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ELRCPartially AllowedStatement of Claim dated 18th July 2017, filed 19th July 2017 (number not stated in judgment)· [2019] KEELRC 1408 (KLR)
Peter Munyiri Maina v Family Bank Limited [2019] KEELRC 1408 (KLR)
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#What this practically means
#Executive summary
#The Claimant, employed by the Respondent Bank on 15th July 2011 as Managing Director and Chief Executive Officer under a five-year fixed term contract that lapsed on 14th July 2016, sued for gratuity of Kshs.57,057,300/-, asserting an entitlement to 31% of gross salary for each year, being the rate he said prevailed in tier two banks. He relied on PWC surveys relating to National Bank of Kenya and Housing Finance Company of Kenya Limited, and on the Franklin Njeru authority that terminal benefits follow the terms of the contract. The Respondent acknowledged that gratuity was the only unpaid due, but contended that the correct rate was 18% of gross basic salary per the PWC report, offering Kshs.30,655,800/-, and urged that each party bear its own costs citing Cecilia Karuru Ngayu. The court identified the sole issue as the applicable gratuity rate. It held that the two benchmark banks are government owned with gratuity rates coinciding with parastatal rates of 31%, and therefore do not reflect banking industry rates for private tier two banks. The court applied the PWC average of 18% for tier two banks for years two to five, holding that the Claimant bore the burden of proving the 31% industry rate using comparable private banks and failed to discharge it. The first year remained at the contractual 10%. The court awarded a total of Kshs.30,655,800/- and ordered each party to bear its own costs. Judgment delivered at Nairobi on 14th June 2019 by Maureen Onyango, Judge.
Key legal issues
#01
Whether the gratuity rate for years 2 to 5 of the fixed term contract is 31% (as claimed) or 18% (as contended by the Respondent)
Holding
The applicable rate is 18% of Gross Basic Salary per the PWC report on tier two banks; 10% applies for the first year as expressly provided in the appointment letter
Reasoning
The appointment letter fixed 10% for year one and pegged subsequent years to banking industry rates. The Claimant relied on two government-owned banks (National Bank of Kenya and Housing Finance Company of Kenya Limited) whose 31% rate coincides with parastatal rates and does not reflect the private banking industry. The PWC report put the average tier two bank gratuity rate at 18%, and the burden was on the Claimant to prove the higher rate using comparable private banks, which he failed to do.
p. 2
Legal principles established
#- Terminal benefits are to be calculated based on the terms of the actual contract; where a contract pegs subsequent gratuity rates to industry rates, the party alleging a particular industry rate bears the burden of demonstrating it using comparable institutions
- Government-owned banks' gratuity rates, being aligned to parastatal/public sector rates, are not a true reflection of the banking industry rates for private tier two banks
Court orders
#- 1.Gratuity awarded at 10% of Gross Basic Salary for the 1st year of employment (Kshs.2,700,000.00)
- 2.Gratuity awarded at 18% of Gross Basic Salary for the 2nd to 5th years of employment (Kshs.6,696,000.00 each)
- 3.Total award of Kshs.30,655,800.00
- 4.Each party shall bear its own costs
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction over the employee-employer relationship (disputed gratuity under a fixed term contract)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Peter Munyiri Maina v Family Bank Limited [2019] KEELRC 1408 (KLR)", Case Analysis (2019). Statement of Claim dated 18th July 2017, filed 19th July 2017 (number not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1408/eng@2019-06-14
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.