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ELRCPartially AllowedCause No. 314 of 2014

James Oyoya Omusotsi v Meas Agricultural Centre Limited [2020] KEELRC 1107 (KLR)

Employment and Labour Relations Court of Kenya
11 May 2020
1,701 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled that an employer claiming redundancy must prove why it selected a particular employee, and must pay statutory minimums including house allowance.

What this practically means

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Executive summary

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The claimant was employed by the respondent as a storekeeper by letter dated 1st September, 2005 at a monthly wage of Ksh.7,000 with 21 annual leave days, confirmed on 15th December, 2006. By notice dated 16th March, 2012 his employment was terminated on grounds of downsizing due to difficult economic times, and he was paid three months' notice pay of Ksh.21,000 and 15 days' service pay of Ksh.22,750, less statutory deductions, totalling Ksh.42,670. He sued for underpayments for six years, house allowance, severance pay and leave allowance, alleging he was the only employee targeted and discriminated against. The respondent denied underpayment and contended terminal dues were paid in full; it called no witness. The court held that under sections 40, 43(2) and 45(2) of the Employment Act the employer bears the duty to demonstrate operational requirements and the rationale for selecting affected employees, and that a redundancy must not target an individual employee. In the absence of evidence of the extent of the downsizing, the termination lacked procedural fairness and was declared unfair, attracting one month's compensation of Ksh.10,682. Following the applicable Wage Orders, the court found no underpayment at appointment but assessed underpayments at Ksh.50,102, and held house allowance of Ksh.153,187 due since the appointment letter could not legally consolidate wages in an underpayment. Severance pay and leave allowance were refused: service pay had already been generously paid, and granted leave and off days defeated a further leave claim. Judgment was entered for the claimant with costs, and a 30-day stay of execution was granted.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the termination of the claimant's employment on grounds of redundancy/downsizing was procedurally fair under sections 40 and 45 of the Employment Act
  2. 2.Whether the claimant was discriminated against as the only employee targeted in the downsizing
  3. 3.Whether the claimant was underpaid relative to the applicable Wage Orders and whether house allowance was due
  4. 4.Whether severance pay was due over and above the service pay already made
  5. 5.Whether leave pay was due

Key legal issues

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01

Procedural fairness of redundancy termination

Holding

The termination was procedurally unfair because the respondent did not adduce evidence of the extent of the downsizing or the rationale for targeting the claimant, contrary to sections 40 and 45 of the Employment Act.

Reasoning

Section 40(1)(a) requires notice of the reasons for and extent of an intended redundancy. Section 43(2) read with section 45(2) obliges the employer to prove a valid and fair reason based on operational requirements. The respondent made only general denials and did not address the targeting/discrimination claim in evidence or submissions. Absent material evidence of the extent of the downsizing, the termination lacked procedural fairness and compensation is due.

p. 2
02

Underpayment of wages

Holding

There was no underpayment at appointment in 2005, but underpayments accrued from May 2006 to April 2012, assessed at Ksh.50,102.

Reasoning

Under the Regulation of Wages (General)(Amendments) Orders, 2005 the minimum wage for a storekeeper was Ksh.6,531, below which the claimant was not paid. As wages were graduated, the claimant continued to receive Ksh.7,000 while minimum wages rose to Ksh.7,135, Ksh.9,495 and finally Ksh.10,682. The court computed the shortfalls period by period, totalling Ksh.50,102, and used Ksh.10,682 as the last due wage for computation of dues.

p. 2
03

House allowance

Holding

House allowance of Ksh.153,187 was due because the Wage Orders provide for a basic wage inclusive of house allowance and the appointment letter could not legally provide for a consolidated wage in an underpayment.

Reasoning

The applicable Wage Orders make provision for a basic wage inclusive of a house allowance. A private appointment letter cannot contract out of the statutory wage structure by treating the wage as consolidated where it is below the minimum. The claim for Ksh.153,187 was found reasonable and justified and was awarded in full.

p. 3

Legal principles established

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  • A redundancy must not be applied to target an individual employee; the employer must give the rationale for the affected employees and prove valid and fair operational requirements, failing which the termination is unfair.

Court orders

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  1. 1.Declaration that employment terminated unfairly
  2. 2.Compensation awarded at one month's pay of Ksh.10,682
  3. 3.Underpayments of Ksh.50,102
  4. 4.House allowance of Ksh.153,187
  5. 5.Costs to the claimant
  6. 6.Stay of execution for 30 days, with further time to be sought by formal application addressed on the merits

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (employment and severance/underpayment claims)

Relief refused

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Severance pay of Ksh.21,552

The claimant had already been paid service pay for 6.5 years instead of 6 full years, which was generous; a second similar payment would be unjust.

p. 3

Leave allowance of Ksh.85,104

The termination letter allowed the claimant 3 months leave and 42 off days with a 3 months' notice; claiming annual leave in this context would be unjust enrichment.

p. 3

Underpayments as claimed at Ksh.349,248

Assessed at Ksh.50,102 based on applicable Wage Orders, and there was no underpayment at appointment in 2005.

p. 3

Costs

Costs awarded to the claimant (item (e) of the final orders: 'Costs')

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Accordingly, judgement is hereby entered for the claimant against the respondent in the following terms; a) Declaration that employment terminated unfairly; b) Compensation awarded at one month pay ksh.10,682; c) Underpayments ksh.50,102; d) House allowance Ksh.153,187; and e) Costs.
p. 3Final orders/disposition
A redundancy therefore affecting employment should not be applied to target an individual employee.
p. 2Redundancy and targeting of individual employees
It is the duty of the employer to demonstrate that there is an operational requirement leading to termination of employment on account of redundancy as otherwise, the termination of employment is unfair.
p. 2Employer's burden of proof in redundancy
Without any material evidence as to the extent of the downsizing of employees and which required the termination of the claimant’s employment vide notice issued to him and dated 16 th March, 2012 action taken by the respondent to terminate employment even where there may have been an underlying reason of redundancy lacked procedural fairness.
p. 2Procedural fairness in redundancy
Upon request by the firm of Ikua & Co. Advocates for 45 days stay of execution, the court hereby allows for stay of execution for 30 days and where more time is required, a formal application shall be filed and addressed on the merits.
p. 3Stay of execution
Discrimination against any employee is a matter outlawed under the provisions of Article 27 of the Constitution and section 5 of the Employment Act, 2007 (the Act).
p. 2Prohibition of discrimination in employment

Issues in the judgment

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minor

Internal inconsistency in the notice computation: the letter of termination is dated 16th March, 2012 but the judgment records leave expiring '7th march, 2016', an apparent typographical error for 2012.

material

Arithmetic inconsistency in the underpayment computation: the judgment states an underpayment of Ksh.3,682 for 10 months 'by ksh.13,682 which is due' while the total underpayment is assessed at Ksh.50,102; the figures do not reconcile on the face of the judgment.

minor

Unclear computation for the period May 2006 to April 2010: the judgment refers to 'May, 2009 to 2006' and a total underpayment of Ksh.6,480 over four years, which does not match the stated Ksh.135 monthly shortfall.

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 Oyoya Omusotsi v Meas Agricultural Centre Limited [2020] KEELRC 1107 (KLR)", Case Analysis (2020). Cause No. 314 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2020/1107/eng@2020-05-11

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