[2024] KEELRC 2239 (KLR)

Mwangi v Keroche Breweries Limited (Cause E035 of 2022) [2024] KEELRC 2239 (KLR) (18 September 2024) (Judgment)

Neutral citation: [2024] KEELRC 2239 (KLR)

Republic of Kenya

In the Employment and Labour Relations Court at Nakuru

Cause E035 of 2022

DN Nderitu, J

September 18, 2024

Between

Peter Wachira Mwangi

Claimant

and

Keroche Breweries Limited

Respondent

Judgment

I. Introduction 1. The claimant commenced this cause by way of a statement of claim dated 22nd September, 2022 filed in court on 26th September, 2022 through Betty Wamukore & Owiti Company Advocates. As it is the procedure, the statement of claim is accompanied with a verifying affidavit sworn by the claimant, a list of witness, a written statement by the claimant, a list of documents and a bundle of copies of the listed documents.

2. The claimant is seeking for the following reliefs –a.A declaration that the respondent failed to adhere to the procedure set out under Section 40 of the Employment Act on redundancy.b.A declaration that the claimant’s employment was subsequently unlawfully, unfairly, wrongfully, and maliciously terminated and was done without following fair procedure.c.Consequent to the holding in Prayers (a) and (b) a Declaration that the statutory requirements preceding termination were not adhered to.d.One month salary lieu of notice amounting to Kshs200,000/=.e.Full salary for 10 months commencing 1st June, 2020 to March, 2021 when the claimant was on unpaid leave.f.Redundant severance pay amounting to Kshs500,000/=.g.Unpaid dues amounting to Kshs117,196/=h.Unpaid housing allowance for a period of 60 months.i.Payment of the equivalent of twelve months gross wages for unfair and unlawful termination amounting to Kshs2,400,000/=j.Damages for mental anguish and degradationk.Costs and interest of the claim.

3. The respondent through Waruiru Karuku & Mwangale Advocates filed a memorandum of response to the claim on 23rd January, 2023. In the response, the respondent denies liability and prays that the claimant’s claim be dismissed with costs for want of merits.

4. The respondent neither filed documents nor witness statement(s).

5. The claimant filed an answer to the respondent’s response to the claim on 9th February, 2023 dismissing the response/defence and reiterating that judgment be entered against the respondent as prayed in the memorandum of claim.

6. The claimant’s case came up for hearing on 19th September, 2023 when the claimant (CW1) testified and closed his case.

7. The defence was to be heard on 4th October, 2023 but the respondent offered no evidence and its case was closed.

8. Counsel for both parties addressed the court by way of written submissions. Miss Wamukore for the claimant filed written submissions on 18th October, 2023 while Mr Kabugu for the respondent filed on 30th January, 2024.

II. The Claimant’s Case 9. The claimant’s case is expressed in the statement of claim, the oral and documentary evidence adduced by the claimant (CW1), and in the written submissions by his counsel.

10. In the statement of claim, the claimant avers that he was engaged by the respondent, a limited liability brewer based at Naivasha, Nakuru County, as a procurement manager vide a contract dated 25th January, 2016.

11. It is pleaded that the claimant was on a gross monthly salary of Kshs200,000/=. It is further pleaded that the respondent failed to provide housing to the claimant or pay housing allowance in lieu thereof throughout his entire period of employment.

12. It is pleaded that after completing his annual leave ending on 21st May, 2020, the claimant was orally instructed to remain on unpaid leave by the respondent allegedly due to the effects of the Covid-19 pandemic.

13. It is pleaded that on 15th March, 2021 the claimant received a letter informing him that he had been terminated on redundancy. It is pleaded that the said termination was contrary to the applicable law and in total breach and violation of the claimant’s employment and labour rights.

14. In his testimony in court the claimant adopted his filed statement dated 16th September, 2022 as his evidence-in-chief. He produced copies of his filed documents as exhibits 1 to 4.

15. In cross-examination the claimant stated that he worked for the respondent for five years as a procurement manager in the terms and conditions set out in the contract alluded to above. He insisted that housing was not taken care of in the contract and that he was neither housed by the respondent nor paid housing allowance.

16. Further, the claimant stated that the reason for redundancy was stated as the economic woes brought about by Covid-19 pandemic. He stated that the terminal dues stated in the letter of termination as payable to him were not settled by the respondent.

17. It is on the basis on the foregoing that the claimant is seeking that judgment be entered in his favour as prayed in the statement of claim.

III. The Respondent’s Case 18. The respondent’s case shall only be restricted to the issues of law raised in the pleadings and the submissions by its counsel as neither oral nor documentary evidence was adduced.

IV. Submissions 19. The claimant’s counsel identified the following issues for determination –i.Was the declaration of redundancy by the respondent against some members of claimant’s union unlawful?ii.Whether the claimant is entitled to reliefs sought.iii.Who bears the costs of the suit?

