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ELRCOtherNot stated in judgment· [2017] KEELRC 1802 (KLR)

Banking Insurance & Finance Union (Kenya) v Kenya Post Office Savings Bank Ltd [2017] KEELRC 1802 (KLR)

Employment and Labour Relations Court
10 February 2017
LNLINNET NDOLO
1,877 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~8 min to read original · ~4 min brief

The bottom line

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Kenya's court nullified a microfinance bank's pay agreement because unions and state corporations must involve the Salaries and Remuneration Commission before bargaining.

What this practically means

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Executive summary

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This first-instance claim by the Banking Insurance and Finance Union (Kenya) arose from a dispute over monetary proposals for a Collective Bargaining Agreement with the Respondent covering June 2013 to June 2015. The Claimant sought a 30% general wage increment in each of the two years, enhanced house, leave, medical, commuter and sundry allowances, after conciliation of the trade dispute failed. The Respondent, a state corporation, countered that as a state agency it required approval from the National Treasury and the Salaries and Remuneration Commission, and that it lacked financial capacity, having recorded cumulative losses of Kshs 8.14 billion and negative equity. SRC filed a report advising that the Respondent retain existing remuneration levels, finding the proposed wage increase neither affordable nor fiscally sustainable. The Court framed two issues: SRC's role in the negotiations, and the import of SRC's submissions. Departing from Nduma J's decision in Kenya Union of Commercial Food and Allied Workers, the Court held that SRC's mandate under Article 230(4)(b) extends to all public servants, including employees of state corporations and commercial parastatals, and that no CBA ought to be negotiated without SRC's input. Applying the Court of Appeal's decision in Teachers Service Commission v KNUT, it held SRC's advice binding. The Court nullified all agreements reached between the parties on the proposed CBA and directed them to commence fresh negotiations in line with SRC guidelines, with each party bearing its own costs.

Key legal issues

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01

Whether the Salaries and Remuneration Commission has a role in CBA negotiations between a trade union and a commercial state corporation

Holding

SRC's mandate under Article 230(4)(b) extends to employees of state corporations, including commercial parastatals; the Respondent falls within SRC's mandate and no CBA ought to have been negotiated without its input

Reasoning

The Court declined to follow Nduma J's decision in Kenya Union of Commercial Food and Allied Workers, which had held that commercial parastatals lie beyond SRC's mandate. The Judge reasoned that SRC was established to cure an unchecked wage bill and wage disparities in the public sector, which could not be achieved if commercial parastatals were excluded. The Court aligned itself with Rika J's decision in National Union of Water Sewerage Employees.

p. 4
02

The weight to be given to SRC's submissions on the Respondent's ability to pay

Holding

SRC's advice is binding; on SRC's analysis the Respondent lacked financial capacity and fiscal sustainability to implement the proposed CBA, so the agreements reached were nullified

Reasoning

SRC reported cumulative losses of Kshs 8.14 billion, negative equity and revenue reserves, a qualified Auditor-General opinion, declining income, and comparative salary levels higher than peer institutions. Following the Court of Appeal decision in Teachers Service Commission v KNUT, the Court held SRC's advice binding, rendering agreements reached in disregard of it invalid.

p. 5

Legal principles established

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  • The mandate of the Salaries and Remuneration Commission under Article 230(4)(b) of the Constitution extends to all public servants, including employees of state corporations and commercial parastatals
  • The advice of SRC under Article 230(4)(b) on remuneration and benefits of all public officers is binding, and any exercise of power that ignores it is invalid
  • No CBA ought to be negotiated for a state corporation without the input of SRC

Court orders

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  1. 1.All agreements reached between the Claimant and the Respondent on account of the proposed CBA for the period running from June 2013 to June 2015 are nullified
  2. 2.The parties are directed to commence fresh negotiations in line with the guidelines issued by SRC
  3. 3.Each party will bear its own costs
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over the collective bargaining dispute; Constitution Articles 41 and 230(4) considered

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, "Banking Insurance & Finance Union (Kenya) v Kenya Post Office Savings Bank Ltd [2017] KEELRC 1802 (KLR)", Case Analysis (2017). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2017/1802/eng@2017-02-10

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