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Background
1. Via the Memorandum of Claim dated 4th March 2022, the Respondent prayed for judgment against the Respondent for;
a) A declaration that the notice of termination on account of redundancy dated 6th December,2021, issued to the Claimant is illegal and unlawful, hence amounts to unfair termination;
b) By grant of prayer (a) above, a declaration do issue that subsequently, the second notice of termination on account of redundancy dated 14th December,2021, issued to the claimant is illegal and unlawful, hence null and void ab initio;
c) The Claimant be reinstated to her position and paid the salary that she could have earned in the months she has been out of work if it were not for the unfair termination:
d) That in the alternative to prayer (c) above, this Honourable Court be pleased to Order the Respondent to pay the Claimant her terminal dues, which include:
I. One Month Notice In lieu of Notice KShs 104,270.15/
II. Severance pay for the years worked 104,270.15x8years worked = KShs. 834,161.20
III. 12 months'' salary compensation for unfair termination (12x104,270.15)/= KShs... 1,251,241.80/
IV. Certificate of Service as per Section 51 of the Employment Act,2007.
V. Interest at Courts'' rates in terms of item (d)-i, ii, & iii above.
VI. That the Respondent bear the Costs of this Claim with interest at Court rates. Any other award that this Honourable Court deems fit.
2. The Respondent resisted the Claimant’s claim through a Memorandum of Response dated 6th June 2022. The Respondent asserted that the termination of the Claimant’s employment on account of redundancy was justified as it was a result of a genuine restructuring of the company and procedurally proper.
Claimant’s case
3. The Claimant’s case was that Fidelity Commercial Bank Limited employed her on 1st April 2014 as a receptionist earning KShs. 25,000 per month under a letter of appointment dated 10th March 2014. Due to her diligence and exemplary performance, she was promoted on 1st April 2015 to the position of clerk with a revised gross salary of KShs. 30,000.
4. Following the transition from Fidelity Commercial Bank to SBM Bank, her employment continued without interruption. By a letter dated 18th August 2018, she was redeployed from the Mombasa Branch to the Diani Branch and appointed as a Teller. However, her terms and conditions of employment remained the same. On 22nd March 2019, SBM Bank issued her a new employment contract aligning her position and terms with its restructures.
5. The Claimant continued to serve diligently. On 25th September 2019, she was transferred to the Mombasa Moi Avenue Branch, effective 7th October 2019. Later, by a letter dated 3rd December 2020, she was again transferred to the Nyali Branch, effective 4th January 2021. Her salary was periodically reviewed, the last adjustment being on 23rd April 2020 to a gross pay of KShs. 94,915.15.
6. On 8th December 2021, she reported to work as usual but was unexpectedly issued with a notice of termination dated 6th December 2021, purporting to terminate her employment on account of redundancy, effective 7th December 2021. The said notice referenced a general notice to staff dated 6th December 2021, which was in fact an internal staff memo indicating that employees affected by the redundancy would be individually notified by the Human Resources Department from 7th December 2021.
7. The Claimant asserts that the Respondent unlawfully declared her redundant without adherence to the statutory procedure outlined in Section 40 of the Employment Act. She maintains that the notice was defective and irregular, having been issued after its effective date. Additionally, she was instructed to vacate the premises immediately without being given adequate time to hand over her responsibilities. Moreover, she experienced disrespectful treatment from her branch manager.
8. The Claimant asserts that no prior notice of redundancy was issued to her trade union, the Banking, Insurance and Finance Union (BIFU) or to the Labour Officer, as required under Section 40(1)(a) and (b) of the Employment Act. The Respondent failed to consider seniority, skill, ability, and reliability in the selection process and ignored the “Last In, First Out” principle. Furthermore, the redundancy exercise was discriminatively targeted unionised employees and amounted to victimisation for her union membership.
9. She further maintains that prior to the redundancy, the branch manager had been intimidating her and encouraging her to apply for a Voluntary Early Separation Scheme (VESS), which she declined. She believes the redundancy was a covert continuation of the VESS intended to dismiss certain employees. Despite her position being declared redundant, the Teller position remains in existence, thereby evidencing that her termination was malicious and pretextual.
10. The Claimant asserts that following the termination of her employment on 7th December 2021, the Respondent subsequently attempted to legitimise its actions by issuing a second termination letter dated 14th December 2021, claiming that her position had been declared redundant effective from 7th December 2021. However, it was stated that her final working day would be 15th January 2022. Additionally, the Respondent provided her with a “Full and Final Dues Settlement Letter” dated 20th December 2021 and a Certificate of Service indicating her exit date as 15th January 2022, which she contends was incorrect, as her actual last working day was 8th December 2021.
11. The Claimant asserts that the alleged redundancy breached her employment contract, the Collective Bargaining Agreement (notably Clauses A5(d) and A7), and the Respondent’s Human Resource Policy. She claims that the termination was unlawful, unfair, and contrary to Sections 40 and 45 of the Employment Act, as the Respondent failed to provide valid or fair reasons and to follow due process.
Respondent’s case
12. The Respondent acknowledges that the Claimant was initially employed by Fidelity Commercial Bank (later acquired by SBM Bank) on 1st April 2014 as a receptionist under a six-month probationary contract, which was extended for a further six months due to unsatisfactory performance. She was confirmed in her position on 21st April 2015 and later promoted to Clerk. Following SBM Bank’s acquisition of Fidelity Commercial Bank, her employment was duly transferred and integrated into the Respondent’s structure, and she was subsequently redesignated as a Teller.
13. The Respondent affirms that the Claimant’s transfers to various branches were conducted lawfully, and clarifies that the transfer from Diani Branch to Moi Avenue Branch in Mombasa was at her own written request. When the Moi Avenue Branch closed in December 2020, the Claimant was temporarily redeployed to the Nyali Branch pending the completion of a job evaluation exercise.
14. The Respondent clarifies that in 2021, owing to the closure of various branches and the substantial staffing structure acquired from Fidelity Commercial Bank and Chase Bank, it was necessary to implement a significant restructuring to optimise operational efficiency.
15. On 5 October 2021, the Respondent issued an internal memo to all staff introducing a Voluntary Early Separation Scheme (VESS) and simultaneously notified the Ministry of Labour, the Banking, Insurance and Finance Union (BIFU), the Kenya Bankers Association (KBA), and the Federation of Kenya Employers (FKE) of its intention to declare redundancies if the VESS did not achieve the required staff reductions.
16. After the VESS failed to achieve the targeted number of exits, the Respondent proceeded with the redundancy process. It held consultations with BIFU and KBA representatives on 16th November 2021, followed by formal correspondence documenting the discussions. The Union responded on 17th November 2021, agreeing to the redundancy but requesting enhanced severance pay of one and a half months’ salary for each completed year of service, which the Respondent considered.
17. On 6th December 2021, the Respondent issued the statutory redundancy notices to the Ministry of Labour, BIFU, KBA, and the Central Bank of Kenya, as well as a general memo to staff announcing that affected employees would be individually notified. The Claimant was among those affected and was issued with a Notice of Termination on account of redundancy dated 6th December 2021. The Respondent avers that the notice was lawful, procedurally fair, and compliant with Section 40 of the Employment Act and the applicable Collective Bargaining Agreement (CBA).
18. The Respondent denies the Claimant’s allegations of being dismissed abruptly or disrespectfully. It asserts that she, like all affected employees, was placed on a five-day garden leave, commencing on 7th December 2021, to allow time to process the redundancy news. The garden leave was not deducted from her leave balance. The Claimant, however, failed to return to work on 14th December as instructed and only reported back on 7th January 2022 to clear and attend an outplacement training in Nairobi, fully sponsored by the Respondent.
