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ELRCPartially AllowedCMEL Cause No 49 of 2019 (appeal therefrom, Mavoko)· [2023] KEELRC 396 (KLR)

Steel Makers Limited v Obare (Appeal E001 of 2020) [2023] KEELRC 396 (KLR)

Employment and Labour Relations Court
16 February 2023
7,207 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~29 min to read original · ~4 min brief

The bottom line

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An employer who fires a worker for demanding unpaid wages, without a hearing, must pay up—but maximum compensation awards need justification.

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 (Manani J) against the decision of the Principal Magistrate's Court at Mavoko in CMEL Cause No 49 of 2019 delivered on August 19, 2020, which found that the Appellant employer unfairly terminated the employment of the Respondent, a driver, and awarded him notice pay, salary arrears, leave dues, service pay, twelve months' compensation, interest, costs and a certificate of service. The employment ended around March 11, 2019 after the Respondent and colleagues demanded unpaid salaries spanning November 2018 to February 2019; the Respondent was arrested on March 7, 2019 and blocked from the premises when he sought to resume work. The Appellant advanced nine grounds, distilled into seven issues, contending inter alia that termination was for misconduct (absenteeism during an unauthorized industrial action), that leave dues were time barred, and that the awards were unjustified. The court reaffirmed the duty of a first appellate court to re-evaluate the evidence. It upheld the finding of unfair termination, holding that a demand for salary arrears could not constitute gross misconduct and that no hearing was afforded contrary to sections 41, 43 and 45 of the Employment Act. It held that probation cannot be imposed as a disciplinary measure, and that even a probationer is entitled to a hearing. Leave dues were held not to be continuing injury claims, and in any event the claim, filed a month after termination, was not time barred. Salary arrears and service pay (computed at 15 days per year from November 2007) were upheld on the employer's failure to discharge its burden of proof. The only variation was to compensation: the unexplained maximum award of twelve months' salary was set aside and replaced with six months' salary (Kshs 158,964/-), the Respondent's prior absenteeism having contributed to termination. The appeal was otherwise dismissed, with costs of the appeal awarded to the Respondent.

Key legal issues

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01

Whether termination of the Respondent was for a valid reason and in accordance with fair procedure

Holding

The trial magistrate was correct to find unfair termination; the Appellant had no valid reason (the employees were demanding salary arrears of four months) and gave no hearing

Reasoning

The Appellant's witness conceded the salary arrears that triggered the events of March 4, 2019. A demand for salary arrears could not amount to gross misconduct. There was no evidence of a disciplinary session, notification of the accusations, or an opportunity to respond before the Respondent was blocked from the premises on March 11, 2019, contrary to sections 41, 43 and 45 of the Employment Act.

p. 6
02

Whether the award of unpaid salary was justified

Holding

Upheld; the Appellant failed to discharge the evidential burden of proving payment of the arrears

Reasoning

The defence witness confirmed four months of unpaid salaries but could not confirm payment to the Respondent. No bank slips, Mpesa statements or payment vouchers were produced. Under section 109 of the Evidence Act, the burden lay on the Appellant, and under section 10(7) and section 74 of the Employment Act the employer is custodian of employment records.

p. 7
03

Whether the leave dues claim was time barred and proved

Holding

Not time barred and upheld; leave pay is a periodic entitlement, not a continuing injury, and the cause of action arises on termination per the Court of Appeal in G4S

Reasoning

The claim was filed about a month after termination, within three years on any view. On the merits, the Respondent testified on oath to nine years of untaken leave, and the defence witness admitted unpaid leave claims without denying the nine-year period.

04

Whether the maximum compensation of twelve months' salary was justified

Holding

Set aside and reduced to six months' salary (Kshs 158,964/-) because the trial magistrate gave no justification for the maximum award and the Respondent's prior conduct contributed to termination

Reasoning

Under section 49 of the Employment Act the maximum award requires cogent justification. The trial magistrate exercised her discretion whimsically by offering none. Further, the Respondent's episodes of unexplained absenteeism, particularly October 2018, soiled the employment relationship and contributed to the termination, justifying a reduction to six months.

p. 10
05

Whether the Respondent was entitled to service pay from November 2007

Holding

Upheld; the Appellant failed to disprove the November 2007 commencement date and did not prove NSSF membership or that the Respondent was a casual

Reasoning

The employer bears the burden under section 10(7) to disprove disputed contract particulars where the contract was not reduced to writing. Even if casual, section 37 converts the engagement after one month, and section 93 transposes pre-2007 contracts. Service pay was computed at 15 days' pay per year for eleven years, upholding Kshs 143,068/-.

p. 12
06

Whether the trial court erred in awarding costs to the Respondent

Holding

No error; costs follow the event and the Respondent was the successful party with no misconduct shown

Reasoning

A successful party may only be denied costs on cogent grounds. There was no evidence of misconduct by the Respondent, so the costs order was properly made in his favour.

