[2015] KEELRC 212 (KLR)

REPUBLIC OF KENYA

IN THE EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA AT NAIROBI

CAUSE NO 2161 OF 2014

LISTER NYARIAGE KINGOINA ……… CLAIMANT

VERSUS

RETRIEVER LIMITED …………….. RESPONDENT

JUDGEMENT

1. Issue in dispute is the unfair dismissal of employment of the Claimant by the respondent.

2. The Memorandum of Claim was filed on 5th December 2014 on the grounds that he was employed by the Respondent vide letter dated 26th November 2012 as a Credit Controller at a starting salary of kshs.35, 000. 00 and upon confirmation the salary was increased to Kshs.42,000. 00 per month for a fixed period of 2 years ending 3rd june 2015. The Claimant worked diligently until 13th October 2014 when the Respondent issued a show cause letter and the Claimant replied on 14th October 2014. On 31st October 2014 the Respondent dismissed the Claimant unprocedurally on allegations of negligence leading to loss of monies the particulars of which were never explained to the claimant. The Respondent sale policy was that that debt collection payments were to be made available by the person who had made the sale and such salesperson was responsible for any sales that became bad debts.

3. The claim is also that the Claimant was the Credit Controller working in the credit control department and separate from the sales department. Before termination the Claimant was not accorded a hearing in contravention of section 41 of the Employment Act. The Claimant through her advocates made a demand notice to the Respondent and in reply the Respondent made incomprehensible averments and when clarifications were sought there was no reply.

4. The Claimant is thus seeking to be reinstated back to her positon and in the alternative be paid her terminal dues of;

A month’s notice pay at kshs.42,000. 00

Leave pay for 2014 at kshs.33,923. 00

Pro rata leave for 2013 at kshs.3,230. 00

Service gratuity at the rate of 15 days for each completed year at Kshs.42,000. 00

Salary for 7 months for contract period at kshs.294,000. 00

12 months compensation at kshs.504,000. 00

5. The Claimant is also seeking that the termination be declared unfair and unlawful. Costs of the suit.

6. In evidence, the Claimant stated that upon employment by the Respondent as Credit Controller she had her duties outlined and did perform them diligently. She was based at the respondent’s head office in Nairobi as there were other branches. She worked for 6 days from 8. 30am to 5pm and on half day on Saturday.

7. The Claimant also testified that in October 2014 she discovered arrears by the sales team from September 2014 and asked to start doing cash collections but when she tried to do so, she realised the sales team were pocketing cash from clients especially staff from the Mombasa branch. The Claimant shared this with the General Manager Mr Charles Gekonge and was asked to compile a report. After doing the report, she was issued with a show cause letter for negligence with the sales team. The Claimant noted that she was never the supervisor of the sales team and was simply doing her follow up work. All she had wanted to do was follow up on the non-paying client and discovered the sales team had received payments and never remitted or accounted for it. The Claimant was however dismissed without being given a hearing. She was not told that her reply to the show cause was insufficient and was simply told that she had been negligent. The General Manager was the supervisor of the sales team but also did the show cause letter to the claimant. In this case the Claimant did her weekly reports while the sales teams reported to the general manager.

8. The Claimant also testified that in the case of one client Mr Johnstone Thitiri, he was a client for the Mombasa team and Wambua was responsible. The client confirmed making payments to Wambua and in the sales team report this was indicated as having been paid but in actual sense, the sales team had not deposited these monies from the client. The Claimant had no authority over Wambua while the general manager held several meetings with the sales team and should have been aware of the problem of non- remittance.

9. The Claimant also testified that it is not true that she held client cheques in her drawer. Upon dismissal, all properties of the responded were handed over but no inventory was taken. This was also not a reason for the summary dismissal. After the show cause, there was no notice as the next document was the summary dismissal.

10. The Claimant restated her claims and gave emphasis that her contract was for two years and had 7 moths to completion and the balance of such time should be paid together with compensation for unfair termination.