19. To regularise the process, the Claimant was issued a second termination letter dated 14th December 2021, confirming her last working day as 15th January 2022. She was paid all dues up to that date, including salary, leave pay, and severance, which the Respondent maintains exceeded the CBA minimums. She also continued to enjoy medical and insurance benefits until March and July 2022, respectively, and received extended loan repayment terms and a three-month moratorium on loan principal payments.
20. The Respondent avers that the redundancy process was lawful, objective, and transparent, conducted with full participation of the Claimant’s union. The selection criteria were agreed upon with the union and based on the needs of the new structure. The redundancy was not targeted at unionised employees and was occasioned solely by operational requirements, including branch closures and role rationalisation.
21. The Respondent further denies that the position of Teller continued to exist in the same form, explaining that the restructuring reduced the number of Teller positions as part of organizational streamlining. It also denies coercing the Claimant to sign any documents or withholding any of her benefits.
Claimant''s Submissions
22. The Claimant submits that the termination of her employment on account of redundancy was unlawful and unfair due to failure to comply with the mandatory provisions of Section 40(1)(a) of the Employment Act. No notice of redundancy was issued to the Labour Officer in Mombasa or to the Banking, Insurance and Finance Union, of which she was a member.
23. The Claimant argues that the Respondent sought to regularise its unlawful actions by repeatedly calling her to return to work after termination and later issuing a second, irregular termination notice dated 14th December 2021, which purported to declare her redundant retroactively from 7th December 2021.
24. The Respondent also attempted to coerce her into acknowledging the second letter, even though she had already been dismissed and ceased working on 8th December 2021. She asserts that the termination was contrary to the Employment Act, her employment contract, the collective bargaining agreement (clauses A5(d) and A7), and the Respondent’s Human Resource Policy.
25. Citing Barclays Bank of Kenya Ltd v Gladys Muthoni & 20 Others [2018] eKLR, the Claimant emphasises that the procedure under Section 40 of the Employment Act is mandatory, and failure to comply renders a termination unfair.
26. The Claimant relies further on the case of Kenya Union of Domestic Hotels, Educational Institutions and Hospital Workers (KUDHEIHA) v The Aga Khan University Hospital, Nairobi [Cause No. 815 of 2015], where the Court reiterated that redundancy procedures must be strictly followed.
27. The Claimant asserts that no valid redundancy notice was ever served on her union or the Mombasa Labour Officer. Relying on the Barclays Bank of Kenya Ltd case (supra), the Claimant stresses that service of such notice is mandatory, a position also upheld in Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] eKLR, where the Court of Appeal held that employers must notify the Labour Officer of the reasons for and extent of the redundancy at least one month prior to termination. The Claimant thus contends that failure to adhere to this statutory procedure rendered the redundancy process defective.
28. The Claimant also relied on the case of Betty Chemurgor v Laico Regency Hotel Limited (Cause No. 2524 of 2016), where the Court affirmed that both procedural and substantive fairness are essential, and the absence of either makes a termination unfair. The Claimant submits that her termination fell short of these legal standards.
29. On substantive fairness, the Claimant relies on the case of Jane I. Khalachi v Oxford University Press E.A. Ltd (Cause No. 924 of 2010), where the Court held that redundancy cannot target a single employee and that the reasons and extent of redundancy must be justified through a fair process. In the present case, the Claimant argues that the Respondent’s redundancy process was a sham, as her position continued to exist, and alleged performance issues were merely used to disguise an unlawful redundancy. The Court’s striking out of the Respondent’s supplementary documents further confirmed that the process was irregular.
30. The Claimant also relies on the case of Banking, Insurance and Finance Union (Kenya) v Murata Sacco Society Ltd (Cause No. 616 of 2010), where the Court held that redundancy must be based on genuine business reasons and guided by fair selection criteria, including seniority, skill, reliability, and consultation with the union and labour officer. The Respondent failed to demonstrate that it applied an objective.
31. It is further submitted that redundancy notices must be genuine, not perfunctory, and affected employees must be truly engaged. The purported “Voluntary Employment Separation Scheme (VESS)” cited by the Respondent is unknown in law and cannot replace the redundancy process outlined under Section 40.
32. A purported redundancy which does not in fact exist cannot be deemed a fair or valid reason for termination. The purported redundancy was a sham. The termination notice dated 6th December 2021 merely stated that her role no longer existed within a “fit-for-purpose structure,” without any proof that the position had actually been abolished. To support this submission, reliance has been placed on the case of Paul Wachira Ndonga v Keroche Breweries Limited (Cause No. 374 of 2017)
33. Lastly, given her eight years of service and the Respondent’s disregard for due process, the Court should award the maximum compensation of twelve months’ salary.
Respondent’s submissions
34. The Respondent submits that the termination of the Claimant’s employment was lawful, justified, and procedurally sound. The restructuring arose from the Respondent’s acquisition of Fidelity Bank and Chase Bank, which resulted in excess staff and necessitated a reorganisation to streamline operations.
35. Citing Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others [2014] KECA 404 (KLR), the Respondent argues that an employer retains managerial prerogative to reorganise its business and determine staffing needs, a decision the courts should not interfere with.
36. The Respondent argues that proper procedures were followed as specified under Section 40(1) of the Employment Act. A notice of intention to declare redundancy, dated 5th October 2021, was properly served on the Banking, Insurance and Finance Union (BIFU) and the Labour Office, and was received on 7th October 2021. The notice, although titled “Voluntary Early Separation Scheme,” clearly indicated that if the VESS did not deliver the expected results, the Respondent would move forward with redundancy in accordance with the Employment Act and the CBA.
37. The Respondent relies on the case of Barclays Bank of Kenya Ltd & Another v Gladys Muthoni & 20 Others [2018] eKLR to argue that a letter, despite its heading, could constitute a valid redundancy notice if it meets the statutory requirements.
38. Prior to the redundancy, consultations were conducted with the union, as evidenced by correspondence indicating a meeting on 16th November 2021 where the modalities and benefits were discussed, and the union’s proposals were accepted. Since the union, being the legally recognised representative, did not contest the process, the Respondent maintains that the consultation requirements were fulfilled.
39. Regarding selection, the Respondent states that the criteria were agreed upon with the union and based on seniority, skill, ability, and reliability. The Claimant’s selection was the result of a job evaluation, considering her qualifications and position relative to others. She was properly informed through letters dated 6th December 2021 and 14th January 2022, along with a memo circulated to all staff. The Claimant’s claim of surprise is unfounded, as the process had been ongoing for over two months and notices were duly issued to the union, not necessarily to each employee individually.
40. On terminal dues, the Respondent maintains that the Claimant was paid all entitlements, including one month’s notice pay, salary up to 15th January 2022, one and a half months’ pay for every completed year of service, and accrued leave. Additional benefits included extended medical and life insurance cover, a moratorium on staff loans, and preferential loan rates.
41. The Respondent clarifies that the item labelled “gratuity” in the payslip represented severance pay, explaining that its payroll system did not include a separate field for severance. The Claimant, it argues, is therefore not entitled to any additional payment under that heading, as this would constitute unjust enrichment.
42. The Respondent concludes that the termination was both substantively and procedurally fair, and that the Claimant received her full entitlements. Consequently, she is not eligible for damages. Even if the court were to find otherwise, only nominal damages would be appropriate, given the enhanced severance pay and other benefits she received.
Analysis and determination
43. Have carefully considered the pleadings, evidence and pleadings by the parties, and the following issues emerge for determination;
1. Was the termination of the Claimant’s employment by the Respondent on account of redundancy fair and lawful?
2. Is the Claimant entitled to the prayers sought?
Was the termination of the Claimant by the Respondent on account of redundancy fair and lawful?
