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Case Brief · caselaw.co.ke
ELRCPartially AllowedNot stated in judgment (ELC Cause filed 19th August 2014)

Simon Makau Mutuku v Coconut Limited [2016] KEELRC 565 (KLR)

Employment and Labour Relations Court
29 July 2016
2,584 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled a redundancy unlawful because the employer skipped notifying the labour officer and paying dues, awarding the worker over Kshs. 232,000.

What this practically means

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Executive summary

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The Claimant, employed as a storekeeper from October 2010 at a salary of Kshs. 15,000/-, sued the Respondent alleging unfair termination by redundancy on 31st January 2014 without notice or payment of terminal dues, contrary to Sections 40 and 41 of the Employment Act 2007. He sought notice pay, redundancy pay, January 2014 salary, leave, severance pay, house allowance, refund of alleged unlawful deductions, twelve months' compensation, costs, interest and a certificate of service. The Respondent asserted the redundancy was lawful, the salary was consolidated, and terminal dues would be paid upon handover of company property. At the hearing the Claimant admitted receiving the redundancy letter and that house allowance was later factored into his pay; the Respondent's general manager confirmed no prior notice was issued, the letter was never copied to the labour officer, and dues were not paid at termination. Holding Section 40 couched in mandatory terms, the court found the redundancy declaration illegal and unfair for failure to notify the labour officer and pay dues. On Section 31, absent a written contract or CBA consolidating salary, the Claimant was entitled to house allowance for 31 months. Claims for unlawful deductions and regarding invoices failed. Judgment was entered for the Claimant: notice pay, January 2014 salary, house allowance of Kshs. 67,500/-, nine months' compensation of Kshs. 135,000/- (subject to Section 49 deductions), a certificate of service, costs of the suit, and interest at court rates from the date of judgment.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the declaration of redundancy complied with Section 40 of the Employment Act 2007
  2. 2.Whether the termination was lawful and fair under Sections 40 and 41 of the Employment Act
  3. 3.Whether the Claimant was entitled to house allowance under Section 31 of the Employment Act
  4. 4.Whether there were unlawful deductions from the Claimant's salary
  5. 5.Whether the Claimant was in custody of the Respondent's invoices
  6. 6.What terminal dues and compensation the Claimant was entitled to

Key legal issues

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01

Compliance with Section 40 redundancy procedure

Holding

The redundancy was illegal and unfair because the letter was not copied to the labour officer and terminal dues were not paid

Reasoning

The court held Section 40 couched in mandatory terms requiring notice, copy to labour officer, and payment of dues at termination. It was undisputed the 18th January 2014 letter was not copied to the labour officer and no terminal dues were paid, so the declaration of redundancy missed a key step and was unlawful and unfair.

p. 4
02

Entitlement to house allowance under Section 31

Holding

Claimant entitled to unpaid house allowance for 31 months as there was no written contract or CBA consolidating salary

Reasoning

Section 31(2) exempts employers where the contract consolidates a housing element in wages or a CBA so provides. Here there was no written contract and no CBA, so the Claimant had an expectation of and legal entitlement to house allowance for the months it was not provided.

p. 4
03

Claimed unlawful salary deductions

Holding

Claim failed; only non-statutory deductions were loan deductions

Reasoning

The Claimant alleged unlawful deductions between May and December 2013. The court found the only deductions that were not statutory were loan deductions, so no unlawful deduction was proved.

p. 4
04

Custody of the Respondent's invoices

Holding

Respondent did not prove the Claimant stole or had custody of the invoices

Reasoning

The Respondent alleged the Claimant withheld invoices. The Respondent produced copies of the invoices which did not show the Claimant issued or handled them, so the allegation failed.

p. 4
05

Compensation for unfair termination

Holding

Nine months' salary compensation awarded under Section 49

Reasoning

Having found the termination unlawful and unfair, the court exercised discretion under Section 49 to award 9 months' salary (Kshs. 135,000/-) rather than the 12 months claimed, subject to statutory deductions.

p. 4

Legal principles established

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  • Section 40 of the Employment Act is mandatory: notice of redundancy must be given and copied to the labour officer, and terminal dues paid at termination
  • Failure to notify the labour officer of a redundancy renders the declaration of redundancy illegal and unfair
  • House allowance under Section 31 cannot be deemed consolidated absent a written contract or CBA providing consolidation

Court orders

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  1. 1.Salary in lieu of notice Kshs. 15,000/-
  2. 2.Salary for January 2014 Kshs. 15,000/-
  3. 3.Unpaid house allowance for 31 months Kshs. 67,500/-
  4. 4.Kshs. 135,000/- being 9 month's salary compensation for unlawful termination
  5. 5.Certificate of service in terms of Section 50 of the Employment Act
  6. 6.Items (a) to (d) subject to deductions in terms of Section 49 of the Employment Act
  7. 7.Costs of the suit to the Claimant
  8. 8.Interest on items (a) to (d) at Court rates from the date of judgment until payment in full

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

majority
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act 2007); specific enabling provision not cited

Relief refused

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One month's salary in lieu of redundancy (Kshs. 17,250/-)

Not included in the judgment entered; redundancy was itself the unlawful act giving rise to compensation

Severance pay at 15 days for each completed year of service (Kshs. 28,875/-)

Not expressly awarded in the final orders

Refund of unlawfully deducted salary (Kshs. 15,625.16 / 13,000)

The Claimant did not prove unlawful deductions; the only non-statutory deductions were loan deductions

p. 4

12 months' salary compensation for unfair termination

Court awarded 9 months' compensation instead

p. 4

Costs

Costs of the suit awarded to the Claimant

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The provisions under Section 40 above are couched in mandatory terms. There must be notice, the notice must be copied to a labour officer and where the employee is a member of a union to that said union.
p. 3mandatory redundancy procedure
This was an abridgement of the law and thus the declaration of redundancy having missed this key step was illegal and unfair.
p. 4consequence of non-compliance with Section 40
If the salary was consolidated there should have been a contract or CBA to that effect.
p. 4house allowance under Section 31
I enter judgment for the Claimant against the Respondent as follows:
p. 4disposition
Interest on a), b), c), d) above at Court rates from the date of judgment until payment in full.
p. 4final orders - interest

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, "Simon Makau Mutuku v Coconut Limited [2016] KEELRC 565 (KLR)", Case Analysis (2016). Not stated in judgment (ELC Cause filed 19th August 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/565/eng@2016-09-02

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