[2024] KEELRC 1954 (KLR)

Mutembete v SGA Security Solutions Limited (Cause E006 of 2023) [2024] KEELRC 1954 (KLR) (25 July 2024) (Judgment)

Neutral citation: [2024] KEELRC 1954 (KLR)

Republic of Kenya

In the Employment and Labour Relations Court at Mombasa

Cause E006 of 2023

M Mbarũ, J

July 25, 2024

Between

Edyline Musanya Mutembete

Claimant

and

SGA Security Solutions Limited

Respondent

Judgment

1. The respondent employed the claimant as an accounts assistant on 1st May 2009. She rose to the rank of regional finance and administrative officer and worked until 7 May 2021 when her employment was terminated earning Ksh.218, 500 per month.

2. The claim is that on 7 May 2021, the claimant was served with notice of summary dismissal by the respondent and forced to sign the same in the presence of the police. The respondent had formed a committee to investigate the conduct of the claimant which found the claimant culpable leading to dismissal.

3. The claim is that there was no fair hearing or justified reasons leading to termination of employment or payment of terminal dues. The investigations conducted were not proper and did not allow the claimant to state her case. Upon the summary dismissal, the respondent caused the claimant to be charged in Criminal Case No.E669 of 2021 at Shanzu Law Court.The claimant is seeking payment of terminal dues;a.Notice pay Ksh.218,500;b.12 months compensation for unfair loss of employment Ksh.2,622,000;c.28 leave days ksh.203,933. 33;d.12 years gratuity/severance pay at 18 days Ksh.1,573,200;e.7 days worked in May Ksh.50,983. 33; andf.Costs.

4. The claimant testified in support of her case that she was the regional finance administration office of the respondent and supervised 9 accountants. On 7 May 2021, she was called to a board meeting where she found the general manager who served her with notice of summary dismissal. She wanted to read the letter first but police officers came in and arrested her over alleged fraud together with 3 other employees. The claimant was informed by another employee Johnson Kimaiyo that there was a misappropriation of resources in the technical department and that materials issued for assignments were not properly used. Richard Ocheing, Alfred Mukwabi and Bernard Nzioki were in the technical team and were arrested for misappropriation of company resources. Immediately upon the arrest of the claimant, the cashier, David Ayora working under her was issued with a notice to show cause on why he did not raise the alarm that there were delays in receiving receipts for monies paid out to the three staff. A complaint had been lodged against the claimant that receipts for payment had not been received in time.

5. The claimant testified that the three technical team members would get cash to purchase goods in the market. She would not accompany them and paid them based on submitted invoices. The three would submit receipts on account of the job done or quotation for materials to be purchased. She would note and approve for payment.

6. The cashier did the data entries and the general manager would approve then scan the documents to the head office for payment. The claimant would initiate these payments which required 2 people for online authorization for the bank to release money to the noted recipients.

7. The claimant testified that in some instances, payment would be in cash for transaction of up to Ksh.2, 000 but most payments would be made online. She was accused of soliciting from suppliers which was not correct and there are Mpesa statements. The origin of the alleged payments from clients is not stated. There was no proof that the payments resulted from solicitation from clients.

8. The claimant admitted making payments to Richard Ocheing, Alfred Mukwabi and Bernard Nzioki based on invoices and quotations since her duty was to approve what the client was willing to pay and had no role in what the market prices were and she was not in procurement. She was however charged in Criminal Case No.E669 of 2021 at Shanzu Law Court with three others but the matter was withdrawn. The respondent accused her of redeeming bonga points which she admitted and was willing to refund. The head of operations, George Meroka too did the same thing but was not charged and no disciplinary action was taken against him.

9. Upon cross-examination, the claimant admitted that she had withdrawn about 11,000 bonga points from the respondent and returned the same. During the course of her employment, she was issued with warning letters dated 3 January 2012 and 10 march 2015. Both related to case of indiscipline and lapses in the books of account in Mombasa office and failure to ensure proper reconciliations. On 25 August 2020 she was issued with letter on the withdrawn bonga points and tendered an apology to the general manager.