44. There is no dispute that the Claimant’s employment was terminated at the initiative on account of an alleged redundancy. However, there is a dispute regarding the fairness of the termination, with the Claimant contending that it was both procedurally and substantively unfair, and the Respondent asserting that it was a justified termination effected in full compliance with the procedure contemplated under the Employment Act.
45. Time and again, this Court has stated that the defining characteristic of dismissals due to redundancy is that they occur without any fault on the part of the employee. As a result, the law imposes specific and strict requirements on an employer considering dismissing an employee on grounds of redundancy, aimed at ensuring fairness. Section 40 of the Employment Act specifies mandatory requirements the employer must comply with before terminating an employee’s employment due to redundancy.
46. The Court of Appeal in the case of Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] KECA 404 (KLR), stated:
“There are two broad aspects of this definition. The first one is that the loss of employment in redundancy cases has to be by involuntary means and at the initiative of the employer. It should not be a contrived situation. It has to be non-volitional. I understand this to refer to a situation, in most cases an economic downturn, brought about by factors beyond the control of the employer, which leaves the employer with no option but to take an initiative, the consequence of which will be inevitable loss of employment.
The second aspect is that the loss of employment in redundancy has to be at no fault of the employee, and the termination of employment arises “where the services of an employee are superfluous” through “the practices commonly known as abolition of office, job or occupation and loss of employment.” In this case, what I understand as required to be determined in this aspect of the definition of redundancy is whether the appellant abolished the offices, jobs or occupations of the affected employees, resulting in their services being superfluous, hence their loss of employment. Corollary to that is the justification for that abolition, if the appellant indeed abolished their offices. Determination of these two aspects will determine the first issue of whether or not the redundancy in this case was necessary.”
47. The Employment Act provides that an employer may terminate an employee’s employment based on operational requirements of the employer. The Court in Jane Khalachi vs Oxford University Press E.A., Cause No. 924 of 2010, cited with approval by the Court of Appeal in The German School Society &another v Ohany & another [2023] KECA 894[KLR], held that;
“employers have the prerogative to determine the structures of their business and therefore make positions redundant. Positions and not employees become redundant, the employee can be redeployed, which means the employee is given another job, or the employee is retrenched, meaning the employee loses the job altogether…………….. Although not expressly defined under the Employment Act 2007, reorganization is contemplated by section 45[2] as a fair termination reason.’’
48. However, the termination on the grounds of redundancy can only be considered fair if it is substantively justified and procedurally fair. Camouflaged redundancies will hardly pass the fairness test contemplated under section 45 of the Employment Act. In the German School Society [supra], the Court stated;
“53. In this regard, it is an employee’s prerogative to elect to make its employees redundant if there is a justifiable business reason for doing so. The Employment Act does not list instances of redundancy, and therefore, an employer should ensure that the reason is based on operational business requirement…………….”
49. Section 40 of the Employment Act elaborately provides for termination on account of redundancy in the Kenyan context, thus;
40. Termination on account of redundancy
(1) An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions—
(a)where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;
(b)where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;
(c)the employer has, in the selection of employees to be declared redundant, had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
(d)where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;
(e)the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
(f)the employer has paid an employee declared redundant not less than one month''s notice or one month''s wages in lieu of notice; and
(g)the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service.
(2) Subsection (1) shall not apply where an employee''s services are terminated on account of insolvency as defined in Part VIII, in which case that Part shall be applicable.
(3) The Cabinet Secretary may make rules requiring an employer employing a certain minimum number of employees or any group of employers to insure their employees against the risk of redundancy through an unemployment insurance scheme operated either under an established national insurance scheme established under written law or by any firm underwriting insurance business to be approved by the Cabinet Secretary.
50. The Claimant’s claim, as I observe, is founded on the assertion that the Respondent failed to comply with the requirements stipulated by the aforementioned provision when terminating her employment allegedly due to redundancy. It is critical to note at this juncture that Section 40 of the Employment Act is structured in such a way that clearly indicates that non-compliance with any one of the specified requirements would render the redundancy-based termination unfair. The requirements outlined in this section are arranged in a conjunctive manner. See Kenya Airways Ltd v Aviation &Allied Workers Union Kenya & 3 others [2014] KECA 404 [KLR].
51. It is crucial to note at this juncture that, in an effort to restructure its business operations, the Respondent undertook two consecutive processes, all of which were aimed at optimizing its Human Capital, the Voluntary Employment Separation Scheme, and declaration of redundancies.
52. It is essential to emphasise that a Voluntary Retirement Separation Scheme is not equivalent to a redundancy separation as outlined under the provisions of section 40 of the Employment Act, despite the possibility that the underlying reasons for both forms of separation may be similar. There are circumstances, as exemplified in this case, where the two separation processes may occur concurrently within an organisation. These processes are inherently distinct: one being governed by internally established mechanisms, and the other by statutory regulations. It would be inappropriate to argue that notifications concerning the VRSS should be considered proper notifications under Section 40. I am not persuaded, therefore, with the Respondent’s submissions to the effect that the letter dated 5th October 2021, amounted to a notice as contemplated under Section 40 of the Employment Act.
53. It is undisputed that the Claimant was a member of a Trade Union at the pertinent time. Accordingly, pursuant to section 40[1][a], a notice of the Respondent’s intent to declare redundancies was necessarily required to be issued to both the Trade Union and the labour officer. Such notice must be given for a minimum duration of 30 days.
54. Undeniably, via a letter dated 5th October, 2021, the Respondent informed the Ministry of Labour that it was offering to its employees a Voluntary Employment Separation Scheme (VESS). The letter was also copied to the Kenya Bankers Association, the Federation of Kenyan Employers, and the Banking, Insurance, and Finance Union. The letter was captioned “Voluntary Employment Separation Scheme.”
55. According to the letter, the scheme was open to all interested employees of the Respondent Bank, as part of the identified areas for business reorganisation, by offering the Bank’s employees the option to leave employment on agreed terms voluntarily.
56. The letter detailed the Board''s resolution concerning the Scheme, including the objectives intended to be accomplished, the individuals eligible to apply for voluntary exit and the applicable deadlines, as well as the terms governing the Scheme. I find it difficult to comprehend the reasonableness of the Respondent’s assertion and their Counsel’s submissions that this letter, which related to an internally devised process, should be regarded as the notice contemplated under section 40[1][a].
57. This Court notes that the letter at the tail end read;
“……………………. Should the VESS exercise not yield the expected result, the bank will embark on a redundancy programme whose scale will be dependent on the outcome of the VESS and will be in line with the Employment Act, 2007 and the Collective Bargaining Agreement in force.
A separate notification shall be issued should the Bank result to undertake a redundancy programme………………….”
58. Undoubtedly, part of the letter states that it is strictly related to the VESS, and the Respondent’s appreciation that this scheme was independent of any redundancy process, and that the Employment Act had stipulations to be followed if a redundancy process was to be considered.
59. On 17th November 2021, the Respondent issued a notice of Intended Redundancy to the General Secretary of the Banking Insurance and Finance Union [Kenya], informing the Union that the VESS did not achieve the expected take-up by staff members. As a result, they planned to proceed to the Redundancy phase, impacting all levels of staff at the Bank, including 27 who were Union members. In the letter, the Respondent proposed an exit package for employees who would exit employment under the redundancy process.
60. On the same date, the Trade Union corresponded with the Respondent, providing comments on the proposed package and submitting a counteroffer. They requested to be informed of the selection criteria. The Trade Union explicitly stated that the Respondent may proceed further with the process, provided that the Union’s views are duly considered beforehand.