20. On the first issue, it is submitted that the fact of the employment of the claimant by the respondent as contained in the contract dated 25th January, 2016 is not in dispute. It is also not in dispute that the claimant was terminated on redundancy as per the letter dated 15th March, 2021.

21. It is submitted that in terminating the claimant on redundancy the respondent failed, refused, and or neglected to comply with the mandatory provisions in Section 40 of the Employment Act (the Act). In this regard counsel cited Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals & Allied Workers Union (KUDHEIHA) V Nairobi Hospital (2022) eKLR in laying emphasis that the provisions in the above cited law place a mandatory obligation upon an employer to comply therewith before terminating an employee on redundancy.

22. On the other hand, counsel for the respondent identified the following issues for determination –a.Whether the claimant’s termination was unlawful.b.Whether the claimant is entitled to Accrued House allowance.

23. On the first issue, it is submitted that redundancy is a lawful way of terminating employment at the option of an employer as held in Kenya Airways Limited V Aviation & Allied Workers Union of Kenya & 3 Others (2014) eKLR provided that the same conforms with the law. It is submitted that the respondent complied with Section 40 of the Act in terminating the claimant on redundancy.

24. It is further submitted that in the adversity that Covid-19 presented the respondent was so adversely affected that its very survival in business was in jeopardy. It is submitted that faced with that reality the respondent had reasonable and genuine grounds in terminating the claimant and other employees. It is submitted that the respondent was justified in so doing under Section 43(2) of the Act.

25. The respondent’s counsel took the view and submitted that the letter of termination dated 15th March, 2021 sufficed for the notices required under Section 40(1) of the Act.

26. For all the afore-stated, the court is urged to dismiss the claim with costs. The submission on reliefs shall be covered below in a part dedicated to the same.

V. Issues For Determination 27. The court has carefully and dutifully gone through the pleadings filed, the oral and documentary evidence tendered by the claimant, and the written submissions by counsel for both parties. The following issues commend themselves to the court for determination-a.Whether the termination of the claimant on redundancy was fair and lawful.b.Whether the claimant is entitled to the reliefs sought.c.Who should bear the costs of the cause?

VI. Termination 28. The uncontested evidence on record is that the claimant was an employee of the respondent as a procurement manager from 25th January, 2016 to 15th March, 2021 when he was terminated on redundancy. The employment relationship between the parties was governed by a contract dated 25th January, 2016.

29. The fact that the claimant was terminated on redundancy as per the notice/letter dated 15th March, 2021 is also not disputed. What is in contest is whether the said termination on redundancy was unfair and unlawful as pleaded and urged by the claimant. The respondent takes the diametrically opposed position that the termination on redundancy was handed down in accordance with the law.

30. The law on redundancy is provided for under Section 40 of the Act in the following terms –40. (1)An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions -a.where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy:(b)where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;(c)the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;(d)where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;(e)the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;(f)the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and(g)the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service.(2)Subsection (1) shall not apply where an employee’s services are terminated on account of insolvency as defined in Part IX in which case that Part shall be applicable.(3)The Minister may make rules requiring an employer employing a certain minimum number of employees or any group of employers to insure their employees against the risk of redundancy through an unemployment insurance scheme operated either under an established national insurance scheme established under written law or by any firm underwriting insurance business to be approved by the Minister.

31. The above law was illuminated and expounded by the Court of Appeal in the decision cited by counsel for the respondent – Kenya Airways Limited V Aviation & Allied Workers Union of Kenya (Supra).

32. The steps to be taken by an employer in declaring and effecting redundancy are rather straight-forward and should not be expected to attract debate. The issue for determination is whether the respondent complied with those provisions in declaring the claimant redundant in the notice dated 15th March, 2021.

33. The obvious and straight-forward answer is that the respondent did not comply with the law in rendering the claimant redundant. No evidence was availed that a notice was issued to the claimant and served upon the labour officer in-charge of the area. Even if the claimant was not a member of a union he was nonetheless entitled to be served with a notice under Section 40(1)(b) of the Act. There is also no evidence adduced by the respondent on the criteria that was used in considering the claimant for redundancy. Further, there is no evidence that the respondent complied with the rest of the law as stated above, including payment of terminal dues.

34. The allegation by the respondent that it was adversely affected by the Covid-19 pandemic has not been proved as no statements of accounts were availed or any other records or documents to prove that allegation.

35. While an employer has the option of declaring an employee redundant for substantive reasons as those contemplated under Section 43 of the Act such grounds and reasons must be based on genuine and reasonable foundations and not on whims or caprice.

36. The court finds and holds that the termination of the claimant by the respondent on the alleged redundancy lacks in substance and procedure and the same is hereby declared unfair and unlawful.

VII. Reliefs 37. Flowing from the finding and the holding in the foregoing part of this judgment, the court shall consider the reliefs sought as hereunder.

38. Prayer (a) is for a declaration that the respondent failed to adhere to the procedure set out in Section 40 of the Act and the court has found as much in the foregoing part of this judgment. A declaration shall be issued to that effect as per the orders hereunder.

