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ELRCPartially AllowedCause No 2350 of 2016· [2021] KEELRC 124 (KLR)

Eric Mwidako Mugatsia v Dhanush Infotech Limited [2021] KEELRC 124 (KLR)

Employment and Labour Relations Court of Kenya
17 December 2021
3,790 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 ordered an employer to pay over Kshs 2.7 million after an unfair, improperly documented redundancy and withheld salary.

What this practically means

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Executive summary

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The claimant, employed by the respondent from 23rd June 2014 at a gross salary of Kshs 314,300, sued alleging underpayment, unlawful redundancy, unilateral variation of his contract from permanent and pensionable terms to a one-year fixed term contract, and exposure to harassment by Gabonese authorities due to the respondent's failure to secure a proper work permit. The claim was undefended; the respondent neither entered appearance nor filed a response, and the matter proceeded to formal proof hearing on 7th October 2021, with the claimant testifying and calling one witness. The court framed three issues: unfair labour practices, lawfulness of the termination, and entitlement to reliefs. It found the contract variation was not unilateral since the offer letter referenced prior discussions and the salary was reviewed upwards, but held that withholding the claimant's salary without justifiable cause constituted an unfair labour practice under Article 41(1) of the Constitution. The termination, occasioned by loss of a client contract, was characterised as redundancy. The court found no evidence of compliance with the section 40(1) Employment Act preconditions - notice to the labour officer, selection criteria, severance pay or leave compensation - and applied Hesbon Ngaruiya Waigi vs Equatorial Commercial Bank Limited to hold the redundancy unfair and unprocedural. The court awarded compensatory damages of four months' salary, unpaid June 2016 salary, severance pay, salary underpayment of Kshs 392,163, accrued leave, half the unutilized Gabon rent and Kshs 200,000 for household goods, totalling Kshs 2,790,163, with interest and costs to the claimant. House allowance and notice pay were declined.

Key legal issues

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01

Whether the unilateral alteration of employment terms amounted to an unfair labour practice

Holding

The court found the contract amendment was not unilateral and not entirely to the claimant's detriment, since the offer letter referenced prior discussions and salary was reviewed upwards

Reasoning

The court held unfair labour practices are circumstantial, determined by the specific acts of violation alleged. On the contract variation, the offer letter dated 10th August 2015 referred to previous discussions, and the second contract reviewed the salary upwards in net terms, so the variation could not be deemed detrimental or unilateral.

p. 2
02

Whether withholding salary constituted an unfair labour practice

Holding

Yes - withholding salary without justifiable cause constituted an unfair labour practice, exposing the claimant to financial hardship

Reasoning

Section 17(1) of the Employment Act obliges an employer to pay the entire amount of wages earned. Email evidence showed the respondent gave no plausible reason for withholding the salary, kept apologising and promised remittance, which amounted to an unfair labour practice under Article 41(1).

p. 2
03

Whether the termination by redundancy was lawful and procedural

Holding

No - the redundancy was unfair and unprocedural as there was no evidence of notice to the labour officer, selection criteria, severance pay or leave compensation, and the operational-reason ground was unproved

Reasoning

The termination fell within the definition of redundancy in section 2 of the Employment Act. Section 40(1) sets out mandatory preconditions including notice to the labour officer, selection criteria, leave pay-off, one month's notice and severance pay. None was evidenced. The reason (loss of a client contract) fell under section 43(2)(c)(ii) operational requirements and was unproved as the respondent did not participate.

p. 3

Legal principles established

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  • Withholding an employee's salary without justifiable cause constitutes an unfair labour practice under Article 41(1) of the Constitution
  • An employer must strictly comply with the preconditions in section 40(1) of the Employment Act before declaring an employee redundant; non-compliance renders the termination unfair and unprocedural

Court orders

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  1. 1.Judgment entered for the claimant against the respondent totalling Kshs 2,790,163.00, comprising compensatory damages equivalent to 4 months' gross salary (3,000 USD at Kshs 112.70), unpaid salary for June 2016 (1,500 USD), severance pay for 10 months (1,250 USD), salary underpayment of Kshs 392,163.00, accrued leave days (17.5 days) of 1,750 USD at Kshs 112.70 (Kshs 197,225.00), reimbursement of rent expense (3,500 USD at the prevailing 2016 exchange rate, Kshs 355,250.00) and reimbursement of purchase of household goods (Kshs 200,000.00)
  2. 2.Interest on the award at court rates from the date of judgment until payment in full
  3. 3.Respondent to bear the costs of the suit

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 41(1)
  • Constitution of Kenya, 2010Article 159(2)(d)
  • Constitution of Kenya, 2010Article 48
  • Employment ActSection 2 (definition of redundancy)
  • Employment ActSection 17(1)
  • Employment ActSection 28(1)(a)
  • Employment ActSection 40(1)
  • Employment ActSection 43(2)(c)(ii)
  • Employment ActSection 45(2)
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B

Cases cited (4)

  • Aviation & Allied Workers Union vs Kenya Airways Limited and 3 others
    (2012) eKLR
  • Ibrahim Kamasi Amoni vs Kenital Solar Limited
    (2018) eKLR
  • Mary Nyawira Karimi vs Pure Circle (K) Limited
    (2018) eKLR
  • Hesbon Ngaruiya Waigi vs Equatorial Commercial Bank Limited
    (2013) eKLR
Jurisdiction invoked
Article 162(2) of the Constitution establishing the Employment and Labour Relations Court (jurisdiction invoked by filing of a memorandum of claim under the Employment Act; judgment cites Article 41(1) on fair labour practices)

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, "Eric Mwidako Mugatsia v Dhanush Infotech Limited [2021] KEELRC 124 (KLR)", Case Analysis (2021). Cause No 2350 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/124/eng@2021-12-17

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