[2023] KEELRC 2680 (KLR)

Muragu v Unaitas Sacco Limited (Cause 230 of 2020) [2023] KEELRC 2680 (KLR) (27 October 2023) (Judgment)

Neutral citation: [2023] KEELRC 2680 (KLR)

Republic of Kenya

In the Employment and Labour Relations Court at Nairobi

Cause 230 of 2020

SC Rutto, J

October 27, 2023

Between

Kenneth Mwangi Muragu

Claimant

and

Unaitas Sacco Limited

Respondent

Judgment

1. The Claimant instituted the suit herein vide a Memorandum of Claim dated 28th May 2020. It is the Claimant’s case that he was employed by the Respondent as a Senior T24 Analyst. The Claimant avers that on 16th June 2018, he was arrested and charged in Court for conspiracy to defraud contrary to Section 317 of the Penal Code. He further states that he received a letter on 23rd July 2018 from the Respondent placing him on suspension pending further investigations and without a right to be heard. That to date, he is yet to receive formal communication of the investigations. Citing constructive dismissal, the Claimant seeks the following reliefs against the Respondent: -i.A declaration and finding that the termination of the Claimant’s employment with the Respondent was unlawful and unfair;ii.An order directing the Respondent to reinstate the Claimant to his employment without loss of position, status or benefits or in the alternative payment of Kshs 225,000/= backdated to the date of suspension;iii.Special damages of Kshs 11,323,000/= as pleaded in paragraph 17;iv.General damages for financial embarrassment;v.Costs and interest on (ii) and (iii) above at court rates from the date of judgment until payment in full;vi.Certificate of service; andvii.Any other relief that this Honourable Court may deem fit to grant in the interest of justice.

2. Opposing the Claim, the Respondent contends that the process of arrest was conducted by the police. The Respondent further avers that the suspension of the Claimant did not amount to termination of employment and as such, was only temporary and fully paid. That during the whole process of investigations, the Claimant was accorded ample opportunity to be heard in accordance with the Human Resource Policy Regulations. The Respondent further denies summarily dismissing the Claimant. It is on account of the foregoing that the Respondent has asked the Court to dismiss the Claimant’s suit with costs.

3. Both parties called oral evidence during the hearing which proceeded on 18th April 2023 and 21st June 2023.

Claimant’s Case 4. The Claimant testified in support of his case and at the outset, sought to adopt his witness statement and all the documents filed on his behalf to constitute his evidence in chief.

5. It was the Claimant’s testimony that on or about 16th June 2018, the Respondent informed him and some of his colleagues that they were to accompany officers from the Criminal Investigation Department based in Parliament Police Station for purpose of recording a statement. He duly complied and accompanied the said Investigating Officers to Parliament Police Station where he wrote a statement.

6. To his uttermost shock, immediately after recording his statement on the same day, he was arrested without being informed of any charges against him or of any wrongdoing on his part. He was not permitted to return to his workstation to collect his documents and personal effects.

7. The Claimant contended that to date, he has been unable to clear from the organization.

8. It was his further testimony that on 20th June 2018, he was charged in criminal proceedings Milimani CR. No.1145 of 2018 R v Kenneth Mwangi & Another for conspiracy to defraud contrary to section 317 of the Penal code Cap, wherein he was subjected to a cash bail of Kshs 600,000/= and the hearing of the case scheduled for 6th July 2018.

9. That on 26th June 2018, he was informed by the Respondent that his account had been frozen and that he would not access his salary pending determination of the internal disciplinary proceedings at its Kasarani Branch.

10. On 23rd July 2018, he received a suspension letter dated 14th June 2018 from the Respondent placing him on suspension pending further investigations and without a right of fair hearing as provided for under the Respondent’s staff Human Resource Policy Regulations.

11. The Claimant averred that he was summarily dismissed without being made aware of any findings or outcome of any ‘completed investigations’ and neither was he subjected to any formal enquiry as to any of the alleged ‘suspicious activities’ undertaken in the system.

12. He was aggrieved for being on suspension without pay but nonetheless remained hopeful that the said investigations would exonerate him from the false accusations that had been levelled against him.

13. The Claimant averred that he was not subjected to a disciplinary hearing or issued with a show cause letter either before or after his criminal case. That even after his acquittal, he was not subjected to a disciplinary hearing.

14. That he tried going back to work but he was told to await further communication. He is yet to receive any communication from the Respondent.

15. According to the Claimant, his termination from employment by the Respondent was actuated by malice.

16. He maintained that the decision to terminate his employment was not only unfair and in breach of the Respondent's statutory duty owed to him, but it was also in flagrant breach of the Respondent's own Human Resource Policy/ Manual.

