[2013] KEELRC 283 (KLR)

REPUBLIC OF KENYA

Industrial Court of Kenya

Cause 1664 of 2012 [if !mso]> <style> v:* {behavior:url(#default#VML);} o:* {behavior:url(#default#VML);} w:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} </style> <![endif]

IN THE MATTER OF THE SALARIES AND REMUNERATION COMMISSION ACT 2011; AND IN THE MATTER OF THE WATER ACT 2002

AND

IN THE MATTER OF ARTICLES 159, 230 [4], 232, 259 AND 260 OF THE CONSTITUTION OF KENYA

BETWEEN

NATIONAL UNION OF WATER & SEWERAGE EMPLOYEES………….CLAIMANT

VERSUS

MATHIRA WATER AND SANITATIONCOMPANY LIMITED…....1ST RESPONDENT

TANA WATER SERVICE BOARD……….…………….....………2ND RESPONDENT

THE PERMANENT SECRETARY

MINISTRY OF WATER AND IRRIGATION……………....………3RD RESPONDENT

AND

THE HONOURABLE ATTORNEY GENERAL ……....... 1ST INTERESTED PARTY

SALARIES AND REMUNERATION COMMISSION ..... 2ND INTERESTED PARTY

Rika J

CC. Elizabeth Anyango

Mr. Michael Owuor instructed by Michael Owuor and Company Advocates for the Claimant

Mr. Mahinda instructed by Gathaara Mahinda and Company Advocates for the 1st Respondent

Mr. Kinyua instructed by Kahari and Kiai Advocates for the 2nd Respondent

M/S Nthiga State Counsel, instructed by the Attorney General, for the 3rd Respondent; the 1stInterested Party; and the 2nd Interested Party

JUGDMENT

1. The Claimant is a Trade Union registered under the Labour Relations Act 2007. It represents unionisable employees in the water and sanitation industry. The first Respondent is a Water Company and Agent of the second Respondent, registered under the Companies Act Cap 486 the Laws of Kenya, while the second Respondent is a Water Service Board created under the Water Act 2002. The third Respondent is the Accounting Officer in the Ministry of Water and Irrigation. The first Interested Party is the Chief Government Legal Advisor. The second Interested Party is a Commission created under Article 230 of the Constitution of Kenya, mandated with among other things, to set and regularly review the remuneration and benefits of the State Officers, and to advise the National and County Government on the remuneration and benefits of all Public Officers.

2. This Claim was initiated by the Claimant on 21st September 2012. The first Respondent filed its Statement of Reply on 4th December 2012. The parties subsequently agreed to file submissions on or before 14th December 2012. The Judgment of the Court was to be delivered on 29th January 2013, but owing to pressure of work, various judicial workshops, trainings and unavoidable gatherings, the Court has not been able to prepare and deliver the Judgment before today. Delay is regretted.

3. The Claimant submits that it has a Recognition Agreement with the first Respondent. The parties went on to negotiate a Collective Bargaining Agreement, which was due for registration at the Industrial Court in September 2012. On 3rd September 2012, the first Respondent wrote to the Claimant stating that the second Respondent had advised that, ‘’the CBA constitutes salary review and that in accordance with the directive from the office of the President, Tana Water Services Board is not in a position to recommend approval. Based on the above circular that mentions that the Salaries and Remuneration Commission is supposed to advise on salary reviews, we are not in a position to enter into an agreement until we get the correct position from the office of the President.’’The CBA, that was for all purposes and intents concluded, could not be registered at the Industrial Court in order to take legal effect. This is why the Claimant has approached this Court, seeking-:

a)A declaration that the Salaries and Remuneration Commission Act 2011 does not apply to this, or any other CBA entered into, or likely to be entered into between the Claimant, and the Respondent or any other limited companies formed under the Companies Act Cap 486 and the Water Act 2002 as Water Service Providers, with which recognition has been made with the Claimant;

b)An Order that the Claimant and the Respondent be at liberty to submit the Collective Bargaining Agreement to the Industrial Court for Registration;

c)A permanent injunction restraining the 2nd and 3rd Respondents from interfering with the Claimant and the Respondent or any other Water Service Providers with whom the Claimant will make recognition for the purposes of Collective Bargaining;

d)A declaration that the 3rd and 2nd Respondents’ letters of 7th June 2011 and 29th August 2012 respectively are a nullity in the circumstances;

e)Such any other relief the Court may be pleased to grant; and costs.

4. The Claimant submits that the Salaries and Remuneration Commission is created under Article 230 [4] with powers and functions set out as follows:-

a)Set and regularly review the Remuneration and Benefits of State Officers; and

b)Advise the National and County Government on the Remuneration of all other Public Officers.

Section 11 of the Salaries and Remuneration Commission Act 2011 gives additional powers to include:-

a)To inquire into and advise on the Salaries and Remuneration paid out of Public Funds; and,

b)Keep under review all matters relating to Salaries and Remuneration of Public Officers.

