[2000] KEELRC 1 (KLR)

REPUBLIC OF KENYA

IN THE INDUSTRIAL COURT OF KENYA

AT NAIROBI.

CAUSE NO.62 OF 2001

(Coram: Charles P. Chemmuttut, J.,

J.M. Kilonzo & A.K. Kerich, Members.)

KENYA ENGINEERING WORKERS’ UNION...........................................................Claimants.

v.

RELIANCE INDUSTRIES LTD...........................................................................Respondents.

Issues in Dispute:-

1. Basic Monthly Minimums.

2. General Wage Increase

3. House Allowance.

4. Leave Travelling Allowance.

5. Redundancy.

6. Death of an Employee.

7. Casual Workers.

8. Job Classification.

9. Shopstewards Rights.

10. Suspension.

11. Safari Allowance.

12. Long Service Award.

13. Effective Date and Duration.

Joseph A.N. Omolo, Industrial Relations Officer, for the Claimants (hereinafter called the Union).

J.O. Nyaberi, Advocate, of Omwoyo, Momanyi, Gichuki & Co., Advocates,

for the Respondents (hereinafter called the Company).

A W A R D.

On 25th May, 2001, the Minister for Labour referred this dispute to the Court for consideration and determination under powers conferred upon, or vested in, him by Section 8 of the Trade Disputes Act. Cap.234, Laws of Kenya (which is hereinafter referred to as the Act); and his reference, together with the statutory certificate from the Labour Commission under Section 14(9)(e) of the Act, were received by the Court on 28th May, 2001. Mr. Omolo for the Union submitted his written memorandum on 10th July 2001, and the learned counsel for the Company, Mr. Nyaberi, filed his reply statement on 16th August, 2001. On a number of occasions, the parties took several adjournments for one reason or another, and the opening submissions were eventually heard on 12th June, 2002, while the final submissions were made on 1st August, 2002.

The Company is an engineering concern, dealing in the manufacture and sale of wheelbarrows mainly to the local market (Kenya), and the other half to neighbouring countries, especially Uganda. The raw material for the manufacture of the wheelbarrows is obtained from local companies, namely, Mabati Rolling Mills Ltd., Vacu-Lug Ltd, etc., and the Company manufactures between 200 and 500 wheelbarrows per day. Their only competitors are from the Jua Kali sector.

As a result of the Court awards in Causes Nos. 51 of 1996 and 27 of 1999, the parties signed a valid recognition agreement and also entered into a two years’ collective agreement for the period 1st March, 1998 to 28th February, 2000. (see Union Apps. I(a) & (b) and 2(a) & (b) ). The Company employ a total workforce of 38 employees, but the present dispute, which arose when the parties were negotiating the renewal or review of their said collective agreement, affects only 17 unionisable employees, whose total consolidated monthly wage bill amounts to Kshs.83,181/=, or an annual wage bill of Kshs.998,172/=. The Union forwarded its proposals to the Company on 27th March, 2000, but the latter declined to negotiate. On 29th June, 2000, the Union reported a formal trade dispute to the Minister for Labour in accordance with Section 4 of the Act. The Minister accepted, or took cognisance of, the dispute; and, in exercise of his powers under Section 6(2)(a) of the Act, appointed Mr. J.M. Kiraguri of Ministry of Labour Headquarters to act as the Conciliator. However, during their subsequent conciliation meetings, the parties were unable to agree. The management of the Company also refused to sign the Notification of Dispute, Form ‘A’,

for adjudication and determination of this dispute by the Court. Under the circumstances, the Minister for Labour invoked Section 8 of the Act as aforestated (see Union Apps. 3 to 15).

The case of the Union was that the Company has ability to pay because it has no competitors apart from Jua Kali sector. Mr. Omolo also urged the Court to ignore the wage increase of 20%, which the Company voluntarily awarded to the employees during the period under consideration.