Respondent’s Case 17. The Respondent called oral evidence through Mr. Nephat Macharia Murimi who testified as RW1. He identified himself as the Respondent’s Chief Manager - Human Resources. Similarly, he adopted his witness statement to constitute his evidence in chief. He proceeded to produce the documents filed on behalf of the Respondent as exhibits before Court.

18. It was RW1’s evidence that the Respondent is a regulated financial institution within the framework of the law under the Societies Act, 2008. That in the conduct of its business, the Respondent handles on trust, money belonging to its customers and or members.

19. In the ordinary course of business, it was discovered that sometimes in May/June 2018 or thereabout, the Respondent’s core banking system had been manipulated to permit unauthorized disbursement of loans and simultaneous writing off of such loans. The modus operandi which is detailed in the Respondent’s internal report, entailed the unauthorised creation and/or use of user credentials by officers within the Respondent’s ICT department.

20. RW1 further stated that an analysis carried out at the time pointed to the position that one of the user credentials used for purposes of the said manipulation of the core banking system had been created by the Claimant. In view of the obvious connotation that the whole enterprise aforesaid represented perpetration of a criminal offense, he is aware that the attendant developments were reported to the relevant investigative authorities for appropriate action.

21. RW1 stated in further testimony that the ensuing investigations by those agencies pointed to the Claimant’s complicity leading to the opening of criminal proceedings against him together with others. The Respondent had reasonable basis to suspect that the Claimant had committed a criminal offence to its detriment and it was proper that the decision to place him on suspension was taken. That before conclusion of the criminal proceedings, the Claimant elected to commence these proceedings against the Respondent yet no decision to terminate him had been taken.

22. According to RW1, given the nature of the Respondent’s business, the Claimant’s suspected involvement in the matters set out hereinabove, eroded the trust and confidence that ought to have been reposed in the relationship between it and an employee holding such a sensitive position as the Claimant hence the Respondent was justified in taking the decision to place him on suspension.

Submissions 23. The Claimant submitted that his termination from employment through constructive dismissal constituted unfair termination within the meaning of the Employment Act. In addition, he submitted that the decision to place him on suspension for an indefinite period amounted to constructive dismissal and thereby constituted unfair termination.

24. He further argued that by placing him on suspension for an indefinite period, the Respondent’s conduct defeated the purpose of suspension which is meant to allow for completion of investigations. In support of the Claimant’s argument, the case of Risper Nyandwaki Nyambane v Viva Afya Limited (2022) eKLR was cited.

25. The Claimant further argued that the Respondent has failed to adequately meet the requirements of substantive justice by failing to provide accurate and clear evidence of impropriety and/or negligence on his part as the reason forming the basis for his termination.

26. On its part, the Respondent submitted that the Claimant, from his Memorandum of Claim, never sought to have the court declare that he was constructively dismissed from employment. That without any pleading in this regard, the Respondent invited the Court to note and hold that it would not be open to accede to the invitation by the Claimant that his termination was unfair yet there is no suggestion either in pleading or evidence reflecting the same. To this end, the Court was invited to consider the determination in the case of Rem Ogodo Ogana v Kenya Sugar Board (2016) eKLR.

27. It was the Respondent’s further submission that it is clear from evidence on record that it never issued the Claimant with a termination letter hence the obligation to afford him the procedural fairness safeguard in Section 41 of the Employment Act never arose.

28. The Respondent maintained that as per its Human Resource Manual, an employee could at the discretion of the employer be suspended without pay for disciplinary reasons. That from this understanding therefore, nothing would turn on the fact that the Claimant was under suspension while criminal proceedings against him were ongoing and before the claim was filed. It was submitted that such suspension was in line with a contractual stipulation and therefore cannot be said to have constituted a breach of an essential term of contract.

29. Citing the case of Thomas Sila Nzivo v Bamburi Cement Limited (2014) eKLR, the Respondent further argued that it was justified in taking steps to place the Claimant on suspension.

Analysis and Determination 30. Having considered the pleadings filed by both parties, the evidence, as well as the rival submissions, the following issues stand out for determination:i.Whether the Claimant’s suspension constituted constructive dismissal by the Respondent;ii.Whether the Claimant entitled to the reliefs sought?

Constructive Dismissal? 31. It is common ground that the Claimant was suspended from duty with effect from 14th June 2018 pending investigations. The Claimant was informed through the said letter of suspension that he will be issued with further guidance.

32. It is that suspension from duty that the Claimant has termed as unfair and unlawful and thus alleges constructive dismissal. The Respondent holds otherwise and contends that there was no constructive dismissal and that there was no letter of termination.

33. Constructive dismissal occurs when an employee is forced to leave his or her employment not on their own accord, but because of the employer’s conduct.

