Fursys Kenya Limited v Oyare (Appeal E046 of 2021) [2023] KEELRC 2846 (KLR) (31 October 2023) (Judgment)
Neutral citation:
[2023] KEELRC 2846 (KLR)
Republic of Kenya
Appeal E046 of 2021
K Ocharo, J
October 31, 2023
Between
Fursys Kenya Limited
Appellant
and
Samuel Oyare
Respondent
(Being an Appeal against the Judgment and Decree of Honourable David Obonyo Mbeja S.R.M in the Chief Magistrate’s Court at Milimani Commercial Courts delivered on 1st April 2021 in CMEL Cause No. 1413 of 2019)
Judgment
Introduction
1.The appeal herein which has been initiated vide a Memorandum of Appeal on 29th April 2021 assails the Judgment of the Honorable Senior Resident Magistrate in the above-mentioned cause, putting forth principal grounds that he erred in law and fact;a.In finding that the Claimant was wrongfully, unlawfully and unfairly terminated;b.In finding that the Claimant was rendered both redundant and unfairly terminated – two diametrically opposed findings;c.In awarding excessive compensation of 12 months’ salary;d.In awarding interests at court rates on the awarded damages/compensation from the date of filing suit;e.In ignoring authorities by superior courts on the issue of redundancy;f.In failing to indicate the reason or reasons to justify why he reached the decision to make a maximum award;h.In exercising judicial discretion capriciously and whimsically in the award of compensation hence arriving at an erroneous decision factually and legally.
2.On the above grounds, the Appellant prayed for orders that: -1.This Appeal be allowed and judgment entered in favour of The Appellant in the following terms:a.The judgment of the Chief Magistrates Court [Hon. Mr. David Obonyo Mbeja (SRM)] dated 1st April 2021 in CMEL Cause No. 1413 of 2019 be set aside.b.CMEL Cause No. 1413 of 2019 be dismissed with costs to the Appellant.2.Costs of this appeal be awarded to the Appellant.
3.The Appellant filed a Record of Appeal dated 13th June 2022 and a Supplementary Record of Appeal dated 4th July 2022.
4.When the matter came up for direction on the appeal on 29th July 2022, this Court ordered that the appeal be canvassed by way of written submissions, and gave timelines for the parties to file their respective submissions.
5.The Appellant filed Submissions dated 14th January 2023, and the Respondent filed his dated 15th September 2022.
The Case Before The Trial Court
6.Through a Memorandum of Claim dated 14th August 2019 filed by the Respondent herein before the Trial Court the Respondent contended that he first came into the employment as a technician on 1st June 2007, but the said employment was unlawfully terminated on 7th August 2019 on grounds of redundancy.
7.On its part, the Appellant herein resisted the Respondent’s claim by way of a Memorandum in Response dated 29th June 2020. It denied the allegations contained in the Respondent’s Memorandum of Claim in toto. Further, denying the Appellant‘s entitlement to the reliefs that he had sought in his pleadings.
8.In his evidence before the Learned Trial magistrate, the Respondent took issue with the procedure leading up to the termination on the alleged account of redundancy. He categorically stated prior to the termination he was not issued with any formal notice indicating the Appellant’s intention to terminate his employment on account of redundancy. Further, if indeed the Appellant had a justification to terminate the employment of his employees on account of redundancy then the same was without any specific criteria of selection of those to who were to be affected. The Appellant failed to give regard to seniority in time, skill, ability and reliability of each employee.
9.The Respondent alleged before the Trial Magistrate that upon terminating his employment, the Appellant failed to pay him his terminal dues.
10.The Respondent summed up his case before the Trial Court by stating that the Appellant’s actions were un-procedural and unlawful as there was non-adherence with the provisions of the Employment Act 2007. The Respondent claimed an order for reinstatement to his place of work; 1 month’s salary in lieu of notice and 12 months’ gross salary compensation for unlawful termination.
11.The Appellant asserted that before terminating the Appellant’s employment on account of redundancy, it gave the Respondent and the Labour Office the requisite notice of the intended redundancy in compliance with the provisions of Section 40 (1) (b) of the Employment Act 2007. After the termination, it requested all the employees declared redundant, including the Respondent, to visit the finance department to be paid for their terminal dues i.e. all untaken leave days, one month’s salary in lieu of notice, and severance pay.
12.On the issue of the criteria for the selection of employees to be declared redundant, the Appellant stated that it checked the abilities and skills of the employees and uniformly applied the same criteria to all the employees. The Respondent was selected as he had been given warning letters for absconding work and was not efficient at work.
