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ELRCPartially AllowedCause No. 1432 of 2012· [2015] KEELRC 234 (KLR)

Ephantus Ndirangu Murage v Memusi Trading Limited [2015] KEELRC 234 (KLR)

Employment and Labour Relations Court of Kenya
14 October 2015
MMM. Mbaru
1,209 words in judgment
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The bottom line

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A Kenyan court confirmed that retrenched workers are owed severance pay under section 40 of the Employment Act, and won a balance plus costs.

What this practically means

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Executive summary

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The claimant, formerly Finance and Operations Manager of the respondent, was declared redundant on 19th March 2012 after employment from 10th December 2010. He claimed service pay based on his salary with interest, interest on the redundancy package already paid on 28th May 2012, and payment for loss of earning capacity. The respondent contended that all terminal dues, including salary for days worked, accumulated leave, severance pay at 15 days per year, and six months' pension contributions, had been paid in full, and sought dismissal with costs. The parties agreed that the only unresolved issue was service pay. The court held that the dispute was governed by section 40 of the Employment Act on redundancy, and that severance pay under section 40 is distinct from service pay under section 35(5), the latter applying only to ordinary terminations where statutory deductions were not remitted. Recomputing the entitlements - notice pay of Kshs.120,646.00 which had been omitted, leave pay of Kshs.24,129.00 and severance of Kshs.60,323.00, plus salary for days worked and pension refund - the court arrived at total dues of Kshs.297,438.00, less Kshs.236,187.00 already paid, and entered judgment for the balance of Kshs.61,251.00 less tax. Noting the respondent's failure to refer the redundancy to the Labour Officer as required by section 40(1)(a), the court awarded the claimant costs. Claims for interest and loss of earning capacity were not granted.

Key legal issues

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01

Whether service pay or severance pay is due on redundancy termination

Holding

Only severance pay under section 40 is due in redundancy; service pay under section 35(5) applies to ordinary termination where statutory dues were not remitted

Reasoning

The court distinguished the two heads of pay. Severance pay arises solely from redundancy under section 40(f), while service pay arises under section 35(5) where an employer was not remitting statutory deductions. Since the claimant was declared redundant, the court computed his entitlement as severance pay notwithstanding his reliance on clause 9 of the contract and section 35(5) and (6).

p. 2
02

Quantum of redundancy dues and the balance payable

Holding

Redundancy dues of Kshs.205,098.00 plus salary for days worked and pension refund totalled Kshs.297,438.00; less Kshs.236,187.00 already paid, the balance is Kshs.61,251.00

Reasoning

The court recomputed notice pay (previously omitted), leave pay (overstated by the claimant) and severance pay (overstated), applied section 49(2) of the Employment Act, deducted the amount actually paid before tax, and entered judgment for the balance, subject to tax deductions.

p. 3

Legal principles established

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  • Severance pay under section 40 of the Employment Act is distinct from service pay under section 35(5); severance pay is payable only in redundancy
  • In a redundancy the employer must pay leave due in cash, one month's notice pay or wages in lieu, and severance pay at not less than fifteen days' pay for each completed year of service
  • An employer should refer redundancy cases to the Labour Officer for advice; failure to do so attracts costs

Court orders

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  1. 1.Judgment entered for the Claimant for the sum of Kshs.61,251.00 less tax due
  2. 2.Claimant awarded costs of the suit

Authorities

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Legislation

  • Employment Actsection 35(5)
  • Employment Actsection 35(6)
  • Employment Actsection 40 (including 40(1)(a) and 40(1)(e)-(g))
  • Employment Actsection 49(2)
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act; claim for service/terminal benefits)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Ephantus Ndirangu Murage v Memusi Trading Limited [2015] KEELRC 234 (KLR)", Case Analysis (2015). Cause No. 1432 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/234/eng@2015-10-14

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