Section 13 [1] [d] of the Salaries and Remuneration Commission Act provides further that the Commission has power to-:

c) Take any measures it considers necessary to ensure that in harmonization of Salaries and Remuneration, equity and fairness is achieved in the Public Sector.

The mandate of the Commission is exercisable with respect to Public Officers in the Public Service, whose Salaries and Remuneration are payable directly from the Consolidated Fund. Water Service Providers are not established under the Constitution and are not therefore State Bodies. Their employees are not Public Officers. The functions of the second Respondent are well defined under Section 47 of the Water Act 2002. The first Respondent does not need the approval of the second Respondent to execute the CBA. The CBA is a negotiated document, where both parties define their rights and obligations. The Salaries and Remuneration Commission Act 2011 does not apply to the salary review of the Claimant’s members. The Claimant finally submits that the first Interested Party has recently advised that State Corporations were not established under the Constitution, and are thus not State Organs. The mandate of the second Interested Party is limited by the Constitutional definition of the term public service or office. The Claimant prays the Court to grant the above Orders.

5. The first Respondent concedes that there is a CBA negotiated and concluded between the first Respondent and the Claimant. The CBA could not be registered before the Industrial Court as the second Respondent withheld its approval. Refusal, according to the first Respondent was due to the proposed salary enhancement. The CBA proposes 15% wage increment in the first year and 20% in the second. The first Respondent wrote to the Claimant advising that these negotiated increments are above the approved structure, and it was therefore necessary to obtain the approval of the Water Service Board, the second respondent herein.

6. The second Respondent advised that the wage adjustment through the CBA constituted a salary review. As advised through the directive of the Office of the President, under circular Refop. CAB, 2/23A dated 25th May 2011, it is the sole responsibility of the Salaries and Remuneration Commission to advise on salary reviews.

7. The first Respondent holds its employees are not public officers, and their salaries do not emanate from apublic fund. A Public Officer is defined by the Black Laws Dictionary as a person who holds a public office under a national state or local government, and authorized by that government to exercise some specific function. The Salaries and Remuneration Commission Act 2011 adopts Article 260 of the Constitution in defining a Public Officer as a State Officer; or any other person other than a State Officer who holds public office. ‘Public Office’ is defined as an office in the national government or county government, if the remuneration or benefits of the office are directly payable from the consolidated fund or directly out of money provided by Parliament. The Public Officers Ethics Act 2003 defines a Public Officer under section 2 to mean an officer, employee or member including unpaid, part time temporary officer or employee or member of any of the following:-

The government or any department, service or undertaking of the government;

The National Assembly or Parliament;

Local Authority;

A corporation, council, board, committee, or other body which has power to act under the, and for the purpose of any written law relating to local government, or public utility or otherwise to administer funds belonging to or granted by the government, or money raised to administer funds belonging to, granted by the government or money raised by rates, taxes or charges in pursuance of any such laws; and

Co-operative Society established under the Co-operative Societies Act.

8. From these definitions, a Public Officer executes government functions, not for profit or personal interest. His position is created by the Constitution; Act of Parliament; or of Municipality or other legally constituted Bodies. The functions and powers of the Public Officer are defined and executed through the law. The Public Officer is employed to execute government functions and therefore, remunerated directly from the consolidated fund or money authorized by Parliament.

9. An employee of Mathira Water and Sanitation Company is an Officer of that company. His position is not created by legislation, rather, by the Memorandum and Articles of Association or by the company’s Executive, using powers donated by the Articles of Association. Though the services are rendered to benefit the general public, they are primarily focused on assisting the company achieve its mandate. The employees’ duties are defined by contract, not legislation. An employee of the first Respondent cannot be described as being under Public Service Employment. Such employees are not Public Officers.

10. Public Fundhas the meaning assigned to it by the Exchequer and Audit Act Cap 412 the Laws of Kenya. Public moneys include, revenue, any trust or other moneys held, whether temporarily or otherwise by an officer in his official capacity, either alone or jointly with any other person, whether an officer or not.Public money is the term used to describe monies that come into possession of or is distributed by the government or government entity, and money raised by private entity where it is doing so under statutory authority, or money held by the government in trust for third parties, money that can create liability for the Government.

11. The employees of Mathira Water and Sanitation Company are not paid from the Public Fund. The Company’s Memorandum of Association stipulates that the company is to remunerate any person or persons being officers or agents of the company for services rendered in or about the conduct of the company’s business.The service provision agreement between the first two Respondents provides that revenue collected is deposited in the Tariff Revenue Account. The employees of the two Respondents are remunerated from this Account. The company is expected to remunerate its officers. Employees’ costs are met from this Account. This is not part of the Consolidated Fund under the Constitution. The employees are not paid from the Public Fund.

12. The first Respondent argues therefore, that in its view, its employees are not subject to the Salaries and Remuneration Commission Act 2011.