13.The Appellant asserted that the termination of the Respondent’s and the other employee’s employment was a result of its poor financial status, which called for right sizing of its human capital. Redundancy is a legitimate ground for termination of an employment contract. The termination was both procedurally and substantively fair.
14.The learned Trial Magistrate heard both the Respondent and the Appellant’s witness on their respective cases. He thereafter rendered himself on the matter on 1st April 2021. In his judgment, the Learned Magistrate analyzed the law on redundancy in detail and concluded that the Appellant hadn’t demonstrated that the termination was in strict adherence to the provisions of section 40 of the Employment Act. The notices contemplated thereunder were not issued by the Appellant. In particular, the trial court held that the Respondent [employee] and the labour office had not been issued with the requisite notice of the intended redundancy. It found that the letters produced by the Appellant were simply termination notices, rather than notices of intended redundancy. The fact that the words “redundancy” and “notification” were included in the body of the letters, didn’t change their character. The mandatory one-month notice was not given.
15.Having found that the Appellant failed to issue the Respondent herein and the Labour Officer with the mandatory 30 days’ notice per Section 40 (1) (b)of the Act, the trial Court held that the termination of the Respondent’s on account of redundancy was unfair.
16.Regarding the selection criteria, the learned Trial Magistrate concluded that there was no evidence before him that could suggest that the selection process of those who were to be affected was fair. The Appellant didn’t present before him the evaluation material alleging that the same was confidential. In his view, section 40 [1] was not complied with.
17.On the terminal dues payable to the Respondent, the trial Court held that the Appellant had failed to comply with Sections 40 (1) (f) and (g) of the Employment Act 2007 by paying the Respondent one month’s wages in lieu of notice and severance pay at the rate of not less than 15 days pay for every year of service. In particular, the Appellant had only produced evidence of payment of severance pay for only 5 years of service, rather than the 12 years that the Respondent served.
18.Having found that the termination on account of redundancy was not demonstrated to have been in adherence with the prescripts of the law, the learned Trial Magistrate awarded the Respondent 12 months’ gross salary pursuant to section 49[1][c] of the Employment Act.
19.The trial Court found that the Claimant was entitled to severance, but the sum of Kshs. 113,424.66 that the Appellant paid the Respondent was an underpayment. The amount was not out of a computation done in accordance with the stipulations of section 40 of the Act.
The Appeal.
20.The Appellant, being aggrieved by the decision of the Trial Court, filed the present Appeal, on the grounds set out hereinabove.
Appellant’s Submissions
21.In its submissions dated 14th January 2023, the Appellant urges this Court to reconsider the evidence, reevaluate the same and draw its own conclusions without necessarily being bound by the findings of the Trial Court as held in Selle & Another vs Associated Motor Boat Co. Ltd & Others (1968) EA 123.
22.It is the Appellant’s submission that it followed the strict procedure contained in Section 40 of the Employment Act 2007, by issuing the Respondent and the Labour Office with a formal written notice of the intended redundancy. The Appellant directs this Court to letters dated 7th August 2019 and 22nd August 2019 to the Respondent and the Labour Officer, respectively.
23.It is further submitted that the redundancy was effected after consultations had been held between the Appellant and its employee, in accordance with Article 13 of Recommendation No. 166 of the ILO Convention No. 158 – Termination of Employment Convention 1982, which by dint of Article 2 (6) of the Constitution of Kenya 2010 is part of the laws of Kenya.
24.The Appellant cited the Court of Appeal case of Cargill Kenya Limited vs Mwaka & 3 Others Civil Appeal 54 of 2019 [2021] KECA 115 to buttress its position that issuance of a notice of termination before declaring a redundancy is not a requirement or condition under Section 40 (1) (f) of the Employment Act 2007.
25.On the issue of the compensation for unfair termination awarded by the trial Court, the Appellant submits that compensation equivalent to 12 months’ gross salary was excessive in the circumstances of the case. Further, in arriving at the award, the trial Court did not take into account the factors set out in Section 49 of the Employment Act 2007.
26.The Appellant submitted further that the trial Court failed to take into consideration the reasons for the redundancy and the measures which the Appellant took to settle terminal benefits inclusive of severance pay to the Respondent. In essence, the Trial Magistrate did not give reasons justifying the maximum award of 12 months’ gross salary. On the requisite duty to do so, the Appellant placed reliance on Civil Appeal No. 180 Of 2017 Kiambaa Dairy Farmers Co-Operative Society Limited v Rhoda Njeri & 3 others [2018] eKLR (Kiambaa Case) and Ol Pejeta Ranching Limited vs David Wanjau Muhoro [2017] eKLR.
