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ELRCPartially AllowedELRC Appeal No. 592 of 2018 (appeal from MC ELRC No. 592 of 2018)· [2023] KEELRC 388 (KLR)

Gituamba Stones Limited v Omondi (Employment and Labour Relations Appeal E150 of 2021) [2023] KEELRC 388 (KLR)

Employment and Labour Relations Court
10 February 2023
AMAnna Ngibuini Mwaure
3,537 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 upheld a dismissal as unfair because the employer never heard the employee out, but sharply cut the compensation awarded.

What this practically means

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Executive summary

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This is a first appeal to the Employment and Labour Relations Court at Nairobi against the judgment of the chief magistrate (D O Mbeja) delivered on October 29, 2021, which found that Gituamba Stones Limited had unlawfully and unfairly summarily dismissed its quarry pit supervisor and awarded him 12 months' compensation, one month's notice pay, service pay and annual leave, with interest from the date of filing suit. The employer appealed on the grounds that there were valid and fair grounds for dismissal, that the maximum compensation ignored section 49(4) of the Employment Act, that the claimant's NSSF membership barred service pay, and that interest should run from judgment. The court, as the first appellate court, re-evaluated the evidence following Selle v Associated Motor Boat Company Ltd. It held that the dismissal failed both twin tests of substantive justification and procedural fairness: there was no notification and hearing as required by section 41(2), and the reasons for termination were not validly established. However, it found the maximum 12 months' compensation to be a blanket, unjustified award; since the claimant's past behaviour contributed to the distrust in the employment relationship, it substituted three months' gross salary compensation (Ksh 159,696). Notice pay was retained; service pay and leave pay were set aside (the claimant being an NSSF member who had been paid for his leave days); and interest was redirected to run from the date of the appellate judgment. The appeal partially succeeded, each party bearing their own costs of the appeal, with the subordinate court's costs of the claimant preserved on the revised award in a corrective order.

Key legal issues

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01

Procedural fairness of the summary dismissal

Holding

The dismissal was unprocedural as the claimant was neither notified nor heard before termination

Reasoning

Section 41(2) of the Employment Act mandates that an employer hear and consider an employee's representations before summary dismissal for misconduct. The dismissal letter showed termination followed management investigation and recommendation without notification or hearing. The claimant's uncontroverted evidence that his role did not involve collecting payments further undermined the employer's justification under sections 43, 45 and 47(5).

p. 5
02

Quantum of compensation under section 49

Holding

The maximum 12 months' compensation was reduced to 3 months because the claimant contributed to his termination and the magistrate gave no reasons for the maximum award

Reasoning

The Court of Appeal in Postal Corporation of Kenya v Andrew K Tanui requires consideration of the effect of dismissal, Parliament's intention in capping awards, and comparable awards. The magistrate made a blanket award without justification. Evidence of past suspensions showed honesty issues and distrust, meaning the claimant contributed to his termination, justifying a reduced award under section 49(1) and (4).

p. 6
03

Service pay for NSSF members

Holding

Service pay could not be awarded since the claimant was an NSSF member and exempt under section 35(6)

Reasoning

Section 35(6) expressly excludes employees who are members of the National Social Security Fund from service pay entitlement. NSSF contributions were confirmed as remitted, yet the magistrate awarded service pay without stating reasons for disregarding the exemption. The respondent's attempt to justify the award as severance pay under section 40(1)(g) failed as there was no redundancy.

p. 7
04

Interest on compensatory damages

Holding

Interest should run from the date of judgment, not the date of filing suit

Reasoning

Following Mukisa Biscuits Manufacturing Co Ltd v West End Distributors Ltd (No 2), where damages must be assessed by the court, the right to damages arises only upon assessment, so interest is awarded from the date of judgment. The trial court's award of interest from the date of filing suit was therefore erroneous and varied.

p. 7

Legal principles established

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  • For a termination to be fair, an employer must show both substantive justification and procedural fairness, including notification and hearing under section 41 of the Employment Act
  • An employee who is a member of the NSSF is not entitled to service pay under section 35(6) of the Employment Act
  • Interest on unliquidated damages runs only from the date of assessment (judgment), not the date of filing suit
  • A maximum compensatory award under section 49(1) must be justified with reasons and reference to comparable awards; a blanket maximum award is erroneous
  • A first appellate court must reconsider and re-evaluate the evidence and draw its own conclusions while making due allowance for not having seen or heard the witnesses

Court orders

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  1. 1.Upheld the trial court's finding that the respondent/claimant was unlawfully and unfairly terminated
  2. 2.Substituted the 12 months' gross salary compensation with 3 months' salary compensation (Ksh 53,232 x 3 = Ksh 159,696)
  3. 3.Retained the award of one month's salary in lieu of notice (Ksh 53,232)
  4. 4.Set aside the award of service pay (Ksh 583,505.62)
  5. 5.Set aside the award of annual leave pay (Ksh 42,995)
  6. 6.Directed that interest accrue from the date of this judgment rather than the date of filing suit
  7. 7.Ordered each party to pay their own costs of the appeal
  8. 8.In a subsequent order correcting an inadvertent omission, ordered costs to the respondent/claimant in the subordinate court as awarded by the subordinate court based on the revised award

Authorities

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Legislation

  • Employment Actsection 49(4)
  • Employment Actsection 35(5) and (6)
  • Employment Actsection 43(2)
  • Employment Actsection 41(2)
  • Employment Actsection 47(5)
  • Employment Actsection 45
  • Employment Actsection 44(2), (3) and (4)
  • Employment Actsection 49(1)
  • Employment Actsection 40(1)(g)
  • Retirement Benefits Actregistered pension or provident fund scheme
  • Civil Procedure RulesOrder 21 Rule 1
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure ActSection 1B

Cases cited (9)

  • Kenya Revenue Authority vs Reuwel Waithaka Gitahi and 2 others
    2019 eKLR
  • Kennedy Kioko Wambua versus Consolidated Bank of Kenya
    2019 eKLR
  • Hassanath Wanjiku versus Vanela House of Coffees
    2018 eKLR
  • Mukisa Biscuits Manufacturing Co Ltd versus West End Distributors Limited (No 2)
    (1970) EA 469
  • Ken freight E A versus Benson Nguti
    2016 eKLR
  • Selle versus Associated Motor Boat Company Ltd
    1968 EA 123
  • Pius Machafu Isindu vs Lavington Security Guards Limited
    [2017] eKLR
  • Walter Onuro Ogul vs Teachers Service Commission Cause No 955 of 2011
  • Postal Corporation of Kenya and Andrew K Tanui
    Civil Appeal No 127 of 2015
On appeal from
Chief Magistrate's Court at Nairobi
MC ELRC No. 592 of 2018
Jurisdiction invoked
First appellate jurisdiction over an appeal from the chief magistrate's Employment and Labour Relations Court judgment

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, "Gituamba Stones Limited v Omondi (Employment and Labour Relations Appeal E150 of 2021) [2023] KEELRC 388 (KLR)", Case Analysis (2023). ELRC Appeal No. 592 of 2018 (appeal from MC ELRC No. 592 of 2018). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/388/eng@2023-02-10

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