11. Upon cross-examination, the Claimant testified that her probation period was extended on the grounds that her performance had not been to the required standard and that she had not more efforts into her work. Her duties required the issuance of certification of tracking installation and all staff issuing certificates had to first confirm with her to ensure payments had been made. Some certificates would be issued without the claimant’s knowledge. It was however not the duty of the Claimant to follow up on debts as she was not in control of sales. It was not the duty of the Claimant to guard the Respondent against unwarranted debts. This was not her role. She was not in a position to confirm that the sales team reports were accurate and was only required to compile them and submit to the respondent. When the Claimant tried to follow up on the money collections, she was issued with a show cause letter.

12. The Claimant also stated that she was at the meeting where the Respondent set down rules of operation and the general manger; managing director and the accountant agreed on what each should do to avoid theft in the business but there was no follow up. Upon dismissal, the Claimant did hand over all cheque books, phone and receipt book.

Respondent’s case

13. In defence the Respondent admitted that they had employed the Claimant but showed poor performance during probation which was extended to enable improvement. She was confirmed for the two years contract. The most critical role the Claimant was to undertake was to ensure the Respondent did not incur high debts and that the sales team did not accrue debts that would jeopardise the financial position. She was to ensure that the reports submitted to her by the sales team were truthful and had no gaps that exposed the Respondent to losses. She was to ensure that all financial reports were genuine and reflected the correct position of debts. However, the Claimant continued to receive such reports but never confirmed their accuracy, consistency and genuineness. The Respondent also discovered that the reports submitted by Stephen Wambua from sales team was not truthful yet the Claimant had not discovered this or stopped the ongoing fraud. An audit done indicted that the Claimant was underperforming and not collecting debts. The Respondent had 7 million shillings debts.

14. The Respondent case is that the Claimant as the credit controller was responsible for handing receivables from all branches including Mombasa. She was issued with a show cause letter but failed to take responsibility for her actions and blamed it on the sales team. The Claimant did not require the permission of the sales people to do her work well. In response the Claimant noted her lapses and promised to work on it. After this the Respondent discovered that the Claimant had several cheques in her drawer that had not been banked for a long time without any explanation. This was contrary to Respondent policy. When called to explain to the general manager, there was no satisfactory answer and noting the gross misconduct, the Claimant was summarily dismissed.

15. The Claimant was negligent in her duties which led to financial losses for the respondent. The Claimant failed to undertake her duties diligently which necessitated the summary dismissal under the provisions of section 44(4) of the Employment Act. The dismissal was justified as the Claimant was of poor performance, neglected to do her work and carelessly undertook her duties. Before dismissal, the Claimant had been given a hearing where she gave a detailed response and was heard by the general manger.

16. The Respondent did not provide for service gratuity and the claim thus should be dismissed. The leave due was only for 19 days at the time of dismissal. Salary for 7 months not justified as the Claimant should have mitigated her loss by getting a new job. The claims are not justified as the Claimant was in error and the entire suit should be dismissed with costs.

17. In evidence, the Respondent called JOB Omondi the head of Finance for the Respondent who has been working at the Respondent Company since late July 2014. He worked with the Claimant for only 3 months. He testified that the Claimant as custodian of all receivables; all cash; receipts; banking; responsible for debts and follow up and compiled monthly reports. There was a duty to note what debts existed. In the reports submitted by Wambua it notes the client and the payments outstanding. There was a price structure and depending on the amounts one could tell as to whether the payment was for a new sale or a renewal. As the Credit controller, it was the duty of the Claimant to follow up on the credit book and to ensure there were no debts. The reports submitted weekly had inconsistencies and the information was incorrect. When Mr Charles Gekonga went to Mombasa it was discovered that clients had paid but there was no remittance of the same to the respondent. Some clients who had not paid promised to pay. The discrepancies in the payments led to the show cause issued to the claimant. Upon termination, the Respondent discovered that the Claimant had several unbanked cheques in her drawer. Some were stale and could not be banked.