On the other hand, the learned counsel for the Company, Mr. Nyaberi, pleaded inability to pay due to poor business performance or state of the economy, which has faced depression or slump and has also forced many companies out of business, including some giant industries in engineering sector. He submitted that the operations and business of the Company were purely run on bank loans, which attract very high interest rates. He pointed out that the operations of the Company do not require any specialized skills on the part of the employees because most of the work is performed by, or contracted to, a contractor and the employees who are actually idle most of the time are only left with fairly simple task of fixing and joining the parts which are already manufactured.

Mr. Nyaberi contended further that, since the Company’s business is seasonal and also owing to stiff competition from other companies, the Company is not able to break-even and is considering many options, including entering into a new line of production altogether or dismantling down all the machines, and lease out the godowns to other people and/or relocate the entire business to a country outside Kenya owing to high cost of production. In the meantime, however, the Company is seriously considering retrenching all the staff on permanent terms of employment, and award all the work to the contractor who will re-employ or re-engage them, if they will still be interested . He averred that it was very unfair for the Union to demand another increment soon after the Company had voluntarily given 20% wage increase to the employees; otherwise the said increment should be off-set against the demand.

In their analysis and observations for the relevant period in this dispute, the Economic and Planning Division (which is hereinafter referred to as the EPD) have stated in a nutshell that the management of the Company refused or declined to either respond to the questionnaire sent to it or to furnish them with their audited accounts on the ground that the same were confidential, and that the Company was not in business with a view to sharing profits with the employees. However, there was a power rationing during the year 2000, which forced the Company to purchase a generator on loan, worth Kshs.2 million and the running costs of the same is Kshs.5,000/= per day, and there are currently too intermittent problems with water supply.

With the foregoing observations in view, and after consultation with the two members of the Court, I now proceed to consider seriatim all the issues before me and award accordingly.

1. Basic Monthly Minimums.

The Union demanded that the current minimums be improved by 25% for the first year and another 25% for the second year, or 50% for the two years’ period, while the Company maintained that the same are already far above statutory minimum rates.

During their investigation, the EPD established that the basic minimum wages in the parties’ collective agreement have been overtaken by the statutory wage rates of 1st May, 2000 and 1st May, 2001. The current consolidated monthly pay ranges between Kshs.4,000/= for watchmen and machine attendants and Kshs.8,560/= for a heavy vehicle driver. These rates, which include 15% housing element or consideration, are below the statutory minimum rates that became effective on 1st May, 2001, for certain categories of employees, e.g. sales clerk, lorry driver, machine attendants and electrician.

Minimum wages, as the name itself implies, represents the level below which wage cannot be allowed to drop; and it is a well established principle of industrial law, and universally recognised that management must pay minimum wages to the employees whether it earns any profits or not. Thus, the term minimum wages is the lowest wage in the scale below which the efficiency of the employee is likely to be impaired. It is the “wage floor”, allowing at a standard considered socially, medically and ethically acceptable.

According to the EPD report the basic minimum wages in the Company’s establishment are below the statutory minimum rates of 1st May, 2000 and 1st May, 2001. The legal position is that no employee should earn less than the statutory minimum rate of pay, and for this reason I award that the basic minimum wages in the Company’s concern be brought up to the current statutory minimum rates of pay pursuant to the General Wages Orders for the years 2000 to 2003.

2. General Wage Increase.

The Union demanded a general wage increase as follows:-

(a) 1st year, w.e.f. 1. 3.2000 – 40%,

(b) 2nd year, w.e.f. 1. 3.2001 - 40%,

or a total of 80% for the two years’ period.

The Company, however, pleaded inability to meet the demand beyond the 20% wage increase which was allegedly awarded to the employees with effect from January, 2001.

The Union conceded that an increase was given, but challenged the assertion by the Company that it amounted to 20%; and in support of its contention, it submitted two payment or salary vouchers for one employee in respect of December, 2000, i.e. before the increase, and February, 2001, i.e. after the increase, which showed that the consolidated pay went up from Kshs.4,948. 10 to Kshs.5,700/=, i.e. an increase of 15. 2%.