10. The claimant testified that under her contract and code of conduct, she was bound that upon negligence of duty or on committing gross misconduct, she would be subject to summary dismissal. Soliciting from clients and aiding or abetting another employee to breach the code of conduct, one is liable for gross misconduct. There were audits conducted annually upon which a notice to show cause was issued and suspended pending investigations. She was invited for disciplinary hearing on 12 April 2021 and attended accompanied by Washington Onyango. There was an investigation report that noted that the claimant as head of finance had failed to put internal controls to prevent fraud and also received funds from clients hence culpable for professional negligence which was gross misconduct.

11. The claimant testified that her NSSF dues were paid by the respondent for the duration of employment but claims gratuity pay for years worked. During the suspension period, there was no salary payment.

12. In response, the respondent’s case is that on 1st may 2009 the claimant was employed as accounts assistant and rose through the ranks to regional finance and administration officer. The claimant was registered with NSSF and NHIF. Her employment performance was periodically reviewed and job description changed and salary increased.

13. The claimant had the duty to supervise daily activities of finance and account and ensure timely collections and payments of all company obligations. She was required to ensure internal controls and CIT cash counts. In the year 2020, following a finance audit, the claimant was cited and implicated in a case where the respondent lost Ksh.2, 301,095 through fraud and malpractices. She was taken through the disciplinary process in line with the respondent’s human resource manual.

14. The claimant was issued with a notice to show cause on 17 march 2021 which outlined the allegations made against her and that disciplinary process would commence. On 19 march 2021 the claimant was suspended to allow for investigations and disciplinary hearing conduct on 20 April 2021 before a panel of 7 members including her representative. The claimant was required to answer to charges that she;a.Deliberately authorized payment of Ksh.2,301,095 without due diligence, without receipts either sighted or confirmed;b.Failed to prevent fraud, forgery and stealing by three employees;c.The claimant improperly solicited money from suppliers and service providers as kickbacks o for making their payments;d.Did nothing to avert malpractices and fraud in her department;e.Failed to follow procurement procedures leading to loss of money on VAT;f.Negligent performance while on duty leading to overpayments.

15. Through letter dated 7 may 2021 the respondent explained to the claimant why they had found her culpable for not adhering to set down rules and through letter dated 15 may 2021 the claimant was allowed to file an appeal which as heard on 28 may 2021.

16. On 11 May 2021, the claimant and three other former employees of the respondent were arrested and charged in Criminal case No.669 of 2021 at Shanzu Law Court for stealing. The criminal case was investigated by the DPP and during which the claimant filed CMCC ELRC No.E076 of 2022 against the respondent but later withdrew it.

17. The response is that under the provisions of Section 44(4) of the Employment Act, the respondent was entitled to issue a summary dismissal notice to the claimant for gross misconduct. By dint of Section 35 of the Act, no notice was due and or payment of gratuity since the respondent had complied with Section 35(5) and (6) of the Act. The claim for severance pay is not applicable. The claimant had utilized all her leave days and the claim should be dismissed with costs.

18. In evidence, the respondent called Patrick Kilonzo the human resources officer who testified that following an audit of the finance department, the respondent noted various malpractices involving the claimant and issued her with notice show cause followed by suspension to allow the disciplinary hearing. She was found culpable and issued with notice of summary dismissal. The employees who had committed fraud were Richard Ocheing, Alfred Mukwabi and Bernard Nzioki who were exchanged with the claimant in a criminal case which was later withdrawn. The three officers were found to have sourced goods through malpractices which the claimant failed to note and address in her role as regional finance administrator.

