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ELRCAllowedCause No 1705 of 2015· [2018] KEELRC 1761 (KLR)

James Okello Ouma & 4 others v Rift Valley Railways (Kenya) Ltd [2018] KEELRC 1761 (KLR)

Employment and Labour Relations Court
13 June 2018
1,151 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 railway workers were owed enhanced severance pay under a concession agreement, not just the Employment Act minimum, and awarded over Kshs 3.7 million.

What this practically means

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Executive summary

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Five former employees of the Respondent, a railway concessionaire, claimed underpayment of severance pay on retrenchment. The Respondent issued them appointment letters on 25 October 2006 following the Concession of Kenya Railway Freight and Passenger Services Agreement between Kenya Railways Corporation, the Respondent and the Government of Kenya, effective 7 April 2006 upon signing of the Interface Agreement. The Claimants were retrenched on 29 November 2012 and 29 October 2014, and were paid severance at one month's salary per completed year of service. They sued on 24 September 2015 contending that, having each served less than 10 years, they were entitled to two and a half months' salary per completed year under section D.4.3(a) of the Agreement. The Respondent argued that section applied only to KRC employees retrenched at the commencement date, that the Agreement did not apply to the Claimants, and raised privity of contract, maintaining the Employment Act governed. The Court found the Claimants were transferred employees within section A.1, that the Agreement governed their retrenchment packages, that the privity objection was a red herring, and that severance was to be computed at 2.5 months per completed year for employees with less than 10 years' service. The Court accepted lengths of service from the Respondent's own Terminal Dues and Release letters and adopted the Claimants' unrebutted computations. Judgment was entered for the five Claimants for severance balances totalling approximately Kshs 3.7 million, with costs to the Claimants.

Key legal issues

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01

Whether the Claimants were transferred employees under the Agreement

Holding

All five Claimants received appointment letters after the 7 April 2006 commencement date and therefore qualified as transferred employees.

Reasoning

Section A.1 of the Concession Agreement defined transferred employees as KRC employees employed by the Concessionaire after the commencement date. The commencement date was fixed at 7 April 2006 when the Interface Agreement was signed, and this was undisputed. All appointment letters were issued on 25 October 2006, after that date, so all Claimants fell within the definition.

p. 2
02

Whether the Agreement governed the retrenchment package rather than the Employment Act

Holding

The Agreement applied to the Claimants' retrenchment package as transferred employees, and the Respondent's contrary contention contradicted section D.4.3(a).

Reasoning

Having found the Claimants were transferred employees, the Court held the Agreement applied to their retrenchment package. Section D.4.3(a) expressly stipulates retrenchment packages payable to transferred employees. The Court noted that in transfer of business cases, transferor and transferee ordinarily agree on employee liabilities, making the privity objection a red herring.

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03

How severance pay was to be computed

Holding

Severance pay was to be computed at the same rate as KRC employees retrenched at the commencement date: 1 month's pay per completed year for those with at least 10 years' service, and 2.5 months' pay per completed year for those with less than 10 years' service.

Reasoning

Under the Agreement, transferred employees were entitled to computation of severance pay at the same rate as KRC employees retrenched by 7 April 2006. The Claimants, having served less than 10 years each, were entitled to two and a half months' salary per completed year of service, contrary to the Respondent's computation of one month per year.

p. 2
04

Whether the Respondent could challenge the lengths of service

Holding

The Court accepted the lengths of service stated in the Respondent's own Terminal Dues and Release letters and rejected the Respondent's challenge.

Reasoning

The Claimants pointed to Terminal Dues and Release letters issued by the Respondent indicating length of service. The Court held it was an afterthought for the Respondent to depart from its own records. Further, the Respondent did not rebut the computations presented, so the Court adopted them and found the Claimants entitled to the underpayments as computed.

p. 3

Legal principles established

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  • Where a concession agreement expressly provides retrenchment packages for transferred employees, that provision governs their severance pay and objections of privity of contract are unavailing.
  • A party cannot depart from the length of service recorded in its own terminal dues and release documents.

Court orders

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  1. 1.Respondent to pay severance pay balances: Kshs 1,224,300 to James Okello Ouma; Kshs 387,567 to Yusuf Onyango Obonyo; Kshs 828,360 to David Harambe Otambo; Kshs 830,772 to Patrick Gekonge Maraburi; Kshs 464,634 to Romanus Ohanga
  2. 2.Claimants to have costs

Authorities

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Legislation

  • Employment Actnot specified
Jurisdiction invoked
Original employment cause under the Employment Act and the court's employment jurisdiction

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, "James Okello Ouma & 4 others v Rift Valley Railways (Kenya) Ltd [2018] KEELRC 1761 (KLR)", Case Analysis (2018). Cause No 1705 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1761/eng@2018-06-13

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