34. In addressing the question of constructive dismissal, the Court of Appeal had this to say in the case of Coca-Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR:“What is the key element and test to determine if constructive dismissal has taken place? The factual circumstances giving rise to constructive dismissal are varied. The key element in the definition of constructive dismissal is that the employee must have been entitled or have the right to leave without notice because of the employer’s conduct. Entitled to leave has two interpretations which gives rise to the test to be applied. The first interpretation is that the employee could leave when the employer’s behavior towards him was so unreasonable that he could not be expected to stay - this is the unreasonable test. The second interpretation is that the employer’s conduct is so grave that it constituted a repudiatory breach of the contract of employment - this is the contractual test.”

35. The Court proceeded to highlight the following as the guiding principles in determining a case of constructive dismissal: -a.What are the fundamental or essential terms of the contract of employment?b.Is there a repudiatory breach of the fundamental terms of the contract through conduct of the employer?c.The conduct of the employer must be a fundamental or significant breach going to the root of the contract of employment or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract.d.An objective test is to be applied in evaluating the employer’s conduct.e.There must be a causal link between the employer’s conduct and the reason for employee terminating the contract i.e causation must be proved.f.An employee may leave with or without notice so long as the employer’s conduct is the effective reason for termination.g.The employee must not have accepted, waived, acquiesced or conducted himself to be estopped from asserting repudiatory breach; the employee must-within a reasonable time terminate the employment relationship pursuant to the breach.

36. As stated herein, the Claimant’s case revolves around his suspension which was communicated to him on 14th June 2018. In as much as the Employment Act has not addressed the question of suspension from employment, it is not a strange phenomenon in an employment context, hence it is usual for an employer to suspend an employee from work, pending further disciplinary action or investigations. Such was the determination by the Court of Appeal in the case of Charles Muturi Mwangi v Invesco Assurance Co. Ltd [2019] eKLR where it was held as follows: -“On the second issue for determination indicated above, the appellant seems to be saying that there was no provision for his suspension in the contract of employment and so his suspension was unlawful. Without overstretching that argument, we can only say that we find that line of argument preposterous. We say so because, even in cases where employees are employed under permanent and pensionable terms, suspension and interdiction pending investigations for alleged misconduct is ordinarily part of the disciplinary process. Whether such suspension or termination was unfair is another issue altogether.”

37. Similarly, in the case of Mary Chemweno Kiptui v Kenya Pipeline Company Limited [2014] eKLR, it was held as follows: -“A suspension therefore is ultimately a right due to an employer who on reasonable grounds suspects an employee to have been involved in misconduct, of poor performance or physical incapacity and wishes to remove such an employee from the work place to enable further investigation without subjecting the employee to further commission of more acts of misconduct, underperformance or the conditions leading to incapacity. The suspension period is a time available to an employer to control as the employee can be summoned back to work any time to undertake disciplinary proceedings or upon terms and given by an employer.”

38. I fully adopt and associate myself with the findings in the foregoing authorities and hold that a suspension is a right due to an employer. To this end, the suspension of an employee cannot be deemed to be unfair on the part of the employer. Nevertheless, where the suspension is indefinite and no communication from the employer is forthcoming, then such suspension cannot be deemed to be fair.

39. As stated by the Respondent in the letter of suspension, the Claimant’s suspension was to pave way for investigations. In this regard, the Claimant was placed on suspension from 14th June 2018, and at the time of filing the instant suit on 9th June 2020, there is no evidence that the Respondent had reverted to the Claimant on the outcome of the investigations.

40. In support of its case, the Respondent exhibited a copy of the Investigation Report titled “Report on suspicious loan transactions”.

41. The report which is undated, does not indicate when the investigations were concluded. Further, the Respondent did not indicate, let alone suggest that it had notified the Claimant of the outcome of the investigations. After all, the Claimant’s suspension was to pave for investigations by the Respondent. Hence one wonders why the Respondent would suspend the Claimant in order to undertake investigations and fail to communicate the findings of the investigation to him upon conclusion. Essentially, the Claimant was left in limbo as it is apparent that at the time of instituting the instant suit, he was yet to be notified of the outcome of the investigations. It may very well be said that the Claimant was in the dark as regards his employment status with the Respondent.

42. In the circumstances and applying the principles set out in the case of Coca-Cola East & Central Africa Limited v Maria Kagai Ligaga (supra), the Respondent’s action of placing the Claimant on suspension for a considerably long time without any communication on the outcome of the investigations, which was the very reason for which he had been placed on suspension, clearly shows that the Respondent was no longer interested in continuing with the employment contract. This amounted to a significant breach that went to the root of the employment contract. Therefore, the Claimant was entitled to treat himself as constructively dismissed.

43. I hasten to add that my finding on this issue would have been different had the Claimant been suspended pending the conclusion of his criminal case. This way, the Claimant’s suspension would not have been deemed to be indefinite.

