Mng’anya v Smart Banking Solutions Ltd (Cause 142 of 2020) [2023] KEELRC 387 (KLR)
The bottom line
#A Kenyan court ruled that skipping mandatory redundancy procedures converts a redundancy into unfair termination, entitling the employee to compensation.
What this practically means
#Executive summary
#Key legal issues
#Existence and date of employment relationship
The Claimant was an employee on an oral contract; the earliest he could have joined the Respondent was January 2015, though eligibility to work in Kenya began with the work permit of 24th June 2016.
The court applied the statutory definitions of 'employee', 'employer' and 'contract of service' in Section 2 of the Employment Act and found the oral arrangement satisfied the definition. RWI produced no documentary evidence of engagement terms, invoking Section 10(7) which places the burden on the employer. Documentary evidence (work permit dated 24th June 2016, salary paid in Tanzania shillings in 2015, Respondent's incorporation on 27th November 2014) fixed January 2015 as the earliest possible start date.
Whether the separation was a lawful redundancy, unfair termination or mutual separation
The email communications amounted to a redundancy statement, but Section 40 was not complied with in any respect, converting the redundancy into an unfair termination under Section 45; the oral separation agreement did not waive the Claimant's claims.
Both parties agreed the company faced financial distress. The email from Sean Merali of 21st August 2017 amounted to a redundancy statement, but no Section 40 notices or payments were made. Although parties negotiated an exit and USD 35,000 was paid, the oral agreement contained no waiver or full-and-final-settlement clause and the written draft was never executed, so it did not extinguish the claims. Reliance placed on Coastal Bottlers Ltd v Kimathi Mithika on discharge vouchers.
Discrimination and harassment
The claim failed for lack of evidential foundation.
Counsel relied on Section 45(5)(b) of the Employment Act, but the court noted that provision does not address discrimination; the applicable provision was Section 5. Applying Ol Pejeta Ranching Ltd v David Wanjau Muhoro and the South African authority in Transport & General Workers Union, the court held that discrimination requires differential treatment of similarly circumstanced individuals, and the Claimant neither identified his colleagues nor their treatment, nor his own ethnicity.
Quantum of compensation for unfair termination
The equivalent of one month's salary (USD 7,000) awarded under Section 49(1)(c).
Although unfair termination entitled the Claimant to compensation under Section 49(1)(c), the court took into account the short duration of employment (about 2½ years), absence of misconduct, receipt of USD 35,000 under the negotiated exit package, and the fact that the Claimant neither contested the redundancy nor expressed a wish to continue serving. Twelve months' compensation was therefore reduced to one month.
Legal principles established
#- Where an employer fails to produce a written contract, the burden of proving or disproving an alleged term of employment lies on the employer.
- Oral agreements supported by credible evidence are enforceable.
- Failure to comply with Section 40 of the Employment Act renders a redundancy an unfair termination within Section 45.
- An unsigned draft separation agreement with no full-and-final-settlement clause does not waive an employee's right to pursue further claims.
Court orders
#- 1.Declaration that termination of the Claimant's employment on account of redundancy was unfair and unlawful.
- 2.Equivalent of one (1) month's salary USD 7,000.
- 3.Costs of this claim.
- 4.Interest at court rates from date of Judgement till payment in full.
- 5.Certificate of service.
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction under the Employment Act, 2007
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mng’anya v Smart Banking Solutions Ltd (Cause 142 of 2020) [2023] KEELRC 387 (KLR)", Case Analysis (2023). Cause No 142 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/387/eng@2023-02-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.