61. The Respondent did not demonstrate that the letter was served on the Labour Officer.
62. By a letter dated 6th December 2021, the Respondent wrote to the Cabinet Ministry of Labour, the Kenya Bankers Association, the Central Bank of Kenya and the Banking Insurance and Finance Union regarding the intended termination of employees on account of redundancy. The letter read in part;
RE: SBM BANK[KENYA]LIMITED -NOTIFICATION OF TERMINATION OF EMPLOYMENT OF STAFF ON ACCOUNT OF REDUNDANCY.
On behalf of the Board of Directors and Management of SBM BANK [Kenya] Limited and as per our previous communication dated 5th October 2021, I wish to inform you that the Bank’s Voluntary Employment Separation Scheme [VESS] has now been concluded.
The VESS exercise did not yield the expected results, and in line with our earlier communication to you, the Bank is therefore proceeding to carry out a redundancy exercise, which will be in compliance with the provisions of the Employment Act, 2007, and the Collective Bargaining Agreement in force.
The affected employees will be notified of their redundancy individually from 7th December 2021 through the Bank’s Human Resources Department……………...”
63. Via the internal memo dated 6th December, 2021. The Respondent informs its staff members about an intended redundancy program.
64. In the letter dated 6th December 2021, the Claimant was informed of her termination of employment on account of redundancy, effective 7th December 2021. The same is signed and received on 8th December, 2021.
65. Up to this point, I am convinced and agree with the Claimant’s Counsel’s submissions that none of the letters mentioned hereinabove qualify as notices under section 40(1)(a) of the Employment Act. None of these letters provided a notice period of 30 days.
66. This Court has not lost sight of the fact that the letter dated 6th December 2021 was explicit. The Claimant was declared redundant effective 7th December 2021. I have no reason to doubt her assertion that she exited her role on 8th December 2021 upon receiving the letter. However, I have doubts regarding the Respondent’s account of the events following 8th December 2021. To justify the issuance of a second termination notice, dated 14th December 2021, the Respondent claimed that after being issued the letter dated 6th December 2021, the Claimant was permitted to proceed on a five-day gardening leave. The term'' gardening leave'' was not specified as a term of the redundancy in any of the letters related to the process. Furthermore, no document has been presented by the Respondent to demonstrate that the Claimant was authorised to proceed on leave, not even an email.
67. In the letter dated 14th December 2021, the Respondent informed the Claimant that she was declared redundant effective 7th December 2021, with her last day of work being 15th January 2022. The same is neither signed nor received by the Claimant.
68. It is peculiar that the “Termination notice on account of redundancy” was allegedly issued six days after the Claimant''s exit, which occurred pursuant to the termination notice dated 6th December 2021. In my opinion, this subsequent notice appears to be a belated attempt designed solely to mitigate the Respondent''s illegitimate procedures concerning the termination process.
69. The Claimant contended that the Respondent failed to apply an objective selection criterion for determining those impacted by the redundancy. She asserted that only Union members were targeted. Section 40 [1][c] sets out the selection criteria the employer must observe when declaring its employees redundant. In the case of Williams v Compare Maxam Ltd [1982] IRLR 83, while referring to the decision in Greig v Sir Alfred McAlpine & Son [Northern]Ltd [1979] IRLR, 372, elaborated the selection criteria as follows;
“ In considering the reasonableness of a redundancy dismissal where a selection has to be made between those who are to be retained and those who are to be dismissed, the most important matter on which the employer has to satisfy the Tribunal is that he acted reasonably in respect of the selection of the particular employee. That normally involves two questions, namely, whether the employer adopted reasonable criteria for selection, and whether those reasonable criteria were reasonably and fairly applied in respect of the individual.
70. In Cargill Kenya Limited v Mwaka & 3 Others [2021] KECA 115[KLR], elaborating on the requirement for an objective criterion in the selection of those to be impacted by a redundancy, the Court of Appeal stated;
“ From the above provisions and decisions, the requirements in fulfilling the threshold set by section 40[1][c] can therefore be summarised as follows. First, an employer should include the factors set out in section 40[1][c] of the Employment Act in the criteria for evaluating the employees to be declared redundant. Second, the employer is required to prove that the criteria were objectively, uniformly, and fairly applied. ……”
71. In the Kenya Airways Case[supra], the Court stated;
“ 66. Clearly, the selection process is required to be based on seniority, skill, and experience, reliability and ability of the employee.”
72. The Respondent generally claimed that the selection of those affected by the redundancy was based on an evaluation exercise. However, they did not provide any evidence to indicate that such an evaluation took place, nor that the criteria outlined in the aforementioned provision were applied.
73. I have carefully considered the circumstances under which the redundancy process was initiated by the Respondent, and am satisfied that the reason for the redundancy was genuine, as the organizational restructure was necessary.
74. In light of the foregoing premises, I conclude that the termination of the Claimant’s employment was procedurally unfair.
75. I now consider whether the Claimant is entitled to the reliefs sought. The Claimant seeks reinstatement to her position and payment of the salary she would have earned during the months she has been out of work, had it not been for the unfair termination. Considering the provisions of Section 12[3] of the Employment and Labour Relations Court Act, the remedy cannot be granted to the Claimant. It is now more than three years since the termination. The provision prohibits an order of reinstatement after three years of the date of termination of an employee’s employment.
76. The Claimant seeks, in the alternative, one month’s salary in lieu of notice, KShs. 104, 270.15. Under section 40[1][f], the employer is enjoined to pay the employee whose employment has been terminated on account of redundancy, notice pay equivalent to one month’s salary. Ordinarily, the Claimant is entitled to the benefit.
77. Additionally, the Claimant was under Section 40[1] of the Employment Act, entitled to severance pay, 15 days’ salary for each year worked. As such, KShs. 834,161.20 was payable to her under this head.
78. Section 49[1][c] of the Employment Act, 2007, grants courts the authority to award compensatory damages for unfair dismissal if an employee successfully challenges their termination as unfair. However, it is important to note that the exercise of this authority is discretionary and depends on the circumstances of each case.
79. I have carefully considered the circumstances of this case, including that the Respondent did not demonstrate that an objective criterion was used in identifying the Claimant as those to be impacted by the redundancy, her length of service in the employment of the Respondent, the fact that the Claimant did not contribute to the termination, the Respondents non-adherence to the statutory safeguards that are designed in law to protect employees against unfair and arbitrary dismissals on account of redundancy, and the attempt by the Respondent to mislead on the issuance of notices, and conclude that the Claimant is entitled to the compensatory award to the extent of eight months’ gross salary.
80. Under section 51 of the Employment Act 2007, a certificate of service is a statutory right for an employee to receive, and an obligation for the employer to issue one. There is no dispute that the Respondent did issue a certificate of service to the Claimant, which indicated his last day of work as 15th January 2022. Having found, as I have hereinabove, that the termination of her employment was effective 7th December 2021, it would be misleading to allow the certificate issued to maintain the date of 15th January 2022.
81. In the upshot, Judgment is hereby entered for the Claimant in the following terms;
I. A declaration that the termination of her employment on account of redundancy was unfair.
II. A declaration that the issuance of the 2nd termination letter dated 14th December 2021 by the Respondent was irregular and an afterthought.
III. Compensation for unfair termination, pursuant to the provisions of section 49[1][c] of the Employment Act, 2007, eight months’ gross salary, KShs. 834,161.20.
IV. One month’s salary in lieu of notice, KShs. 104, 270.15.
V. Severance pay, KShs. 834,161.20.
VI. The amounts specified in [IV] and [V] shall not be payable if they have already been settled at any time.
VII. A fresh Certificate of Service to issue to reflect the date of termination as 7th December 2021.
VIII. Interest on the awarded sum at court rates from the date of this Judgment till full payment.
IX. Costs of this suit.
Read Signed and Delivered this 13th Day of November 2025.
