Kimaru & 6 others v Nairobi Securities Exchange PLC (Employment and Labour Relations Cause 686 of 2019) [2023] KEELRC 1039 (KLR)
The bottom line
#Kenya's Employment Court declared the NSE's 2019 redundancy unlawful, but only two of seven former employees—those who refused to sign discharge vouchers—were compensated.
What this practically means
#Executive summary
#Key legal issues
#Whether there was a valid reason for the redundancy declaration
Valid only in respect of the 2nd, 6th and 7th Claimants; no evidence that the positions of the 1st, 3rd, 4th and 5th Claimants were lost.
The Respondent relied on a restructuring to eliminate overlaps. However, the new organizational chart contained inconsistencies with the regulator correspondence, and the Respondent did not produce the old structure. The letter of February 19, 2019 showed that some Claimants' positions were never targeted for merger or elimination, and others merely had their titles changed with functions intact, so the operational-requirements justification failed for those Claimants.
Whether the redundancy notices dated February 27, 2019 were valid
They were genuine redundancy (not termination) notices, but defective for being silent on the extent of the redundancy.
Following the Court of Appeal in Cargill Kenya Limited v Mwaka, notices communicating a future severance date and terminal dues were held to be redundancy notices, not termination notices. However, section 40(1)(a) requires a notice to state the reason and extent of the redundancy; the notices stated the reason but never disclosed how many employees would be affected, and the letter to the regulator stating the extent was not copied to the Claimants.
Whether the selection procedure complied with section 40(1)(c) of the Employment Act
It did not; the Respondent offered no evidence of the selection criteria applied.
The employer must apply the last-in-first-out principle or depart from it for cogent, objectively verifiable reasons based on skill, ability and reliability. The Respondent produced no documents explaining how the Claimants were selected, including how occupants of renamed, functionally unchanged positions were displaced without any stated criteria. The process was opaque and failed the statutory threshold.
Whether the discharge vouchers signed by five Claimants bar their compensation claims
Yes; the vouchers were voluntarily executed and the undue influence plea failed.
Discharge vouchers are contractual. Undue influence must be pleaded and proved to a higher standard than balance of probabilities; the five Claimants neither amended pleadings nor adduced cogent evidence, and the surrounding evidence (payment before or after signing irrespective of signature, and payment to the two who refused to sign) contradicted the coercion narrative. The vouchers therefore barred reopening compensation for those five Claimants.
What compensation is due to Tom Kimaru and Caleb Musau
Four months' gross salary each under section 49 of the Employment Act.
Having found their terminations unlawful, the court applied the section 49 guidelines: length of service (approximately six and fifteen years), the circumstances of separation in which neither party was wholly to blame, and the substantial terminal dues already paid at above the statutory minimum scales. The court considered further exaggerated awards inequitable and settled on four months' gross pay.
Legal principles established
#- Validity of a redundancy requires both a valid reason and fair procedure under sections 40, 43 and 45 of the Employment Act.
- A redundancy notice must state both the reason and the extent of the proposed redundancy; silence on extent renders it defective.
- The selection of employees for redundancy must be based on the section 40(1)(c) denominators (seniority, skill, ability and reliability, or last in first out) and must be open and verifiable.
- A discharge voucher is contractual and, unless successfully assailed for vitiating elements such as fraud or undue influence, bars reopening of compensation claims, though it does not bar enquiry into the lawfulness of termination.
- Allegations of undue influence must be specifically pleaded and proved to a standard higher than a balance of probabilities.
Court orders
#- 1.The Respondent's decision to declare the Claimants redundant is declared irregular and unlawful.
- 2.The claims by the 2nd, 4th, 5th, 6th and 7th Claimants for compensation and other forms of damages (save for the declaration) are dismissed; the prayers for compensation of Bahati Morara, Nelly Orwaya, Lillian Mbula, Winnie Mbaluka and Sammy Mutua are dismissed.
- 3.Tom Kimaru is awarded compensation for unlawful dismissal of Kshs 785,410 x 4 = Kshs 3,141,640.
- 4.Caleb Musau is awarded compensation for unlawful dismissal of Kshs 796,920 x 4 = Kshs 3,187,680.
- 5.Interest on the amounts awarded from the date of judgment.
- 6.Costs of the case to the Claimants compensated.
- 7.The award is subject to the applicable statutory deductions.
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction under the Employment Act (sections 40, 43, 45 and 49) in a first-instance unfair termination/redundancy claim
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kimaru & 6 others v Nairobi Securities Exchange PLC (Employment and Labour Relations Cause 686 of 2019) [2023] KEELRC 1039 (KLR)", Case Analysis (2023). Not indicated in the judgment as supplied. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1039/eng@2023-04-27
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.