Muthoni v Barium Capital Limited & another (Cause E199 of 2022) [2024] KEELRC 2345 (KLR)
The bottom line
#Kenya's Employment Court ruled that skipping mandatory redundancy steps makes a retrenchment unfair termination, awarding an employee over Kshs.12.8 million.
What this practically means
#Executive summary
#Key legal issues
#Who the Claimant's employer was
Both respondents operated as a single economic entity; the 2nd Respondent exercised significant control over the Claimant's employment.
The court found the Claimant signed an employment contract with the 1st Respondent, but the contract's Clause 6 expressly contemplated offering services to any Centum Group affiliate, payslips were issued by the 2nd Respondent, and the 2nd Respondent controlled finances, HR and payroll. Relying on the qualification of the Salomon rule for group accounting, the court found no clear operational dichotomy between the respondent companies.
Whether the Claimant's redundancy was bonafide
The redundancy was not bonafide; the notice was ineffectual and the process lacked substantive justification and procedural fairness.
The notification of redundancy dated 15th June 2020 preceded the 1st Respondent's board resolution of 19th June 2020, indicating the process was orchestrated. No evidence proved notice to the Labour Officer under Section 40(1)(b), no prior notification or discussion with the Claimant occurred, and no explanation was given on selection, reasons or extent of the redundancy. The respondents did not controvert that the redundancy was a strategy orchestrated by the 2nd Respondent to close the 1st Respondent.
Whether the Claimant is entitled to the reliefs sought
A declaration of unfair termination was granted, redundancy dues of Kshs.10,903,410.52 as admitted were awarded, and compensation of 2 months' gross salary was granted; constitutional damages and bonus claims failed for want of evidence.
Having found the termination unfair, the court made the declaration sought. The redundancy package of Kshs.10,903,410.52 was confirmed by email and awarded as admitted. Considering the Claimant's about 11 years at the Centum Group and the finding that the redundancy was not bonafide, the court deemed 2 months' gross salary fair compensation. The Article 41 damages and bonus claims were unsupported by evidence and were declined.
Legal principles established
#- The provisions of Section 40(1) of the Employment Act on redundancy are mandatory and an employer must comply with all the conditions therein before declaring an employee redundant.
- Where a redundancy lacks substantive justification and procedural fairness, it constitutes unfair termination under Section 45(2) of the Employment Act.
- Where companies in a group operate as a single economic unit with no clear operational dichotomy, they may be treated as one for purposes of employment liability.
Court orders
#- 1.Declaration that termination of the Claimant's employment on account of redundancy was unfair.
- 2.Redundancy dues awarded as admitted, Kshs.10,903,410.52.
- 3.Equivalent of 2 months' salary as compensation for unfair termination, Kshs.1,960,000.00.
- 4.Costs of the suit awarded to the Claimant.
- Jurisdiction invoked
- Original jurisdiction of the Employment and Labour Relations Court under the Employment Act, 2007 and Article 41 of the Constitution of Kenya
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Muthoni v Barium Capital Limited & another (Cause E199 of 2022) [2024] KEELRC 2345 (KLR)", Case Analysis (2024). Cause No E199 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2345/eng@2024-09-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.