration that the termination of the Claimant was unfair
  2. 2.Compensation awarded at kshs.569,110.00
  3. 3.Notice pay at kshs.113,882.00
  4. 4.Severance pay at kshs.313,010.50
  5. 5.Medical cover deductions refunded at kshs.387,000.00
  6. 6.Payments subject to the provisions of section 49(2) of the Employment Act
  7. 7.Payments due less kshs.389,394.03 already received from the respondent
  8. 8.Claimant awarded 50% of costs
  9. 9.A Certificate of Service to be issued within 7 days without any conditions
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act; Labour Relations Court Act)

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, "Gladys Agayo v Somak Travel Ltd [2015] KEELRC 122 (KLR)", Case Analysis (2015). Cause No. 413 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/122/eng@2015-11-12

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