'
Background
1. Via the Memorandum of Claim dated 4th March 2022, the Respondent prayed for judgment against the Respondent for;
a) A declaration that the notice of termination on account of redundancy dated 6th December,2021, issued to the Claimant is illegal and unlawful, hence amounts to unfair termination;
b) By grant of prayer (a) above, a declaration do issue that subsequently, the second notice of termination on account of redundancy dated 14th December,2021, issued to the claimant is illegal and unlawful, hence null and void ab initio;
c) The Claimant be reinstated to her position and paid the salary that she could have earned in the months she has been out of work if it were not for the unfair termination:
d) That in the alternative to prayer (c) above, this Honourable Court be pleased to Order the Respondent to pay the Claimant her terminal dues, which include:
I. One Month Notice In lieu of Notice KShs 104,270.15/
II. Severance pay for the years worked 104,270.15x8years worked = KShs. 834,161.20
III. 12 months'' salary compensation for unfair termination (12x104,270.15)/= KShs... 1,251,241.80/
IV. Certificate of Service as per Section 51 of the Employment Act,2007.
V. Interest at Courts'' rates in terms of item (d)-i, ii, & iii above.
VI. That the Respondent bear the Costs of this Claim with interest at Court rates. Any other award that this Honourable Court deems fit.
2. The Respondent resisted the Claimant’s claim through a Memorandum of Response dated 6th June 2022. The Respondent asserted that the termination of the Claimant’s employment on account of redundancy was justified as it was a result of a genuine restructuring of the company and procedurally proper.
Claimant’s case
3. The Claimant’s case was that Fidelity Commercial Bank Limited employed her on 1st April 2014 as a receptionist earning KShs. 25,000 per month under a letter of appointment dated 10th March 2014. Due to her diligence and exemplary performance, she was promoted on 1st April 2015 to the position of clerk with a revised gross salary of KShs. 30,000.
4. Following the transition from Fidelity Commercial Bank to SBM Bank, her employment continued without interruption. By a letter dated 18th August 2018, she was redeployed from the Mombasa Branch to the Diani Branch and appointed as a Teller. However, her terms and conditions of employment remained the same. On 22nd March 2019, SBM Bank issued her a new employment contract aligning her position and terms with its restructures.
5. The Claimant continued to serve diligently. On 25th September 2019, she was transferred to the Mombasa Moi Avenue Branch, effective 7th October 2019. Later, by a letter dated 3rd December 2020, she was again transferred to the Nyali Branch, effective 4th January 2021. Her salary was periodically reviewed, the last adjustment being on 23rd April 2020 to a gross pay of KShs. 94,915.15.
6. On 8th December 2021, she reported to work as usual but was unexpectedly issued with a notice of termination dated 6th December 2021, purporting to terminate her employment on account of redundancy, effective 7th December 2021. The said notice referenced a general notice to staff dated 6th December 2021, which was in fact an internal staff memo indicating that employees affected by the redundancy would be individually notified by the Human Resources Department from 7th December 2021.
7. The Claimant asserts that the Respondent unlawfully declared her redundant without adherence to the statutory procedure outlined in Section 40 of the Employment Act. She maintains that the notice was defective and irregular, having been issued after its effective date. Additionally, she was instructed to vacate the premises immediately without being given adequate time to hand over her responsibilities. Moreover, she experienced disrespectful treatment from her branch manager.
8. The Claimant asserts that no prior notice of redundancy was issued to her trade union, the Banking, Insurance and Finance Union (BIFU) or to the Labour Officer, as required under Section 40(1)(a) and (b) of the Employment Act. The Respondent failed to consider seniority, skill, ability, and reliability in the selection process and ignored the “Last In, First Out” principle. Furthermore, the redundancy exercise was discriminatively targeted unionised employees and amounted to victimisation for her union membership.
9. She further maintains that prior to the redundancy, the branch manager had been intimidating her and encouraging her to apply for a Voluntary Early Separation Scheme (VESS), which she declined. She believes the redundancy was a covert continuation of the VESS intended to dismiss certain employees. Despite her position being declared redundant, the Teller position remains in existence, thereby evidencing that her termination was malicious and pretextual.
10. The Claimant asserts that following the termination of her employment on 7th December 2021, the Respondent subsequently attempted to legitimise its actions by issuing a second termination letter dated 14th December 2021, claiming that her position had been declared redundant effective from 7th December 2021. However, it was stated that her final working day would be 15th January 2022. Additionally, the Respondent provided her with a “Full and Final Dues Settlement Letter” dated 20th December 2021 and a Certificate of Service indicating her exit date as 15th January 2022, which she contends was incorrect, as her actual last working day was 8th December 2021.
11. The Claimant asserts that the alleged redundancy breached her employment contract, the Collective Bargaining Agreement (notably Clauses A5(d) and A7), and the Respondent’s Human Resource Policy. She claims that the termination was unlawful, unfair, and contrary to Sections 40 and 45 of the Employment Act, as the Respondent failed to provide valid or fair reasons and to follow due process.
Respondent’s case
12. The Respondent acknowledges that the Claimant was initially employed by Fidelity Commercial Bank (later acquired by SBM Bank) on 1st April 2014 as a receptionist under a six-month probationary contract, which was extended for a further six months due to unsatisfactory performance. She was confirmed in her position on 21st April 2015 and later promoted to Clerk. Following SBM Bank’s acquisition of Fidelity Commercial Bank, her employment was duly transferred and integrated into the Respondent’s structure, and she was subsequently redesignated as a Teller.
13. The Respondent affirms that the Claimant’s transfers to various branches were conducted lawfully, and clarifies that the transfer from Diani Branch to Moi Avenue Branch in Mombasa was at her own written request. When the Moi Avenue Branch closed in December 2020, the Claimant was temporarily redeployed to the Nyali Branch pending the completion of a job evaluation exercise.
14. The Respondent clarifies that in 2021, owing to the closure of various branches and the substantial staffing structure acquired from Fidelity Commercial Bank and Chase Bank, it was necessary to implement a significant restructuring to optimise operational efficiency.
15. On 5 October 2021, the Respondent issued an internal memo to all staff introducing a Voluntary Early Separation Scheme (VESS) and simultaneously notified the Ministry of Labour, the Banking, Insurance and Finance Union (BIFU), the Kenya Bankers Association (KBA), and the Federation of Kenya Employers (FKE) of its intention to declare redundancies if the VESS did not achieve the required staff reductions.
16. After the VESS failed to achieve the targeted number of exits, the Respondent proceeded with the redundancy process. It held consultations with BIFU and KBA representatives on 16th November 2021, followed by formal correspondence documenting the discussions. The Union responded on 17th November 2021, agreeing to the redundancy but requesting enhanced severance pay of one and a half months’ salary for each completed year of service, which the Respondent considered.
17. On 6th December 2021, the Respondent issued the statutory redundancy notices to the Ministry of Labour, BIFU, KBA, and the Central Bank of Kenya, as well as a general memo to staff announcing that affected employees would be individually notified. The Claimant was among those affected and was issued with a Notice of Termination on account of redundancy dated 6th December 2021. The Respondent avers that the notice was lawful, procedurally fair, and compliant with Section 40 of the Employment Act and the applicable Collective Bargaining Agreement (CBA).
18. The Respondent denies the Claimant’s allegations of being dismissed abruptly or disrespectfully. It asserts that she, like all affected employees, was placed on a five-day garden leave, commencing on 7th December 2021, to allow time to process the redundancy news. The garden leave was not deducted from her leave balance. The Claimant, however, failed to return to work on 14th December as instructed and only reported back on 7th January 2022 to clear and attend an outplacement training in Nairobi, fully sponsored by the Respondent.