13. The first Respondent was incorporated to act as an agent of the second Respondent. An agent has the authority to act in any way required by the principal business. The Service Provision Agreement between the two Respondents defines the terms of the agency. The second Respondent monitors the activities of the first Respondent to ensure the objectives of the water license, are met. The employees are contracted by the first Respondent. There is privity of contract between the first Respondent and its employees. Neither the Water Service Board; the Salaries and Remuneration Commission; nor the Government can be allowed to interfere or control the terms of that contract. The Water Services Board should not have sought the advice of the Salaries and Remuneration Commission; it should if it was necessary, have referred the issue to the Water Services Regulatory Board, which has overall supervisory powers under the Water Act 2002.

14. Private limited liability companies such as the first Respondent have the liberty to enter into CBAs, without reference to the Salaries and Remuneration Commission. In conclusion, the first Respondent urges the Court to find that the first Respondent is a private limited liability company, capable of freely entering into contract with other parties. It concurs with the Claimant that-:

a)the Salaries and Remuneration Commission Act 2011 does not apply or govern the relation between the first and second Respondents over salary review; and

b)Subject to the Service Provision Agreement, the first Respondent has the liberty to enter into CBA with a trade union.

15. The second Respondent does not agree with the Claimant and the first Respondent. The Court must apply the common law test in defining who is an employer, and who is an employee. The Court has been invited to look at these tests- control; integration; economic reality; mutuality of obligations; and the multiple test. It is not always straightforward to determine what an employment relationship is. Parastatals, State Corporations, Local Authorities and other Statutory Bodies offer services to the public through mostly autonomous bodies, created by a myriad of Statutes. Article 260 of the Constitution, only defines a certain category of public officers.

16. It is correct the first Respondent is an independent legal entity. However, it is important to understand the complexity surrounding the incorporation of Water Companies under the Companies Act. Section 3 of the Water Act vests every water resource in the State. Section 4 gives the Minister responsible for Water, oversight role over all institutions and persons involved in water services. Water Services Regulatory Board [WASREB] is empowered to regulate water services. Section 51 empowers the Minister to establish the Water Services Boards, responsible for efficient and economical provision of water services. Tana is one such Board. Section 53 provides that the license shall be issued to an Agent of the Board. The Agents are the Water Service Providers such as Mathira Water and Sanitation Company Limited. It provides water only as an Agent of the Board. Both the Board and the Agent are under the supervision of the Ministry, through WASREB.

17. Article 43 [1] of the Constitution of Kenya requires the Government to ensure every person resident in this Country has clean and safe water. The proposed CBA would have an adverse effect on the ability of the State to meet the cost of this Constitutional mandate.

18 The second Respondent urges the Court to examine the issues in dispute, within the structural reforms in the water sector, contained in the Water Act 2002. Reference has been made to a paper presented by Professor Albert Mummatitled‘Kenya’s New Water Law: an analysis of the implications for the rural poor.’ He argues that the water reforms revolves around four themes namely: the separation of the management of water resources from the provision of water services; the separation of policy making from the day to day administration and regulation; decentralization of functions to lower state organs; and the involvement of non-governmental entities in the management of water resources and in the provision of water services. The CBA cannot be concluded without the involvement of the real employer. The second Respondent does not agree with the issues as framed by the Claimant and the first Respondent. It feels that the crux of the matter lies in identifying the real employer. The Claim should be dismissed with costs.

19. The Attorney General, on behalf of the third Respondent and the Interested Parties, does not dispute that the first Respondent is registered as a private limited liability company, under the Companies Act. The company however, is an agent of the second Respondent under the Water Act, and as shown by Clause 3[a] of the Memorandum of Association. Section 53 [1] of the Water Act confers upon the second Respondent legal mandate, to efficiently and economically provide water services authorized by a license; by itself or through an agent. It has the power to acquire the tools needed to carry out its mandate under Section 53 [3]. Section 3 vests upon the State ownership of all water resources. The assets utilized by the first Respondent belong to the second Respondent, a State Corporation. The assets are leased to the first Respondent in order that the second Respondent fulfills its legal mandate, under Section 53 [1] of the Water Act. The directives of the Permanent Secretary in the Ministry, issued in the letter dated 7th June 2011, and from which the second Respondent derived its instructions to the first Respondent with respect to the CBA, issued within the legal mandate of the State, under Section 4 and 47 of the Water Act.

20. Section 11 of the Salaries and Remuneration Commission Act 2011, vests upon the second Interested Party the powers to inquire into and advise on the salaries and remuneration to be paid out of public funds. The first Respondent is utilizing the assets of the State under lease from the State Corporation; revenues generated from use of those assets are public funds. Section 11[c] of the Salaries and Remuneration Commission Act vests upon the Commission the power to ‘’ advise the national and county government on the harmonization, equity, fairness of remuneration for the attraction and retention of requisite skills in the public sector. This should be read together with Article 260 of the Constitution, which defines public service as ‘’the collectivity of all individuals, other than State Officers, performing a function of a State Organ.’’ Section 55 [1] of the Water Act provides that ‘’ a Water Service Board may, in accordance with this section, arrange for the exercise and performance of all or any of its powers and functions, under license by one or more agents…..’’The first Respondent is an agent of the second Respondent.

