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IndustrialPartially AllowedCause No 1539 of 2010· [2012] KEIC 35 (KLR)

Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals and Allied Workers v Kenyatta National Hospital (Cause 1539 of 2010) (Employment and Labour) [2012] KEIC 35 (KLR)

Industrial Court of Kenya
17 September 2012
4,777 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Industrial Court awarded KNH union workers a 46% salary increase and higher house allowances for 2009-2011, rejecting the hospital's claim that government circulars excused it from paying.

What this practically means

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Executive summary

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The Claimant union filed a claim on behalf of unionisable employees of the Respondent hospital seeking, in respect of the 2009-2011 Collective Bargaining Agreement, a 45% salary increment in each of two years, revised house and commuter allowances, and a leave travelling allowance of one month's basic salary capped at Kshs.60,000, with costs. The Respondent opposed, citing a financial deficit of about Kshs.282 million, reliance on Government grants, and circulars barring salary reviews pending guidelines from the Salaries and Remuneration Commission. By consent, an Economic Report from the Economic Planning Division of the Ministry of Labour was filed and its author, Mr. Okwayo, testified; he recommended no increase, though the report confirmed a 34.6% rise in CPI, improved productivity, and higher housing and transport costs. The court found jurisdiction under the Industrial Court Act and Article 162(2)(a) of the Constitution. It held that the demand was warranted, that the employees' accrued rights survived the post-2010 circulars, and that the Respondent, a Body Corporate under Legal Notice No.109 of 1987, bore responsibility for budgeting and exchequer approval. The court awarded a 46% total salary increment, 23% house allowance increment, modest leave travelling allowance increments by job group, and left commuter allowance under the existing Government scheme, directing the parties to sign the CBA within 45 days.

Key legal issues

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01

Whether the claim for salary and allowance increments was deserving

Holding

Yes - the employees deserved increments given the admitted entitlement, the rise in cost of living, housing and transport costs, and international and municipal law guaranteeing just and favourable remuneration

Reasoning

The court noted that the Respondent's counsel admitted the employees deserved an increment. The EPD Report confirmed that the cost of living, housing and transport had increased during the CBA period. The court also invoked the international and municipal law principle that an employee has a right to just and favourable remuneration ensuring an existence worthy of human dignity. On a balance of probability the demand was warranted.

p. 5
02

The applicable rate of salary increase

Holding

Total salary review of 46% for the two-year CBA period (23% per year), combining CPI compensation of 17.3% per year, 5.7% for productivity, informed by the wage differential concept

Reasoning

The court assessed compensation for inflation using CPI (34.6% over two years), accepted the unchallenged averment of a 48% productivity improvement of which the employees were entitled to a half-share, and noted a 73% wage differential gap exceeding the 50% permitted under the Wage Guidelines. Exercising discretion with regard to socio-political and economic factors, the court fixed 23% per year, totalling 46%.

p. 6
03

Whether the Respondent's financial deficit and Government circulars barring salary reviews were compelling reasons to withhold the increment

Holding

No - the Respondent, as a Body Corporate, is responsible for its own budgeting and seeking exchequer approval; the circulars did not extinguish accrued rights

Reasoning

The court found that the Respondent is a State Corporation with the status of a Body Corporate under Legal Notice No.109 of 1987, able to incur obligations independently of the State. Nothing was shown that budget proposals were made with the Claimant's demands in mind or that the exchequer was put on notice. The rights accrued before the circulars, and withholding the award risked industrial unrest in an essential services hospital.

p. 9

Legal principles established

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  • A State Corporation established as a Body Corporate has the capacity and responsibility to negotiate its employees' terms and to seek budget approvals independently of the exchequer.
  • Employees' accrued rights to salary review cannot be defeated by circulars issued after the rights accrued.
  • An employer's financial deficit alone is not a compelling reason to withhold salary increments where the employer has not demonstrated efforts to secure budgetary approval.

Court orders

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  1. 1.Salary Increament of 46% for the period of 1st July 2009 – 30th June, 2011 CBA
  2. 2.House Allowance increament of 23% for the period 1st July 2009 – 30th June 2011, putting the lowest house allowance at Kshs.5,289/-
  3. 3.Leave Traveling Allowance increament of Kshs.2,000, 1,500, and 1,000/- to Job Groups K.17-11; K.10-9 and K.8 respectively
  4. 4.Commuter Allowance to remain as per the government scheme of between Kshs.3,000 – 8,000 per month until the next CBA after the one under review
  5. 5.Parties directed to conclude and sign the Collective Bargaging Agreement for 1st July 2009 – 30th June 2011 within forty five (45) days of the judgment incorporating the awarded salary and allowances

Authorities

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Legislation

  • Labour Relations ActSection 12(xiii)
  • Labour Institutions ActSection 12
  • Industrial Court ActNot specified
  • Constitution of KenyaArticle 162(2)(a)
  • Kenya Constitution 2010Provision establishing the Salaries and Remuneration Commission
  • Legal Notice No.109 published in the Kenya Gazette No.23 of 10-4-1987Section 4
  • Wage GuidelinesGuideline No.1; Guideline No.2(1)
Jurisdiction invoked
Industrial Court Act and Article 162(2)(a) of the Constitution of Kenya

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, "Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals and Allied Workers v Kenyatta National Hospital (Cause 1539 of 2010)  (Employment and Labour) [2012] KEIC 35 (KLR)", Case Analysis (2012). Cause No 1539 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keic/2012/35/eng@2012-09-17

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