44. As stated herein, the Respondent was within its right as an employer to place the Claimant on suspension. However, the same ought to have been reasonable and undertaken within the confines of the law. By all means, a suspension spanning more than two years cannot be termed as reasonable and fair.

45. In light of the foregoing, it is my finding that the Claimant’s prolonged and indefinite suspension amounted to constructive dismissal hence he was unfairly and unlawfully terminated from employment.

Reliefs? 46. The Claimant has sought salary during suspension from 14th June 2018 to May 2019. During the period of suspension, the Claimant was presumed innocent as his culpability was yet to be established. It is therefore my considered view that he was entitled to full salary during this period. In addition, the Respondent did not provide a justification for withholding the Claimant’s salary during the period he was on suspension.

47. On this issue, I will follow the determination by the Court of Appeal in the case of Chief Justice and President of the Supreme Court of Kenya & another v Khaemba (Civil Appeal 522 of 2019) [2021] KECA 322 (KLR) (17 December 2021) (Judgment), where it was held that:“There was no express, implied or other provision or suggestion in the Judicial Service Act and Employment Actof 2007 that the salary of a judicial officer or other staff on suspension would be withheld or not paid during the period of suspension. The respondent could not be penalised in the absence of such a clear rule.”

48. The claim for leave arrears partially succeeds as the Respondent did not exhibit leave records in fulfilment of its obligation under Section 74 (1) (f) of the Employment Act, to prove that the Claimant proceeded on leave as required under the law. However, as the Claimant had only served for five (5) months, the leave pay will be prorated accordingly.

49. As the Court has found that the Claimant’s termination was unfair and unlawful on account of constructive dismissal, he is entitled to compensatory damages under Section 49 of the Employment Act, 2007. To this end, I award him damages equivalent to four (4) months of his gross salary. This award has taken into account the Claimant’s prolonged suspension without pay as well as the length of the employment relationship.

50. The Claimant has also prayed for reinstatement. Under the Employment Act, 2007, the remedy of reinstatement is provided for under Section 49(3) (a). The factors to be considered by a court of law when deciding whether to grant an order reinstatement, are spelt out in Section 49(4). This includes the practicability of recommending reinstatement or re-engagement. It is my considered view that an order of reinstatement is not practical in this case noting the manner in which the parties separated. Besides reinstatement is only granted in exceptional cases. The Court is not satisfied that this is an exceptional case as to warrant reinstatement.

51. The claim for payment of the balance for the remainder of the Claimant’s contract for 3 years 6 months is declined. In the instant case, the Claimant’s contract was not exhibited hence it is not clear whether there is a clause in the contract requiring for payment of any sum of money in the event of termination of the contract. Besides, the purpose of compensation is to make good the employee’s loss and not to punish the employer. As was held in the case of David Mwangi Gioko and 51 others v Nairobi City Water & Sewerage Company Limited, [2013] eKLR:“This court has in the past held that there is need in resolving employment disputes to pay heed to the principle of a fair go all round. This principle requires the court to balance the interest of the employer and that of the employee.

52. The claim for general damages for financial embarrassment is similarly declined as the compensatory damages are adequate to make good the Claimant’s loss.

Orders 53. It is against this background that I enter Judgment in favour of the Claimant against the Respondent as follows:a.The Claimant is awarded unpaid salary from June, 2018 to May, 2019 being Kshs 2,028,000. 00. b.The Claimant is awarded compensatory damages in the sum of Kshs 676,000. 00 being equivalent to four (4) months of his gross salary.c.The Claimant is awarded the sum of Kshs 49,291. 67 being equivalent to the prorated unpaid leave.d.The total award is Kshs 2,753,291. 67. e.Interest on the amount in (d) at court rates from the date of Judgment until payment in full.f.The Claimant shall also have the costs of the suit.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 27TH DAY OF OCTOBER, 2023. STELLA RUTTOJUDGEAppearance:For the Claimant Ms. Kirui instructed by Mr. Kihang’aFor the Respondent Mr. Situma instructed by Mr. WasikeCourt Assistant Abdimalik HusseinORDERIn 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 March 2020 and subsequent directions of 21st April 2020 that judgments and rulings shall be delivered through video conferencing or via email. They have waived compliance with Order 21 Rule 1 of the Civil Procedure Rules, which requires that all judgments and rulings be pronounced in open court. In permitting this course, this court had been guided by Article 159(2)(d) of the Constitution which requires the court to eschew undue technicalities in delivering justice, the right of access to justice guaranteed to every person under Article 48 of the Constitution and the provisions of Section 1B of the Civil Procedure Act (Chapter 21 of the Laws of Kenya) which impose on this court the duty of the court, inter alia, to use suitable technology to enhance the overriding objective which is to facilitate just, expeditious, proportionate and affordable resolution of civil disputes.STELLA RUTTOJUDGE