The EPD worked out two sets of cost of living compensation entitlement, based on the Union’s demand that the effective date of the new collective agreement should be 1st March, 2000, and on the Company’s position that there should be no back-dating of the effective date. The unionisable employees fall in the middle income group; and if the demand by the Union is granted the employees would be entitled to compensation of 10% for the rise in the cost of living, but if the effective date is not back-dated the compensation entitlement would be 17. 7%. In the circumstances, the Union’s demand, if granted, would raise the wage bill by Kshs.347,200/= for the first year and a further Kshs.486,080/= for the second year, or a total of Kshs.833,780/= for the two years’ period. On the other hand,

if the Company’s position is upheld, the additional wage bill would be Kshs.130,172/= each year. However, the consumer price indices entitlement, based on a two year compensation period, would hike the wage bill by a total of Kshs.88,970/=, and if the effective date is not back-dated, the wage bill would rise by Kshs.161,379/=.

As I have observed on numerous occasions before, the primary objective in deciding trade or industrial disputes with regard to wage increase to the employees is and has to be the ability of the Company to pay and the restoration of peace, harmony and good will in the industry concerned so as to do justice to the interests of both labour and capital. Considering the small number of employees engaged by the Company and the 20% voluntary wage increase already given, I am of the opinion that the demand by the Union of a further 40% wage increase each year, or 80% for the two years’ period, as very high and unreasonable. This being the case, and keeping in view the submissions of the parties on this issue, I am constrained to award an additional general wage increase of 10% each year, or 20% for the two years’ period, and I so order.

3. House Allowance.

The employees are presently entitled to house allowance of 15% of their individual current consolidated basic monthly wage.

The Union demanded 30%, or a minimum of Kshs.2,000/= per month, house allowance for the first year, and a further 30%, or a minimum of Kshs.2,500/= per month, for the second year for any employee who is not provided with free accommodation by the Company.

The Company maintained that the prevailing house allowance rates are fair and reasonable.

The EPD report shows that most of the employees live in Dandora where the average rent for 10’ x 10’ rooms is Kshs.2,000/= per month, while others reside or stay in Mathare North and Kayole Estates. The Union contended that the present house allowance does not adequately cater for the rents in these areas. The EPD also established that the proportion of the house allowance is about Kshs.150,000/= out of the present wage bill of Kshs.998,172/= per year; and the demand by the Union, if granted, would raise the current house allowance bill by Kshs.360,000/=, while the consumer price indices entitlement would raise it by Kshs.7,594/= and Kshs.13,804/= for the period under consideration.

There is no gainsaying the fact that decent and reasonable accommodation is scarce and unaffordable, particularly in urban centres, and landlords have been quick to exploit the situation to the disadvantage of the public, especially employees of low income wages or earnings (see: Cause No.38 of 1997: Tailors & Textiles Workers’ Union v. Garment Mass Production Group; Cause No.96 of 1998: Kenya Shoe & Leather Workers’ Union v. Leather Industries of Kenya Ltd; Cause No.96 of 2000: Kenya Union

of Commercial, Food & Allied Workers v. Queensway Properties Ltd., and Cause No.10 of 2001: Kenya Union of Commercial, Food & Allied Workers v. Avery Kenya Ltd). But, it is incumbent upon every employer to provide reasonable housing accommodation, or pay sufficient rent, to each of his employees. Section 9 of the Employment Act, Cap.226, Laws of Kenya, provides, inter alia, as follows:-

“Every employer shall at all times, at his own expense, provide reasonable housing accommodation to each of his employees either at or near to the place of employment or shall pay to the employee such sufficient sum, as rent, in addition to his wage or salary, as will enable the employee obtain reasonable accommodation………………………..”.

On careful consideration of the submissions by the parties on this issue, and keeping in view Wage Guideline 2(ii) and (iv) and the above legal position imposed upon every employer, I am inclined to improve the present house allowance entitlement of 15% of the individual employee’s current consolidated basic monthly wage by 2. 5%, to make it 17. 5% house allowance of the individual employee’s basic monthly wage, and I award accordingly.

4. Leave Travelling Allowance.

Clause 8 of the parties’ outgoing collective agreement provides that:-

“After each period of twelve months of continuous service with the company an employee shall be entitled when proceeding on annual leave, to leave travelling allowance of sh.1,500. 00 per annum”.

