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ELRCPartially AllowedNot stated in the extract· [2023] KEELRC 2510 (KLR)

Adis v Style Industries Ltd & another (Employment and Labour Relations Petition E036 of 2022) [2023] KEELRC 2510 (KLR)

Employment and Labour Relations Court
13 October 2023
AMAnna Ngibuini Mwaure
1,914 words in judgment
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The bottom line

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What this practically means

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Executive summary

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This is a judgment of the Employment and Labour Relations Court in Nairobi, delivered virtually by Anna Ngibuini Mwaure, Judge, on October 13, 2023, following the main judgment of December 7, 2022 in favour of the petitioner and a consent of March 30, 2023 settling salary for March 2022, two months' salary in lieu of notice and unutilized leave totalling Kshs 2,204,934/-. The court had directed parties to file submissions on the number of years worked, to fix the amount payable under paragraph 65(1) of the judgment. The petitioner claimed 22 years of continuous service (2000-2022) across Strategic Industries Ltd and its successor, the 1st respondent, which purchased the business under an asset purchase agreement dated July 6, 2012. The respondents maintained that the 1st respondent was incorporated in 2012, employed the petitioner on a fresh contract from November 1, 2012, that employees were excluded from the purchased assets, and that clause 7 allocated pre-closing employment dues to the seller. Applying Abyssinia Iron & Steel and Joseph Kahuko Mwangi, the court held that the two employment contracts were entirely distinct, that the asset purchase agreement excluded employees and their accrued dues, and that the purchaser was only obliged to offer employment, which the petitioner was free to accept. Employment was therefore held to have commenced November 1, 2012, and the petitioner was awarded 15 days per year worked from 2012 to 2022, i.e. Kshs 2,722,750/-, with interest from the date of the award and costs as previously awarded to the petitioner.

Key legal issues

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01

Whether employment transfers automatically on a sale of business assets

Holding

Employees are not part of the transferred assets; a new employment contract with the purchaser creates a different employer/employee relationship and is not a continuation of the prior employment.

Reasoning

The court relied on Abyssinia Iron & Steel, noting that where employees sign fresh contracts with a new entity, a different employer/employee relationship arises. Clause 7 of the asset purchase agreement terminated all seller employment contracts at closing, allocated statutory and termination dues to the seller, and obliged the purchaser only to make offers of employment which employees were free to accept or reject. The new contract with the 1st respondent was therefore not a continuation.

p. 4
02

Computation of service pay for years worked

Holding

Service is limited to November 1, 2012 to 2022, i.e. 10 years, at 15 days per year worked.

Reasoning

Having found that employment with the 1st respondent commenced on November 1, 2012 by a fresh written contract, the court excluded the 12 years with Strategic Industries Ltd (2000-2012). The petitioner was awarded 15 days for each of the 10 years worked from 2012 to 2022, computed as Kshs 544,550 x 10/2 = Kshs 2,722,750/-. Other dues had been settled by consent dated March 30, 2023.

p. 4

Legal principles established

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  • Under an asset purchase agreement where employees are excluded from the transferred assets and pre-closing employment liabilities are for the seller's account, an offer of fresh employment by the purchaser does not continue the seller's employment relationship, and accrued entitlements lie against the seller.

Court orders

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  1. 1.The petitioner's employment with the respondents is held to have commenced on November 1, 2012
  2. 2.The petitioner is awarded 15 days for every year worked from 2012 to 2022, translating to Kshs 544,550 x 10/2 = Kshs 2,722,750/-
  3. 3.Interest to accrue from the date of the award till full payment
  4. 4.Costs as previously awarded to the petitioner
  5. 5.A signed copy of the judgment to be availed to each party upon payment of Court fees
Jurisdiction invoked
Original employment and labour relations jurisdiction (Employment Act; judgment on remitted point following main judgment of December 7, 2022)

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, "Adis v Style Industries Ltd & another (Employment and Labour Relations Petition E036 of 2022) [2023] KEELRC 2510 (KLR)", Case Analysis (2023). Not stated in the extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/2510/eng@2023-10-13

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