p. 13

Legal principles established

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  • Absence from duty does not automatically terminate employment; the employer must make efforts to ascertain the employee's whereabouts and reasons for absence and follow the disciplinary procedure under section 41 before terminating
  • The law does not countenance placing an employee on probation as a disciplinary measure, and probation under section 42(2) of the Employment Act cannot exceed six months in the first instance plus a further six months by agreement
  • Even an employee on probation is entitled to the protection of section 41 of the Employment Act, including a hearing
  • Periodic entitlements such as leave pay, salary and house allowance are not continuing injury claims; they create distinct causes of action on each default and are subject to the three-year limitation period under section 90 of the Employment Act
  • Where an employer fails to reduce a contract into writing as required, the burden of proving or disproving disputed terms (including commencement date) lies with the employer under section 10(7) of the Employment Act
  • Under section 37 of the Employment Act, casual contracts automatically convert to indefinite term contracts after one month of continuous service; transitional contracts under the repealed Act are governed by section 93 of the current Act
  • Service pay under section 35(5) of the Employment Act is computed, in the absence of a statutory formula, at 15 days' pay for each completed year of service, borrowing the severance formula under section 40
  • A trial court may only award the maximum twelve months' compensation under section 49 of the Employment Act on cogent, justified grounds; an unexplained maximum award is an improper exercise of discretion

Court orders

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  1. 1.Grounds 1, 6, 7 and 9 of the Appeal dismissed
  2. 2.Award of salary arrears of Kshs 113,109/- upheld
  3. 3.Award of unpaid leave dues upheld
  4. 4.Award of service pay of Kshs 143,068/- upheld
  5. 5.Award of salary in lieu of notice affirmed
  6. 6.Award of compensation for unfair termination set aside and replaced with compensation equivalent to six months' salary (Kshs 158,964/-)
  7. 7.Appeal dismissed save for the alteration to the compensation award; all other findings of the trial court upheld
  8. 8.Respondent awarded costs of the appeal

Authorities

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Legislation

  • Employment Actsections 41, 43, 45
  • Employment Actsection 42(2)
  • Employment Actsection 49
  • Employment Actsection 90
  • Employment Actsection 35(5)
  • Employment Actsection 9
  • Employment Actsection 10 and section 10(7)
  • Employment Actsection 37
  • Employment Actsection 40
  • Employment Actsection 74
  • Employment Actsection 93
  • Employment Act cap 226 (now repealed)
  • Evidence Actsection 109
  • ELRC Procedure RulesRule 28(3)

Cases cited (17)

  • Nanji Premji Khetani v Raphael Charo Jefwa
    [2021] eKLR
  • Abok James Odera T/a A. J Odera & Associates v John Patrick Machira T/a & Co. Advocates
    [2013] eKLR
  • Kenya Ports Authority v Kuston (Kenya) Limited
    [2009] 2 EA 212
  • China Zhongxing Construction Company Ltd v Ann Akuru Sophia
    [2020] eKLR
  • Stephen Ouma Ludende v Radar Limited
    [2019] eKLR
  • Augustine Otieno Afullo v University of Kabianga
    [2021] eKLR
  • Ayub Kombe Ziro v Umoja Rubber Products Limited
    [2022] eKLR
  • Milano Electronics Limited v Dickson Nyasi Muhaso
    [2021] eKLR
  • Monica Munira Kibuchi & 6 others v Mount Kenya University; Attorney General (Interested Party)
    [2021] eKLR
  • Jackson Muiruri Wathigo t/a Murtown Supermarket v Lilian Mutune
    [2021] eKLR
  • Nanyuki Water & Sewage Company Limited v Benson Mwiti Ntiritu & 4 others
    [2018] eKLR
  • Vipingo Ridge Limited v Swalehe Ngonge Mpitta
    [2022] eKLR
  • G4S Security Services (K) Limited v Joseph Kamau & 468 others
    [2018] eKLR
  • Ol Pejeta Ranching Limited v David Wanjau Muhoro
    [2017] eKLR
  • Kenya Broadcasting Corporation v Geoffrey Wakio
    [2019] eKLR
  • Stephen Mkale Mulindi v Provide International
    [2019] eKLR
  • Farah Awad Gullet v CMC Motors Group Limited
    [2018] eKLR
On appeal from
Principal Magistrate's Court at Mavoko
CMEL Cause No 49 of 2019
Jurisdiction invoked
First appellate jurisdiction over the Principal Magistrate's Court (ELRC) in an employment cause; appeal determined on written submissions and the Record of Appeal

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Steel Makers Limited v Obare (Appeal E001 of 2020) [2023] KEELRC 396 (KLR)", Case Analysis (2023). CMEL Cause No 49 of 2019 (appeal therefrom, Mavoko). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/396/eng@2023-02-16

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