Bayport Financial Services Limited

IN THE COURT OF APPEAL OF TANZANIA AT IRINGA fCORAM: MKUYE, 3.A., MGEYEKWA, 3.A. And NGWEMBE, 3.A.) CIVIL APPEAL NO. 381 OF 2022 BAYPORT FINANCIAL SERVICES (T) LIMITED ...... .......... APPELLANT VERSUS CATHERINE F. MWITA............ ........... ........ .... RESPONDENT (Appeal from the decision of the High Court of Tanzania at Iringa) (Mlvambina, 3/1 dated the 25th day of March, 2022 in Labour Revision No. 05 of 2021 JUDGMENT OF THE COURT 2na &. iO'1 December, 2024 MKUYE, 3.A.: This appeal emanates from the ruling and order of the High Court of Tanzania (Labour Division) dated 29/3/2022 (Hon. Miyambina, 1) in Labour Revision No. 05 of 2021. The brief facts culminating to this appeal are as follows: the respondent, Catherine F. Mwita was on 9/3/2015 employed by the appellant, Bayport Financial Services (T) Limited, in the position of Credit Administration Officer and her duty of station was at Ileje within Mbeya Region. Sometimes in 2017, the respondent was transferred to Iringa where she continued with her duties until in 2018 when the appellant conducted a retrenchment exercise which led her to lose her job. The reason for the retrenchment, according to the appellant, was that she was experiencing financial downfall due to market forces in which her major portfolio went on a downward spiral. As a result, in order to address the occurrence, the appellant was forced to initiate recovery structures that would involve reducing the number of her employees. The employees were allegedly notified of the coming retrenchment and representatives were selected to represent others in the consultation meeting from all regions where the appellant had offices. The alleged negotiations were held at Dar es Salaam where it was resolved that retrenchment was inevitable. According to the respondent, she maintained that she was not involved in the process but was later on served with a termination letter on 31/7/2018. Upon receiving the termination letter, the respondent among others questioned the criteria that was used in the selection of employees who would be affected by the retrenchment as it was not clear. Believing that the retrenchment exercise was unfair and her termination was unlawful, she approached the Commission for Mediation and Arbitration (CMA). On her part, the appellant, maintained that she issued the notice of retrenchment vide an email notifying the employees of the intended retrenchment, on account that she was experiencing financial difficulties caused by unfavourable market trend/ and that she issued a notice of a consultation meeting and directed the employees to select their representatives. The CMA, having heard both the parties made a finding that the retrenchment exercise was substantively valid but procedural(y flawed, as the respondent was not consulted in the process. As a result, the respondent was awarded compensation equal to twelve (12) months salaries amounting to TZS. 8,089,920.00. The appellant, being aggrieved, lodged an application for revision before the High Court to challenge the decision of the CMA. The High Court having heard the parties found that the decision of the CMA was justified. It observed that the respondent being not a member of any Trade Union, did not attend the consultation meeting; and that the CMA was justified to award the compensation of TZS. 8,089,920.00. Still aggrieved, the appellant has appealed to this Court on five grounds of appeal. However, considering that this is an appeal on a labour matter which is supposed to be on points of law as per section 57 of the Labour Institutions Act, we refrain from reproducing all the grounds since some of them are on factual issues in which case grounds Nos. 1, 2 and 3 which appear to be premised on facts will not be reproduced. For that matter, there remains only two grounds of appeal (grounds no 4 and 5) which can be paraphrased as follows: 4. That, the trial Judge erred in law and fact in deciding that there was no proper consultation meeting which was conducted by the appellant 5. That, the award o f twelve months salary was severe whilst noting that it was only the retrenchment procedure that was adjudged faulty. When the appeal was called on for hearing, the appellant was represented by Ms. Glory Venance, learned advocate whereas the respondent was represented by Mr. Jonas Burton Kajiba, also learned advocate. On being called upon to elaborate her grounds of appeal, Ms. Venance assailed the High Court for upholding the decision of CMA that the retrenchment was procedurally unfair for lack of consultation; and confirming the compensation of twelve (12) months salaries. With regard to the issue of consultation, she began by stating the principles of law that it is governed by section 38 (1) of the Employment and Labour Relations Act, Cap 366 R.E. 2019 (the ELRA) and rule 23 of the Employment and Labour Relations (Code of Good Practice) Rules, 2007 (the Code of Good Practice) requiring the employer to give notice to the employees on the reason for retrenchment and conducting a proper consultation. She added that, under rule 23 of the Code of Good Practice, the obligation is placed on the employer to jointly solve the problem. The learned advocate argued that, in this case, the respondent was issued with the notice showing the intended retrenchment and its reason and an email directing her to select/appoint a representative to the meeting but she did not show cooperation as she did not respond. Neither did she question or object the representative chosen. The learned counsel added that, the respondent's act of keeping quite was a problem on her side; that is why even the appellant proceeded with retrenchment believing that she will accede. In her view, there was a proper