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ELRCPartially AllowedCause No E019 of 2023· [2024] KEELRC 2114 (KLR)

Shah v Alloy Castings Limited (Cause E019 of 2023) [2024] KEELRC 2114 (KLR)

Employment and Labour Relations Court
26 July 2024
SRStella Rutto
4,602 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~18 min to read original · ~4 min brief

The bottom line

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A Kenyan employer's redundancy was ruled unfair because it could not prove the job was truly abolished, so it must pay over Kshs. 2 million.

What this practically means

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Executive summary

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The Employment and Labour Relations Court at Nairobi (Stella Rutto, J) determined a claim by a former Head of Marketing whose employment, commenced on 6th January 2021, was terminated on 23rd February 2022 on grounds of redundancy. The Claimant sought a declaration of unfair termination, twelve months' compensation, severance pay, accrued leave pay, salary deductions, punitive damages, a Certificate of Service and costs. The Respondent defended the redundancy as a genuine restructuring merging the Sales and Marketing departments, applying the last-in-first-out principle, and asserted compliance with Section 40 of the Employment Act. The court framed two issues: whether the termination was unfair and unlawful, and entitlement to reliefs. On substantive justification, the Respondent produced only the pre-restructuring organizational structure and no structure evidencing the merger, and so failed to prove the Claimant's position was abolished. Procedurally, the notice issued declared the redundancy after the decision, not an intention to declare redundancy under Section 40(1)(b); selection relied solely on LIFO without regard to skill, ability and reliability under Section 40(1)(c); and there was no evidence of meaningful consultations. Severance pay was payable because service runs from first employment, not confirmation, giving one completed year. The salary deduction claim failed as the absences were unapproved and unsupported by medical evidence, and punitive damages were declined. Judgment was entered for the Claimant: a declaration of unfair and unlawful termination, Kshs. 1,650,000 compensatory damages (three months' salary), Kshs. 275,000 severance pay, Kshs. 77,916.67 unpaid leave, totaling Kshs. 2,002,916.67, with interest, costs, and the Certificate of Service to be released within 14 days.

Key legal issues

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01

Substantive justification for redundancy

Holding

The Respondent failed to prove the Claimant's position was abolished from its organizational structure.

Reasoning

The Respondent relied on a restructuring merging Sales and Marketing departments, but only exhibited the pre-restructuring structure showing two separate heads. There was no organizational structure flowing from the merger proving the Marketing department headed by the Claimant had ceased to exist. The employer bore the burden of proving the termination was attributable to the redundancy.

p. 6
02

Procedural fairness - notice under Section 40(1)(b)

Holding

The notice given declared redundancy after the decision had been made, contrary to the statutory requirement of a notice of intention.

Reasoning

Section 40(1)(b) requires a notice of intention to declare redundancy before the redundancy takes effect, to elicit consultation. The notice dated 23rd February 2022 communicated the decision already taken, so the Respondent did not substantially comply with the statutory requirement.

03

Selection criteria under Section 40(1)(c)

Holding

Reliance solely on LIFO did not satisfy the requirement to consider seniority together with skill, ability and reliability.

Reasoning

The Respondent applied only the last-in-first-out principle without considering the Claimant's skill, ability and reliability. The court found this did not substantially comply with Section 40(1)(c) and left doubt whether selection was objective.

p. 7
04

Pre-redundancy consultations

Holding

No evidence of meaningful consultations; the Respondent was at fault.

Reasoning

RW1 testified only to verbal consultations with the HR Manager. There was no concrete evidence that consultations were undertaken in line with ILO Convention No. 158 standards, and consultations must be meaningful, not cosmetic.

p. 7
05

Severance pay entitlement

Holding

The Claimant completed one year of service from January 2021 to January 2022 and was entitled to severance pay.

Reasoning

Section 40(1)(g) entitles an employee to not less than 15 days' pay per completed year. Service runs from first employment, not confirmation, so the Claimant's employment from January 2021 completed a year by January 2022.

p. 8
06

Salary deductions for absences

Holding

The deductions were lawful as the absences were unapproved and unsupported by medical evidence.

Reasoning

The Claimant admitted she had no approved leave on the days in question and produced no medical certificate for her alleged illness. Under Sections 30(1) and 30(2) sick pay requires a certificate and notification, so the Respondent could recover the salary.

p. 9

Legal principles established

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  • A redundancy termination must be both substantively justified and procedurally fair.
  • The notice under Section 40(1)(b) must be a notice of intention to declare redundancy, issued before the redundancy decision takes effect.
  • An employee earns severance pay from first employment, not from confirmation.
  • An employer relying on redundancy must prove abolition of the office and that termination is attributable to the redundancy.

Court orders

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  1. 1.A declaration that the termination of the Claimant from employment was unfair and unlawful
  2. 2.Award of Kshs. 1,650,000.00 compensatory damages for unfair termination
  3. 3.Award of Kshs. 275,000.00 severance pay for one completed year of service
  4. 4.Award of Kshs. 77,916.67 for unpaid leave (4.25 days)
  5. 5.Total award of Kshs. 2,002,916.67
  6. 6.Interest on the total award at court rates from the date of Judgment until payment in full
  7. 7.The Claimant shall have the costs of the suit
  8. 8.The Respondent to release the Certificate of Service within 14 days if not already issued

Authorities

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Legislation

  • Employment ActSection 9(2)
  • Employment ActSection 40(1)
  • Employment ActSection 40(1)(b)
  • Employment ActSection 40(1)(c)
  • Employment ActSection 40(1)(e), (f) and (g)
  • Employment ActSection 28(1)(a)
  • Employment ActSection 30(1)
  • Employment ActSection 30(2)
  • Employment ActSection 51(1)
  • Employment (General) Regulations, 2014Not specified
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • ILO Convention No. 158 - Recommendation No. 166Article 13

Cases cited (4)

  • Eddie Mutegi Njora v Mega Microfinance Co. Ltd
    (2015) eKLR
  • Cargill Kenya Limited v Mwaka & 3 others
    (2021) KECA 115 (KLR) 22
  • Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others
    (2014) eKLR
  • Barclays Bank of Kenya Ltd & another v Gladys Muthoni & 20 others
    (2018) eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act (first-instance employment claim)

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, "Shah v Alloy Castings Limited (Cause E019 of 2023) [2024] KEELRC 2114 (KLR)", Case Analysis (2024). Cause No E019 of 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2114/eng@2024-07-26

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