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ELRCPartially AllowedCause No. 1066 of 2018· [2021] KEELRC 2241 (KLR)

Phylis Wangari Nganga v Intra Africa Assurance Company Limited [2021] KEELRC 2241 (KLR)

Employment and Labour Relations Court
29 January 2021
MOMaureen Onyango
5,069 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 ruled that calling a forced exit 'termination' while paying severance doesn't hide a botched redundancy, awarding the employee 8 months' salary.

What this practically means

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Executive summary

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The claimant, employed by the respondent from 2nd January 2005 as an Office Assistant/Secretary in Eldoret on a monthly salary of Kshs.42,252, had her employment terminated by letter dated 1st March 2018 citing loss of confidence, with one month's salary in lieu of notice and half a month's basic pay per year of service paid. When a demand letter followed, the respondent's advocates replied that the termination on 28th February 2018 was on grounds of redundancy following a change in the company's operational model. The court identified three issues: whether the separation was termination or redundancy; whether it was valid and lawful; and entitlement to reliefs. It found the respondent's two positions contradictory, and that payment of severance pay showed the intention was redundancy, effected without complying with the mandatory Section 40 procedure. On validity, the court held that termination on loss of confidence required proof of valid reasons under Section 43 and fair procedure under Section 41 of the Employment Act; no hearing was accorded, and the performance appraisals showed good performance. The termination was unfair and unlawful both procedurally and substantively. On reliefs, the court found that notice pay, leave days and severance pay had already been paid in the final dues of Kshs.174,524, and dismissed those claims, noting the claimant did not prove she protested the reduction of leave days and scrapping of leave allowance. Applying Section 49(4), the court awarded 8 months' salary as compensation, Kshs.338,016, ordered a certificate of service under Section 51, and awarded the claimant costs with interest at court rates from the date of judgment until payment in full. The judgment was delivered virtually under the COVID-19 practice directions.

Key legal issues

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01

Whether the separation was termination for misconduct or redundancy

Holding

The respondent's own documents were contradictory, but payment of severance pay showed the intention was redundancy, which did not follow the statutory procedure under Section 40

Reasoning

The termination letter cited loss of confidence while the advocates' letter cited redundancy following an operational change. The final dues included severance pay computed at half a month's basic pay per year of service, consistent only with redundancy. The respondent thus characterized an unlawful redundancy as a termination without complying with Section 40 of the Employment Act.

p. 7
02

Whether the termination was valid and lawful

Holding

The termination was unfair and unlawful both procedurally and substantively; no hearing was given and performance appraisals showed good performance

Reasoning

Termination on loss of confidence amounts to misconduct requiring valid reasons under Section 43 and fair procedure under Section 41. The respondent furnished no evidence of compliance with Section 41 or its internal disciplinary process. The appraisals showed good performance, and if performance was in issue the claimant should have been alerted and given opportunity to improve before termination.

p. 7
03

Entitlement to reliefs

Holding

Compensation of 8 months' salary awarded under Section 49; claims for items already paid in the final dues dismissed

Reasoning

Since no employment contract was produced, the Employment Act provisions apply. The notice, leave days and severance pay had been paid. Compensation was assessed under Section 49(4) considering the circumstances of termination, 13 years of service and good work ethic reflected in the appraisals, yielding 8 months' gross salary.

p. 9

Legal principles established

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  • Valid termination on grounds of misconduct requires both substantive justification under Section 43 and fair procedure under Section 41 of the Employment Act
  • Where an employer pays severance pay, the intention was to declare the employee redundant and the statutory procedure under Section 40 must be complied with
  • Where no written contract of employment is produced, the court falls back on the provisions of the Employment Act

Court orders

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  1. 1.Claimant awarded 8 months' salary as compensation for unfair termination in the sum of Kshs.338,016.00 under Section 49 of the Employment Act
  2. 2.Claims for salary in lieu of notice, leave allowance, leave days accrued and severance pay dismissed as already paid
  3. 3.Claimant to be issued with a certificate of service under Section 51 of the Employment Act
  4. 4.Claimant awarded costs of the suit
  5. 5.Interest to accrue at court rates from date of judgment till payment in full

Authorities

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Legislation

  • Employment ActSection 40(1)
  • Employment ActSection 40(a)
  • Employment ActSection 40(b)
  • Employment ActSection 41
  • Employment ActSection 43
  • Employment ActSection 45
  • Employment ActSection 49
  • Employment ActSection 49(4)
  • Employment ActSection 51
  • Employment ActSection 10(7)
  • Employment ActSection 74
  • Employment ActSections 7, 8, 10, 11
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure ActSection 1B
  • Civil Procedure RulesOrder 21 Rule 1

Cases cited (17)

  • Joseph Ouko Lwambe v Royal Garment Industries EPZ Limited
    (2018) eKLR
  • Walter Ogal Anuro v Teachers Service Commission
    (2013) eKLR
  • David Njoroge Muiru v Elsa Limited
    (2014) eKLR
  • Godfrey Andabwa Ashiono v Coconut (K) Limited
    (2019) eKLR
  • Paul Ngeno v Pyrethrum Board of Kenya Limited
    (2013) eKLR
  • Angela Shiukuru Ilondanga v Airtel Networks Kenya Limited
    (2018) eKLR
  • Thomas De La Rue (K) Ltd v David Opondo Omutelema
    (2013) eKLR
  • Mary Nyawira Karimi v Pure Circle (K) Limited
    (2018) eKLR
  • Judith Atieno Owuor v Sameer Agriculture and Livestock Limited
    (2020) eKLR
  • Republic v Institute of Certified Public Secretaries of Kenya ex parte Mundia Njeru Geteria
    (2010) eKLR
  • Simon Karuga Waweru v Twiga Stationers Limited
    (2019) eKLR
  • Kenyatta University & Another v Fred Obare
    (2017) eKLR
  • Banking Insurance and Finance Union v National Bank of Kenya Limited
    (2020) eKLR
  • Jane Samba Mukala v Ol Tukai Lodge Limited
    Industrial Cause Number 823 of 2010; (2010) LLR 255 (ICK) (September, 2013)
  • Kenya Science Research International Technical and Allied Workers Union (KSRITAWU) v Stanley Kinyanjui and Magnate Ventures Ltd
    Cause No. 273 of 2010
  • Lilian O. Ochang v Kenol Kobil Limited
    (2015) eKLR
  • Mary Chemweno Kiptui v Kenya Pipeline Company Limited
    [2014] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment and labour relations disputes (Employment Act, 2007)

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, "Phylis Wangari Nganga v Intra Africa Assurance Company Limited [2021] KEELRC 2241 (KLR)", Case Analysis (2021). Cause No. 1066 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/2241/eng@2021-01-29

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