[2016] KEELRC 1512 (KLR)

REPUBLIC OF KENYA

EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA AT NAIROBI

CAUSE NO. 637 (N) OF 2009

BAKERY CONFECTIONERY FOOD MANUFACTURING & ALLIED

WORKERS UNION (K)………………………….............................................………..CLAIMANT

VERSUS

SPIN KNIT DAIRY LIMITED.…………………............................................….1ST RESPONDENT

BROOKSIDE DAIRY LIMITED…………..........................................………...2ND RESPONDENT

Mr Amalemba for the Claimant

Mr Moleje for the Respondent

JUDGEMENT

1. The suit was commenced vide a memorandum of claim dated the 29th October 2009. The suit was filed by the Claimant Union on behalf of all unionsable employees of the 1st Respondent.

2. The Claimant alleges unlawful, malicious and wrongful redundancy of all employees of Spin Knit Dairy limited on 6th October 2009 leading to an unlawful and irregular absorption of the employees into the employment of Brookside Dairy Limited which adversely affected the said employees.

3. The Claimant seeks;

A declaratory order that the notice of redundancy dated 15th October 2009 issued to Unionisable employees of the 1st Respondent as illegal and unlawful

A declaratory order that all the unionisable employees in the employment of the 1st Respondent as on 15th October 2009 so far purportedly declared redundant have been unlawfully declared redundant.

A permanent injunctive order to restrain the 1st Respondent from declaring redundant any of its unionisable employees save as provided for in the collective agreement.

A permanent injunctive order to restrain the 1st Respondent from forcing its unionisable employees to be contracted through the 2nd Respondent herein.

A declaratory order that the purported absorption of the unionisable employees of the 1st Respondent by the 2nd Respondent is unlawful.

A restraining order halting the 2nd Respondent from issuing fresh contracts of employment to the unionisable employees of the 1st Respondent outside the registered collective agreement.

An order for the immediate reinstatement by the 1st Respondent of all the grievants herein unlawfully and improperly declared redundant into their former employment without any loss of pay, benefits and/or seniority.

An order compelling the 1st Respondent to pay to its unionsable employees their full entitlements under clause 8 of the Registered Collective Bargaining Agreement No 273 of 2008 inclusive of gratuity/retirement benefits under clause 25 of the said Agreement of the employees upon being purposely declared redundant.

4. The Claimant relies on annexture A – W attached to the memorandum of claim; Notice to produce filed on 3rd February 2010, list of legal authorities duly filed and written submissions filed on 22nd September 2015.

5. The Respondent filed a memorandum of reply on 1st November 2009 in which they admit having declared all the employees of the 1st Respondent redundant, paid all their temianl dues pursuant to the declaration of redundancy and all employees subsequently absorbed by the 2nd Respondent to fresh employment.

6. The Respondents in particular deny having violated the Collective Bargaining Agreement between the Claimant and the 1st Respondent at section 40 of the Employment Act, 2007 which governs declaration of redundancies for lawful reasons.

7. The Respondent rely on annextures 1 – 10 of the memorandum of reply which clearly show the sequence of events arising from the take over of the 1st Respondent by the 2nd Respondent pursuant to which the staff of the 1st Respondent were declared redundant by fact of take over of business by the 2nd Respondent with effect from 6th October 2009.

The Agreement.

8. The Merger Agreement between the 1st and 2nd Respondent was submitted to the court under seal vide a letter dated 17th September 2010 for reasons of confidentiality and the following are the pertinent matters noted by the court in the document:-

The Agreement dated 30th October 2009 between the 1st Respondent and the 2nd Respondent is for the sale of the business (as a going concern) and assets of Spin Knit Dairy Limited.

In terms of clause 2. 4 of the Agreement, save for the elections made under clause six (6) of the Agreement, the 2nd Respondent did not take over any liabilities of the 1st Respondent and same continued to vest in the 1st Respondent.

Clause six (6) deals with payment of value added tax.

The 1st and 2nd Respondents did not constitute a partnership or agency and either of the parties has no authority to bind the other.

The Agreement is to be governed by and construed in all respects in accordance with the laws of Kenya.

The properties, trademarks and motor vehicles subject of the agreement are found in the 1st, 2nd and 3rd schedule respectively and were all taken over by the 2nd respondent.

Determination

9. The issues for determination in this matter are as follows;

Whether there was an acquisition of the 1st Respondent by the 2nd Respondent or was it a merger?

Whether the decision by the 1st Respondent to declare the employees of the 1st Respondent redundant was lawful and whether it was implemented in compliance with section 40 of the Employment Act, 2007 and clause 7 & 8 of the CBA and therefore lawful and fair.

Whether the Claimant is entitled to the reliefs sought.

Issue i

10. Upon a careful study of the agreement between the 1st Respondent and the 2nd Respondent it is clear that the 2nd respondent acquired the entire business and assets of the 1st Respondent with effect from 6th October, 2009. The operation of the 1st Respondent ceased as a matter of fact. In the acquisition agreement, the fate of the employees of the 1st Respondent was not spelt out. However, the 1st Respondent was responsible for all its liabilities which would include paying the terminal benefits of the employees of the Claimant.

11. It is common cause however that the 2nd Respondent agreed and as a matter of fact absorb all the employees of the 1st Respondent. It is also clear that the operations of the 1st Respondent came to an end. Therefore the 1st Respondent did not merge with the 2nd Respondent but the 2nd Respondent acquired the business and assets of the 1st Respondent.

Issue ii

12. It is not in dispute that the 1st Respondent declared its employees redundant in anticipation of its acquisition by the 2nd Respondent. What is in issue is whether the decision to declare the employees redundancy was lawful and whether the procedure followed in effecting the same complied with the CBA and section 40 of the Employment Act, 2007.