19. Emmanuel Angore rectified that he conducted investigations into the matter leading to the summary dismissal of the claimant. There were fraudulent transactions supported by audits that the claimant would make cash payments to Richard Ocheing, Alfred Mukwabi and Bernard Nzioki based on forged receipts alleging that they had sourced goods for clients yet the claimant paid without proper verification. The claimant approved the payments without checking whether the purchases and invokes were correct leading to a loss of over Ksh.2. 3 million. The claimant was culpable of negligence and was taken through the disciplinary process.

20. Angore testified that the claimant was also arrested by the police following their investigations. He also recorded his statement with the police following his internal investigations but the matter was later withdrawn.At the close of the hearing, both parties filed written submissions.

Determination 21. Through a letter dated 17 March 2021, the respondent directed the claimant to show cause why disciplinary action should not be taken against her for gross misconduct. The respondent noted that following an audit and internal investigations, it had been noted that Richard Ocheing, Alfred Mukwabi and Bernard Nzioki had been receiving payments from her department and in some cases, failed to account for the monies paid to them by issue of receipts. That the claimant had deliberately and intentionally allowed this malpractice despite numerous reminders from the cashier, David Ayora.

22. In the same letter, the respondent noted that the claimant had deliberately and intentionally failed to use skeptical skills to question and or detect the authenticity of most of the receipts submitted to account for the monies paid to Richard Ocheing, Alfred Mukwabi and Bernard Nzioki, leading to loss of over Ksh.2. 3 million. The claimant had approved payments including petty cash vouchers without questioning why the three employees had submitted fake and forged receipts from one supplier to defraud the respondent. As head of finance, the claimant had failed to be diligent and the respondent had good cause to believe that she was getting kickbacks from these fraudulent transactions.

23. It was also noted that under the claimant, the respondent had made financial losses due to negligence of duty. These included cases of double payments or over-payments of terminal dues to some of the former employees including Peter Obonyo, and Owili Agango. The overpayments were still outstanding and the claimant had put zero effort into ensuring the same was re-banked.

24. Also, the respondent noted that the company bought foodstuffs to cushion employees against the impact of Covid-19 but the claimant secretly redeemed company bonga points at Naivas Supermarket using her card without prior approval from management or seeking authorization. This was tantamount to stealing hence in breach of her contract.

25. In response, the claimant noted that she had noted anomalies concerning receipts from Richard Ocheing, Alfred Mukwabi and Bernard Nzioki and had threatened to recover the same from their salaries. Alfred had sought a supplier but after a while claimed the supplier refused to give goods on credit since the purchases were huge. She had discussed this with her team and tasked Rogers to be in control and to only post payments that had receipts.

26. On the second charge, the claimant relied that all receipts were handed over to cashiers who would occasionally inform her of questionable receipts. She had rejected receipts that do not add up and or susceptible to fraud. These challenges of cash payments had been brought to the attention of the management meeting on 19 March 2020 but some were considered and paid.

27. On the third charge, the claimant replied that she had noted all her approvals based on proper judgment and not based on personal benefit. She had not been informed of any fake receipts or received kickbacks.

28. On payments to Owili and Obonyo, the claimant admitted that these were erroneous influenced by several factors. She informed the GM immediately upon realization and had the matter followed up aggressively to have them repay including through Sacco. She also accompanied them to the bank to fill a standing order which was later stopped.

29. On the last issue, the claimant admitted to having loaded Naivas bonga points to her card and this happened because they had called to ask for her ID number at the point of billing. She was not aware that his was wrong and was willing to refund the same. The claimant made an apology for her conduct and promised there would be no repeat.Essentially, the claimant admitted to all the five issues put to her.

30. Taking of bonga points without prior authorization of the respondent as the owner is stealing contrary to Section 44(4) of the Employment Act which forbids criminal conduct against the property of the employer. Such is defined as gross misconduct.

31. The admission that there were possible fake receipts submitted was allowing a loss of money to the company. As head of finance, the claimant had a core duty to safeguard the financial resources of the respondent which she failed to do. This is well defined under Section 44(4) (e) and (g) of the Employment Act as gross misconduct subject to summary dismissal.