consultation as per rule 23 of the Code of Good Practice. On being prompted by the Court whether the law provided for an exception of employing a different method in the retrenchment process, she said there was none. Regarding the issue of compensation of 12 months awarded to the respondent, Ms. Venance conceded that according to section 40 (1) of the ELRA, the minimum award is of 12 months salaries. However, she contended that in awarding such compensation, the courts below ought to consider the gravity of the unfairness, more so, when taking into account that, in this case, there was only a procedural unfairness. She added that, considering that the appellant was undergoing financial hardship, the 12 months salaries compensation was on a higher side. She, therefore, urged the Court to take into account the circumstances of the case. To bolster her argument, she referred us to the case of Felician Rutwaza v. World Vision, Civil Appeal No. 313 of 2019 [2021] TZCA (2 February 2021) at page 15 -16. In the end, she implored the Court to allow the appeal and consider awarding a reasonable compensation in view of the circumstances of the case. In response, Mr, Kajiba resisted the appeal. In relation to the issue of consultation, it was argued that it is a requirement of law for an employee who is not a member of any Trade Union to represent himself in a consultation meeting as per section 38 (1) (d) (iii) of the ELRA regardless of the circumstances the employer is going through. He added that, in terms of rule 23 (1) of the Code of Good Practice, the employer is given a mandatory obligation to comply with both substantive and procedurally fairness. Elaborating the issue of the retrenchment exercise Mr. Kajiba submitted that, the employee can be represented by a Trade Union or in person where he/ she is not a member of the Trade Union. He contended that, in this case, as the respondent was not a member of any Trade Union, the employer had a duty to ensure that she represented herself in the consultation meeting. Regarding the contention that the respondent did not respond to the notice sent to the respondent by email, he argued that, she had no option to indicate that she will attend personally. For that matter he argued that, the High Court was correct to hold that the respondent ought to attend in the consultation meeting in person as she was not a member of any Trade Union. With regard to the issue of compensation raised in ground No. 5, the learned counsel argued that, the 12 months salaries awarded by the CMA and confirmed by the High Court was quite proper. He pointed out that, in terms of section 40 (1) (c) of the ELRA, the arbitrator or Judge is empowered, in case he finds that the termination was unfair procedurally or substantively, to award compensation of not less than 12 months' salary. While relying on the case of Bati Services Company Limited v, Shargia Feizi, Civil Appeal No. 38 of 2021 [2023] TZCA 17595 (5 September 2023) pg 12, he submitted that the 12 months' salary was a minimum award. He countered the appellant's argument of looking at the circumstances of the case arguing that this is a statutory compensation providing for a minimum compensation. Responding to the case of Felician Rutwaza (supra) which was cited by Ms. Venance, he argued that it has been overridden by the case of Rati Services Company Limited (supra) which was decided later. Apart from -that, he argued that in the former case the High Court had reduced the award unlike in the case at hand. Mr. Kajiba went on arguing that as the CMA and High Court exercised their discretion, this Court has no reason to fault it. To fortify his argument, he cited to us the case of Selcom Gaming Limited v. Gaming Management (T) and Another [2006] T.L.R. 200, in which the Court expounded the criteria for interfering with the findings of the courts below. Lastly, he implored the Court to find that the appeal is unmerited and dismiss it for lack of merit. In rejoinder, Ms. Venance reiterated her submission in chief. She then, argued that the case of Rati Services Ltd (supra) is distinguishable as in that case the termination based on misconduct and that it was found to be unfair both substantively and proceduraily. She added that, the case of Selcom Gaming Limited (supra) was equally distinguishable on the criteria set but in this case the Court can interfere basing on the circumstances of the case as per rule 32 of the Labour Institutions (Mediation and Arbitration Guidelines) Rules (G.N. No 67 of 2007) (the Mediation and Arbitration Rules). She urged the Court to allow the appeal. In response relating to rule 32 of the Mediation and Arbitration Rules, Mr. Kajiba argued that, the rule cannot override the principal legislation and hence, section 40 (1) (c) must be complied with. Having considered the grounds of appeal, the rival arguments and the record of appeal, we think, the issue for our determination is whether the appeal is merited. With regard to the complaint on the issue of consultation, we think, section 38 (1) (c) of ELRA and rule 23 (4) of the Code of Good Practice could provide guidance. Section 38 (1) (c) of ELRA provides: "In any termination for operational requirements (retrenchment), the employer shall comply with the following principles, that is to say, he shall - (b). ............ (C).................... (d) give the notice, make the disclosure and consult, in terms o f this subsection with: 0 ( - (Hi) any employees not represented by recognized or registered Trade Union." To our understanding/ under section 38 (1) (d) (iii) of the ELRA, the employer mandatory, is enjoined among others, to consult with any Trade Union in the work place or where the employee is not a member of any Trade Union to consult with him or her personally. As to rule 23 of the Code of Good Practice, it places obligation on the employer both procedurally and substantively and requires her to permit the involvement of the parties in solving the problem jointly. The said provision reads as follows: "23 (4) The obligations placed on an employer are both procedural and substantive. The purpose o f the consultation required by section 38 o f the Act is to permit the parties, in the form o f a joint problem-soiving exercise, to reach agreement. " In this case, Ms.Venance is adamant that the procedure was followed as the respondent was served with a notice through an email which required her to select a representative but she remained passive. She also added that, given the financial hardship the appellant was undergoing, she had to choose representatives from regions and credit officers. She also argued that, the respondent could have opted to attend the meeting herself. Having gone through the record of appeal, we agree with the findings of both CMA and the High Court in so far as consultation is concerned. We agree that the retrenchment was not properly conducted as per the law due to some irregularities which were committed. In first place, the mode that was used to get the representatives who were to attend the consultation meeting was not known under the law. We note that there was a contention regarding the email that was sent to the respondent requiring her to select a representative. DW2 testified that the employees were notified through an email which was also sent to the heads of regions directing selection of two representatives to the consultation meeting. In the first place, the employees, according to the email of the notice of retrenchment dated 23/7/2018, did not afford the employees sufficient time for the exercise, it gave them hardly two hours to submit the names of the representatives. Secondly, it was not in compliance with the law, more so, when taking into account that, the respondent was not a member of any recognized Trade Union in the sense that the law required the employee in such a situation to represent herself in the consultative meeting. Thirdly, the respondent was not involved in selecting the said representatives as Masumain Mwanga, the Head of Region- Southern Highland II just forwarded the names of representative (Geofrey Samson and Philipo Hizza) without involving the respondent, (see pages 132-133 of the record of appeal). Fouthly, the appellant's argument that the respondent could have responded to the email by opting to attend to the consultative meeting in person, in our view, is unfortunate, Although credit officers from the branches were also chosen to attend the meeting as was shown in the email and testified by DW2, that would not have been the case to the respondent who had been already served with an email requiring her to select a representative. Such option could not have been taken in the circumstances. Fifthly, section 38 (1) (c) of ELRA and rule 23 of the Code of Good Practice do not provide for an alternative for person who are to attend in the consultation meeting as was conceded by Ms. Venance. Apart from that, the criteria for retrenchment was not known as the appellant did not disclose the criteria employed for selection of employees to be retrenched including the respondent. Despite the fact that the issue was listed among the agenda under item (d) - (page 134), the same was not discussed in the consultation meeting as shown in the minutes of the said meeting. Much as the appellant tendered the minutes of the purported consultation meeting to prove it. We, therefore, find the the fourth ground of appeal is devoid of merit and we dismiss it. With regard to the issue of the award of twelve months salary compensation, our take off would be revisiting section 40 of the ELRA. In essence, it provides for the remedies in case the arbitrator or Judge finds that the termination of an employee was unfair. It states as follows: "40 (1) Where an arbitrator or labour court finds a termination is unfair, the arbitrator or court may order the employer (b)............ *.. (c) to pay compensation to the employee o f not less than twelve months remuneration." The said section provides for the minimum compensation awarded under the law. In this case, the arbitrator awarded the respondent TZS. 8,089,920.00 being equal to twelve month's salary compensation after having been satisfied that the termination was substantively fair but procedurally unfair. Though the appellant seems to convince us that the award was at the higher side and that the Court should consider reducing it due to the economic factors she is undergoing, we think#, this is an attempt by the appellant to win sympathy from the Court as the proposed reason is not among the factors to be considered when awarding compensation under the law. Much as section 40 (1) (c) of the ELRA provides for a minimum compensation for an employee who is terminated unfairly either substantively or procedurally, Ms. Venance, took us to the provisions of rule 32 (5) of the Mediation and Arbitration Rules which provides for factors where the Court can award an appropriate compensation based on the circumstances of the case. The said rule provides as follows: "32 (5) Subject to sub rule (2), an arbitrator may make an award o f appropriate compensation based on the circumstances o f each case considering the following factors: - (a) any prescribed minimum or maximum compensation; (b) the extent to which the termination was unfair; (c) the consequences o f the unfair termination for the parties including the: extent to which the employee was able to secure alternative work or employment; (d) the amount o f the employees' remuneration; (e) the amount o f compensation granted