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ELRCPartially AllowedELRC CAUSE NO. E 777 OF 2022· [2024] KEELRC 986 (KLR)

Ndung’u v Choice Microfinance Bank Limited (Cause E777 of 2022) [2024] KEELRC 986 (KLR)

Employment and Labour Relations Court
11 April 2024
3,685 words in judgment
View original judgmentRead on Kenya Law Watch case
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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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The Claimant, formerly Head of Operations and later CEO of the Respondent, sued claiming constructive dismissal after the Respondent failed to issue him written terms as CEO, retained him on his previous salary of Ksh. 100,000.00 instead of the Ksh. 420,000.00 earned by his predecessor, demoted him, and removed him from the management communication platform. The Respondent denied forcing his resignation, asserted it had offered a responsibility allowance of Ksh. 500,000.00 which he rejected, and counter-claimed alleging the Claimant caused it losses through fraudulent procurement of overpriced computers and a conflict of interest by transacting insurance business with it through his brokerage firm. The court framed five issues and held that employers must pay equal pay for work of equal value under Article 41 of the Constitution and section 5 of the Employment Act, and that the Respondent's failure to justify the pay disparity constituted unfair labour practice, declaring the Claimant underpaid by Ksh. 320,000.00 per month. The court further held that the Respondent's conduct, including breaching its commitment to discuss terms, ignoring the Claimant's resignation-warning letter, and demoting him, amounted to constructive dismissal. The counter-claim failed: the price variance was explained by higher-grade computers, the procurement statute did not cover the Respondent as a non-public entity, and the Respondent's own policies merely required disclosure of conflicts of interest. The court awarded Ksh. 2,880,000.00 for underpayment and Ksh. 1,680,000.00 for unfair dismissal, ordered a Certificate of Service, declined the house allowance claim, dismissed the counter-claim, and awarded the Claimant costs of the counter-claim.

Key legal issues

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01

Equal pay for work of equal value

Holding

The Respondent subjected the Claimant to unfair labour practice by paying him Ksh. 100,000.00 as CEO when the outgoing CEO earned Ksh. 420,000.00 for the same work, with no objective justification

Reasoning

Article 41 protects fair labour practices including fair remuneration, and section 5 of the Employment Act mandates equal pay for work of equal value. The Respondent provided no objective criteria for the pay disparity, and the outgoing CEO's Ksh. 420,000.00 was an entry salary, defeating the experience-based explanation.

p. 4
02

Constructive dismissal

Holding

The Claimant was unfairly terminated through constructive dismissal

Reasoning

The Respondent failed to issue a written contract as required by sections 9 and 10 of the Employment Act, reneged on its commitment to discuss terms, ignored the Claimant's 21st September 2022 letter, and demoted him. These intolerable conditions justified resignation, deemed a forced termination by the employer.

p. 5
03

Alleged breach of procurement laws, fraud and conflict of interest

Holding

The court absolved the Claimant; the counter-claim failed

Reasoning

The investigation report showed only a variance in prices accounted for by higher-grade equipment, not fraud. Further, the Public Procurement and Asset Disposal Act applies to State organs and public entities under section 3, and no evidence showed the Respondent fell within that category. The conflict-of-interest claim failed because the Respondent's own policies only require disclosure, and the Board did not object to the insurance transaction.

p. 6

Legal principles established

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  • Employers must pay equal pay for work of equal value and cannot justify pay disparities between employees performing the same work without objective criteria
  • Failure to pay an employee a salary matching the value of his work constitutes repudiation of the contract and may ground constructive dismissal
  • Where an employer fails to reduce the contract into writing, it bears the burden of proving the terms it asserts under section 10(7) of the Employment Act

Court orders

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  1. 1.Declared that the Claimant was underpaid by the Respondent during his tenure as CEO in comparison with the CEO whom he replaced
  2. 2.Declared that the Claimant's contract of service was unfairly terminated through constructive dismissal
  3. 3.Awarded the Claimant Ksh. 2,880,000.00 for underpayment of salary for his tenure as CEO
  4. 4.Awarded the Claimant Ksh. 1,680,000.00 as compensation for unfair dismissal from employment
  5. 5.Declined the claim for house allowance
  6. 6.Ordered the Respondent to issue the Claimant with a Certificate of Service
  7. 7.Dismissed the Respondent's counter-claim
  8. 8.Awarded the Claimant costs of the counter-claim
  9. 9.Directed that the award is subject to the applicable statutory deductions
  10. 10.Deemed any other relief sought but not expressly granted as declined

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 41
  • Employment ActSections 5, 9, 10, 10(7), 49, 51
  • Public Procurement and Asset Disposal ActSection 3
  • Equal Remuneration Convention, 1951 (No. 100)null
  • Employment and Labour Relations Court (Procedure) RulesRule 28 (3)

Cases cited (1)

  • Godfrey Allan Tolo v Tobias O. Otieno & another
    [2022] eKLR
On appeal from
null
null
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under Article 41 of the Constitution and the Employment Act

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, "Ndung’u v Choice Microfinance Bank Limited (Cause E777 of 2022) [2024] KEELRC 986 (KLR)", Case Analysis (2024). ELRC CAUSE NO. E 777 OF 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/986/eng@2024-04-11

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