32. The fact of failing to check before approving payments following submission of forged receipts from Richard Ocheing, Alfred Mukwabi and Bernard Nzioki is admitted which went to the core duties of the claimant. As the officer given mandate to approve payments, financial probity demanded keenness to detail and to alert the respondent of any malpractice to allow for internal controls.

33. Intrinsically, the responses to the first and second charges that the claimant had allowed Richard Ocheing, Alfred Mukwabi and Bernard Nzioki to receipt payments based on forged and fake receipts and further failed to use her skills to question and or detect the authenticity of most of the receipts submitted, this led to abdication of duty.

34. In these circumstances, the court will not interfere with internal disciplinary findings of the employer where the employee, called to render an account admits to misconduct. Whether partial or in full, the responses given upon the notice to show cause were sufficient to allow the respondent to proceed and issue a notice of summary dismissal. However, the respondent took the option to take the claimant through the entire due process to the end. She was invited to the disciplinary hearing and attended in the company of Washington Onyango. She could not give satisfactory responses concerning the allegations made against her.

35. In her evidence in court, the claimant asserted that she was not in procurement to know the prices of various goods. She was not accompanying the three officers, Richard Ocheing, Alfred Mukwabi and Bernard Nzioki to the market to source for prices and hence, she approved what was submitted to her office.

36. The claimant was charged for negligence of duty which led to financial loss. Her position allowed her to question any payment before approval. The employment contract well outlined her duties including checking on proper accounting and putting in internal controls to avoid fraud. To take the standpoint that she was not in procurement and that she did not accompany the technical team to the field or market was to support dereliction of duty. The backstopped with her to check on all payments including all receipts, invoices and payments.

37. The offer to follow up on the overpayment of terminal dues and refund of bonga points directly implicated the claimant in her role. She cannot extricate herself from the sanction of summary dismissal.

38. In the case of Oyombe v Eco Bank Limited (Civil Appeal 185 of 2017) [2022] KECA the court held that where the employee had admitted having been involved in fraudulent acts which cost his employer loss of money, termination of employment through summary dismissal was justified.

39. In this case, the respondent produced the three warning letters which were regarding other misconduct the claimant is noted to have committed. These involved acts of financial impropriety which had cost the company money and a good reputation. These warnings are not denied.

40. In the case of Duncan Muisyo v Cabinet Secretary Ministry of Health & 3 others [2016] eKLR the court held that where there are proper and professional investigations and audits which reveal financial impropriety on the part of the employee, upon the due process and called to account, the employer is justified to issue notice of summary dismissal. In this case there was an audit conducted. This was further followed up by investigations. The fact that the claimant was arrested and charged in a criminal court and later released, internal disciplinary proceedings revealed she was of gross misconduct.The court finds termination of employment in this case was justified.Notice pay and compensation are not due to the claimant.

41. On the claim for 28 leave days, indeed, the employer is the custodian of work records. In this case, the respondent submitted annexures 8 and 9 of the bundle to confirm that the claimant had no pending leave days.

42. On the claim for gratuity/severance pay, under the employment contract, there was no benefit for gratuity due. This being a case of summary dismissal, such benefit did not accrue. Further, severance pay is only due in a case premised under the provisions of Section 40 of the Employment Act. This case did not present any characteristic therefrom.

43. On the claim for 7 days worked in May 2021 this is admitted as due for Ksh.50, 983. 33.

44. Accordingly, save for the admitted claim for work for 7 days all at ksh.50, 983. 33 the claim is without merit and is hereby dismissed. The claimant to attend at the shop floor for clearance and payment of the admitted dues. Each party bears its costs.

DELIVERED IN OPEN COURT AT MOMBASA THIS 25 DAY OF JULY 2024. M. MBARŨJUDGEIn the presence of:Court Assistant: Japhet Muthaine……………………………………… and …………………………………