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ELRCPartially AllowedCause No. 1524 of 2014· [2016] KEELRC 1854 (KLR)

Frank Zawadi Wanjala Mudibo & 5 others v Zircon Group Limited [2016] KEELRC 1854 (KLR)

Employment and Labour Relations Court of Kenya at Nairobi
30 May 2016
MMM. Mbaru
4,516 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 employers cannot extend probation or cut staff citing cash flow without following redundancy law, and awarded employees compensation and unpaid dues.

What this practically means

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Executive summary

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Six employees of Zircon Group Limited, operating Urban Radio, sued for wrongful, unfair and unlawful termination, breach of trust and non-payment of terminal benefits. Five were terminated on 2 May 2014 by letters citing cash flow problems and workforce reduction; the 5th Claimant resigned in February 2014 after non-payment of salary. The Respondent contended all Claimants were on probation, extended by internal memo to June 2014, and terminable on 7 days' notice under section 42 of the Employment Act. The court held that probationary periods cannot be extended without the employee's knowledge and written consent; the memo extending probation carried no consents, so the Claimants had completed their contractual probation. Because the terminations were expressly grounded on cash flow problems and workforce reduction, they amounted to a redundancy governed by section 40 of the Employment Act, whose mandatory procedures were not followed, rendering the terminations unfair. The 5th Claimant's resignation, caused by non-payment of her dues, amounted to constructive dismissal. The court awarded compensation (one month for the 1st and 6th Claimants, three months for the 2nd and 4th), notice pay, prorated leave and unpaid salary arrears to each claimant as itemised, and declared the 5th Claimant constructively dismissed with one month's compensation. Severance pay was declined as none served over a year, and house allowance was declined as salaries were all-inclusive. The Respondent was ordered to issue Certificates of Service, with costs to the claimants. Judgment delivered on 30 May 2016 by M. Mbaru, J.

Key legal issues

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01

Whether the Claimants were still on probation at termination

Holding

Save for the 5th Claimant, the Claimants had completed their contractual probation periods; the memo extending probation lacked their written consent

Reasoning

Probation under section 42 of the Employment Act cannot exceed 12 months and may only be extended with the employee's consent. The internal memo extending probation to 30 June 2014 was not accompanied by consents, and the 6th Claimant based in Kisumu could not have accessed it. The probation periods therefore ended as per the contracts of employment.

p. 5
02

Whether the terminations were a redundancy requiring compliance with section 40

Holding

Yes - by citing cash flow problems and workforce reduction the Respondent moved from probationary provisions to a redundancy situation, and non-compliance with section 40 rendered the terminations unfair

Reasoning

The termination letters cited major cash flow problems and workforce reduction, with positions no longer required. This is the statutory definition of redundancy under section 40. There was no evidence of how many employees the Respondent had, no notice to the Labour Officer, and the Respondent's own officers retained their jobs, so the terminations were unfair.

p. 6
03

Whether the 5th Claimant was constructively dismissed

Holding

Yes - her resignation was forced by non-payment of salaries and constituted constructive dismissal, an unfair labour practice

Reasoning

Ms Nyaga was not paid her January salary and could not pay rent or transport, causing her to stop reporting. The Respondent's witness confirmed she stopped reporting and was summoned. Non-payment made her unable to perform her duties, and the resignation was justified and forced upon her.

p. 6
04

What remedies are due

Holding

Compensation, notice pay under section 49(1)(c) and prorated leave were awarded; severance pay and house allowance declined; unpaid salaries awarded as itemised

Reasoning

None of the Claimants served over one year to earn severance. The 2nd and 4th Claimants, having long completed probation, received 3 months' compensation each; the 1st and 6th, whose probation was not yet complete, received one month each. Leave accrued at 2 days per month on gross pay, and salary arrears were computed from the Respondent's own records.

p. 6

Legal principles established

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  • An extension of a probationary period requires the full knowledge and consent of the employee and cannot be imposed unilaterally
  • Where an employer terminates employees citing cash flow problems and workforce reduction, the termination is a redundancy regulated under section 40 of the Employment Act, and failure to observe section 40 is unfair
  • Failure to pay an employee's dues is degrading and inhuman, and terminating or accusing an employee of absenteeism caused by non-payment of salary is an unacceptable labour practice amounting to constructive dismissal

Court orders

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  1. 1.Declaration that the Claimants (save for the 5th Claimant) were unfairly terminated
  2. 2.Compensation awarded: 1st Claimant one month (Kshs.74,816.00); 2nd and 4th Claimants 3 months' salary each (Kshs.168,645.00 and Kshs.154,692.00); 6th Claimant Kshs.158,889.00
  3. 3.Notice pay awarded to the 1st, 2nd, 4th and 6th Claimants
  4. 4.Prorated leave dues awarded to each claimant
  5. 5.Unpaid salary arrears and salaries awarded to the 1st, 2nd, 3rd, 4th and 6th Claimants as itemised
  6. 6.Declaration that the 5th Claimant was constructively dismissed; compensation of one month's salary (Kshs.40,000.00) and leave due of Kshs.5,333.00 awarded
  7. 7.Respondent to unconditionally issue the Claimants with Certificates of Service pursuant to section 51 of the Employment Act
  8. 8.Costs to the claimants

Authorities

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Legislation

  • Employment Actsection 40
  • Employment Actsection 41
  • Employment Actsection 42
  • Employment Actsection 49(1)(c)
  • Employment Actsection 28
  • Employment Actsection 51

Cases cited (5)

  • Hesbon Ngaruiya Waigi versus Equatorial Commercial Bank Limited
    [2013] eKLR
  • Emmanuel Mutisya Solomon versus Agility Logistics
    Cause No.1448 of 2011
  • Jalang'o & Another versus Amicabre Travel Services Limited
    Cause no.1068 of 2012
  • Peris Nyambura Kimani versus Dalbit Group limited
    Petition No.63 of 2014
  • Gladys Agayo versus Somak Travel Ltd
    Cause No. 413 of 2014
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act; Employment and Labour Relations Court Act)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Frank Zawadi Wanjala Mudibo & 5 others v Zircon Group Limited [2016] KEELRC 1854 (KLR)", Case Analysis (2016). Cause No. 1524 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/1854/eng@2016-05-30

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