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ELRCPartially AllowedCause No 1088 of 2011· [2019] KEELRC 2044 (KLR)

Daniel Githinji Waiganjo v Kenpipe Co-operative Savings and Credit Society Limited [2019] KEELRC 2044 (KLR)

Employment and Labour Relations Court of Kenya
8 March 2019
2,837 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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Kenya's Employment Court ruled Kenpipe Sacco's restructuring dismissal was an unlawful redundancy and ordered payment of about Kshs.1.48 million to the former employee.

What this practically means

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Executive summary

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The claimant was employed by the respondent on successive three-year fixed-term contracts from 10 March 1992, rising to Deputy Manager. On 4 April 2007 he was suspended over alleged irregular payments but was exonerated by a Disciplinary Committee and recalled. Instead of resuming work he was sent on leave and, by letter dated 17 September 2007, his services were terminated with effect from 18 September 2007 for failure to apply for any position following the respondent's restructuring. The claimant sued for a declaration of wrongful termination, notice pay, unpaid emoluments, accrued leave, gratuity, severance pay, Sacco shares and general, punitive, exemplary and aggravated damages; the respondent filed a defence and counterclaim for outstanding Sacco loans. The matter had earlier been heard by Onyango J, but that judgment was set aside on appeal and a fresh trial ordered. The court adopted the evidence and submissions from the first trial by consent. Holding that the real reason for termination was redundancy, the court found non-compliance with the mandatory procedure under section 16A of the repealed Employment Act and section 4(5) of the Trade Disputes Act: no prior notice, no notification of the labour officer and no Ministerial approval. The termination was declared premature and irregular. The claimant was awarded Kshs.1,478,296.25 comprising three months' salary in lieu of notice, salary arrears, 206 accrued leave days and gratuity for six months, with costs and interest from filing, less statutory deductions. Severance pay, general damages and punitive/exemplary/aggravated damages were refused. The Sacco shares claim and the loan counterclaim were remitted to the Cooperative Tribunal.

Key legal issues

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01

Whether the termination was wrongful termination by redundancy

Holding

The termination was premature and irregular as the mandatory redundancy procedure in section 16A of the repealed Employment Act and section 4(5) of the Trade Disputes Act was not followed

Reasoning

The court found the real reason for termination was redundancy following restructuring. Under section 16A(1) the employer must notify the union and labour officer, pay leave in cash, give one month's notice and severance pay at 15 days per completed year. Section 4(5) of the Trade Disputes Act required reporting to the Minister. None of these steps was taken; the claimant got no prior notice and the labour officer was not informed.

p. 3
02

Notice period applicable on termination

Holding

Claimant entitled to 3 months' salary in lieu of notice per the express contract terms; the Employee Handbook was not part of the contract

Reasoning

No proof was given of when the June 2007 Employee Handbook came into force or that the claimant was notified of it before termination. Even if published, a handbook of general HR guidelines cannot override express contract terms. The contract stipulated 3 months' notice or salary in lieu, yielding Kshs.454,875.45.

p. 3
03

Unpaid emoluments and accrued leave days

Holding

Unpaid emoluments awarded at Kshs.275,913.53 as admitted by the respondent's witness; 206 leave days awarded at basic salary, Kshs.624,458.50

Reasoning

No particulars were pleaded for the Kshs.736,925 claimed, so only the assessed sum admitted by Rw1 was awarded. The employer failed to produce leave registers to disprove the claimant's 206 days; the leave application form of 6.8.2007 showing 285 accrued days was sufficient evidence, corroborated by Rw2's cross-examination.

p. 3
04

Gratuity and severance pay for prior contract cycles

Holding

Gratuity for the 6 months of the last contract awarded at the respondent's assessed Kshs.123,048.75; severance pay for the earlier 3-year contracts refused as unjust enrichment

Reasoning

Gratuity for each completed contract 1992 to March 2007 had been paid; the respondent undertook to pay gratuity for the final 6 months and assessed it at Kshs.123,048.75, which the court adopted. The earlier fixed-term contracts were distinct and concluded; awarding severance for them would unjustly enrich the claimant, and the redundancy occurred before one year of the last contract was completed.

p. 4
05

Sacco shares and the loan counterclaim

Holding

Both remitted to the Cooperative Tribunal

Reasoning

The claim for personal savings/shares and the respondent's counterclaim for outstanding Sacco loans are disputes between a Sacco and its member, over which the Cooperative Tribunal has original jurisdiction. The court noted the respondent's Reply admitted the loan had been repaid by guarantors.

p. 4

Legal principles established

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  • Termination on account of redundancy requires strict compliance with the mandatory procedure in section 16A(1) of the (repealed) Employment Act, including notice to the union and labour officer and severance pay for each completed year of service
  • An employer's handbook/policy guidelines cannot replace or undo the express terms of an individual employee's contract of service
  • The burden of keeping and producing employment records, including leave records, lies on the employer
  • Damages for breach of an employment contract are limited to the earnings during the notice period
  • Disputes between cooperative societies/Saccos and their members fall within the original jurisdiction of the Cooperative Tribunal

Court orders

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  1. 1.Judgment entered for the claimant against the respondent as follows: Notice Kshs.454,875.45; Salary arrears Kshs.275,913.53; Accrued leave Kshs.624,458.50; Gratuity Kshs.123,048.75; Total Kshs.1,478,296.25
  2. 2.Claimant awarded costs of the suit
  3. 3.Interest on the award at court rate from the date of filing the suit
  4. 4.Award to be paid less statutory deductions
  5. 5.Claims for severance pay, general damages and punitive/exemplary/aggravated damages dismissed
  6. 6.Claim for Sacco shares/personal savings and the loan aspect of the counterclaim remitted to the Cooperative Tribunal

Authorities

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Legislation

  • Constitution of KenyaArticle 162(2)(a)
  • Employment Act (repealed)section 16A(1), section 16A(2)
  • Trade Disputes Act (repealed)section 2, section 4(5)

Cases cited (1)

  • Kenya Revenue Authority vs Menginya Salim Murgani
    [2010] eKLR
Jurisdiction invoked
Article 162(2)(a) of the Constitution (establishment of the Employment and Labour Relations Court); suit transferred from the High Court via the defunct Industrial Court

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, "Daniel Githinji Waiganjo v Kenpipe Co-operative Savings and Credit Society Limited [2019] KEELRC 2044 (KLR)", Case Analysis (2019). Cause No 1088 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/2044/eng@2019-03-08

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