21. The Attorney General invokes Section 2 of the Public Officers Ethics Act 2003, to elaborate who a public officer is. The provision states, ‘’an officer, employee or member including an unpaid, part-time temporary officer or employee or member of … a corporation, council, board, committee, or other body which has power to act under, and for the purposes of any written law, relating to local government, or undertaking of public utility or otherwise to administer funds belonging to, or granted by the government, or money raised by rates, taxes or charges in pursuance of any such laws.’’The first Respondent is involved in utilization of water resources, which is a public utility, and therefore, its Officers qualify as public officers under this law. The Board has the powers to determine fees, levies, premiums and other charges to be imposed for water services. Funds realized by the first Respondent, are directly from charges imposed upon the public pursuant to the Water Act. The Orders sought by the Claimant cannot be granted, in particular as seeks to bar the application of the Salaries and Remuneration Commission Act, to CBAs likely to be entered into, between the Claimant and any other water companies. At common law, a contract cannot confer rights or impose rights on strangers to the contract- see- Hands of Hope International v. Mayfair Insurance Co. ltd, e.KLR [2010]. The CBA subject of the dispute is between the Claimant and the Respondent. Other agreements and parties not involved in this dispute cannot be the subject of Court Orders. Lastly, the Attorney- General submits that under Section 16 [1] of the Government Proceedings Act Cap 40 the Laws of Kenya, an injunction cannot issue against the Government and its emanations. The Claim should be dismissed with costs.

The Court Finds and Orders:-

22. The dispute raises the recurrent question of the status of the employees of the Water Companies which were incorporated following the water reforms in Kenya. The process culminated in the enactment of the Water Act 2002. The pioneer Water Companies are the Nyeri Water and Sewerage Company [NYEWASCO] Limited, and the Eldoret Water and Sanitation Company Limited [ELDOWAS]. The two companies preceded the Water Act 2002, and energized the water reform movement, as they were seen as being success stories, in the efficient management and utilization of this resource. The Water Act 2002 and the reforms that followed its enactment have generated a sizable amount of controversy, particularly with respect to the status of the Water Companies and their Staff.

23. The issues in dispute may be reduced to the following:

a)Are employees of the Water Service Providers Public Servants?

b)Do the Water Companies have the freedom to Collectively Bargain with trade unions?

c)Are their employees’ salaries and remuneration to be set and reviewed by the Salaries and Remuneration Commission?

d)Should the Court grant orders protecting the CBA between the first and second Respondents?

24. Brendan Martin, renowned specialist in the social dimensions of industrial and public sector change and development, was commissioned by the World Bank to prepare a Background Paper for the World Development Report 2004, Making Services work for the Poor People. In his Paper ‘What is Public Services’ [Public World, London. bmartin@publicworld.org],he analyzes very well what comprises ‘public services’

25. He begins by conceptualizing ‘public services’ from the definition offered in the Oxford English Dictionary, Second Edition [1989] vol. 12, p. 778 which says:

‘’ In general, and in most senses, the opposite of private. The varieties are numerous, and pass into each other by many intermediate shades of meaning. The exact shade depends on the substantive qualified, and in some expressions more than one sense is vaguely present; in others the usage is traditional and it is difficult to determine in what sense precisely, the thing in question was originally called public.’’From this premise, Mr. Martin suggests that ‘public services’ may refer to:

a)Services provided by the State;

b)Services to the public;

c)Services on behalf of the public;

d)Services providing public goods; and,

e)Services accountable to the public;

The Paper notes from the very outset, that it can be problematic to determine in what sense a thing is given the tag of ‘public’ or ‘private’

26. Another very important observation in this Paper is that history shapes our understanding of public services, the boundaries of the public and private realms, and the way in which services are delivered in different contexts, these being transformed by the current economic and political change. This finds expression in tension between integration and liberalization of national economics, on the one hand, and public policy made and implemented at national and sub-national levels, on the other. Members of the European Union, have in this context, eschewed the term ‘public services’ in favour of ‘services of general interest.’ The essential characteristics of the public services such as health care, education, water and sanitation, and electricity, is that the Government has ‘public responsibility for them.’Direct state provision, is not the only way for the Government to exercise that responsibility. There are alternatives to direct involvement. Private limited liability companies, NGOs and Community Groups may be allocated the power to deliver public services. The result is that we have privately delivered public services. The public services do not cease to be public, if they are privately delivered. In the view of Mr. Martin, the line to be drawn between what is public and what is private, is a matter of qualitative judgment, rather than quantitative measurement.

