[2021] KEELRC 1026 (KLR)

REPUBLIC OF KENYA

IN THE EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA

AT NAIROBI

CAUSE NO 848 OF 2017

AGATHA WAMBURA KIBAI.....CLAIMANT

VERSUS

AAA GROWERS LTD..............RESPONDENT

JUDGMENT

1. The claim against the Respondent is premised on an alleged breach of the employment contract between the parties to this action. Although the contract was reduced into writing by an instrument dated 16th September 2015, its commencement date was expressed as 1st October 2015. It was to run for two years until 1st October 2017.

2. The Claimant asserts that the Respondent unlawfully terminated the contract on 3rd September 2016. She believes that the Respondent’s motivation in terminating the contract was not for operational reasons within the Respondent’s structure as asserted by the Respondent. And hence her conviction that the termination was unlawful.

3. On the other hand, the Respondent asserts that the position held by the Claimant in the Respondent Company was abolished following the decision to close the Human Resource department. Consequently, the Claimant was rendered redundant.

4. The Respondent pleads that it followed the legal procedure under the applicable law in releasing the Claimant and fully paid the Claimant’s dues. In the Respondent’s view, there was therefore no illegality in the manner in which it handled the termination of the Claimant and nothing remains outstanding between them.

5. The parties’ pleading, in large part and detail, underscore the above two positions. In addition, the parties filed their respective witness statements and lists of documents which shed more light on the foundational issues to the dispute.

6. On 4th August 2021, the cause proceeded to hearing with both the Claimant’s and Respondent’s case being heard. It is perhaps necessary to point out at this point that the parties elected to adopt their respective statements as their evidence in chief. In addition, they highlighted salient issues through oral testimony. The parties as well produced copies of the documents set out in their respective lists of documents as exhibits in the order in which the documents are listed.

7. In her evidence, the Claimant stated that she concluded a two year employment contract with the Respondent under which she was to work as a Human Resource Officer. The contract was to commence on 1st October 2015 and run up to 1st October 2017. Her gross salary was agreed at Ksh. 85,000/=. Although the contract stipulates that the Claimant was to commence work on 1st October 2015, she began actual execution of her mandate on 12th October 2015. In support of her testimony regarding the fact of employment, the Claimant produced the contract of employment dated 16th September 2015. The Respondent, both by its pleadings and through evidence by its witness, confirms the foregoing.

8. The Claimant contended that she proceeded on leave and on resumption around 6th September 2016, she was told that the Respondent was restructuring. As a result, her position had been abolished. She was given a letter terminating her services. She produced the letter dated 3rd September 2016. It communicated the decision to terminate her services effective 5th September 2016.

9. The Claimant asserted in her testimony that immediately before her termination, the Respondent advertised her position. This was through a recruitment company by the name Summit Recruitment and Search. The Claimant produced and online advertisement dated 2nd September 2016 as evidence of her assertion aforesaid.

10. The Respondent denied that it later filled the Claimant’s position as its entire Human Resource department had been merged with the Payroll Department. Consequently, the Respondent disputed that the advertisement by the recruitment agency was evidence of the fact that it advertised the position.

11. At the close of the parties’ respective cases, they filed their written submissions. The submissions, fortified by a couple of authorities supporting their respective views, reiterate their respective positions.

12. The parties did not isolate and file a list of issues for determination before the trial commenced. However, from the pleadings coupled with the evidence tendered, the court has identified the following as the issues for determinations:-

a. Whether the contract of service between the Claimant and the Respondent was lawfully terminated on account of redundancy?

b. If the termination was unlawful, what remedies are available to the Claimant?

c. Who is to bear costs of the litigation?

Although, as observed, no issued were formulated by the parties at the pretrial stage, the Respondent did suggest issues for determination through its written submissions. It is perhaps necessary to point out that the issues as formulated by the court mirror those as perceived by the Respondent in its submissions. Further, although the Claimant’s Advocates did not expressly set out issues for determination in their submissions, their address also indirectly mirrors the issues as framed by the court.