The Union demanded that the present leave travelling allowance be raised to Kshs.3,000/= during the first year and Kshs.3,500/= during the second year, to enable the employee and his family members travel home and back.

The Company felt that the current amount is fair and reasonable.

The EPD report shows that 7 of the unionisable employees come from Eastern Province, 4 come from Western Province, another 4 come from Nyanza Province and 2 come from Central Province. The demand by the Union, if allowed, will raise the leave travelling allowance bill from the current amount of Kshs.25,000/= to Kshs.51,000/= for the first year, and to a further Kshs.59,500/= for the second year.

Unfortunately, the EPD report does not show any fares of various destinations; but, as I have observed in my several awards before, leave travelling allowance is personal to the employee himself or herself. In my considered opinion, however, and keeping in view the unpredictable and escalating transport costs, I award that an employee be paid Kshs.1,750/= as leave travelling allowance when he or she proceeds on annual leave.

5. Redundancy.

The relevant provision under Clause 15 of the parties’ collective agreement states that.

“REDUNDANCY:

(a) ………………………………………………………………..

(b) ………………………………………………………………….

(c) ………………………………………………………………….

(d) ………………………………………………………………….

(e) ………………………………………………………………….

(f) Entitlement:

An employee declared redundant shall be entitled to:-

(i) …………………………………………………….

(ii) ……………………………………………………

(iii) ……………………………………………………..

(iv) Severance pay at the rate of 17 days wages for each completed year of service”.

The Union demanded that an employee who is terminated on account of redundancy be paid severance pay at the rate of 40 days for each completed year of service.

The Company was of the view that severance pay should be in accordance with the provisions of the law on this matter.

The EPD established that there have not been any redundancies in the establishment.

The Union has not advanced any reasons for the exorbitant enhancement of the severance pay days from 17 to 40 days. In the circumstances, the demand is unacceptable and the same is hereby rejected.

6. Death of an Employee.

Clause 22 of the parties’ collective agreement provides that:-

“When an employee of a company dies while in the service of the company, the employer shall give Kshs.8,000/= to cover all funeral expenses”.

The Union demanded that when an employee dies while in employment, the Company should provide a transport, coffin and Kshs.50,000/= to defray or towards funeral expenses.

The Company regretted death of an employee, but averred that none has, however, passed away or died since the signing of the first collective agreement. Therefore, the prevailing rate of Kshs.8,000/= awarded by the Court in Cause No.27 of 1999 should be retained as fair and proper.

Incidentally, the EPD established that Mr. Gabriel Mutual, Assistant Shopsteward, died or passed away in May, 2000, and the Company contributed Kshs.25,000/=, out of which Kshs.8,000/= was its own contribution, but the balance of Kshs.17,000/= was recovered by the Company from the deceased’s terminal benefits. The Union argued that the Company had, prior to the signing of the first collective agreement, voluntarily contributed Kshs.25,000/=, towards funeral expenses, and it should keep it that way.

In Cause No.66 of 1998: Kenya Chemical & Allied Workers’ Union v. Eveready Batteries Kenya Ltd., I observed that:-

“It is human and important for the Company to show concern by sharing the cost of bereavement during the period of grief. Hence their contribution…………………………….”.

After serious consideration of this matter, and in order to maintain industrial peace and avoid frequent confrontations between the parties, I am inclined to enhance the Company’s current contribution of Kshs.8,000/= by a further Kshs.2,000/= to make it Kshs.10,000/= towards funeral expenses of an employee who dies while in employment. This amount is fair and reasonable, and I so award.

7. Casual Workers.

Clause 25 of the parties’ collective agreement only provides for mode of payment of daily rates of pay, i.e. consolidated salary of a permanent employee divided by 26 working days.

The Union demanded that a casual employee who works for the Company for 3 consecutive months should automatically qualify for permanent employment.

The Company opposed this demand on the ground that casual employees should not automatically qualify for permanent employment upon working for 3 months.