to persons similar cases; (f) the parties conduct during the proceedings and (g) any other relevant fa ct" [Emphasis added] What can be gathered from the above cited provision is that, it would appear that in considering awarding compensation or remedy for unfair termination while taking into account these factors, it gives the arbitrator discretion in determining the amounts of compensation in certain circumstances. However, in our view, looking at the factor under paragraph (a) relating to the prescribed minimum or maximum compensation we do not think that the arbitrator can exercise such a discretion. We are also aware that in the case of Felician Rwatiza (supra) the Court observed that, it is not mandatory in all cases of unfair termination that the arbitrator should order compensation of not less than 12 months remuneration. Also, it acknowledged that the law abhors substantive unfairness more than procedural unfairness and that the remedy of the former attracts a heavier penalty than the later - See also: Sodetra (SPRL) Ltd v. Njelu Mezza and Another, Labour Revision No. 207 of 2008 (unreported). In the end, it condoned the reduction of the compensation from 12 months salaries to 3 months on account that the termination of the employee was based on fairness substantively, but procedure was unfair. However, that is no longer the position of the law since in the case of Bati Services Ltd (supra), when the Court was faced with akin scenario, where the termination of the employee was found to be substantively fair while procedurally unfair and the employee was awarded compensation of 12 months salaries, it observed as follows: "As stated abover the parties gave two varied interpretations on the above section regarding discretion 17 power o f the court in awarding compensation. We should begin with the rule o f construction to give plain meaning o f the words used - See Katani A. Katani v. The Returning Officer, Tandahimba District and 2 others, Civil Appeal No. 115 o f 2011 (unreported). In the statute, our interpretation o f section 40 (1) (c) o f the ELRA is that where here is a finding by the court or arbitrator that termination o f an employee was unfair, the employer should be ordered to compensate the employee remunerations of not less than twelve months. We therefore agree with the respondent that, discretionary power o f the court to award compensation, in the circumstances of this labour dispute may not go below twelve months compensation. We held so as termination is on fair reason substantively but unfair in terms o f the procedure." [Emphasis added] The Court, then, in the same case, went on to cite the case of Veneranda Maro and Another v. Arusha International Conference Centre, Civil Appeal No. 322 of 2020 [2022] TZCA 37 (18 February 2022), where the Court on the same issue of twelve months compensation stated as follows: "Currently,, although the Jaw prescribes the minimum amount to be awarded as compensation for termination which is not less than twelve months' salary, it is settled law that the arbitrator or the Labour Court has discretion to decide on the appropriate award compensation which could be over and above the prescribed minimum. However, the discretion must be exercised judiciously taking into account ail factors and circumstances in arriving at a justified decision. Where discretion is not judiciously exercised certainly, it will be interfered with by the higher courts. "[Emphasis added] We subscribe to the above standing. In this case, it is without question that the respondent was terminated on fair reason but the procedure was flawed as the respondent did not attend the consultation meeting in person as required by law considering she was not a member of any Trade Union, There was also no room for her to select a representative under the law as the appellant tries to convince us. This, no doubt, must have prejudiced the respondent. Before we pen off, we wish to register that we have considered the principles set out in the case of Felician Rutwaza (supra) leading to reduction of award of twelve months compensation. However, we agree with Mr. Kajiba that it is distinguishable to this case because, one, in that the employee's termination was due to his self-inflicted involvement in politics while in this case the respondent was terminated on retrenchment triggered by the appellant. Two, rule 32 of the Mediation and Arbitration Rules which the learned counsel for the appellant predicated her argument, is under a subsidiary legislation which cannot prevail over the principal legislation which provides for a minimum award of compensation to be not less than 12 months. Moreover, rule 32 (a) of the Mediation and Arbitration Rules emphases for the consideration of any prescribed minimum and maximum compensation provided for by the law. In this regard, we do not find any cogent reason, having regard that the learned Judge did not act on extraneous matters or on misapprehension of facts - See: Selcom Gaming Limited (supra), to fault him in upholding the award of twelve months remuneration compensation which was awarded by the CMA. Therefore, we dismiss this ground for lack of merit. All said and done, we find the appeal un merited and we dismiss it in its entirety. Considering that this appeal emanates from a labour matter, we do not make any order as to costs. It is so ordered. DATED at IRINGA this 9th day of December, 2024. R. K. MKUYE JUSTICE OF APPEAL A. Z. MGEYEKWA JUSTICE OF APPEAL P. J. NGWEMBE JUSTICE OF APPEAL Judgment delivered this 10th day of December, 2024 in the presence of Mr. Jonas Barton Kajiba, learned counsel for the Respondent and also holding brief for Ms. Glory Venance, learned counsel for the Appellant, is hereby certified as a true copy of the original.