13. Starting with the first question, the Claimant’s testimony was that her termination was not on account of redundancy. In her view, a redundancy would only have arisen if her position had been rendered superfluous and obsolete.

14. However, this was not the case as her position remained as evidenced by the fact that the Respondent re-advertised it and someone else took up the job. The Claimant testified that she got inside information from her colleagues and employees of the recruitment company that her position was never abolished.

15. The Respondent on the other hand denied filling the position previously occupied by the Claimant. The Respondent’s witness stated that the entire Human Resource Department of the Respondent was merged with its Payroll Department thereby abolishing the former.

16. Further, the witness testified that there are so many other organizations running similar business as the Respondent within Nairobi and that it is possible that the advertisement by Summit related to an entirely different organization. As a consequence, the advertisement by the recruitment company of a position similar to that which the Claimant previously occupied could not be relied on as proof of the assertion that the Claimant’s position had not been abolished.

17. The court has studied the advertisement by Summit Recruitment and Search. The advertisement does not indicate the client for whom the recruitment was being undertaken.

18. The Claimant stated that she got inside information that the recruitment was at the instance of the Respondent. However, the insiders who supplied this information did not give evidence. Absent this evidence, it is difficult for the court to find sound basis upon which it can hold that the position that the Claimant initially occupied at the Respondent organization was the one advertised by Summit Recruitment and Search.

19. However, the Respondent did not provide its current organogram to show that indeed the Human Resource Department no longer exists. Indeed, this issue was taken up during cross examination of the Respondent’s witness when he conceded that the Respondent had not furnished the court with the new company structure showing that the Human Resource docket is now abolished.

20. In terms of section 45 (2) (b) (ii) of the Employment Act, an employer can rely on operational requirements of his/her/its organization as a ground for lawfully terminating the employment of any employee. As has been observed by the Respondent’s counsel in their submissions, this is a power that is purely within the employer’s docket to re-organize his/her/its business in order to ensure that it runs optimally and remains profitable.

21. If exercised within the law, the court has no jurisdiction to fetter this power. However, where the employer works outside the parameters of the law in declaring a redundancy, the court will declare the subsequent termination as unlawful.

22. If an employee affected by a redundancy declaration disputes its lawfulness, then burden is on the employer to prove that there indeed existed genuine operational requirements justifying the termination. These could include a downturn in the employer’s operations or just that the employer has opted for improved methods of execution of its tasks in order to improve efficiency and profitability. Whatever the operational reasons, the employer must justify them in terms of sections 43 and 45 of the Employment Act in order for the termination to be held as fair.

23. In the court’s view, if an employer asserts that there has been abolition of a position within its structure, then part of the critical evidence to demonstrate this development would be details of the employer’s new organogram. As indicated above, the Respondent asserted that the Claimant’s position was done away with when the Human Resource department was merged with the Payroll department. However, in cross examination, the Respondent’s witness conceded that he had not filed evidence of the current structure of the Respondent. Thus, the court finds that to the extent that the Respondent failed to provide evidence of its current organogram to demonstrate that the Claimant’s position had been abolished, it failed to justify the Claimant’s termination on the basis of abolition of office.

24. Further, the Respondent’s witness indicated that the Respondent was reorganizing in order to cut on operational costs. This would suggest that the Respondent was experiencing some difficult economic conditions to warrant the decision. However, as conceded by the Respondent’s witness, there was no evidence to suggest the economic strain the Respondent was undergoing that would have been alleviated through the layoffs. He further conceded that no evidence of loss making was availed by the Respondent to trigger the redundancy declaration. In the premises, there is no evidence to support the substantive ground upon which the redundancy was premised.