18. The witness also testified that in 2011 the Claimant got a bonus payment as part of the Respondent culture to reward all staff. She got the lowest as she was not of excellent performance. For the period he worked with the Claimant he had noted that she was struggling in her work. Before dismissal, the Claimant was heard by the general manager.

18. In cross-examination, the witness testified that there was no document by the Respondent that outline what were renewal sales and new payments. There was no inventory of the cheques left in the claimant’s drawer. For the stale cheques, the clients were called and they issued new cheques. There was no notice before dismissal but the general manager held a meeting with the Claimant but no minutes were taken. The final dues were paid at kshs.27, 670. 00 via electronic transfer.

19. The witness confirmed to the court that it was the duty of the sales team to source new clients, get the sales and ensure installations were done. All collections from clients were done by the sales team especially those from outside Nairobi and had to inform the Claimant on their daily collections. Before the certificate of installation was issued, a bank deposit had to be confirmed. Wambua was arrested and prosecuted and he gave a cheque to pay for the monies he owed the respondent.

Submissions

20. In submission, the Claimant stated that her dismissal was unfair. She had a fixed term contract and was dismissed without justifiable reason and should be paid for the balance of the contract term. All sales were to be made to the sales person and not the Claimant and to make her responsible for non-collection of such payments was unreasonable. The Claimant was issued with a show cause where she replied and explained her case but was never given a hearing but dismissed. Section 41 of the Employment Act was not followed. The submission by the Respondent that section 44(4) of the Act applied in the dismissal of the Claimant is not correct as she did not neglect any of her duties.

21. The Claimant submitted that she is entitled to one month’s pay as notice; pro rata leave for 2014 and 2013; service pay having worked for a full year; salary for 7 months the remainder of her contract; compensation for unfair termination; and costs of the suit.

22. The Respondent on their part submitted that the Claimant was of poor performance, neglected her duties and after an audit it was discovered that that there was underperformance leading to huge losses which was gross negligence of duty warranting summary dismissal. The Claimant was issued with a show cause letter but she replied and blamed the sales team but admitted that she needed to improve on her work. This admission of lapse in duty satisfied a fair hearing. Hearing does not necessarily have to be oral in all cases and the same depends upon the subject matter. After the show cause was issued, further evidence was found with the discovery of unbanked cheques in her drawer which the Claimant could not give a satisfactory explanation as to why she had kept them. Summary dismissal was therefore justified in this case noting the matters of omission and commission by the Claimant and the neglect of her duties which led to financial loss.

23. The Respondent also submitted that their policy and claimant’s contract of employment did not provide for service gratuity and leave due was for 19 days only. There is no compensation due as the Claimant failed to monitor the sales team leading to huge debt. This is not a case for reinstated noting the acts committed and the reasons for summary dismissal.

24. The Respondent relied on the cases of Kenya Revenue Authority versus Menginya Salim Murgani, Civil Appeal No.108 of 2009; DK Njagi Marete versus Teachers Service Commission, Cause No.379(N) of 2009; Local Government Board versus Arlidge [1915] AC.

Determination

25. On 25th November 2012, the Claimant was issued with an appointment letter as the Credit Controller of the respondent. The letter does not outline her duties but set out her terms and condition of service. The job description or requirements of duties and tasks to be undertaken by the Claimant is not indicated in the statement of defence. The appraisal report/assessment upon confirmation is equally not attached for the court to appreciate the challenges the Claimant faced in the stated underperformance. In the summary dismissal letter issued to the claimant, it is stated that;

As Credit Controller, your responsibilities include but not limited to invoicing and following up on all credit payments from customers. The company has conducted an extensive audit, which has indicated that a number of our customers owe a significant amount of money to the company.

