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ELRCPartially AllowedNot stated in excerpt· [2024] KEELRC 1504 (KLR)

Maundu & 40 others v Beiersdorf EA Limited & another (Cause 2164 of 2016) [2024] KEELRC 1504 (KLR)

Employment and Labour Relations Court
14 June 2024
JRJames Rika
7,150 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~29 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court ruled both a company and its labour agency must pay 41 merchandisers unfairly terminated through an outsourcing arrangement, awarding over Kshs. 8.7 million.

What this practically means

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Executive summary

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Forty-one claimants, former merchandizers, sued two respondent companies for unfair termination, severance pay, outstanding leave, and salaries for the remainder of their contracts. The claimants were originally engaged directly by the 1st Respondent, a skincare and personal hygiene products company, until it outsourced its merchandising function. Thereafter, they signed contracts with the 2nd Respondent, a manpower agency, while continuing to work under the 1st Respondent's control, on its premises, wearing its branded uniforms, and subject to its supervision and appraisal. In June 2016, the 1st Respondent decided to change merchandising agencies and the 2nd Respondent, on the 1st Respondent's instructions, issued termination notices effective 31st July 2016. The Court framed three issues: identity of the employer, fairness of termination, and entitlement to remedies. It held that the outsourcing agreement between the Respondents revealed shared obligations over recruitment, supervision, remuneration, discipline, and statutory compliance, making both co-employers within the meaning of Section 2 of the Employment Act, which includes an agent within the definition of employer. The Court criticized the abuse of triangular employment relationships, holding that outsourcing of core functions to evade legal and regulatory burdens was improper. It found the termination amounted to redundancy effected without following Section 40 of the Employment Act, rendering it unfair and unlawful. Both Respondents were declared jointly and severally liable. Compensation was awarded at 5 months' salary per claimant based on the remaining contract period, plus severance of 15 days' salary per year worked to a maximum of 5 years. Claims for outstanding leave and the balance of contract salaries were declined for lack of evidence and duplication of compensation respectively. Total award of Kshs. 8,702,280 was granted, with certificates of service, costs, and interest.

Key legal issues

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01

Whether the Respondents were co-employers of the Claimants

Holding

Yes, both Respondents were co-employers; the outsourcing agreement and shared responsibilities established co-employment

Reasoning

The Court examined the outsourcing agreement between the Respondents and found shared responsibilities including supervision, remuneration, disciplinary control, and occupational safety. Both parties determined essential terms and conditions of service. Under Section 2 of the Employment Act, an 'employer' includes an agent; the 2nd Respondent conceded it was an agent of the 1st Respondent, making both co-employers liable jointly and severally.

p. 10
02

Whether the termination was unfair

Holding

Yes, termination was unfair and unlawful as it should have followed the redundancy procedure under Section 40 of the Employment Act

Reasoning

The Claimants' functions became unnecessary to the 1st Respondent's business; their contracts were terminated not for fault but for operational requirements, effectively amounting to redundancy. The Respondents failed to follow the mandatory redundancy procedure under Section 40, and did not consult the Claimants or each other on terminal benefits.

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Whether compensation should be based on length of service

Holding

No conclusive evidence of length of service; compensation based on remaining contract period of 5 months' salary

Reasoning

Under Section 49(4)(e) of the Employment Act, the Court considers length of service and reasonable expectation of continued employment. The Claimants did not establish precise length of service predating 2010, but common evidence showed they expected to serve the remaining 5 months of their contracts. The Court adopted this expectation in awarding compensation equivalent of 5 months' salary.

p. 14
04

Whether outsourcing of core functions was lawful

Holding

Outsourcing a core function (merchandising) to evade legal and regulatory burdens was improper

Reasoning

The Court found the 1st Respondent outsourced merchandising, a core business function, and used short-term renewable contracts over long periods (up to 15 years) to evade employment obligations. This represented abuse of the temporary help industry model, converting long-term employees rendering core functions into 'temporary labour'.

p. 12

Legal principles established

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  • An agent of an employer can be a co-employer under Section 2 of the Employment Act
  • Outsourcing of core functions to evade legal and regulatory burdens is an abuse of the temporary help industry
  • Termination on grounds of redundancy must follow Section 40 of the Employment Act

Court orders

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  1. 1.Declared that termination of the Claimants' contracts was unfair and unlawful
  2. 2.Declared Respondents jointly and severally liable to the Claimants
  3. 3.Respondents to pay each Claimant specified severance and compensation amounts (40 claimants listed)
  4. 4.Respondents jointly and severally to pay total sum of Kshs. 8,702,280
  5. 5.Certificates of Service to be issued to the Claimants by both Respondents
  6. 6.Costs to be paid by Respondents to Claimants
  7. 7.Interest at court rate from date of Judgment until payment in full
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act (Employment and Labour Relations Court Act)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Maundu & 40 others v Beiersdorf EA Limited & another (Cause 2164 of 2016) [2024] KEELRC 1504 (KLR)", Case Analysis (2024). Not stated in excerpt. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1504/eng@2024-06-14

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