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ELRCPartially AllowedNot stated in judgment· [2018] KEELRC 1396 (KLR)

Kenya Hotels and Allied Workers Union v Wellcome Inn Hotels / Malindi Investments Limited Herald Kampa [2018] KEELRC 1396 (KLR)

Employment and Labour Relations Court
26 July 2018
3,600 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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The claimant union sued on behalf of 37 grievants formerly employed at Lawfords Beach Club, Malindi, seeking declarations that a lockout on 15 July 2002 and their summary dismissal were unlawful, plus notice pay, severance, refund of SACCO shares and costs. The respondents denied the employment relationship, contending the grievants were employed by Malindi Investments Limited, and maintained the grievants were temporarily redeployed to sister hotels in Diani but refused, warranting summary dismissal for insubordination. The court held that both the first respondent (as owner) and the second respondent (as director, hence a 'manager' under section 2 of the repealed Employment Act) were employers, and that joinder of the second respondent was proper. On the merits, the court found the club had closed for lack of business and that the purported transfer of the grievants to hotels owned by separate corporate entities, without a negotiated transfer-of-service agreement and without resolving their outstanding salary and dues claims, amounted to termination by redundancy. The lay-off breached section 16A of the repealed Employment Act and Regulation 15 of the Hotel and Catering Trades Order, which required one month's notice to the union or Labour Officer, rendering the dismissals unlawful and unfair. The court awarded notice pay graded by service (2 months for 5-9 years; 3 months for 10 years and above), severance at 12 days' pay per year of service, and refund of unremitted SACCO shares, tabulating individual awards for each grievant. Judgment was entered with interest at court rates, subject to statutory deductions, with each party bearing her own costs.

Key legal issues

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01

Whether the respondents were the grievants' employers

Holding

Yes - the first respondent owned the hotel and the second respondent, as its director, was a 'manager' within the definition of employer under section 2 of the Employment Act (repealed); the joinder of the second respondent was proper.

Reasoning

Rw1 confirmed on oath that he was a director of the companies owned by the first respondent, including Malindi Investments Limited which operated Lawfords Beach Club. The court applied the definition of employer in section 2 of the repealed Employment Act, retained in the 2007 Employment Act, and held the director was a manager and a necessary party.

p. 3
02

Whether the summary dismissal was unlawful and unfair

Holding

Yes. The transfer to sister companies without a transfer-of-service agreement amounted to redundancy, and the lay-off procedure breached section 16A of the Employment Act and Regulation 15 of the Hotel and Catering Trades Order requiring one month's notice.

Reasoning

The club closed for lack of business and the employer attempted to transfer staff to hotels owned by separate corporate entities without a negotiated transfer agreement. The grievants' demands for outstanding salaries and dues went unresolved. Dismissing them for declining the transfer without the statutory lay-off notice rendered the dismissal unlawful and unfair.

p. 4
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Entitlement to reliefs

Holding

Notice pay of 2 months for 5-9 years' service and 3 months for 10 or more years; severance at 12 days' pay per year of service; refund of unremitted SACCO shares allowed as uncontested.

Reasoning

Regulation 20 of the Hotel and Catering Trades Order prescribed two months' notice for 5 years' service and three months for 10 years. Severance was awarded at 12 days per year under Regulation 15(e). The SACCO shares claim was uncontested, with Rw1 admitting not all shares had been refunded.

p. 4

Legal principles established

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  • A director of the company operating an establishment is a manager within the statutory definition of employer and cannot escape the obligations of an employer.
  • Purported transfer of employees to another employer without a proper transfer-of-service agreement, occasioned by closure of the business, amounts to termination on account of redundancy.
  • Lay-off without the one month's notice to the union or Labour Officer required by the applicable regulations is unlawful and unfair.

Court orders

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  1. 1.Judgment entered for the claimant against the respondents in terms of the awards made to each grievant (notice pay, severance pay and refund of unremitted SACCO shares) as tabulated
  2. 2.Interest at Court's rates on the awards till payment in full
  3. 3.The awards shall be subject to statutory deductions
  4. 4.Each party to bear her own costs
Jurisdiction invoked
Employment and labour relations dispute referred after conciliation before the Labour Office (first-instance claim under the Employment Act)

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, "Kenya Hotels and Allied Workers Union v Wellcome Inn Hotels / Malindi Investments Limited Herald Kampa [2018] KEELRC 1396 (KLR)", Case Analysis (2018). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1396/eng@2018-07-26

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