13. Section 2 of the Employment Act No 11 of 2007 defines redundancy thus;

“redundancy” means the loss of employment, occupation, job or career by involuntary means through no fault of an employee involving termiantion of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment”.

14. The 1st Respondent having sold its business to the 2nd Respondent had no office to be occupied or job to be done by its employees. The 1st Respondent called the claimant union to a meeting held on 5th October 2009 to explain to them the details of the acquisition.

15. After the meeting between the 1st Respondent and the Union on 5th October 2009, the 1st Respondent wrote to the union and the Labour Office vide letters dated 6th October 2009 of its intention to declare its workers redundant and the extent of the redundancy to involve all the employees in view of the acquisition. The notice was produced before court and marked ‘BS6’. Individual employees were subsequently served with letter of redundancy giving the reasons thereof and the package to each one of them which included;

Salary and allowances for the days worked upto 31st October 2009

Accrued leave days outstanding as at 31st October 2009

Termination notice applicable to the employee

Gratuity payment where applicable

Severance pay

Less any money owed to the 1st Respondent

16. It is not in dispute that the termination for the aforesaid reasons occurred and the requisite terminal packages were paid to each of the affected employees. As a matter of fact, all the employees were thereafter taken up by the 2nd Respondent and employed afresh. The court notes that the union protested in a letter dated 6th October 2009 stating that it was taken by surprise by the Agenda of the meeting and called for setting up of an agenda for future meetings. No subsequent meetings took place before the declaration of redundancy on 6th October 2009.

17. On 16th October 2009 the union reported a dispute to the Ministry of Labour and letter was acknowledged on 16th October 2009 by the Chief Industrial Officer in which parties were requested to submit in writing their respective proposals to Mr. P. N. Macharia the appointed conciliator.

18. A meeting arranged for between the parties scheduled for 15th October 2009 did not take place. A joint conciliation meeting was set for 22nd October 2009. The 1st Respondent expressed its reservation on the intended meeting of October 22nd 2009 and insisted on the Union to respond to the 1st Respondents letter dated 16th October 2009. On 23rd October 2009, the Conciliator declared the dispute as unresolved due to the managements failure to co-operate in the settlement of the dispute out of court.

19. Section 40 of the Employment Act, 2007 provides;

“40 (1) An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions;-

Where the employee is a member of a trade union the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;

Where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officers;

The employer has in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected the redundancy;

Where there is in existence a collective bargaining agreement between an employer and a trade union setting out terminal benefits payable upon redundancy, the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;

The employer has where leave is due to an employee who is declared redundant paid off the leave in cash;

The employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and

The employee has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service”.

20. As stated earlier, the Claimant Union and the 1st Respondent have a recognition agreement and a CBA in place Clause 7 thereof is titled Redundancy and provides;

“(a) should it become necessary for the company to terminate the service of an employee or employees on grounds of redundancy, consideration of either membership or non membership of the union shall not be taken into account. Selection for such termination will be determined by the company on consideration of merit and ability, but when these factors are equal as between employees, the “last in” “first out” principle shall apply.

(b) When redundancies appear inevitable the company shall inform and discuss with the union before any redundancies are implemented, the reasons for and the extent of the intended redundancy prior to the issue of notice to the employee(s)” .

21. Clause 8 provides the package applicable to employees declared redundant and it is not in dispute that the employees were paid in full compliance with this clause. It is the procedure set out under Section 40 of the Employment Act and clause 7 which is the subject of the dispute. From the outset, the court notes that all employees of the 1st Respondent including management and unionisable staff were declared redundant.

22. It is without a doubt that the 1st Respondent on 6th October 2009 notified the Union and the District Labour Officer of the intended redundancy to take place with effect from 1st November 2009.

23. The evidence before court also clearly show that there was no need for a selection criteria to be applied because all employees were declared redundant. The Court is also satisfied that all the terminal dues including leave, not less than one month’s salary in lieu of notice and severance pay in terms of the CBA were duly paid to the employees declared redundant. No evidence of discrimination whatever has been adduced nor was alleged discrimination pleaded.

24. The only issue noted by the court is with respect to the notices issued in terms of section 40(1) (a) and (b) because they fell short of one month in that the same are dated 6th October 2009 and redundancy was to take place effective 1st November 2009. The notice was therefore short by one week. There is however no evidence adduced before court to how this defect by the 1st Respondent prejudiced the Claimant or the affected employees.

25. As a matter of fact all employees declared redundant were absorbed by the 2nd Respondent and none of the employees affected has placed evidence of prejudice before court in the way they were treated by the 1st & 2nd Respondent before, during and after the declaration of the redundancy.

26. The Court however notes that the manner of engagement between the 1st Respondent and the Claimant and between the 1st Respondent and the appointed Conciliator fell far short of expectation. There was intragigence on the part of the union and the management of the 1st Respondent which to a large extent contributed to the escalation of a dispute which ought to have been resolved at the earliest opportunity.

27. The court commends the manner the takeover was carried out especially in that all terminal benefits were paid and all employee taken up in new employment by the 2nd Respondent. This is a practice to be encouraged rather than be censored.

28. To this extent, the court finds that the suit by the Claimant Union lacks merit. The reliefs sought are not warranted and the suit is dismissed with no order as to costs as against the Claimant Union.

29. There is no award for costs because the respondent by its failure to attend conciliation meetings contributed to the unnecessary filing of this suit.

Dated and delivered at Nairobi this 18th day of March 2016

MATHEWS N. NDUMA

JUDGE