The EPD report shows that there are currently 4 casual employees who have worked for more than 3 consecutive months – 1 of whom has been in employment since 1999, while 3 of them have worked since the year 2000. However, the Union has complained that the current rates of casual employees are not based on consolidated wages as stipulated in the parties’ collective agreement, and the management of the Company did not produce the wage bill for casual employees to confirm the contention.

The question of automatic qualification of a casual employee or probationer for permanent employment is a matter of internal management and no hard and fast rules can be laid down. It is for the management to assess the suitability and competence of an employee for permanent employment or confirmation; and under the circumstances, a reasonable period is required to judge the suitability and competence of the employee before he is confirmed in service. For this reason, I am unable to give any finding on this issue, which is hereby rejected.

8. Job Classification.

The Union demanded that a job classification should be undertaken before the signing of a new collective agreement on the ground that the current grouping of the employees is faulty, e.g. drivers’ mates, night watchmen and machine attendant should not be placed in Group I, and drivers should not be lumped together with artisans in Group III, while storekeeper and clerks should not be grouped together in Group V.

The Company contended that there is no need to re-classify the employees in view of the fact that a job classification is already in place.

The EPD report shows that, although the above groupings exist, the job categories have each been given a distinct basic salary, except drivers’ mates and storekeepers and clerks in Group V, who are grouped together.

The Company conceded that a job classification has already been undertaken, and it did not see the need for another one. This being the case, I find no merit in the demand, which is rejected.

9. Shopstewards’ Rights.

This is a new demand which the Union proposed to be incorporated in the parties’ collective agreement. The Union, demanded that shopstewards should be paid when they are permitted to attend Union meetings and negotiations on behalf of other Union members because their activities also benefit the management of the Company as they “calm down” the employees in cases of industrial unrest.

The Company argued that these are the responsibilities of the Union and the employees themselves, and it has no business knowing how many meetings a shopsteward is required to attend and/or for what reasons. Therefore, the Union or the employees, and not the Company, should meet their expenses.

According to the EPD report, there are currently in the establishment a Shopsteward, an Assistant Shopsteward, a Chairman and a Secretary for whom the Union has no problem in securing permission to attend Union meetings and negotiations, but the Company does not fund them.

The demand is not substantiated by the Union. Therefore, I see no useful purpose for incorporating this particular clause in the parties’ collective agreement at the moment. Accordingly, the demand is rejected.

10. Suspension.

This is also a novel demand which the Union proposed that it be inserted in the parties’ collective agreement. The Union demanded that where an employee is suspended from duty to allow for investigation to be carried out, such suspension should be with full pay. However, a decision whether to dismiss or terminate the employee, or whether to withdraw the suspension order, should be made within 10 working days from the date of suspension. The Company was silent on this issue.

The EPD found that, contrary to the assertion by the Union that no suspension has arisen in the recent past, two employees have been dismissed within the past two months for gross misconduct.

The employer’s power to suspend an employee under the ordinary law of master and servant is not an implied term of contract between the master and the servant. Such an order can only be the creature of either a statute governing the contract or of an express term in the contract itself. Therefore, a person under suspension does not by reason of his suspension lose his office nor does he suffer any degradation. He ceases to exercise the powers and to discharge the duties of the office for the time being, but his rank remains the same and his pay does not suffer any deduction. An order of suspension only suspends the contract so far as it relates to performance of duties or enjoyment of privileges, but it does not put an end to the contract itself. During the period an employee remains suspended from duty, he can claim his wages or salary from the employer because, notwithstanding the order of suspension of the employee, the contract of employment is not suspended. In Warburton v. Taff Vale Railway Company; 18 T.L.R.420,it was held that an employee who was suspended from duty for two weeks was entitled to his wages for the period. In Hamley v. Pease & Partners Ltd. (1915), I.K.B.698, an employee absented himself for one day without leave from his employers. The employers did not dismiss him but suspended him from working the following day. Thereby he was prevented from earning the wages he would have earned on that day had he been allowed to work. It was held that the employee was entitled to wages, or damages, representing the amount of his wages, for the day he was not allowed to work.

