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ELRCPartially AllowedCause No 76 of 2013· [2018] KEELRC 1456 (KLR)

Michael Otieno Omiti & 2 others v Wells Fargo Limited & another [2018] KEELRC 1456 (KLR)

Employment and Labour Relations Court
Invalid Date
MOMaureen OnyangoMNMathews Nderi Nduma
2,268 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 reduced a security guard's gratuity award because it should have been calculated on basic pay plus house allowance, not gross pay.

What this practically means

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Executive summary

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The Employment and Labour Relations Court at Kisumu determined two applications arising from its judgment of 12th April 2017 in which the 1st Claimant, Michael Otieno Omiti, had been awarded gratuity of Kshs.478,166.40 for 24 years of service. The Respondent applied on 7th July 2017 for review under section 16 of the ELRC Act and Rule 33 of the ELRC (Procedure) Rules, contending that the gratuity had been computed on gross pay instead of basic pay plus house allowance, and that the correct figure was Kshs.290,237.53; it also explained the delay in filing through an error about the delivery date. The Claimants opposed, arguing any misdirection in calculation was a ground of appeal, not review, and filed their own application on 19th September 2017 seeking an order compelling payment of the balance of the decretal sum, alleging disobedience of the decree and unlawful PAYE deductions. The Court framed two issues: whether there was an error on the face of the record in the gratuity calculation, and whether the Respondent was entitled to deduct PAYE. Relying on the Regulation of Wages (Protective Security Services) Order and prior ELRC authorities including George Onyango Akuti, the Court found the gratuity had wrongly been based on gross pay and reviewed the judgment, substituting an award of Kshs.290,237.53. On tax, invoking section 49(2) of the Employment Act, section 37 of the Income Tax Act and Rika J's decision in Kioko Joseph, it held the Respondent was obliged to deduct and remit tax. The review application succeeded; the Claimants' application was dismissed with each party bearing its own costs.

Key legal issues

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01

Error apparent on the face of the record in the gratuity calculation

Holding

The award of gratuity was based on gross pay instead of consolidated pay (basic pay and house allowance); the judgment was reviewed and the award reduced from Kshs.478,166.40 to Kshs.290,237.53

Reasoning

Rule 33 of the ELRC (Procedure) Rules permits review for a mistake or error apparent on the face of the record. The Regulation of Wages (Protective Security Services) Order entitles an employee after five years' service to eighteen days' pay per completed year based on the employee's wage at termination. Applying Radido J's formula in George Onyango Akuti, the correct basis is basic salary plus house allowance divided by twenty-six, multiplied by the number of days. The Court found its earlier tabulation used gross pay of Kshs.35,000 and was therefore erroneous.

p. 4
02

Entitlement to deduct PAYE from the award

Holding

The respondent was entitled to deduct and remit income tax (PAYE) on the payments to the claimants

Reasoning

Section 49(2) of the Employment Act provides that payments made under that section are subject to statutory deductions. Rika J in Kioko Joseph held that a claimant has a statutory obligation to pay tax assessed on the global award, and the same position was taken in Hosea Njeru Kagondu. The Court further grounded the obligation in section 37 of the Income Tax Act.

p. 4

Legal principles established

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  • Gratuity under the Regulation of Wages (Protective Security Services) Order is calculated on the employee's basic pay and house allowance (consolidated pay), not gross pay
  • Payments under section 49 of the Employment Act are subject to statutory deductions, and the respondent is obliged to deduct and remit PAYE

Court orders

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  1. 1.Review of the judgment delivered on 12th April 2017 by setting aside the award of gratuity of Kshs.478,166.40 in favour of Michael Otieno Omiti and substituting therefor the sum of Kshs.290,237.53
  2. 2.Dismissal of the claimants' application dated 19th September 2017 seeking payment of the balance of the decretal sum
  3. 3.Each party to bear its own costs

Authorities

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Legislation

  • Employment and Labour Relations Court ActSection 16
  • Employment and Labour Relations Court (Procedure) RulesRule 33
  • Regulation of Wages (Protective Security Services) OrderRule 17
  • Employment ActSection 49(2)
  • Income Tax ActSection 37
  • Fair Administrative Actions ActSection 4
  • Constitution of KenyaArticle 47

Cases cited (6)

  • Coda Consulting Group Ltd vs John Kamau Wanyonyi
    (2012) eKLR
  • George Onyango Akuti Vs G4S Security Services Kenya Limited
    [2013] eKLR
  • Joshua Mbogo Orori -V- Pinkertons Kenya Limited
    [2013] eKLR
  • Alex Muthiora Koome -V- G4S Security Services Limited
    [2015] eKLR
  • Kioko Joseph [suing as the representative of Joseph Kilinda] -V- Bamburi Cement Limited
    [2016] eKLR
  • Hosea Njeru Kagondu -V- Kenya Union of Commercial Food and Allied Worker
    [2014] eKLR
Jurisdiction invoked
Section 16 of the Employment and Labour Relations Court Act and Rule 33 of the Employment and Labour Relations Court (Procedure) Rules, 2016 (review of the Court's own judgment)

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, "Michael Otieno Omiti & 2 others v Wells Fargo Limited & another [2018] KEELRC 1456 (KLR)", Case Analysis (). Cause No 76 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1456/eng@2018-07-12

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