26. Without setting out the duties and responsibilities the Claimant was to undertake as Credit Controller for the respondent, these assertions in the letter of dismissal become meaningless. To weigh the requirements bestowed upon the employee vis-à-vis such serious accusations of failing to invoice and follow up on all credit payments from stompers without setting out the framework for the same makes it impossible to allocate blame. It was clear from the claimant’s evidence that the Respondent had various sales team in different braches that included Mombasa but she was not their supervisor. The Respondent did not outline as to how it had structured its business so as to ensure the sales team was dully monitored and followed closely to ensure proper accounting. The evidence of Mr Omondi for the Respondent was of the nature that some sales people failed to take account and indeed Wambua was arrested as a result and was made to pay back the monies he failed to remit to the respondent. It was never stated that this failure was upon the claimant.

27. The Respondent also heavily rely on its audit report in the summary dismissal of the claimant. Such audit report was not submitted to show that the Claimant failed in her duties as the Credit Controller and hence there were losses that can be linked to her negligence. This therefore leaves a serious gap in using evidence such as set out in the summary dismissal letter to terminate the employment of the claimant.

28. The employer has a duty to ensure that its business is running well. Under such a requirement, the employer retains the right to discipline any employee who is underperforming, an employee who is negligent in their duties and indeed the employer has the right to take summary action against any employee who fails to improve in their work despite measures being put in place to have such an employee improve. However, even where the employer enjoys such rights, they must be exercised within the realms of the law. A show cause letter in itself is not an indication of guilt, an employee should be given a chance to explain herself and where such cause lacks merit, be given a fair chance to work. Where the show cause is insufficient, the employer has the duty to follow up by giving the employee a fair chance to be heard in their defence upon setting out clear charges or allegations against the employee that form the basis of any misconduct. In the case of Fredrick Owegi versus CFC Life Assurance, Cause No.1001 of 2012,the court held;

Once an employee is issued with a show cause the disciplinary process has begun and only then can the provisions of section 41 be pursued. Have a hearing in the presence of a union representative or where the employee is not unionised, before another employee of the employee’s choice. This is the correct interpretation of the court decision in Alphonse Machanga Mwachaya versus Operation 680 Limited [2013] eKLR. The submission by the Respondent that the holding in the above case was followed is essentially different with what the Respondent did to the claimant. The Claimant was allowed to respond to the show cause but was never called for a hearing in the presence of an employee of his own choice nor was he given the right to appeal the decision of the Respondent against him.This is the correct reading of the decision. [Emphasis added].

29. Therefore, a show cause is not in itself a sign of culpability. Rather is a preliminary enquiry into a matter that warrant an employee to Respondent to and where such an employee gives a satisfactory response, the matter is settled. Where there is no satisfactory response, then the provisions of section 41 of the Employment Act come into force. The submissions by the Respondent that oral hearing in this case was not necessary I find to be erroneous. This is not an ordinary contract for the provision of goods, rather, employment contracts fall into a special category of their own regulated under statutory provisions in the Employment Act or as the case maybe. The special part being that an employment contract is for provisions of labour by a person and not that of provision of goods.

30. In this case, the requirements set out under section 41 of the Employment Act are mandatory. The drafter of the law, the legislators who approved and by giving the law assent, the Courts have enforced the provisions of section 41 with astounding approval. That the requirements to have an employee heard before termination is paramount. Such hearing must be done in the presence of the employee who should be accompanied by another person of the employees’ choice. The wording of the law thus dictate a physical appearance as the shop floor relations requires that such an employee be given a fair chance to explain themselves in defence. Unless the employee requests to appear otherwise, such as to give their written submissions, the oral hearing is a requirement for the employer to guarantee to the employee. I find such reasonable and capable of enforcement. The Respondent herein had the mechanisms and personnel to have the Claimant heard in her defence. The meeting held with the general manager is not documented so as to indicate what kind of hearing the Claimant was subjected to and the outcome of it is not clear. Such a meeting is contested by the Claimant as not having taken place and in any event, where such a meeting took place, it did not comply with the procedures set out in section 41 of the Employment Act. I take it then the Claimant was dismissed without due process. Such is unfair under the provisions of section 45 of the Employment Act.