19. To regularise the process, the Claimant was issued a second termination letter dated 14th December 2021, confirming her last working day as 15th January 2022. She was paid all dues up to that date, including salary, leave pay, and severance, which the Respondent maintains exceeded the CBA minimums. She also continued to enjoy medical and insurance benefits until March and July 2022, respectively, and received extended loan repayment terms and a three-month moratorium on loan principal payments.
20. The Respondent avers that the redundancy process was lawful, objective, and transparent, conducted with full participation of the Claimant’s union. The selection criteria were agreed upon with the union and based on the needs of the new structure. The redundancy was not targeted at unionised employees and was occasioned solely by operational requirements, including branch closures and role rationalisation.
21. The Respondent further denies that the position of Teller continued to exist in the same form, explaining that the restructuring reduced the number of Teller positions as part of organizational streamlining. It also denies coercing the Claimant to sign any documents or withholding any of her benefits.
Claimant''s Submissions
22. The Claimant submits that the termination of her employment on account of redundancy was unlawful and unfair due to failure to comply with the mandatory provisions of Section 40(1)(a) of the Employment Act. No notice of redundancy was issued to the Labour Officer in Mombasa or to the Banking, Insurance and Finance Union, of which she was a member.
23. The Claimant argues that the Respondent sought to regularise its unlawful actions by repeatedly calling her to return to work after termination and later issuing a second, irregular termination notice dated 14th December 2021, which purported to declare her redundant retroactively from 7th December 2021.
24. The Respondent also attempted to coerce her into acknowledging the second letter, even though she had already been dismissed and ceased working on 8th December 2021. She asserts that the termination was contrary to the Employment Act, her employment contract, the collective bargaining agreement (clauses A5(d) and A7), and the Respondent’s Human Resource Policy.
25. Citing Barclays Bank of Kenya Ltd v Gladys Muthoni & 20 Others [2018] eKLR, the Claimant emphasises that the procedure under Section 40 of the Employment Act is mandatory, and failure to comply renders a termination unfair.
26. The Claimant relies further on the case of Kenya Union of Domestic Hotels, Educational Institutions and Hospital Workers (KUDHEIHA) v The Aga Khan University Hospital, Nairobi [Cause No. 815 of 2015], where the Court reiterated that redundancy procedures must be strictly followed.
27. The Claimant asserts that no valid redundancy notice was ever served on her union or the Mombasa Labour Officer. Relying on the Barclays Bank of Kenya Ltd case (supra), the Claimant stresses that service of such notice is mandatory, a position also upheld in Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] eKLR, where the Court of Appeal held that employers must notify the Labour Officer of the reasons for and extent of the redundancy at least one month prior to termination. The Claimant thus contends that failure to adhere to this statutory procedure rendered the redundancy process defective.
28. The Claimant also relied on the case of Betty Chemurgor v Laico Regency Hotel Limited (Cause No. 2524 of 2016), where the Court affirmed that both procedural and substantive fairness are essential, and the absence of either makes a termination unfair. The Claimant submits that her termination fell short of these legal standards.
29. On substantive fairness, the Claimant relies on the case of Jane I. Khalachi v Oxford University Press E.A. Ltd (Cause No. 924 of 2010), where the Court held that redundancy cannot target a single employee and that the reasons and extent of redundancy must be justified through a fair process. In the present case, the Claimant argues that the Respondent’s redundancy process was a sham, as her position continued to exist, and alleged performance issues were merely used to disguise an unlawful redundancy. The Court’s striking out of the Respondent’s supplementary documents further confirmed that the process was irregular.
30. The Claimant also relies on the case of Banking, Insurance and Finance Union (Kenya) v Murata Sacco Society Ltd (Cause No. 616 of 2010), where the Court held that redundancy must be based on genuine business reasons and guided by fair selection criteria, including seniority, skill, reliability, and consultation with the union and labour officer. The Respondent failed to demonstrate that it applied an objective.
31. It is further submitted that redundancy notices must be genuine, not perfunctory, and affected employees must be truly engaged. The purported “Voluntary Employment Separation Scheme (VESS)” cited by the Respondent is unknown in law and cannot replace the redundancy process outlined under Section 40.
32. A purported redundancy which does not in fact exist cannot be deemed a fair or valid reason for termination. The purported redundancy was a sham. The termination notice dated 6th December 2021 merely stated that her role no longer existed within a “fit-for-purpose structure,” without any proof that the position had actually been abolished. To support this submission, reliance has been placed on the case of Paul Wachira Ndonga v Keroche Breweries Limited (Cause No. 374 of 2017)
33. Lastly, given her eight years of service and the Respondent’s disregard for due process, the Court should award the maximum compensation of twelve months’ salary.
Respondent’s submissions
34. The Respondent submits that the termination of the Claimant’s employment was lawful, justified, and procedurally sound. The restructuring arose from the Respondent’s acquisition of Fidelity Bank and Chase Bank, which resulted in excess staff and necessitated a reorganisation to streamline operations.
35. Citing Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others [2014] KECA 404 (KLR), the Respondent argues that an employer retains managerial prerogative to reorganise its business and determine staffing needs, a decision the courts should not interfere with.
36. The Respondent argues that proper procedures were followed as specified under Section 40(1) of the Employment Act. A notice of intention to declare redundancy, dated 5th October 2021, was properly served on the Banking, Insurance and Finance Union (BIFU) and the Labour Office, and was received on 7th October 2021. The notice, although titled “Voluntary Early Separation Scheme,” clearly indicated that if the VESS did not deliver the expected results, the Respondent would move forward with redundancy in accordance with the Employment Act and the CBA.
37. The Respondent relies on the case of Barclays Bank of Kenya Ltd & Another v Gladys Muthoni & 20 Others [2018] eKLR to argue that a letter, despite its heading, could constitute a valid redundancy notice if it meets the statutory requirements.
38. Prior to the redundancy, consultations were conducted with the union, as evidenced by correspondence indicating a meeting on 16th November 2021 where the modalities and benefits were discussed, and the union’s proposals were accepted. Since the union, being the legally recognised representative, did not contest the process, the Respondent maintains that the consultation requirements were fulfilled.
39. Regarding selection, the Respondent states that the criteria were agreed upon with the union and based on seniority, skill, ability, and reliability. The Claimant’s selection was the result of a job evaluation, considering her qualifications and position relative to others. She was properly informed through letters dated 6th December 2021 and 14th January 2022, along with a memo circulated to all staff. The Claimant’s claim of surprise is unfounded, as the process had been ongoing for over two months and notices were duly issued to the union, not necessarily to each employee individually.
40. On terminal dues, the Respondent maintains that the Claimant was paid all entitlements, including one month’s notice pay, salary up to 15th January 2022, one and a half months’ pay for every completed year of service, and accrued leave. Additional benefits included extended medical and life insurance cover, a moratorium on staff loans, and preferential loan rates.
41. The Respondent clarifies that the item labelled “gratuity” in the payslip represented severance pay, explaining that its payroll system did not include a separate field for severance. The Claimant, it argues, is therefore not entitled to any additional payment under that heading, as this would constitute unjust enrichment.
42. The Respondent concludes that the termination was both substantively and procedurally fair, and that the Claimant received her full entitlements. Consequently, she is not eligible for damages. Even if the court were to find otherwise, only nominal damages would be appropriate, given the enhanced severance pay and other benefits she received.
Analysis and determination
43. Have carefully considered the pleadings, evidence and pleadings by the parties, and the following issues emerge for determination;
1. Was the termination of the Claimant’s employment by the Respondent on account of redundancy fair and lawful?
2. Is the Claimant entitled to the prayers sought?
Was the termination of the Claimant by the Respondent on account of redundancy fair and lawful?