25. In relation to procedural fairness, the Claimant testified that she was only handed a letter dated 3rd September 2016 on 6th September 2016 terminating her services. Prior to this, she had been neither notified of the intended redundancy nor consulted on it. In cross examination of the Respondent’s witness, he stated that the Respondent notified and held discussions with the Claimant regarding the redundancy. However, this happened on the same date the Claimant was terminated.

26. The law on redundancy in Kenya is set out under section 40 as read with section 45 (2) (b) (ii) of the Employment Act. First, it requires that the employer proves the grounds upon which termination is determined for operational reasons. These constitute the substantive grounds for declaring a redundancy. As mentioned earlier, it could be for reasons of economic downturn, technological advancements necessitating change in methodology of execution of tasks among others.

27. Second, the employer must observe the procedural strictures set out under section 40 of the Act. It requires that an employer wishing to terminate employees on grounds of redundancy issues a notice showing the reasons and extent of the intended redundancy. This notice is to be served on the employee personally where he/she is not a member of a trade union. If the employee is a member of a trade union, the notice must be served on the said union. In addition, the notice must be served on the local labour office where the employer operates. The law stipulates the minimum duration of the notice to at least thirty days before the date of termination.

28. Clearly, what is contemplated at this stage is a notice that precedes the decision to terminate. Such notice merely signifies the employer’s decision to commence the redundancy process and states the extent of the proposed redundancy together with the grounds for it. This notice, unlike the subsequent notice of termination, is of general nature addressed to the general employee population if the employer has more than one employee. It is not the same thing as the termination notice which is to be subsequently addressed to the specific employee(s) whose contract of service has been brought to closure on account of redundancy.

29. There is no evidence that the Respondent issued this notice. All that the Respondent did was to issue the termination letter addressed to the Claimant detailing the reasons for the decision to terminate. Indeed, the Respondent’s counsel in their submissions allude to the fact that the Claimant was served with a letter dated 3rd September 2016 supposedly in compliance with the notice dictated by section 40 of the Employment Act. However and as is clear from its content, this was the letter terminating the Claimant’s services and not the notice intended to precede the selection process of employees to be terminated on redundancy.

30. The law also obligates the employer to select employees to be terminated while having regard to the requirements as to seniority in time of employment, skill, ability and reliability of every of the affected employees. There is evidence on record that the Respondent organization had more than one employee at the time of the alleged redundancy. In fact, it is indicated that it had the Human Resource and Payroll departments. In the evidence of the Respondent’s witness, the Claimant and one Bianca Nicoline were laid off when the two departments were merged. However, there is no evidence whether apart from these two the Human Resource department had other employees and how the selection process was undertaken in order to settle on the two for retrenchment. I say so because in his evidence, the Respondent’s witness talks of the merger of the Human Resource and Payroll departments without giving details on the consequences of the merger on the employees who had been working under the distinct departments .

31. In terms of section 45 of the Employment Act, the Respondent was obligated to provide these details to the court in order to justify the termination on operational grounds. This is so because such evidence would demonstrate that the selection procedure adopted by the Respondent complied with the dictates of section 40 of the Employment Act. Absent these details, the selection process can only be termed as opaque and which would as was observed by Maraga J in Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR, fail to meet the criteria under section 40 of the Employment Act.

32. In the final result, the court finds that the Respondent did not satisfy the statutory requirements for declaring a valid redundancy against the Claimant. This is particularly so for want of issuance of the requisite notice and for the opaqueness that surrounded the selection process. As a result, the court finds that the employment contract between the parties was unfairly terminated by the Respondent.

33. The termination having been unlawful, the next question for determination relates to the remedies available to the Claimant. The Claimant has prayed for the following remedies:-

a. A declaration that the Respondent’s termination of the Claimant’s contract of service was unlawful.

b. An order for compensatory damages in the sum of Ksh. 2,261,000/=.

c. Costs of the suit.