31. The Respondent submitted that the Claimant was summarily dismissed under the provisions of section 44 of the Employment Act. That she failed to undertake her duties well and was negligent. However, even where such reasons exist and the Claimant admitted to have lapses in her work, for the provisions of section 44 of the Employment Act to take effect, the same are subject to the dictates of section 41 with regard to a hearing before any summary action is taken against an employee. However serious the gross misconduct, section 41(2) provisions are mandatory thus;

(2) Notwithstanding any other provision of this Part, an employer shall, before terminating the employment of an employee or summarily dismissing an employee under section 44 (3) or (4) hear and consider any representations which the employee may on the grounds of misconduct or poor performance,and the person, if any, chosen by the employee within subsection (1) make.

32. These provisions therefore make a fundamental shift from the predominant theory under common law that a contract and its terms must be followed to the letter. The Kenyan law and particular the Employment Act has given a change to such theory and created space for employee faced with a threat to the loss of employment to be given a fair chance to argue their case. employers too have been given an opportunity to find out what exactly led to any alleged misconduct before taking summary action against an otherwise well performing employee.

33. Where there are exceptional circumstances that make the employer unable to hear the Claimant in their defence, such circumstances must be outlined for the court consideration. Section 44 give instances of an employee absconding duty where such absence without due cause would make it impossible for the employer to reach the employee so as to be heard before summary dismissal or in instances where the employee is intoxicated to a level that conducting a hearing would not achieve any useful purpose. The employer is also allowed to set out a policy guideline adding to the list set out under section 44(4) based on their nature of business and where they find that summary action is justified. I find no exceptional circumstances in this case that the Respondent has established to warrant the summary action against the claimant.

34. In this case therefore, I find the Claimant was not accorded due process sin terms of being taken through the procedures necessary before summary dismissal. Section 45 of the Employment Act apply. The Respondent did not act in accordance with justice and equity in terminating the employment of the claimant. The procedure adopted by the Respondent in reaching the decision to dismiss the Claimant was not fair.

Remedies

35. The Claimant is seeking a reinstatement. It was however clear from her evidence that this was not an issue she was keen to address. The submissions made do not refer to this remedy at all. There are alternative remedies sought which will be considered.

36. The Claimant had a fixed term contract. The contract had 7 more months before due date. The Claimant is claiming he payment of the balance of term. In this regard, upon the court finding that the procedure adopted by the Respondent in the dismissal of the Claimant was unfair, section 49(1)(b) and (c ) must be read together in that the remedy for the remainder of the term and that of compensation has to be either and not both. Putting these into consideration and noting the Respondent did not issue any notice prior to the summary dismissal, the court shall award compensation at 8 months’ salary based on the last monthly pay of the Claimant at kshs.42,000. 00 all being Kshs.336,000. 00.

37. Notice pay is due as the summary action taken was not procedural and was not justified in this case. The Claimant is awarded kshs.42, 000. 00 being one month’s salary in lieu of notice.

38. Leave is claimed. The claimant’s evidence was that she never took all her leave days but took it in blocks of 4 days. The Respondent has admitted owing 19 days of leave. This was not challenged in any material way. I also find that payment of such leave was done vide pay slip for October 2014 assessed at Kshs.29,750. 00 which is on the higher side as this ought to have been at Kshs.26,600. 00. This payment shall not be disturbed.

39. Service gratuity is not outlined in the contract, it is not outlined as how it does arise in the case of the Claimant and this shall not be awarded. Claim declined.

Conclusion

Judgement is entered for the Claimant against the Respondent in the following terms;

The summary dismissal of the Claimant was procedurally unfair;

The Claimant is awarded compensation at kshs.336,000. 00;

Notice pay at kshs.42,000. 00; and

Costs of the suit

Delivered in open Count at Nairobi this 8th day of October the year 2015.

M. Mbaru

JUDGE

In the presence of:

Lilian Njenga: Court Assistant

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