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ELRCPartially AllowedELRC Cause (Mombasa)· [2024] KEELRC 951 (KLR)

Onchagwa v Coast Bottlers Limited & another (Cause 914 of 2017) [2024] KEELRC 951 (KLR)

Employment and Labour Relations Court
11 April 2024
2,607 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court confirmed labour outsourcing is legal but ruled a generic termination notice without reasons makes the dismissal unfair.

What this practically means

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Executive summary

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The claimant sued Kenya Breweries Limited (1st respondent) and Asego Warehouse Services (2nd respondent) seeking two months' notice pay, 42 accrued leave days, five years' gratuity, 12 months' compensation for unfair termination, a certificate of service, and costs. He alleged employment by the 1st respondent from 1 May 2011 under a CBA, with his labour outsourced to the 2nd respondent, and unfair termination in December 2016. The respondents maintained that the claimant was never an employee of the 1st respondent, which lawfully outsourced casual labour at its Kanamai bottling plant to the 2nd respondent under a contract; the 2nd respondent hired him, paid his wages and statutory dues, and gave notice when its outsourcing contract ended, after which all employees, including the claimant, transitioned to Smart Human Capital Ltd and were paid terminal dues. The court framed three issues: identity of the employer, unfairness of termination, and remedies. Applying the Wrigley parameters, it held that labour outsourcing is acceptable and the 2nd respondent was the claimant's employer. However, the general notice of 1 November 2016 was not specific to the claimant and gave no reasons, breaching Sections 35 and 41 of the Employment Act, so the termination was unfair. The court awarded one month's notice pay (ksh.15,500) and one month's compensation (ksh.15,500), and ordered a certificate of service, holding that the leave, gratuity and second month's notice claims failed and that each party should bear its own costs.

Key legal issues

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01

Who was the employer of the claimant

Holding

The 2nd respondent was the employer; the 1st respondent lawfully outsourced non-core labour to the 2nd respondent as an independent contractor.

Reasoning

The court applied the Wrigley parameters for credible outsourcing, noting the 1st respondent outsourced non-core labour through an agreement dated 7 September 2015. The claimant himself admitted employment by the 2nd respondent, who paid his wages and statutory dues through his bank account. The CBA in place related only to the 1st respondent.

p. 4
02

Whether the termination was unfair

Holding

Yes - the general notice dated 1st November 2016 was not specific to the claimant and gave no reasons, breaching Sections 35 and 41 of the Employment Act.

Reasoning

The 2nd respondent's notice of 1st November 2016 was a general notice to all employees, not specific to the claimant, who was not unionised and had no CBA protection. A terminating notice must give reasons to allow the employee to respond under Section 47(5). The failure met the threshold of unfair termination under Sections 41, 43 and 45, entitling the claimant to notice pay and compensation.

p. 5
03

Remedies

Holding

One month's notice pay and one month's compensation awarded against the 2nd respondent; leave, gratuity and extra notice claims failed; certificate of service ordered.

Reasoning

Notice pay at one month (ksh.15,500) was due under Section 35 as the claimant was not unionised. Terminal dues including leave had been paid, and leave application forms were produced. Gratuity accrued only under the CBA not applicable to him. Compensation was reduced because he was paid terminal dues immediately and transitioned to a new employer. Certificate of service is mandatory under Section 51.

p. 5

Legal principles established

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  • Outsourcing of labour, although not legislated in Kenya, is an acceptable labour practice subject to parameters such as not outsourcing core functions or using it to escape accrued obligations.
  • A general notice of termination not specific to the employee and without reasons does not satisfy Sections 35 and 41 of the Employment Act and results in unfair termination.

Court orders

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  1. 1.Judgment entered for the claimant against the 2nd respondent for notice pay ksh.15,500
  2. 2.Compensation of ksh.15,500 awarded against the 2nd respondent
  3. 3.Issuance of Certificate of Service
  4. 4.Each party to bear its costs

Authorities

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Legislation

  • Employment Act, 2007Section 35
  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 43
  • Employment Act, 2007Section 45
  • Employment Act, 2007Section 47(5)
  • Employment Act, 2007Section 49(1)
  • Employment Act, 2007Section 51
  • Collective Bargaining Agreement dated 16 February 2006 (KUCFAW/1st respondent)Section 15(c)

Cases cited (8)

  • Martin Ireri Ndwiga v Olerai Managements Company
    [2017] eKLR
  • Wachira v Mbote & another
    Cause No. 821 of 2018
  • Milano Electronics Limited v Dickinson Nyasi Muhaso
    [2021] eKLR
  • Elizabeth Washeke & 62 Others v Airtel Networks (K) Ltd & another
    [2013] eKLR
  • Josephine M. Ndungu & Others v Plan International Inc.
    [2019] eKLR
  • Wrigley Company (East Africa) Limited v Attorney General & 2 others & another
    [2013] eKLR
  • H. Young & Company (EA) Limited v Ng'eno
    (Appeal 7 of 2020) [2022] KEELRC 14654 (KLR) (6 October 2022)
  • Kenya Ports Authority v Joseph Munao & Others
    Petition No. E008 of 2023
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007

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, "Onchagwa v Coast Bottlers Limited & another (Cause 914 of 2017) [2024] KEELRC 951 (KLR)", Case Analysis (2024). ELRC Cause (Mombasa). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/951/eng@2024-04-11

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