27.The Appellant submits that compensation equivalent to 4 months’ gross salary as awarded in Cargill Kenya Limited v Mwaka, or 2 months’ gross salary as awarded in Judy Gakii Njeru v Wananchi Group (K) Limited [2021] eKLR would have been sufficient for unlawful redundancy.
28.Buoyed by the belief that it followed due procedure while declaring the Respondent redundant by issuing both him and the labour office with the requisite notice, submitted that the compensation awarded by the trial court was unjustified and/or excessive, if not completely wrong.
29.Finally, the Appellant submits that the trial court ignored the decisions of the Superior Courts presented to it by the Respondent on the issue of redundancy. The Appellant relies on the cases of Dodhia v National & Grindlays Bank Limited andAnother [1970] EA 195 and Jasbir Singh Rai & 3 others to buttress its submission that Courts are bound to adhere to judicial precedent.
Respondent’s Submissions
30.The Respondent submitted that this Court being the first Appellate Court over this matter, is enjoined in interrogating this appeal to re-assess and re-evaluate the evidence. To support this point, he cited the case of Mark Oururi Mose vs R [2013] eklr. Further, this Court can only interfere with the findings of the Trial Court if the same appears to have been reached in the exercise of discretion in a wrong manner. To bolster the submission reliance was on the case of Mbogo & Another vs Shah [1968] EA 93 cited with approval in Farah Awad Gullet vs CMC Group Motors Limited [2018] eKLR.
31.The Respondent submits that the Appellant failed to meet the six (6) conditions required by Section 40 of the Employment Act 2007 as the bare minimum conditions for effecting redundancy, as has been stressed in Hesbon Ngaruiya Waigi vs Equitorial Commercial Bank Limited [2013] eKLR cited in Liu Ching Liang vs Webwave Electric Manufacturing (K) Company Limited & 2 Others [2017] eKLR.
32.It is submitted that termination on account of redundancy must be procedurally fair and substantively justifiable under Sections 43 and 45 of the Employment Act 2007 as stated in Ancent Mumo Kalani vs Nairobi Business Ventures Limited [2018] eklr and confirmed in Julie Topirian Njeru vs Kenya Tourist Board Industrial. That fairness in the redundancy process involves engaging the employee in adequate consultations which precede termination. The Respondent states that the Appellant’s redundancy process was unprocedural, not substantive, and did not follow the law.
33.While the Respondent admits that redundancy is a legitimate ground for terminating a contract of employment, there should be a valid and fair reason based on operational requirements of the employer, and the termination should be according to fair procedure. The Respondent relied on Kenya Airways Limited and Aviation & Allied Workers Union of Kenya & 3 others [2014] eKLR to buttress his submissions.
34.Lastly, the Appellant failed to produce any evidence from which the selection criteria for those that were to be affected by the redundancy could be deduced.
Analysis and Determination
35.Firstly, this being a first Appeal, this Court is obliged to reconsider and re-evaluate the evidence and material that was placed before the trial Court and come to its own independent findings and conclusions. This position as was set out elaborately in the case of Selle -vs- Associated Motor Boat Co. [1968] EA 123); see also (Abdul Hameed Saif vs. Ali Mohamed Sholan [1955] 22 E. A. C. A. 270) where the Court held: -
36.In the context of redundancy, the above position was reiterated in the case of The German School Society & another v Ohany & another (Civil Appeal 325 & 342 of 2018 (Consolidated)) [2023] KECA 894 (KLR) (24 July 2023) (Judgment) where, in paragraph 28, the Court of Appeal held as follows: -
37.Cognizant of this role, this Court has analyzed the Appellant’s Record of Appeal and more particularly pages 38 and 39 thereof, where copies of the Letter of Termination to the Respondent dated 7th August 2019, and Letter to the Labour Office dated 22nd August 2019, obtain. The Letter of Termination dated 7th August 2019 titled: “Termination of Employment” reads in part:
38.The letter is signed by one B.M. KIM and copied to the Labour Office.
39.The letter to the Labour Office is captioned “Notification of Termination of Employment – Samuel Oyare Okal”. In sum, the letter forwards to the labour office the Termination letter dated 7th August 2019.