The damages are particularized under paragraph 12 of the statement of claim as comprising the following:-

i. One month’s salary in lieu of notice Ksh. 85,000/=.

ii. Severance pay of Ksh. 51,000/=.

iii. Payment for the unexpired contract period of Ksh 1,105,000/=.

iv. Damages equivalent to 12 months’ pay of Ksh. 1,020,000/=.

34. Although the Claimant pleads for salary in lieu of notice of up to Ksh. 85,000/, evidence was tendered by the Respondent that this amount was paid to the Claimant. The Claimant conceded this in cross examination. Accordingly, this claim is declined.

35. In relation to severance pay, section 40 contemplates payment of a sum equivalent to 15 days for every year worked. The parties agree that the Claimant was employed from 1st October 2015 and was terminated on 3rd September 2016. This was just before the lapse of one year while at work. Therefore, in the court’s view this award is not available to the Claimant.

36. But more importantly, severance pay presupposes that there has been a valid declaration of a redundancy. In my view, it is not payable where a purported redundancy has been declared irregular. In such case, I think that the remedies available to the aggrieved party are those provided for substantially under section 49 and not 40 of the Employment Act.

37. In relation to the claim for damages for the unexpired term of the employment contract, I share the view by Maureen Onyango J expressed inAfred Yambo Oyie v Fatima Misison Hospital [2020] eKLR that the remedies under section 49 of the Employment Act do not prescribe this as one of the remedies. In any event, to award such remedy alongside the remedy for compensation with a twelve months cap seems to me to permit unjust enrichment which the court should not countenance.

38. Further, the Court of Appeal in Directline Assurance Co. Ltd v Jeremiah Wachira Ichaura [2016] eKLR has expressed difficulty in entertaining such award where the contract under review has an express termination clause. In the court’s view, such award can perhaps only be countenanced in situations where the fixed term employment contract did not contain an express termination clause. Accordingly, I decline to make this award.

39. As regards the prayer for compensation equivalent to the Claimant’s gross pay for twelve months, I note from the testimony by the Claimant that the Respondent head-handed her and gave her the two year contract. This testimony by the Claimant was not controverted by the Respondent.

40. Having regard to the circumstances surrounding the Claimant’s hire, it appears clear to me that the Claimant was left with legitimate expectation that her contract would run full term owing to the confidence the Respondent had in her. Therefore, to abruptly terminate the contract must have been traumatic to the Claimant. Besides, the Claimant’s termination happened just days before she would have been entitled to severance pay for one year had the redundancy been procedurally declared. She therefore draws no benefit from this head of damages.

41. There was no evidence that the Claimant had failed to mitigate her loss nor was there evidence that her misconduct contributed to the job loss. Taking all these factors into account, I find that the Claimant is entitled to an award equivalent to at least 7 months of her gross salary at Ksh. 595,000/=. This amount will attract interest from the date of this decision till payment in full.

42. The court orders that the Claimant is awarded costs of the suit.

43. This award is subject to the applicable statutory deductions in line with section 49 of the Employment Act.

44. Summary of the Award:-

a. The Respondent’s termination of the Claimant’s contract of service was unlawful.

b. The Claimant is awarded compensation equivalent to her salary for 5 months of Ksh. 595,000/=.

c. The Claimant is awarded interest on (b) above.

d. The Claimant is awarded costs of the suit.

e. For the avoidance of doubt, this award is subject to the applicable statutory deductions.

DATED, SIGNED AND DELIVERED ON THE 10TH DAY OF SEPTEMBER 2021

B O M MANANI

JUDGE

In the presence of:

…………………………………..for the Claimant

………………………………….for the Respondent

ORDER

In view of the declaration of measures restricting court operations due to the Covid-19 pandemic and in light of the directions issued by his Lordship, the Chief Justice on 15th April 2020, this judgment has been delivered to the parties online with their consent, the parties having waived compliance with Rule 28 (3) of the ELRC Procedure Rules which requires that all judgments and rulings shall be dated, signed and delivered in the open court.

B O M MANANI

JUDGE