As regards the period of suspension, there is no provision or rule limiting the period of suspension when it is ordered for the purposes of holding an enquiry. Of course, it is necessary that the enquiry should be held within the shortest possible time; but no hard and fast rule can be laid down as the period required for holding an enquiry. How long such an enquiry can last and on what terms are matters governed by the relevant standing orders, and will also depend on the circumstances of each case.

Accordingly, the demand as it stands is rejected.

11. Safari Allowance.

Clause 17 of the parties’ agreement provides as follows:-

“An employee who is required to perform his duty away from his principal place of employment, will be entitled to a safari

allowance per day as follows:-

Breakfast - shs.80. 00

Lunch - “ 150. 00

Supper - “ 200. 00

Nightstop - “ 400. 00”.

The Union demanded that the rates be hiked as follows:-

Breakfast - Kshs.200. 00

Lunch - “ 300. 00

Supper - “ 600. 00

Accommodation - “ 1,000. 00

The Company opposed the demand on the ground that the current rates are sufficient for the time being.

The EPD report shows that the unionisable employees who are affected by this demand according to the Union are 2 drivers and 2 turnboys, but the Company maintains that there are 3 cantor trucks which make deliveries throughout the country, including Mombasa, Busia, Migori, Kisii, Kisumu, Eldoret, Kitale, e.t.c, on an average duration of 4 days for such trips. However, orders from outside the country are collected by the foreign companies themselves. The report also indicates that the Company did not furnish the EPD with the annual safari allowance bill; otherwise the demand by the Union would raise the daily allowance under this item by Kshs.1,270/= per person.

In the absence of the annual safari allowance bill, and keeping in view the high costs of meals and accommodation, vis-à-vis the demand by the Union, I am constrained to slightly improve the current rates and award as follows:-

Breakfast - Kshs.130/=.

Lunch - “ 200/=.

Supper - “ 250/=.

Accommodation - “ 500/=.

I so order.

12. Long Service Award.

This is again a new demand which the Union proposed that it be incorporated in the parties’ collective agreement as follows;-

(i) Upto 5 years of service - Kshs.500/=.

(ii) Upto 10 years of service - “ 650/=.

(iii) Upto 15 years of service - “ 750/=.

(iv) Upto 20 years of service - “ 850/=.

Mr. Omolo for the Union submitted that the award will avoid overlapping of wage differentials.

The Company urged the Court to find that the demand is totally irrelevant to its operations and it should be rejected.

The EPD report shows that 6 unionisable employees have worked for 5 years or less, 7 of them have worked for between 5 and 10 years, while 4 have worked for between 10 and 15 years.

I find no force in this demand, and would advise the Union to encourage the employees to work hard so as to increase productivity and earn the increments on merit. The demand is, therefore, rejected.

13. EffectiveDate and Duration.

The collective agreement under consideration expired on 28th February, 2000, and the Union has proposed 1st March, 2000 as the effective date of the incoming collective agreement and for a duration of two years, while the Company has urged the Court to reject the demand in view of the fact that the outgoing collective agreement is still in force and there was no need to enter into another one.

The Union demands the effective date with retrospective effect from 1st March, 2000, but the Company has opposed the demand on the ground that it has no funds to implement it. The demand for retrospective effect of an award cannot be claimed as a matter of right because the fixation of an effective date from which an award should operate is discretionary. It can be conceded only in exceptional circumstances, such as extreme hardship due to very low scale of pay, e.t.c. In any case, there can be no retrospective effect for any period prior to the date on which the proposals for negotiation were first made, and in this case we find that they were made for the first time on 27th March, 2000. Then again, when admittedly the management of the Company has granted increases since the commencement of the dispute, the Court should be loath to order retrospective operation from an earlier date. Lastly, in granting retrospective effect of an award, the Court must take into account the impact of the financial burden on the paying capacity of the Company. On a consideration of all these circumstances

I am of the view that the demand for retrospective effect of the collective agreement with effect from 1st March, 2000, is utterly untenable. Accordingly, I AWARD and ORDER that the effective date be 1st March, 2003, for a duration of two years.

MEMBERS: We agree.

DATED and delivered at Nairobi this 9th day of July, 2003.

Charles P. Chemmuttut,

JUDGE.