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ELRCPartially AllowedCause No. 2258 of 2012· [2015] KEELRC 840 (KLR)

John Ngowah v East Africa Safari Air Express Limited [2015] KEELRC 840 (KLR)

Employment and Labour Relations Court of Kenya
30 June 2015
3,658 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled that an employer who retrenched a worker without following the legally required redundancy procedure must pay him notice, severance, bonus and compensation.

What this practically means

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Executive summary

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The Claimant, employed as an Accounts Clerk (Data Processing), was terminated with immediate effect on 20th December 2010 by a letter citing price wars and high operating costs. He claimed unlawful termination, severance pay, notice pay, service pay, bonus payments and salaries until retirement. The court first resolved that the employer was East Africa Safari Air Express Limited from 1st July 2003, not Eagle Aviation Limited, as the Claimant had accepted a fresh letter of appointment from a different entity; claims predating that date could not lie against the Respondent. The court then found that the sole stated reason for termination - financial difficulties - amounted in law to a redundancy under section 2 of the Employment Act, notwithstanding the Respondent's attempt to frame it as termination for poor performance, which was not stated in the termination letter. While the decision to retrench was the employer's prerogative, the mandatory procedure in section 40 was not followed: the Claimant received no advance notice of the intended layoff or reasons. The termination was therefore unfairly effected, amounting to unfair termination under section 45. Remedies: claims for Kshs.218,500 in terminal benefits and salaries until retirement were abandoned and disallowed; service pay under section 35 was declined because NSSF and NHIF remittances were made; notice pay (Kshs.43,700, admitted), severance pay at 15 days per completed year for 8 years (Kshs.87,400), bonus of Kshs.5,700, and three months' salary as compensation (Kshs.65,550) were awarded, with costs and interest on notice pay, bonus and severance at court rates.

Key legal issues

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01

Identity of the employer and commencement date of employment

Holding

The employer was East Africa Safari Air Express Limited from 1st July 2003, the Claimant having accepted a new letter of appointment from a different entity than Eagle Aviation Limited.

Reasoning

The court compared the two appointment letters (annexures 1 and 2). Although terms were similar, the appointment at annexure 2 was by a different legal entity and was signed in acceptance by the Claimant on 18th July 2003. The explanation that this was a mere change of name was unsupported; the earlier employer was not joined, so no claims predating 1st July 2003 could lie against the Respondent.

p. 3
02

Whether the termination was a lawful termination for poor performance or a redundancy/retrenchment

Holding

The sole reason in the termination letter was financial/operational difficulties, which in law amounts to a redundancy (retrenchment), not a termination for poor performance.

Reasoning

The termination letter cited price wars and high operating costs and offered future recruitment priority. The Respondent's own witness confirmed serious financial problems and a management decision to lay off staff. Poor performance was not stated in the letter, so the court could not treat it as the ground. The situation fell within the statutory definition of redundancy under section 2 of the Employment Act.

p. 4
03

Whether the redundancy complied with section 40 of the Employment Act

Holding

The redundancy was procedurally flawed - no notice of the intended layoff or reasons given in advance - and therefore amounted to unfair termination under section 45.

Reasoning

While the employer's management decision to retrench was genuine and within its prerogative, section 40 procedure is mandatory: notice, reasons for the intended layoff given in advance, and other outlined steps. Nothing prevented the Respondent from complying, and no justification existed under sections 43 or 45. If poor performance were the issue, due process should have been followed instead.

p. 5
04

Remedies

Holding

Notice pay (admitted), severance pay at 15 days per completed year under section 40(1)(g) for 8 years, bonus of Kshs.5,700, and three months' salary as compensation under section 49 were awarded; service pay under section 35 declined.

Reasoning

Notice pay was admitted and computed at two months of Kshs.21,850. Severance pay flowed from the finding of unfair redundancy, 15 days' pay for each of 8 complete years. The bonus was a written benefit recognised by the Respondent, and since poor performance was not the ground, it remained due. Service pay under section 35 was barred because NSSF and NHIF remittances were made. Compensation of three months' salary was fair in the circumstances.

p. 6

Legal principles established

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  • Section 40 of the Employment Act sets out mandatory procedures for redundancy, and non-compliance renders the resulting termination unlawful and unfair under sections 43 and 45.
  • The decision to declare redundancy or retrench is the employer's prerogative, but it must be implemented in accordance with the law.
  • Terminal dues on redundancy are payable immediately upon termination, and an employer may not delay payment on the footing of a 90-day waiting period.

Court orders

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  1. 1.Declaration that the Claimant was unfairly terminated through a flawed redundancy process
  2. 2.Compensation of Kshs.65,550.00 (three months' salary)
  3. 3.Notice pay of Kshs.43,700.00
  4. 4.Bonus payment of Kshs.5,700.00
  5. 5.Severance pay of Kshs.87,400.00
  6. 6.Costs of the suit to the Claimant
  7. 7.Interest on notice pay, bonus and severance pay at court rates

Authorities

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Legislation

  • Employment Actsection 2
  • Employment Actsection 35
  • Employment Actsection 35(6)
  • Employment Actsection 40
  • Employment Actsection 40(1)(g)
  • Employment Actsection 41
  • Employment Actsection 43
  • Employment Actsection 43(2)
  • Employment Actsection 45
  • Employment Actsection 49
  • Retirement Benefits Actnull

Cases cited (4)

  • Mary Chemweno Kiptui versus Kenya Pipeline Co. Ltd
    [2014] eKLR
  • Josephine Muthoni Kamau and 5 Others versus East Africa Safari Air Express Limited
    [2013] eKLR, Cause No. 353 of 2011
  • Kenya union of Domestic Hotels Educational institutions and Hospital workers (KUDHEIHA) versus Aga Khan University Hospital Nairobi
    Cause No. 815 of 2015
  • G N Hale & Son Ltd v Wellington etc. Caretakers etc. IUW
    [1991] 1 NZLR 151 (CA)
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act; claim for unfair termination and terminal dues)

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, "John Ngowah v East Africa Safari Air Express Limited [2015] KEELRC 840 (KLR)", Case Analysis (2015). Cause No. 2258 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/840/eng@2015-06-30

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