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ELRCPartially AllowedNot stated in the judgment (ELRC Appeal at Mombasa; judgment dated 17th December 2020)· [2021] KEELRC 253 (KLR)

Ali Isa Omar v Car & General (Trading) Limited [2021] KEELRC 253 (KLR)

Employment and Labour Relations Court
2 December 2021
ANAgnes Kitiku Nzei
1,211 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~5 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court confirmed that employment award payments are subject to statutory deductions, and cancelled warrants issued for the full undiscounted amount.

What this practically means

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Executive summary

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This ruling by the Employment and Labour Relations Court at Mombasa (Agnes Kitiku Nzei, J) determines an amended Notice of Motion dated 15th July 2021 filed by the Respondent in an appeal whose judgment dated 17th December 2020 partly allowed the Appellant's claim and awarded Ksh.325,333 plus costs. After the party and party bill of costs was taxed at Ksh.218,385, the Appellant obtained warrants of attachment and sale for a total of Ksh.545,718. The Respondent sought to restrain the auctioneers, to nullify and recall the warrants, and to have the judgment declared fully settled upon payment of the decretal sum less statutory deductions, alleging it had deducted Ksh.97,600 for remittance to the Kenya Revenue Authority. The Appellant opposed, contending the deductions were unexplained and the cheques were returned on that account. The court held that the entire award is subject to statutory deductions under Section 49(2) of the Employment Act, applying Court of Appeal authority. Because the parties disputed the extent and formula of the deductions, the court directed that the amount be ascertained by the Kenya Revenue Authority if the parties cannot agree. The warrants of attachment and sale dated 22nd June 2021 were recalled and cancelled, with liberty to the Appellant to file a fresh execution application excluding the disputed deductions. The application partly succeeded, with each party bearing its own costs.

Key legal issues

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01

Whether the entire judgment award is subject to statutory deductions

Holding

Yes; the award of Ksh.325,333 is subject to statutory deductions as required by Section 49(2) of the Employment Act and as pointed out by the Court (Ndolo, J) in the judgment of 17th December 2020

Reasoning

Section 49(2) of the Employment Act provides that payments made under that section are subject to statutory deductions. The Court of Appeal in Kioko Joseph and Directline Assurance confirmed that lumpsum/terminal dues awards are subject to statutory deductions including income tax under Section 37(1) of the Income Tax Act. The court adopted that position and held the award deductible accordingly.

p. 2
02

Whether the warrants of attachment and sale should stand

Holding

The warrants dated 22nd June 2021 were recalled and cancelled because the disputed statutory deductions had not been ascertained; a fresh execution application excluding the disputed amount may be filed

Reasoning

Execution had commenced, but the parties disputed the extent and formula of statutory deductions. Since only the undisputed balance plus taxed party-and-party costs are executable, the warrants could not stand and had to be recalled and cancelled, with liberty to execute afresh for the balance.

p. 2

Legal principles established

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  • An award under Section 49 of the Employment Act is subject to statutory deductions
  • Where parties cannot agree on the extent or formula of statutory deductions, guidance may be sought from the Kenya Revenue Authority
  • Execution may only issue in respect of the undisputed balance of the decree

Court orders

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  1. 1.The warrants of attachment and sale dated 22nd June 2021 are recalled and cancelled
  2. 2.The Appellant may file a fresh application for execution of decree, excluding the disputed amount of statutory deductions
  3. 3.Each party to bear its own costs of the application

Authorities

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Legislation

  • Employment ActSection 49(2); Section 19(1); Section 37(1) referenced within quoted authorities
  • Income Tax ActSection 37(1)
  • Employment and Labour Relations Court (Procedure) Rules 2016Rule 32
  • Civil Procedure RulesRules on execution of an order or decree

Cases cited (2)

  • Kioko Joseph (suing as the legal representative of the Estate of Joseph Kilinda) –vs- Bamburi Cement Ltd
    [2017] eKLR
  • Directline Assurance Co. Ltd –vs- Jeremiah Wachira Ichura
    [2016] eKLR
Jurisdiction invoked
Employment and Labour Relations Court (Procedure) Rules 2016, Rule 32; Employment Act 2007, Section 49(2)

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, "Ali Isa Omar v Car & General (Trading) Limited [2021] KEELRC 253 (KLR)", Case Analysis (2021). Not stated in the judgment (ELRC Appeal at Mombasa; judgment dated 17th December 2020). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/253/eng@2021-12-02

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