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ELRCAllowedNot stated in judgment· [2024] KEELRC 778 (KLR)

Banking Insurance and Finance Institutions Union (K) v Elimu Sacco Society Limited (Cause E6536 of 2020) [2024] KEELRC 778 (KLR)

Employment and Labour Relations Court
28 March 2024
JRJames Rika
2,459 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~10 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court ruled gratuity must cover all years of service and be based on total salary, not just basic pay.

What this practically means

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Executive summary

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The Claimant Union sued on behalf of two grievants, Francis Kioko and John Kithure, who retired on 30th June 2020 after 37 and 33 years of service respectively. They claimed their gratuity under clause 40 of the Collective Bargaining Agreement was computed on fewer years of service and on basic rather than total salary, and that the Respondent unlawfully withdrew house and telephone allowances paid upon their 2011 promotions after the Industrial Court in Cause 543 of 2012 declared the promotions unlawful. The Respondent conceded the grievants were entitled to gratuity under clause 40 but argued it was computable only from 1994, when the CBA took effect, since the grievants were not union members before then and were covered by a provident fund on their pre-1994 years. The court held clause 40 grants gratuity for every complete year of service, not years of union membership, and that salary means total monthly remuneration, not basic salary, since the word 'basic' does not appear in the clause. On the allowances, the court found that order 4 of the Industrial Court judgment directed employees to retain salaries and allowances received since the promotions, and that order was never appealed; the Respondent's unilateral recovery and cessation of those benefits was therefore unlawful. The court awarded Kioko a refund of Kshs 58,760, underpayments of Kshs 959,328 and a gratuity balance of Kshs 702,253; Kithure a gratuity balance of Kshs 840,184; and costs to the Claimant.

Key legal issues

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01

Whether gratuity was payable on complete years of service from first engagement (1983/1987) or only from the CBA's commencement in 1994

Holding

Gratuity was payable on all complete years of service from the date the Grievants entered the Respondent's service.

Reasoning

Clause 40 grants gratuity to any unionisable employee leaving employment for any reason other than gross misconduct, at 10 days' salary per complete year of service. The clause ties entitlement to years of service, not years of union membership. If the parties intended the CBA to apply only from 1994, they could have said so. The Respondent produced no evidence of a pension scheme, provident fund, contract or policy ousting or limiting clause 40.

p. 4
02

Whether gratuity should be computed on basic salary or total salary

Holding

Gratuity was to be computed on total monthly salary, not basic salary.

Reasoning

Clause 40 uses the word 'salary' and does not use the word 'basic'. Under Section 2 of the Employment Act, remuneration is the total value of all payments. Absent express limitation to basic salary, salary means total monthly earnings. The Respondent's use of basic salary was a departure from the text and intent of the clause.

p. 5
03

Whether the Respondent could lawfully withdraw benefits already paid after the Industrial Court judgment in Cause 543 of 2012

Holding

The withdrawal was unlawful because the Industrial Court's order 4 expressly directed that employees retain salaries and allowances since the promotions.

Reasoning

Order 4 was not appealed or reversed. The court did not declare the employment contracts unlawful, only the purported movement to management cadre. If dissatisfied, the Respondent should have appealed or sought clarification rather than take unilateral action. The Respondent could not benefit from its own mischief.

p. 4

Legal principles established

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  • Gratuity under a CBA pegged to 'complete years of service' is computed from the date an employee entered service, not from years of union membership or the date of execution of the CBA.
  • Salary under clause 40 refers to total monthly remuneration, not basic salary, absent express wording limiting it to basic salary.
  • A party dissatisfied with an express court order cannot unilaterally disregard it; recourse lies in appeal or an application for clarification.

Court orders

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  1. 1.The Respondent shall pay Grievant Francis Kioko refund of house and telephone allowances at Kshs 58,760
  2. 2.The Respondent shall pay Grievant Francis Kioko underpayments of these allowances from 2012 to 2020 at Kshs 959,328
  3. 3.The Respondent shall pay Grievant Francis Kioko balance of gratuity at Kshs 702,253
  4. 4.The Respondent shall pay Grievant John Kithure balance of gratuity at Kshs 840,184
  5. 5.Costs to the Claimant
Jurisdiction invoked
Original employment and labour relations jurisdiction; Employment Act Section 2 referenced on meaning of remuneration

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, "Banking Insurance and Finance Institutions Union (K) v Elimu Sacco Society Limited (Cause E6536 of 2020) [2024] KEELRC 778 (KLR)", Case Analysis (2024). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/778/eng@2024-03-28

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