39. Prayers (b) and (c) are for a declaration that the termination was hence unfair and unlawful for lack of both substantive and procedural fairness and the court agrees and grants the same in the terms of the order issued in regard to prayer (a) above in the orders below.

40. Prayer (d) is for one month’s salary in lieu of notice in the sum of Kshs200,000/=. This notice pay is admitted by the respondent in the letter of termination dated 15th March, 2021 and the same is hereby granted in lieu of notice in accordance with clause 11. 1 of the contract dated 25th January, 2016.

41. Prayer (e) is for unpaid salary for the 10 months between June, 2020 and March, 2021 a period during which the claimant was unlawfully placed on unpaid leave until his unlawful termination on 15th March, 2021. This claim is allowed in the sum of Kshs2,000,000/=.

42. Prayer (f) is for severance pay in the sum of Kshs500,000/=. The claimant served the respondent for five years and the severance pay @15% of monthly salary should amount to the claimed Kshs500,000/=. This is the amount awarded under this head.

43. Prayer (g) is for unspecified dues amounting to Kshs117,196/=. In the submissions by his counsel the claimant is said to claim this amount as unpaid or pending salary arrears. It is not submitted as to which period the arrears relate to and the particulars thereof. The court has awarded the claimant salary for the 10 months for the period that he was placed on mandatory unpaid leave. Unless this new claim was supported by evidence, and the court has not come across such evidence, the same shall and hereby fails.

44. Prayer (h) is for unpaid house allowance for the entire period of employment of five years which is equivalent to six years. The court has gone through the contract of employment dated 25th January, 2016 which provides as follows in clause 8. 1 –8. 1SalaryDuring the period that you serve the company under this agreement, the company shall pay to you a monthly gross salary of Ksh200,000/- (Kenya Shillings Two Hundred Thousand only) which will be paid into a bank account of your nomination. The salary is subjected to government employment regulation taxes and deductions ie. NHIF, NSSF, among others stipulated by the Government of Kenya.

45. The respondent in its defence and the submissions by counsel allege that the above salary was “all inclusive” meaning that it included all that was due and payable to the claimant at the end of each month. However, Section 31 of the Act specifically provides that an employer shall provide housing to an employee or pay housing allowance in lieu thereof. This is an obligation on the employer and it is an implied term in each and every contract of employment. If the parties intended that the said salary be consolidated and inclusive of house allowance nothing would have been easier than for them to specifically state so. The court has no business rewriting a contract between the parties. The duty of the court is to interpret the contract and as far as I understand the same it neither provides for housing nor for housing allowance.

46. In the circumstances the claimant is hereby awarded housing allowance for the six years worked out as follows 15% * Kshs200,000 * 12 months * 6years = Kshs1,800,000/=. This is the amount that is awarded under this head.

47. Prayer (i) is for compensation equivalent to 12 months’ gross wages for the unfair and unlawful termination. The request is based on the provisions of Section 49(1)(c) of the Act. The court has found and held that the termination of the claimant on redundancy was grossly unfair and unlawful. The parties have not expressed desire to re-engage. The claimant testified that he did not secure another job after the termination and he went through serious financial hardship as a result of the termination. He stated that the claimant failed and or refused to pay to him the tabulated dues in the letter of termination for no reason at all. The claimant was denied due process and was thrown in the deep end, so to say, by the very employer he had served with dedication for over six years. The claimant was sent on unpaid compulsory leave yet the respondent as a seasoned employer knew or ought to have known and understood that it was wrong.

48. Considering all the factors provided for in the above cited law, the court takes the view and holds that this is an appropriate case for an award of the maximum compensation equivalent to 12 months’ gross pay. The same is calculated as Kshs200,000/= * 12months = Kshs2,400,000/=.

49. Prayer (j) is for damages for mental anguish and degradation. No evidence was tendered in support of this claim and no law has been pointed out in support of the same. The Act does not provide for the same and it has not been proved. In my considered view, the award given above in compensation is adequate. No specific or special damage has been pleaded and proved and as such this claim is denied.

VIII. Costs 50. Costs follow the event and the claimant is awarded the costs of the cause.

IX. Orders 51. For all the foregoing reasons the claimant’s cause succeeds and the court issues the following orders –a.A declaration be and is hereby issued that the termination of the claimant by the respondent on alleged redundancy was unfair and unlawful.b.Consequently, the claimant is awarded the following –i.One month’s salary in lieu of notice Kshs200,000/=ii.Salary arrears for 10 months ………Kshs2,000,000/=iii.Severance pay ………………………Kshs500,000/=iv.Unpaid house allowance ………… Kshs1,800,000/=v.Compensation for unfair & unlawful termination … Kshs2,400,000/=Total ………….………………Kshs6,900,000/=This amount is subject to statutory deductions.c)The claimant is awarded the costs of the cause.

DELIVERED VIRTUALLY, DATED, AND SIGNED AT NAKURU THIS 18TH DAY OF SEPTEMBER, 2024. …………………….DAVID NDERITUJUDGE