27. The water reforms in Kenya, as argued by Professor Albert Mumma in the Paper quoted by the second Respondent in its submissions [New Water Laws: an analysis of the implications for the rural poor, Johannesburg South Africa January 2005], revolves around four themes: [1] the separation of the management of water resources from the provision of the water services; [2] the separation of policy making from the day to day administration and regulation; [3] decentralization of functions to lower state organs; and [4] the involvement of non-governmental entities in the management of water resources and in the provision of water services. The Water Act created different levels of Institutions, in the pursuit of these themes. At the top there is the Ministry of Water which is in charge of policy formulation. It performs this function through the Water Resources Management Authority. Below the Ministry is the non-commercial State Corporation called the Water Services Regulatory Board [WASREB], charged with performance benchmarking, approval of Service Provision Agreements [SAPs], and tariff adjustments. Below the WASREB are the Water Services Boards [WSBs] such as Tana Water Services Board. The WSBs are in charge of the asset management and hold the licenses for water provision. At the bottom are the Water Service Providers [WSPs]. They provide water and sanitation services under license from the WSBs. Mathira Water and Sanitation Company Limited is such a WSP, operating under license from Tana.

28. The WASREB CEO is appointed by its Board, with the approval of the Minister. The Board appoints other employees, on such terms and conditions of employment, as it may agree upon with such employees. This is the same case with the CEO of the WSBs. It is not a requirement of the Water Act however, that WSPs have their CEOs appointed with the approval of the Minister. The Boards of the WSPs have been making attempts to appoint their CEOs without the involvement of the WSBs, but the Minister, has reasserted the overall control of the sector, and given guidelines on the manner of recruitment of WSPs’ CEOs. With respect to other members of staff the WSPs have the liberty, through their Board of Directors, to recruit. Most employees have thus been employed by the WSPs, without the input of the higher oversight Bodies. In terms of recruitment and management of labour, particularly non-management staff, the WSPs have no obligation to look to the WSBs, the WASREB, the Authority or the Minister. They have operational autonomy. The majority of the Water Service Providers are limited liability companies, which are wholly owned by the respective Local Governments. They originated from the water departments of the various Local Governments. The Water Act does not require that all Water Service Providers, the Water Agents, be sub-divisions of the Local Governments, or that they are all registered as limited liability companies; NGOs and Community Groups are allowed to serve as Water Agents. The NGOs and Community Groups can recruit employees, and define the terms and conditions of employment without reference to the license giver. They are Water Service Providers.

29. The Water Bill 2012 proposes to change the structures under the Water Act 2002, to bring them to conform with the devolved structures of government created under the Constitution of Kenya 2010. The changes are necessary but are only likely to throw more confusion on the status of the employees of the water companies, particularly because the dust raised by the reforms beginning in the 1990s clouding the terms and conditions of the employees’ service, has not yet settled. The Water Bill retains much of the control by the National Government, over water resources. It creates the Water Resources Regulatory Authority as an agent of the National Government in management, use and regulation of water resources. Its role is to regulate the management and use of water resources in consultation with the National Land Commission. The Authority is to be headed by a Director General, appointed by the Board, taking into account the directions given by the Salaries and Remuneration Commission. The Basin Water Resources Boards are to replace the Water Services Boards. Their role remains to manage water resources within their basin area. The CEO of the Board is to be appointed by the Board on terms and conditions of employment as determined by the Board, taking into account such directions given by the Salaries and Remuneration Commission. There are other new bodies introduced by the Bill, such as the Water Works Development Board and the Water Services Regulatory Commission, created to oversee use of water resources cross-counties. Water Service Providers have been retained. The Bill preserves the present law which states that a Water Service Provider shall be a company established under the Companies Act Cap 486 the Laws of Kenya, NGOs or other person or body, as shall be approved by the Water Services Regulatory Commission. The WSP may enter into public-private partnership for the exercise and performance by another person of some or the whole of its area of water service.

30. A Body may thus be deemed to be a public sector employer, if the general government [central, local, county, state corporation], exercises control over its general policy. Control may be direct or indirect, and may include the following:-

a)Ability to appoint CEO and Directors who determine the policy of the organization;

b)Right to be consulted over appointments, or veto appointments;

c)Provision of funding, accompanied by the right to determine how the funds are expended;

d)Government’s ownership of majority shares, or special powers for government in the organization’s constitution;

e)Right to demand certain reports or information, to set or constrain policy, outcomes, or determine the way profits should be utilized; and,

f)A general but wide ranging right to control the day to day running of the organization

30. The Water Companies such as Mathira Water and Sanitation Company Limited are previous water departments of Local Governments. They are wholly owned by the Local Governments. Their directors are appointed by the Local Governments and included in the recent past, mayors and councillors. Their Boards also include professionals from the private sector. The Water Companies are to shift under the devolved structures of government, to become subsidiaries of the County Government, perhaps with Governors and County Representatives, included in the Boards.

