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ELRCPartially AllowedNot stated in judgment· [2019] KEELRC 1373 (KLR)

Miriam Nkatha Riungu v Rennaissance Capital (Kenya) Ltd [2019] KEELRC 1373 (KLR)

Employment and Labour Relations Court
14 June 2019
3,595 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~14 min to read original · ~4 min brief

The bottom line

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A Kenyan court awarded an employee millions after her employer botched redundancy procedure by skipping the mandatory one-month notice, despite the redundancy itself being genuine.

What this practically means

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Executive summary

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The claimant, employed by the respondent from 15.10.2007 as Office Administrator and last serving as Office Manager – Associate, was terminated on account of redundancy by letter dated 04.02.2014 signed by Kirsty Ross, Head of HR Africa, with termination effective 04.03.2014. She claimed the 2013 bonus, notice pay, service pay, 12 months' compensation and leave allowance. The court framed three issues: whether the redundancy was unfair, entitlement to maximum statutory compensation, and entitlement to other remedies. On the first issue, the court found the reason for redundancy genuine and valid - office space and staff had reduced and the claimant's roles were subsumed into the joined roles of Chief Administration Officer and Head of Legal and Compliance. However, the procedure was unfair: the mandatory one month's notice under section 40(1)(a) of the Employment Act to the employee and the area labour officer was not effectively served, could not be replaced by pay in lieu, and the claimant exited on the day she received the purported notice without consultations, consideration of alternatives, or the labour officer's advisory input. The court declined to follow Phyllis Njeri Kamau and followed Fredrick Mulwa Mutiso, Bernard Misawo Obora, Kenya Airways and Charles Nyangi Nyamohanga. On the second issue, awarding 9 months' gross pay (Kshs.3,045,492.00) under section 49, the court treated the genuine reason as mitigating and the respondent's unexplained failure to decide the due 2013 bonus as aggravating. On the third issue, the bonus claim, prorate service pay, 12 months' compensation based on company practice, and six years' leave allowance all failed for lack of contractual or statutory basis or proof. Notice pay of Kshs.169,194.00 was awarded, admitted by the respondent. Judgment was entered for the claimant for a total of Kshs.3,214,686.00 payable by 01.08.2019 failing interest at court rates, plus costs of the suit. The judgment was delivered at Nairobi on 14th June 2019 by Byram Ongaya, Judge.

Key legal issues

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01

Whether the redundancy was substantively fair

Holding

The reason for redundancy was genuine and valid - office space and staff had reduced and the claimant's roles were subsumed in a joined Chief Administration Officer and Head of Legal and Compliance position

Reasoning

The court found undisputed evidence that office space reduced from 8,000 to 2,500 square feet and staff reduced by half, and that the claimant's roles were subsumed into the joined roles of Chief Administration Officer and Head of Legal and Compliance held by a qualified advocate. Although the claimant may have been due promotion, the respondent was entitled to make reorganisational arrangements, and the reason for redundancy was genuine and valid under section 43 of the Employment Act.

p. 3
02

Whether the redundancy procedure was fair

Holding

The termination was procedurally unfair because the mandatory one month's notice under section 40(1)(a) was not effectively given and the claimant exited on the same day she received the purported notice

Reasoning

The claimant received the redundancy letter on the very day of termination, her access cards were withdrawn, and there were no consultations, no opportunity for the labour officer's advisory role, and no consideration of alternatives. The court held the one month's notice under section 40(1)(a) mandatory and not satisfiable by pay in lieu, declined to follow Phyllis Njeri Kamau, and followed Fredrick Mulwa Mutiso and Kenya Airways on the purpose of the notice. The termination thus contravened sections 41(1)(a) and 45(2)(c).

p. 3
03

Entitlement to compensation under section 49

Holding

Nine months' gross pay awarded as compensation, the genuine reason for termination being mitigating, and the failure to decide the due 2013 bonus being an aggravating factor

Reasoning

Weighing the section 49 factors, the court found mitigation in the genuine reason for termination, and aggravation in the claimant's clean record, long service, desire to continue in employment, abrupt unprepared termination, and the respondent's unexplained failure to exercise its discretion on the 2013 bonus which had been awarded in previous years (USD 10,000 for 2012). Compensation of 9 months at Kshs.338,388 per month, totalling Kshs.3,045,492.00, was awarded.

p. 4
04

Whether the 2013 bonus of USD 20,000 was payable

Holding

The claim for the bonus failed; the bonus was discretionary and the claimant failed to establish the quantum claimed

Reasoning

Although the bonus decision had fallen due and the respondent's failure to exercise its discretion was an aggravating factor under section 49, the contract made bonus payment subject to the board's sole and absolute discretion. The court found no basis to substitute its own discretion for the respondent's, and the claimant failed to establish the basis for the quantum of bonus for 2013 as claimed, so the prayer failed.

Legal principles established

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  • The one month's notice to the employee and the area labour officer prior to termination on account of redundancy under section 40(1)(a) of the Employment Act is a mandatory requirement that cannot be satisfied by payment in lieu
  • The notice to the labour officer in redundancy serves a dual purpose: to elicit advice to the employer on modalities and to act as a control measure against unlawful terminations clothed in redundancy language
  • The reason for redundancy is judged subjectively: so long as the employer acted in good faith on genuine circumstances making redundancy necessary, the reason is valid under section 43
  • There are two kinds of notices in a redundancy under section 40 of the Employment Act which cannot be issued simultaneously
  • Failure by an employer to exercise a discretion to award or deny a due bonus may be treated as an aggravating factor when awarding compensation for unfair termination

Court orders

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  1. 1.The respondent to pay the claimant a sum of Kshs.3,214,686.00 by 01.08.2019 failing interest at Court rates to be payable thereon from the date of judgment till full payment
  2. 2.The respondent to pay the claimant's costs of the suit
Jurisdiction invoked
Employment Act, 2007 (sections 40, 41, 43, 45, 49)

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, "Miriam Nkatha Riungu v Rennaissance Capital (Kenya) Ltd [2019] KEELRC 1373 (KLR)", Case Analysis (2019). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1373/eng@2019-06-14

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