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ELRCPartially AllowedCause No 1289 of 2014· [2016] KEELRC 591 (KLR)

Kanini Kioko v A-Z Data Solutions Limited [2016] KEELRC 591 (KLR)

Employment and Labour Relations Court
30 September 2016
1,275 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan employer that fires staff citing cashflow must follow redundancy rules under Section 40 of the Employment Act, or pay compensation for unfair termination.

What this practically means

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Executive summary

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The Claimant, employed as Chief Executive Officer at a monthly salary of Kshs. 400,000 plus allowances from 7th October 2013, was terminated by email on 31st March 2014 on grounds of cashflow constraints. She sued for a declaration of unlawful termination, reinstatement, transfer of 5% of the Respondent's shares plus a further 5% on payment of Kshs. 4,250,000, unpaid salary, prorata leave, notice pay and 12 months' compensation. The Respondent denied approving her salary terms, disputed the certificate of service and the alleged share offer as executed by unauthorised persons, and accused her of insubordination. The court framed two issues: whether the termination was unlawful and whether remedies were due. Finding the termination was in substance a redundancy, the court held that none of the conditions in Section 40 of the Employment Act, 2007 had been observed, and applying Francis Maina Kamau v Lee Construction, found the termination substantively and procedurally unfair. The court awarded three months' salary in compensation, one month's notice pay, admitted salary arrears for December 2013 to March 2014, and prorata leave, less Kshs. 200,000 already paid, totalling Kshs. 3,000,000, with interest from judgment. The share transfer claim was dismissed as unproved. Costs were awarded to the Claimant.

Key legal issues

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01

Whether the termination of the Claimant's employment was unlawful/unfair

Holding

The termination was substantively and procedurally unfair; it was in substance a redundancy effected without compliance with Section 40 of the Employment Act

Reasoning

The termination email cited cashflow constraints, indicating the termination was in substance a redundancy. Section 40 sets mandatory conditions for redundancy, including notification of the employee and labour officer, one month's notice or wages in lieu, and severance pay. There was no evidence the Respondent observed any of these conditions, so following Francis Maina Kamau v Lee Construction, the termination became unfair under Section 45.

p. 3
02

Whether the Claimant was entitled to the remedies sought, including shares

Holding

Compensation of three months' salary, notice pay, admitted salary arrears and prorata leave were awarded; the share transfer claim was dismissed as unproved

Reasoning

The court took into account the Claimant's length of service (about six months) and the Respondent's conduct. Salary for December 2013 to March 2014 was admitted and payable, and prorata leave was allowed. However, the claim for transfer of shares was not proved and was dismissed. Amounts already paid in July 2014 were deducted.

p. 4

Legal principles established

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  • Where an employer fails to observe the conditions in Section 40 of the Employment Act when terminating on grounds amounting to redundancy, the termination becomes unfair under Section 45

Court orders

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  1. 1.3 months' salary in compensation of Kshs. 1,200,000
  2. 2.1 month's salary in lieu of notice of Kshs. 400,000
  3. 3.Salary for December 2013 to March 2014 of Kshs. 1,600,000
  4. 4.Prorata leave of Kshs. 116,667
  5. 5.Less amount paid in July 2014 of Kshs. 200,000, total amount payable Kshs. 3,000,000
  6. 6.Interest at court rates on the judgment amount from the date of judgment until payment in full
  7. 7.Claimant to have the costs of the case

Authorities

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Legislation

  • Employment ActSection 2
  • Employment ActSection 40
  • Employment ActSection 45
  • Labour Relations ActSection 2 (corresponding definition of redundancy)

Cases cited (1)

  • Francis Maina Kamau v Lee Construction
    [2014] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (employment dispute)

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, "Kanini Kioko v A-Z Data Solutions Limited [2016] KEELRC 591 (KLR)", Case Analysis (2016). Cause No 1289 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/591/eng@2016-09-30

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