31. Courts have examined the status of the Water Companies in various decisions, and appear to agree that although these are limited liability companies, they are registered as agents and instrumentalities of the Local Governments. They are private companies, rendering public services, and controlled by Public Authorities. In Eldoret High Court Miscellaneous Civil Application Number 97 of 2003, Republic v. Eldoret Water and Sanitation Company ex parte Booker Onyango [2008 e.KLR],Justice Mohammed Ibrahim concluded the Eldowas is an agent and instrumentality of the Government. This conclusion was adopted by this Court in the case of Industrial Court Cause Number 1722 of 2011, David Gioko and Others v. Nairobi City Water and Sewerage Company Limited.The Court concluded that a circular issued by the Head of Public Service, altering the mandatory retirement age of public service employees from 55 to 60 years, applied to the employees of the Nairobi City Water and Sewerage Company Limited. The employer and the trade union adopted the 60 year mandatory retirement age in their CBA. The employees of Mathira Water and Sanitation Company may therefore be viewed as public servants, as they are working for an agent and instrumentality of a Public Authority. They are public servants, though not in the traditional public service, controlled directly by Government Ministries. Their employer is a private company, rendering public service. The Water Bill proposes that the water agents may conduct their functions through a public-private partnership. Persons drawn in as partners of the water agents will themselves be new forms of employers, and their employees would not easily fit in the public servant-private employee dichotomy. In the view of the Court, employees of the water companies are vaguely public servants, going by the definition given by Oxford Dictionary at paragraph 25 above. The characterization is a matter of qualitative judgment, rather than quantitative measurement. The employees fall within the advisory function of the Salaries and Remuneration Commission, created under Article 230 (4) (b).

32. The Constitution of Kenya Article 260, defines public service as ‘’the collectivity of all individuals, other than State Officers, performing a function within a State Organ.’’A state organ means ‘’a commission, office, agency or other body established under this Constitution.’’ Public Office means, ‘’an office in the national government, a county government, or public service, if the remuneration and benefits of the office are payable directly from the Consolidated Fund, or directly out of money provided by Parliament.’’ A Public Officer is defined as ‘’any State Officer; or any person other than a State Officer who holds public office.’’The Salaries and Remuneration Commission Act Number 10 of 2011 adopts the definition of public officer, contained in the Constitution. The water companies are private limited liability companies, performing a public function, within the Ministry of Water which is State Organ. They are agencies of the Government. The revenue generated by the first Respondent accrues from its sale of water resources. Water is a resource that belongs to the people of Kenya, the public, held in trust for them by the Government. The tariff revenue account is not therefore a private account, but a public account, privately held and transacted. The employees of the water companies are paid from public funds, not private funds.

33. Article 41 [5] guarantees every trade union, employers’ organization and employer, the right to collective bargaining. It also extends the freedom of association to employees, employers and their organizations. Article 36 grants to all persons, freedom of association. The right to collectively bargain and, the freedom to associate, are part of the Constitutional regime of fundamental rights and freedoms. The right of workers to collectively bargain freely with their employers, is an essential element of the freedom of association. Collective bargaining is a voluntary process in which the employees and employers meet, and freely agree on the terms and conditions of employment. It is an important part of workplace democracy. It is an expression of People’s Sovereignty.

34. International Labour Organization [ILO] Convention Number 87 on Freedom of Association and the Protection of the Right to Organize [1948], and the ILO Convention Number 98 on Right to Organize and Collective Bargaining [1949], are the international legislations upon which these rights are founded. The two Conventions form part of the core ILO Conventions. They are rooted in the Constitution of the ILO itself, and the Declaration of Philadelphia of 1944. The Conventions recognize the right of public sector employees to collectively bargain. Article 4 of the 1949 Convention while acknowledging that public servants involved in the administration of the State may be limited by National Laws from collective bargaining, requires that means appropriate to national conditions be taken where necessary, to encourage and promote the full development and utilization of machinery for voluntary negotiation between employers and employees, with a view to regulation of terms and conditions of employment, by means of collective agreements. The Conventions require that public sector employees are not discriminated against, in enjoyment of the freedom of association and the right to collectively bargain.

35. The right of public sector employees to freely collectively bargain is given more attention in the 1978 ILO Labour Relations [Public Service] Convention 151. It builds on the requirements of Article 4 of the 1949 Convention stating, ‘’measures appropriate to national conditions be taken to encourage and promote the full development and utilization of machinery for negotiation of terms and conditions of employment between public authorities concerned and public employees’ organizations, or such other methods as will allow representatives of public employees to participate in the determination of these matters.’’Thus, public servants may adopt other methods of determining terms and conditions of employment, other than the method of collective bargaining. The Public Service Convention also agrees that certain category of employees such as the armed forces and the police may be excluded from the right of collective bargaining. The Convention also excludes high level employees whose functions are considered as policy making or managerial, and those whose duties are highly confidential, from the scope of the right to collectively bargain.

36. Convention 151 specifies that ‘’ public sector employees shall have, as other workers, civil and political rights which are essential for the normal exercise of freedom of association, subject only to the obligation arising from their status and the nature of their functions. ‘’ Other methods other than collective bargaining, should not however, be applied to undermine the application of any more favourable provision in other International Labour Conventions.