40.The law relating to redundancy is now well settled in the Kenyan situation. The primary law on redundancy is Section 40 of the Employment Act 2007 which provides: -
41.There is no doubt in my mind that Section 40[1][a] provides for the issuance of notices where the employee[s] to be affected by the intended termination of employment on account of redundancy, is a member[s] of a trade union. A notice signifying the employer’s intention must be served upon the trade union and the Labour Officer. The notices must be issued at least 30 days prior to the date appointed for the termination. Section 40[1][b] contemplates a scenario where the employee[s] to be affected by an intended termination of his or her employment is not a member of a trade union. In such a situation the notice must be issued in writing to the employee and the Labour Officer. Too, the notice must be of not less than thirty days. See, The German School Society & another v Ohany & another (Supra).
42.In my view, the central issue in this appeal is whether the Appellant did issue notices contemplated under Section 40 (1) (b) of the Act. A cursory perusal of the Termination Letter dated 7th August 2019 reveals that the same terminated the Respondent’s employment With Immediate Effect. It wasn’t a thirty days’ notice. The notice contemplated in the provision is not supposed to be a termination notice but a notification of an intended redundancy. Similarly, the letter to the Labour Office must be one notifying of an intended termination of employment. It cannot be a post-termination notification. The letter dated 22nd August 2019 to the Labour Office was issued after the Respondent’s employment had been terminated. It simply informed them of the termination. It did not give 30-days’ notice.
43.By reason of the foregoing. I am persuaded by the Respondent that the Learned trial Magistrate didn’t err in finding that the termination of his employment was without adherence to the provisions section 40[1][b] of the Act and that consequently, the termination was unfair.
44.The Appellant placed reliance on the Cargill Kenya Limited case (Supra) in its submissions. With great respect, the submissions reflect how far off the mark the Appellant was in appreciating the point of discussion that was in the matter as regards section 40[1][a] and [b] of the Act, and the Court’s holding thereon. The point of discussion was whether, under section 40, the employer is enjoined to issue two notices i.e. a notice signifying the employer’s intention to terminate his employee[s] employment on account of redundancy and subsequently a termination notice. The Court expressed the view that it is only a notice of intended redundancy contemplated under the provision.
45.In fact, one will safely conclude that section 40[1][f] provides for payment of wages in lieu of notice following an appreciation that issuance of a termination notice is not contemplated thereunder.
46.The justification for the notice of intended redundancy is to birth consultations between the employer and the employee and this was aptly captured in The German Society School (Supra). The Court of Appeal held at paragraphs 56, 57 and 60:-
47.No doubt, the Letter of Termination dated 7th August 2019 issued to the Respondent herein did not allow for consultations as required by the law.
48.The Appellant takes issue with the trial Court’s finding that the Respondent was unfairly declared redundant and unfairly terminated, findings which it considers to be diametrically opposite.
49.On this issue, I return that the two positions are in no way contradictory. The Court in Kenya Airways Ltd and Aviation & Allied Workers Union of Kenya & 3 Others Civil Appeal No. 46 of 2013 held as follows: -
50.In my view, the Trial Magistrate’s statement was referring to procedural fairness in the process that led to the termination of the Respondent’s employment and the effect [the unfair termination] This he rightly so. Section 45 (2) of the Act which speaks to procedural and substantive fairness, is wholly applicable to terminations as a result of redundancy.
51.I now turn to the issue of the compensation for unfair termination. Undeniably, the award was made under the provisions section 49[1][c] of the Act. The learned Trial Magistrate had the discretion to make the award and fix the amounts for compensation, however after taking into account the factors enumerated in section 49 (4) namely:-
52.On this issue, there can be no doubt that the trial court gave reasons for the award. The reasons are elaborately set out on page 12 of the judgment. In my view, the reasons suggest that he was aware of the factors considerable under the provision above stated and that he did consider them. The Learned Magistrate did err in awarding the compensation.
53.Cognizant of the parameters set out in the case Mbogo & Another -v- Shah [1968] EA 93, I see no sufficient reason that has been advanced that will prompt this Court to disturb the award by the trial Court upon an exercise of judicial discretion. It was not sufficiently argued that the Learned Magistrate misdirected himself, acted on matters he should not have acted on, failed to take into consideration matters that he should have and/or arrived at the wrong conclusion.
54.In the upshot, I hereby dismiss the Appeal herein with costs to the Respondent.
READ, DELIVERED AND SIGNED THIS 31ST DAY OF OCTOBER 2023.......................OCHARO, KEBIRA. JUDGEIn the presence of:Mr. Ayugi for the ClaimantNo Appearance for the Respondent