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ELRCPartially AllowedCause No E026 of 2021· [2023] KEELRC 1401 (KLR)

Mungai v Devyani Foods Industries (Kenya) Limited (Cause E026 of 2021) [2023] KEELRC 1401 (KLR)

Employment and Labour Relations Court
8 June 2023
MNMathews N. Nduma
1,878 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan employer cannot use Covid-19 as an excuse to skip the legal redundancy steps, and the court awarded the employee over Kshs 1.1 million.

What this practically means

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Executive summary

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The claimant, employed by the respondent from January 5, 2012 as Production Manager (UHT Plant) on successive fixed-term contracts, earning Kshs 322,000 monthly, was terminated on April 12, 2020 under clause 11(e) of his contract following a review of operations during the Covid-19 pandemic. He sued claiming wrongful, unfair and discriminatory summary dismissal, notice pay, twelve months' compensation, salary for the unexpired contract period, leave pay and severance pay. The respondent contended that financial distress caused by Covid-19 justified the termination after the claimant refused a salary cut agreed under a tripartite memorandum of understanding, and that terminal dues were fully paid. The Court framed two issues: whether the termination was for a valid reason following a fair procedure, and the remedies due. It found the claimant was retrenched for operational and financial reasons, but the respondent failed to prove compliance with Section 40 of the Employment Act - no notice of intended redundancy to employees or the Ministry of Labour, no demonstration of financial distress justifying retrenchment of the production manager, no hearing, and no service pay. The termination was therefore unlawful and unfair. The Court awarded severance pay of Kshs 161,000 for one year served in the last contract and three months' salary compensation of Kshs 966,000, with interest and costs, dismissing the remaining claims including notice and leave pay (already paid) and dues for previous contracts.

Key legal issues

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01

Whether the termination was for a valid reason following a fair procedure

Holding

The termination was not for a valid reason and the procedure was unfair; the termination was unlawful and unfair.

Reasoning

The respondent admitted retrenching the claimant for operational and financial reasons, shifting the burden to it under Sections 43 and 40 of the Employment Act. It adduced no evidence of notice of intended redundancy to employees or the Ministry of Labour, no proof of financial distress justifying retrenchment of the production manager specifically, no hearing for the claimant, and no payment of service pay. Sections 36, 40, 41, 43 and 45 were all flouted.

p. 4
02

Remedies for unlawful and unfair termination

Holding

Claimant awarded severance pay for one year served in the last contract (Kshs 161,000) and three months' salary compensation (Kshs 966,000); notice and leave pay claims dismissed as already paid.

Reasoning

Under Section 49(1)(c) and (4), the Court considered the claimant's 8½ years of diligent service, the lack of notice or reasons, the flouting of Section 40 procedural requirements, loss of career progression, and the mistreatment by the CEO. It relied on cited authorities to fix compensation at three months' salary, treating this as an appropriate case for compensation.

p. 4
03

Whether terminal dues were owed for previous completed contracts

Holding

Claim for terminal dues for previous contracts dismissed for lack of evidence.

Reasoning

The Court found no sufficient evidence that the respondent owed terminal dues in respect of previously completed contracts; the claimant had served on separate successive contracts and was serving a three-year contract of which only 14 months had elapsed at termination.

p. 3

Legal principles established

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  • An employer retrenching an employee on operational/financial grounds must comply with Section 40 of the Employment Act, including notice to employees and the Ministry of Labour, and demonstrate the valid reason and a fair procedure.
  • The Covid-19 pandemic did not excuse an employer from complying with employment laws.

Court orders

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  1. 1.Kshs 161,000 severance pay
  2. 2.Kshs 966,000 being the equivalent of three (3) months' salary in compensation
  3. 3.Interest at Court rates from date of judgment till payment in full
  4. 4.Costs of the suit
  5. 5.All other claims set out in the Statement of Claim dismissed

Authorities

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Legislation

  • Employment Act, 2007Section 43(1) and (2)
  • Employment Act, 2007Section 40 including 40(1)
  • Employment Act, 2007Section 2
  • Employment Act, 2007Sections 36, 41, 45
  • Employment Act, 2007Section 49(1)(c) and (4)

Cases cited (3)

  • Fredrick Ouma -vs- Spectre International Limited
    [2013
  • Kenya Union of Commercial, Food and Allied Workers –vs- Meru North Farmers Sacco Limited
    Cause No 74 of 2013
  • Daniel Mburu Muriu -vs- Hygrotech East Africa Limited
    [2021] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (original employment dispute)

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, "Mungai v Devyani Foods Industries (Kenya) Limited (Cause E026 of 2021) [2023] KEELRC 1401 (KLR)", Case Analysis (2023). Cause No E026 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1401/eng@2023-06-08

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