37. The effect of these International Legislations is that public sector employees have been granted the full freedom to associate and collectively bargain in certain jurisdictions, with National Laws restricting only some categories of public servants such as the armed forces and the police. Article 41 of the Kenyan Constitution does not discriminate against public service employees. Article 24 [5] states, that a provision in the legislation may limit the rights or fundamental freedoms of persons in the Kenya Defence Forces or the National Police Service. Among the freedoms and rights that may be limited are those under Article 41 including the freedom to associate and the right to collectively bargain.

38. Other jurisdictions have adopted models where consultation co-exists with collective bargaining processes. In France, public employees’ organizations are entitled to collectively bargain. Public employees are also allowed to determine their terms and conditions through their representatives serving on consultative bodies. South Korean public sector employees’ organizations are allowed to collectively bargain, with the employees allowed also, to have consultations through workplace associations. Namibia has divided the subjects that may be collectively negotiated, from those that are subject to consultations. Japan has in place the National Public Service Act, which establishes an Authority, composed of independent persons. The Authority makes recommendations to the Cabinet and the Diet [Parliament] on review of the terms and conditions of public sector employees. The United Kingdom has a Senior Salaries Review Board, which advises on the salaries of senior officials.

39. The creation of Salaries and Remuneration Commission of Kenya seems to have been intended to introduce this dual collective bargaining/ consultative model, in determining the terms and conditions of public sector employees in Kenya. It is a Commission established under Article 230 of the Constitution. Article 249 requires that Constitutional Commissions: [a] protect the sovereignty of the people of Kenya; [b] secure the observance by all State Organs of democratic values and principles; and [c] promote constitutionalism.The Salaries and Remuneration Commission has an obligation to promote and protect the freedom of association and the right to collectively bargain, guaranteed by the Constitution to the public sector employees. The Constitution primarily confers two functions to the Commission: to set and regularly review the remuneration and benefits of all State Officers; and to advise the National and County Governments on the remuneration and benefits of all other Public Officers.The focus under the Constitution is on the State Officers such as- The President, Cabinet Secretaries, Principal Secretaries, Members of Parliament and the Attorney General. These are the Public Officers who in the first place, made it necessary to have the Salaries and Remuneration Commission. Members of Parliament in particular, were seen as perennially bent on defining their own terms and conditions of employment, which resulted in a huge wage bill for the treasury. The Commission was not created because the existing public sector collective bargaining structures which exist for the benefit of the unionisable employees, were found wanting; it was created to check the excesses of the High ranking Public Servants. It was never the case that collective bargaining in the public sector, is the cause of the high wage bill.

40. Unfortunately, the existence of the Salaries and Remuneration Commission has been used by Government Ministries, as shown by this dispute, to unnecessarily frustrate public sector collective bargaining and stifle freedom of association. Public service employers are refusing to engage trade unions in collective bargaining, and refusing to effect concluded collective agreements, on the misconceived notion that the Salaries and Remuneration Commission has the exclusive mandate to set the terms and conditions of employment, of public sector employees. The Salaries and Remuneration Commission Act expanded the mandate of the Commission to cover all Public Officers. The Constitution restricts the mandate to advising the National and County Government on the remuneration of public servants. The role is advisory. The Act gives the Commission the power to keep under review, all matters relating to the salaries and remuneration of public servants. It veers off the advisory role to active participation in wage review. The Constitution did not intend that the Commission takes over the collective bargaining role with respect to unionisable employees in the public sector, from employees and employers’ organizations. Review of the terms and conditions of employment of unionisable employees under the Article 41 of the Constitution, is properly the mandate of trade unions and employer groups. The Commission would not be acting in promotion of democratic principles and constitutionalism by curtailing the right of collective bargaining.

41. The Commission has come up with the Salaries and Remuneration Commission [Remuneration and Benefits of State and Public Officers] Regulation 2013. Review by the Commission of the terms and conditions of employment of all Public Officers, shall be made after every four years. Regulation 18 states that the Commission shall not negotiate with a trade union when determining, reviewing or advising on remuneration and benefits of State or Public Officers. It requires the Management of Public Service Organizations with unionisable employees to seek the advice of the Commission, before the commencement of any collective bargaining process with the respective Union, on the sustainability of the proposal by the Union. Even after the parties have successfully completed the collective bargaining, the Management shall, before the signing of the agreement, confirm the fiscal sustainability of the negotiated package with the Commission.

