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ELRCDismissedCause No 6500 of 2020· [2021] KEELRC 370 (KLR)

Stephen Wanga Mugoni v Rama Homes Limited t/a Rama Group of Companies & another [2021] KEELRC 370 (KLR)

Employment and Labour Relations Court
4 November 2021
NMNzioki wa Makau
1,692 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 refused to remove a company from an employee's lawsuit because it had paid the employee's salary and terminal dues.

What this practically means

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Executive summary

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The 1st Respondent/Applicant filed a Chamber Summons dated 25th June 2021 seeking to strike itself out as a party to an employment claim by the Claimant against it and the 2nd Respondent, on the ground that the Claimant disclosed no reasonable cause of action against it: the contract of service dated 19th August 2019 was with the 2nd Respondent, which under Clause 3.i undertook to pay the Claimant's salary of Kshs. 200,000/-. It argued that employment claims lie only between employer and employee and relied on the control, integration, economic reality and mutuality-of-obligation tests from Christine Adot Lopeiyo. The Claimant opposed, averring that the two companies are sister companies sharing offices; that the 1st Respondent issued his induction letter, paid his salary by cheque and, upon termination, issued the acknowledgement of payment of dues dated 7th November 2020. He relied on sections 107 and 109 of the Evidence Act on burden of proof, on Patrick Mutua Mwanzia v Habo Group (company paying claimants and issuing termination letters was their employer), and on Symon Wairobi Gatuma as cited in Phillip Ateng Qguk (courts should look at the business, not legal, structure in enforcing employees' rights), plus the necessary-party principles in Kingori v Chege. The court held the 1st Respondent's admitted payments, including terminal dues, created a live thread with the Claimant such that the suit could not proceed against one respondent to the exclusion of the other; absent the 1st Respondent there would be a pyrrhic determination. The notice of motion was dismissed with costs to the Claimant on 4th November 2021.

Key legal issues

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01

Whether the 1st Respondent is a necessary party notwithstanding that the contract of service was with the 2nd Respondent

Holding

The application to strike out the 1st Respondent was dismissed because it made payments including terminal dues to the Claimant, creating a live thread and making it a necessary party

Reasoning

Although the written contract of service named the 2nd Respondent as employer, the Claimant's uncontroverted pleadings showed the 1st Respondent issued the induction letter, paid his salary by cheque and issued the acknowledgement of payment of terminal dues. The court held that without the 1st Respondent's presence, no effective decree could be passed and the determination would be pyrrhic.

02

Whether payment of salary by a related company makes it an employer

Holding

The court accepted that a company that pays an employee and issues termination/acknowledgement documents may be treated as an employer for purposes of joinder

Reasoning

Relying on the Claimant's authorities, the court accepted that courts should look at the business structure rather than the legal structure adopted by an enterprise in enforcing employees' rights, and that the company paying wages and terminal dues may be joined as employer. The applicant's contract-based arguments did not displace the pleaded admissions of payment.

p. 2

Legal principles established

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  • A necessary party is a person who ought to have been joined and in whose absence no effective decree could be passed; if a necessary party is not impleaded, the suit itself is incompetent
  • A party who makes payments to an employee, including terminal dues, has a live thread with the employee and cannot be struck out where the suit cannot be effectively adjudicated without it

Court orders

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  1. 1.The 1st Respondent's notice of motion (Chamber Summons dated 25th June 2021) seeking to strike out the 1st Respondent as a party to the suit is dismissed
  2. 2.Costs of the application to the Claimant

Authorities

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Legislation

  • Employment ActSection 2
  • Employment and Labour Relations Court ActSection 12(1)(a)
  • Evidence ActSection 107
  • Evidence ActSection 109

Cases cited (5)

  • Christine Adot Lopeiyo v Wycliffe Mwathi Pere
    [2013] eKLR
  • Patrick Mutua Mwanzia & 19 Others v Habo Group of Companies
    [2018] eKLR
  • Symon Wairobi Gatuma v East African Breweries Limited & 3 others
    Industrial Court at Nairobi, Cause No. 1011 of 2010
  • Phillip Ateng Qguk & 27 Others v Westmont Power [Kenya] Limited & Another
    [2015] eKLR
  • Kingori v Chege & 3 Others
    [2002] 2 KLR 243
Jurisdiction invoked
Section 12(1)(a) of the Employment and Labour Relations Court Act

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, "Stephen Wanga Mugoni v Rama Homes Limited t/a Rama Group of Companies & another [2021] KEELRC 370 (KLR)", Case Analysis (2021). Cause No 6500 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/370/eng@2021-11-04

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