44. There is no dispute that the Claimant’s employment was terminated at the initiative on account of an alleged redundancy. However, there is a dispute regarding the fairness of the termination, with the Claimant contending that it was both procedurally and substantively unfair, and the Respondent asserting that it was a justified termination effected in full compliance with the procedure contemplated under the Employment Act.
45. Time and again, this Court has stated that the defining characteristic of dismissals due to redundancy is that they occur without any fault on the part of the employee. As a result, the law imposes specific and strict requirements on an employer considering dismissing an employee on grounds of redundancy, aimed at ensuring fairness. Section 40 of the Employment Act specifies mandatory requirements the employer must comply with before terminating an employee’s employment due to redundancy.
46. The Court of Appeal in the case of Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] KECA 404 (KLR), stated:
“There are two broad aspects of this definition. The first one is that the loss of employment in redundancy cases has to be by involuntary means and at the initiative of the employer. It should not be a contrived situation. It has to be non-volitional. I understand this to refer to a situation, in most cases an economic downturn, brought about by factors beyond the control of the employer, which leaves the employer with no option but to take an initiative, the consequence of which will be inevitable loss of employment.
The second aspect is that the loss of employment in redundancy has to be at no fault of the employee, and the termination of employment arises “where the services of an employee are superfluous” through “the practices commonly known as abolition of office, job or occupation and loss of employment.” In this case, what I understand as required to be determined in this aspect of the definition of redundancy is whether the appellant abolished the offices, jobs or occupations of the affected employees, resulting in their services being superfluous, hence their loss of employment. Corollary to that is the justification for that abolition, if the appellant indeed abolished their offices. Determination of these two aspects will determine the first issue of whether or not the redundancy in this case was necessary.”
47. The Employment Act provides that an employer may terminate an employee’s employment based on operational requirements of the employer. The Court in Jane Khalachi vs Oxford University Press E.A., Cause No. 924 of 2010, cited with approval by the Court of Appeal in The German School Society &another v Ohany & another [2023] KECA 894[KLR], held that;
“employers have the prerogative to determine the structures of their business and therefore make positions redundant. Positions and not employees become redundant, the employee can be redeployed, which means the employee is given another job, or the employee is retrenched, meaning the employee loses the job altogether…………….. Although not expressly defined under the Employment Act 2007, reorganization is contemplated by section 45[2] as a fair termination reason.’’
48. However, the termination on the grounds of redundancy can only be considered fair if it is substantively justified and procedurally fair. Camouflaged redundancies will hardly pass the fairness test contemplated under section 45 of the Employment Act. In the German School Society [supra], the Court stated;
“53. In this regard, it is an employee’s prerogative to elect to make its employees redundant if there is a justifiable business reason for doing so. The Employment Act does not list instances of redundancy, and therefore, an employer should ensure that the reason is based on operational business requirement…………….”
49. Section 40 of the Employment Act elaborately provides for termination on account of redundancy in the Kenyan context, thus;
40. Termination on account of redundancy
(1) An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions—
(a)where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;
(b)where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;
(c)the employer has, in the selection of employees to be declared redundant, had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
(d)where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;
(e)the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
(f)the employer has paid an employee declared redundant not less than one month''s notice or one month''s wages in lieu of notice; and
(g)the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service.
(2) Subsection (1) shall not apply where an employee''s services are terminated on account of insolvency as defined in Part VIII, in which case that Part shall be applicable.
(3) The Cabinet Secretary may make rules requiring an employer employing a certain minimum number of employees or any group of employers to insure their employees against the risk of redundancy through an unemployment insurance scheme operated either under an established national insurance scheme established under written law or by any firm underwriting insurance business to be approved by the Cabinet Secretary.
50. The Claimant’s claim, as I observe, is founded on the assertion that the Respondent failed to comply with the requirements stipulated by the aforementioned provision when terminating her employment allegedly due to redundancy. It is critical to note at this juncture that Section 40 of the Employment Act is structured in such a way that clearly indicates that non-compliance with any one of the specified requirements would render the redundancy-based termination unfair. The requirements outlined in this section are arranged in a conjunctive manner. See Kenya Airways Ltd v Aviation &Allied Workers Union Kenya & 3 others [2014] KECA 404 [KLR].
51. It is crucial to note at this juncture that, in an effort to restructure its business operations, the Respondent undertook two consecutive processes, all of which were aimed at optimizing its Human Capital, the Voluntary Employment Separation Scheme, and declaration of redundancies.
52. It is essential to emphasise that a Voluntary Retirement Separation Scheme is not equivalent to a redundancy separation as outlined under the provisions of section 40 of the Employment Act, despite the possibility that the underlying reasons for both forms of separation may be similar. There are circumstances, as exemplified in this case, where the two separation processes may occur concurrently within an organisation. These processes are inherently distinct: one being governed by internally established mechanisms, and the other by statutory regulations. It would be inappropriate to argue that notifications concerning the VRSS should be considered proper notifications under Section 40. I am not persuaded, therefore, with the Respondent’s submissions to the effect that the letter dated 5th October 2021, amounted to a notice as contemplated under Section 40 of the Employment Act.
53. It is undisputed that the Claimant was a member of a Trade Union at the pertinent time. Accordingly, pursuant to section 40[1][a], a notice of the Respondent’s intent to declare redundancies was necessarily required to be issued to both the Trade Union and the labour officer. Such notice must be given for a minimum duration of 30 days.
54. Undeniably, via a letter dated 5th October, 2021, the Respondent informed the Ministry of Labour that it was offering to its employees a Voluntary Employment Separation Scheme (VESS). The letter was also copied to the Kenya Bankers Association, the Federation of Kenyan Employers, and the Banking, Insurance, and Finance Union. The letter was captioned “Voluntary Employment Separation Scheme.”
55. According to the letter, the scheme was open to all interested employees of the Respondent Bank, as part of the identified areas for business reorganisation, by offering the Bank’s employees the option to leave employment on agreed terms voluntarily.
56. The letter detailed the Board''s resolution concerning the Scheme, including the objectives intended to be accomplished, the individuals eligible to apply for voluntary exit and the applicable deadlines, as well as the terms governing the Scheme. I find it difficult to comprehend the reasonableness of the Respondent’s assertion and their Counsel’s submissions that this letter, which related to an internally devised process, should be regarded as the notice contemplated under section 40[1][a].
57. This Court notes that the letter at the tail end read;
“……………………. Should the VESS exercise not yield the expected result, the bank will embark on a redundancy programme whose scale will be dependent on the outcome of the VESS and will be in line with the Employment Act, 2007 and the Collective Bargaining Agreement in force.
A separate notification shall be issued should the Bank result to undertake a redundancy programme………………….”
58. Undoubtedly, part of the letter states that it is strictly related to the VESS, and the Respondent’s appreciation that this scheme was independent of any redundancy process, and that the Employment Act had stipulations to be followed if a redundancy process was to be considered.
59. On 17th November 2021, the Respondent issued a notice of Intended Redundancy to the General Secretary of the Banking Insurance and Finance Union [Kenya], informing the Union that the VESS did not achieve the expected take-up by staff members. As a result, they planned to proceed to the Redundancy phase, impacting all levels of staff at the Bank, including 27 who were Union members. In the letter, the Respondent proposed an exit package for employees who would exit employment under the redundancy process.
60. On the same date, the Trade Union corresponded with the Respondent, providing comments on the proposed package and submitting a counteroffer. They requested to be informed of the selection criteria. The Trade Union explicitly stated that the Respondent may proceed further with the process, provided that the Union’s views are duly considered beforehand.