42. These Regulations appear to this Court to be too restrictive and in conflict with the idea of freedom of association and the right to collectively bargain under Article 41, and the objects given to the Commission under Article 249. The parties to the Recognition Agreement, employers and employees, cannot begin the collective bargaining process, or complete the process by registration of the CBA at the Industrial Court, without the endorsement of the Commission. What happens if the Commission continuously advises that collective bargaining cannot commence, or even where it has commenced and is successfully concluded, the Commission advises that what is concluded is not fiscally sustainable? Review cycle is now four years. These Regulations are a recipe for industrial unrest in the public sector. The Regulations neither promote the purposes, values and principles of the Constitution. They do not advance the rule of the law, human rights and fundamental freedoms in the Bill of Rights. The Regulations impair collective bargaining and do not facilitate the concept of the co-existence of collective bargaining/ consultative processes, in determining the terms and conditions of unionisable public sector employees. The Commission has by its regulations, even changed the normal two year cycle in review of the terms and conditions of employment, to a four year cycle. The Commissions act without the direction or control of any person under the Constitution, but it must be acknowledged that Industrial Relations are based on democratic participation. Constitutional Commissions must act in accordance with Article 249 of the Constitution.

43. The additional functions of the second Interested Party, under its Constitutive Law, are not contemplated by the Constitution. Article 230 limits review and setting of remuneration and benefits by the Commission to State Officers. The involvement of the Commission on the remuneration of all other Public Officers is purely advisory. Why therefore does the Act extend the review function to all Public Officers?

44. The Constitution recognizes that intrusion by the Commission into the entire area of public sector collective bargaining, would have the effect of eroding the rights and freedoms given by Article 41. This is why the Commission comes in as an advisor under Article 230 (4) (b), rather than an active player determining how and when the collective bargaining should open and close.

45. The expanded functions and the new Regulations are causing confusion in public sector collective bargaining. The refusal by the second Respondent to have the Claimant and the first Respondent register their concluded CBA, is influenced by the thinking behind the new Regulations. What will be the role of Public Sector Trade Unions in the new structure? The Commission shall not engage any Trade Union in collective bargaining. It does not wish to descend to the collective bargaining forum, but retains the power to say when the collective bargaining process should begin, or whether it should begin at all. The Commission has the last word on whether the Government and its Agencies as parties in collective bargaining process, should or should not sign concluded CBAs.

46. Recognition Agreements and subsequent Collective Bargaining Agreements, are an expression of the People’s Sovereignty. The trend that the Salaries and Remuneration Commission has taken, risks creating the perception that this is another tool in the hands of the Executive, which Executive no longer desires to engage Trade Unions in wage negotiation. This is the early impression the Court has formed, from the increasing number of Government Agencies which are being brought to Court for refusal to meet their obligations under CBAs, on the ground that the Salaries and Remuneration Commission has not been involved.

47. In the view of this Court, the Commission must be left to meet its mandate as given under Article 230 of the Constitution. This mandate is two-fold; (a) setting and reviewing of the salaries and remuneration of State Officers; and (b) Advising National and County Government on the Remuneration of all other Public Officers. ‘All other Public Officers’ must include all shades of public servants, including employees of the State Corporations, which like the Water Companies are agents and instrumentalities of the Government. The involvement of the Commission with regard to ‘all other Public Officers,’ must however, be limited to advising the Government and its Agencies in the collective bargaining process, not defining and running the process.

48. The first Respondent has been granted operational autonomy by the second Respondent. Unionisable employees of the first Respondent are not appointed by the second or third Respondent. They are employed by the first Respondent. Under Section 2 of the Employment Act 2007, the Labour Relations Act 2007 and the Industrial Court Act 2011, an agent or factor of a person can be an employer. Water agents can be employers, and independently negotiate terms and conditions of employment with their employees. It is only the terms and conditions of Employment of the CEO and other High Ranking Officers that are determined in consultation with the second Respondent. The Permanent Secretary has been issuing guidelines to the Water Service Boards on the filling of Water Companies’ CEOs’ positions. The Water Bill has followed this trend, requiring the Salaries and Remuneration Commission to be consulted in the determination of the terms and conditions the CEOs of the Regulatory Authority and the Water Basin Boards. Otherwise the Water Companies’ Boards, have the liberty to employ the non-management staff. The Water Companies have entered into Recognition Agreements with Trade Unions. They must be left alone to collectively negotiate and develop the terms of their unionisable employees’ terms and conditions of employment. It cannot be right that the timing of the collective bargaining process and the contents of the collective agreements, are all dependent of the views of the Commission. The Constitution did not intend that the right to

collectively bargain, and the freedom to associate, are shackled through the creation of a

Constitutional Commission.

IT IS HEREBY ORDERED:-

[a] The Salaries and Remuneration Commission Act 2011, does not bar the Claimant and the first Respondent from registering the CBA concluded between them;

[b] The Salaries and Remuneration Commission Act 2011, does not bar any Water Service Provider from collectively bargaining and registering a CBA with any recognized trade union;

[c] The Claimant and the first Respondent are at liberty to submit the CBA concluded between them, to the Industrial Court for registration;

[d] The 2nd and 3rd Respondents shall not interfere with the Claimant’s and 1st Respondent’s right to collectively bargain;

[e] The instructions given by the 3rd and 2nd Respondents respectively, in the letters of 7th June 2011 and 29th August 2012 are declared devoid of any legal effect; and,

[f] No order on the costs

Dated and delivered at Nairobi this 17th day of May 2013

James Rika

Judge

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