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ELRCPartially AllowedCause No E020 of 2022· [2023] KEELRC 2483 (KLR)

Karanja v KCB Bank Kenya Limited (Cause E020 of 2022) [2023] KEELRC 2483 (KLR)

Employment and Labour Relations Court
4 October 2023
9,947 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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Kenya's Employment Court ruled KCB unfairly and discriminatorily terminated a manager through a sham redundancy, awarding her over Kshs. 12 million plus staff-rate loans.

What this practically means

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Executive summary

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The claimant, employed by the respondent bank from 1 September 2008 and last serving as Head, Business Development – Coast Region, was issued a 30 days' notice of intended redundancy on 1 March 2022, with employment terminating on 30 March 2022. She claimed the redundancy was a sham culmination of discriminatory practices from 2018, including a frozen salary, exclusion from training, denial of system access, deletion of her Relationship Manager Code, and non-reimbursement of travel expenses. She sought declarations of constructive dismissal and unfair, unconstitutional termination, reinstatement or payment of salary for 7 years 5 months to retirement, general damages for discrimination, 12 months' compensation, recompense of 1% of business generated, reimbursement of travel expenses, and retention of staff rates on her mortgage and loans. The respondent maintained the redundancy followed a genuine COVID-19-driven reorganization that abolished her role, that she declined to apply for new roles, and that claims relating to 2017–2018 were time barred. The court framed four issues and held: constructive dismissal was not made out because employment ended at the respondent's instance; the redundancy was procedurally flawed under Section 40 of the Employment Act — the claimant was denied system access, was not personally served with the general notice, and the Labour Officer was not served — rendering the termination unfair; the five-year salary freeze without appraisal amounted to direct discrimination under Article 27 of the Constitution and Section 5(3) of the Act; and the loans had to remain on staff rates. The court awarded 10 months' compensation (Kshs. 7,407,700), general damages of Kshs. 5,000,000, and preserved staff-rate loan repayment, with costs to the claimant. Claims for anticipatory salary to retirement, travel reimbursement, and 1% of business generated were refused.

Key legal issues

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01

Whether the redundancy amounted to constructive dismissal

Holding

No. Employment was terminated by the respondent's redundancy notice; the claimant never resigned, so constructive dismissal cannot be inferred and reinstatement was not feasible.

Reasoning

The court distinguished the claimant's December 2021 proposal for 'involuntary retirement/settlement' from an actual resignation induced by intolerable conditions. Constructive dismissal requires the employee to terminate the contract in response to the employer's conduct. Here the respondent issued the notice of 1st March 2022 and employment ended at the employer's instance, so the claimant failed to address the constructive dismissal claim properly.

p. 11
02

Whether the redundancy was justified and procedurally fair

Holding

No. The notice was wrongful, lacking due process under Sections 40 and 45(2) of the Employment Act, resulting in unfair termination.

Reasoning

Although an employer may reorganize its business, the redundancy notice did not disclose reasons and extent as required by Section 40(1). The claimant was locked out of the company system with her credentials reset, could not access the new structure, was not personally served with the general notice, and there was no service on the local Labour Officer. The role was allegedly abolished yet work remained and her junior took over her roles, making the redundancy a sham.

p. 15
03

Whether the claimant was discriminated against

Holding

Yes. The 5-year salary freeze without appraisal, exclusion from training, deletion of her RM Code and being denied access to apply for new roles constituted direct discrimination and unfair labour practice.

Reasoning

From 2017 to 2022 her salary remained static while peers enjoyed reviews, increments and bonuses; no reason was given for the failure to appraise her. The burden shifted to the employer once a prima facie case was made, and the respondent gave no justification. Damages of Kshs. 5,000,000 were awarded, benchmarked against comparable discrimination awards.

p. 15
04

Whether the mortgage and staff loan facilities could be converted to commercial rates

Holding

No. Because termination was by way of a fault-free redundancy, the loan facilities must remain on staff preferential rates until payment in full.

Reasoning

A redundancy arises where the role is abolished and the employee is not at fault. The demand to convert the loans to commercial rates six months after termination was an additional unfair labour practice and revealed the redundancy as a device. Absent records of redundancy insurance cushioning, the loans abide the terms secured during employment, with the 20% rebate and repayments commencing afresh from the judgment date.

p. 18

Legal principles established

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  • An employer has a legal duty under Section 40(1) of the Employment Act to give reasons for, and the extent of, an intended redundancy; redundancy is invalid where valid reasons are not given
  • Where an employee is not a member of a trade union, the redundancy notice must issue personally in writing to the employee and to the local labour officer
  • A redundancy cannot affect a single employee; singling out one employee from the entire workforce is unfair and amounts to unfair labour practice
  • Treating an employee differently from others similarly situated is discrimination prohibited under Article 27 of the Constitution and Section 5(3) of the Employment Act
  • In discrimination claims, once a prima facie case is established, the burden shifts to the employer to show discrimination did not occur

Court orders

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  1. 1.A declaration that the respondent unfairly terminated the claimant in her employment
  2. 2.A declaration that the respondent discriminated against the claimant
  3. 3.Compensation awarded at Kshs. 7,407,700 (10 months' gross salary)
  4. 4.General damages awarded at Kshs. 5,000,000
  5. 5.The claimant shall enjoy mortgage and loan facilities repayment rates on terms subsisting during her employment, with repayments and rebates offered on 30 March 2022 commencing as of 5 October 2023, with monthly repayments until payment in full on staff rates
  6. 6.Costs to the claimant

Authorities

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Legislation

  • Employment Act, 2007Section 40 (including 40(1)(b), 40(a), 40(b))
  • Employment Act, 2007Section 43(2)
  • Employment Act, 2007Section 45 (and 45(2))
  • Employment Act, 2007Section 49
  • Employment Act, 2007Section 2 (definition of redundancy)
  • Employment Act, 2007Section 5(3)
  • Employment Act, 2007Section 90
  • Employment Act, 2007Sections 41 and 44
  • Constitution of Kenya, 2010Article 27
  • Companies ActNot specified

Cases cited (13)

  • Anarita Karimi Njeru v Republic
    [1979] eKLR
  • Cargill Kenya Limited v Mwaka & 3 others
    (Civil Appeal 54 of 2019) [2021] KECA
  • Milton M Isanya v Aga Khan Hospital Kisumu
    (2017) eKLR
  • Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others
    [2014] eKLR
  • The German School Society & another v Ohany & another
    (Civil Appeal 325 & 342 of 2018 (Consolidated)) [2023] KECA
  • Thomas De La Rue (K) Ltd v David Opondo Omutelema
    [2013] eKLR
  • AKO v Abson Motors Limited
    [2021] eKLR
  • Nyarangi & Others v Attorney General
    [2008] KLR 688
  • Griggs v Duke Power Company
    1971 401 US 424 91
  • Keith Wright v Kentegra Biotechnology (Epz) Ltd
    [2021] eKLR
  • Simon Gitau Gichuru v Package Insurance Brokers Limited
    [2021] eKLR
  • Joseph Mutua Nthia v Fredrick Moses M. Katuva
    [2019] eKLR
  • D.K. Njagi Marete v Teachers Service Commission
    [2013] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment and Labour Relations Court Act and Article 162(2) of the Constitution (employment and labour relations dispute; not expressly quoted in the 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, "Karanja v KCB Bank Kenya Limited (Cause E020 of 2022) [2023] KEELRC 2483 (KLR)", Case Analysis (2023). Cause No E020 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/2483/eng@2023-10-04

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