61. The Respondent did not demonstrate that the letter was served on the Labour Officer.
62. By a letter dated 6th December 2021, the Respondent wrote to the Cabinet Ministry of Labour, the Kenya Bankers Association, the Central Bank of Kenya and the Banking Insurance and Finance Union regarding the intended termination of employees on account of redundancy. The letter read in part;
RE: SBM BANK[KENYA]LIMITED -NOTIFICATION OF TERMINATION OF EMPLOYMENT OF STAFF ON ACCOUNT OF REDUNDANCY.
On behalf of the Board of Directors and Management of SBM BANK [Kenya] Limited and as per our previous communication dated 5th October 2021, I wish to inform you that the Bank’s Voluntary Employment Separation Scheme [VESS] has now been concluded.
The VESS exercise did not yield the expected results, and in line with our earlier communication to you, the Bank is therefore proceeding to carry out a redundancy exercise, which will be in compliance with the provisions of the Employment Act, 2007, and the Collective Bargaining Agreement in force.
The affected employees will be notified of their redundancy individually from 7th December 2021 through the Bank’s Human Resources Department……………...”
63. Via the internal memo dated 6th December, 2021. The Respondent informs its staff members about an intended redundancy program.
64. In the letter dated 6th December 2021, the Claimant was informed of her termination of employment on account of redundancy, effective 7th December 2021. The same is signed and received on 8th December, 2021.
65. Up to this point, I am convinced and agree with the Claimant’s Counsel’s submissions that none of the letters mentioned hereinabove qualify as notices under section 40(1)(a) of the Employment Act. None of these letters provided a notice period of 30 days.
66. This Court has not lost sight of the fact that the letter dated 6th December 2021 was explicit. The Claimant was declared redundant effective 7th December 2021. I have no reason to doubt her assertion that she exited her role on 8th December 2021 upon receiving the letter. However, I have doubts regarding the Respondent’s account of the events following 8th December 2021. To justify the issuance of a second termination notice, dated 14th December 2021, the Respondent claimed that after being issued the letter dated 6th December 2021, the Claimant was permitted to proceed on a five-day gardening leave. The term'' gardening leave'' was not specified as a term of the redundancy in any of the letters related to the process. Furthermore, no document has been presented by the Respondent to demonstrate that the Claimant was authorised to proceed on leave, not even an email.
67. In the letter dated 14th December 2021, the Respondent informed the Claimant that she was declared redundant effective 7th December 2021, with her last day of work being 15th January 2022. The same is neither signed nor received by the Claimant.
68. It is peculiar that the “Termination notice on account of redundancy” was allegedly issued six days after the Claimant''s exit, which occurred pursuant to the termination notice dated 6th December 2021. In my opinion, this subsequent notice appears to be a belated attempt designed solely to mitigate the Respondent''s illegitimate procedures concerning the termination process.
69. The Claimant contended that the Respondent failed to apply an objective selection criterion for determining those impacted by the redundancy. She asserted that only Union members were targeted. Section 40 [1][c] sets out the selection criteria the employer must observe when declaring its employees redundant. In the case of Williams v Compare Maxam Ltd [1982] IRLR 83, while referring to the decision in Greig v Sir Alfred McAlpine & Son [Northern]Ltd [1979] IRLR, 372, elaborated the selection criteria as follows;
“ In considering the reasonableness of a redundancy dismissal where a selection has to be made between those who are to be retained and those who are to be dismissed, the most important matter on which the employer has to satisfy the Tribunal is that he acted reasonably in respect of the selection of the particular employee. That normally involves two questions, namely, whether the employer adopted reasonable criteria for selection, and whether those reasonable criteria were reasonably and fairly applied in respect of the individual.
70. In Cargill Kenya Limited v Mwaka & 3 Others [2021] KECA 115[KLR], elaborating on the requirement for an objective criterion in the selection of those to be impacted by a redundancy, the Court of Appeal stated;
“ From the above provisions and decisions, the requirements in fulfilling the threshold set by section 40[1][c] can therefore be summarised as follows. First, an employer should include the factors set out in section 40[1][c] of the Employment Act in the criteria for evaluating the employees to be declared redundant. Second, the employer is required to prove that the criteria were objectively, uniformly, and fairly applied. ……”
71. In the Kenya Airways Case[supra], the Court stated;
“ 66. Clearly, the selection process is required to be based on seniority, skill, and experience, reliability and ability of the employee.”
72. The Respondent generally claimed that the selection of those affected by the redundancy was based on an evaluation exercise. However, they did not provide any evidence to indicate that such an evaluation took place, nor that the criteria outlined in the aforementioned provision were applied.
73. I have carefully considered the circumstances under which the redundancy process was initiated by the Respondent, and am satisfied that the reason for the redundancy was genuine, as the organizational restructure was necessary.
74. In light of the foregoing premises, I conclude that the termination of the Claimant’s employment was procedurally unfair.
75. I now consider whether the Claimant is entitled to the reliefs sought. The Claimant seeks reinstatement to her position and payment of the salary she would have earned during the months she has been out of work, had it not been for the unfair termination. Considering the provisions of Section 12[3] of the Employment and Labour Relations Court Act, the remedy cannot be granted to the Claimant. It is now more than three years since the termination. The provision prohibits an order of reinstatement after three years of the date of termination of an employee’s employment.
76. The Claimant seeks, in the alternative, one month’s salary in lieu of notice, KShs. 104, 270.15. Under section 40[1][f], the employer is enjoined to pay the employee whose employment has been terminated on account of redundancy, notice pay equivalent to one month’s salary. Ordinarily, the Claimant is entitled to the benefit.
77. Additionally, the Claimant was under Section 40[1] of the Employment Act, entitled to severance pay, 15 days’ salary for each year worked. As such, KShs. 834,161.20 was payable to her under this head.
78. Section 49[1][c] of the Employment Act, 2007, grants courts the authority to award compensatory damages for unfair dismissal if an employee successfully challenges their termination as unfair. However, it is important to note that the exercise of this authority is discretionary and depends on the circumstances of each case.
79. I have carefully considered the circumstances of this case, including that the Respondent did not demonstrate that an objective criterion was used in identifying the Claimant as those to be impacted by the redundancy, her length of service in the employment of the Respondent, the fact that the Claimant did not contribute to the termination, the Respondents non-adherence to the statutory safeguards that are designed in law to protect employees against unfair and arbitrary dismissals on account of redundancy, and the attempt by the Respondent to mislead on the issuance of notices, and conclude that the Claimant is entitled to the compensatory award to the extent of eight months’ gross salary.
80. Under section 51 of the Employment Act 2007, a certificate of service is a statutory right for an employee to receive, and an obligation for the employer to issue one. There is no dispute that the Respondent did issue a certificate of service to the Claimant, which indicated his last day of work as 15th January 2022. Having found, as I have hereinabove, that the termination of her employment was effective 7th December 2021, it would be misleading to allow the certificate issued to maintain the date of 15th January 2022.
81. In the upshot, Judgment is hereby entered for the Claimant in the following terms;
I. A declaration that the termination of her employment on account of redundancy was unfair.
II. A declaration that the issuance of the 2nd termination letter dated 14th December 2021 by the Respondent was irregular and an afterthought.
III. Compensation for unfair termination, pursuant to the provisions of section 49[1][c] of the Employment Act, 2007, eight months’ gross salary, KShs. 834,161.20.
IV. One month’s salary in lieu of notice, KShs. 104, 270.15.
V. Severance pay, KShs. 834,161.20.
VI. The amounts specified in [IV] and [V] shall not be payable if they have already been settled at any time.
VII. A fresh Certificate of Service to issue to reflect the date of termination as 7th December 2021.
VIII. Interest on the awarded sum at court rates from the date of this Judgment till full payment.
IX. Costs of this suit.
Read Signed and Delivered this 13th Day of November 2025.
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