A. INTRODUCTION
1. This is a partial appeal by the eight above-named Appellants against the judgments of the trial court, Hon. L. K. Sindani (Senior Principal Magistrate), delivered on 3rd April 2025 in Mombasa CM ELRC Nos. E743 of 2021, E744 of 2021, E745 of 2021, E747 of 2021, E748 of 2021, E749 of 2021, E750 of 2021 and E751 of 2021, in which the Respondent was the common employer and defendant. The appeal is brought by way of a Memorandum of Appeal dated 30th April 2025, and is supported by the Appellants' written submissions dated 11th October 2025. The Respondent opposes the appeal and relies on its written submissions dated 16th June 2026.
2. The eight suits before the trial court arose from a single, common set of facts: the termination, on 31st March 2021, of the employment of eight employees of the Respondent who had all been deployed to render manpower services at the premises of Tata Chemicals Magadi Limited within Mombasa County. Each Appellant filed a separate Statement of Claim dated 9th November 2021, the Respondent filed a separate Statement of Response dated 17th January 2022 in each, and by consent of counsel the evidence led in the lead file, Mombasa CM ELRC No. E751 of 2021 (Justus Nzilu Mutua v Cyka Manpower Services Limited), was adopted as the evidence in the remaining seven files. The trial court heard the eight causes together and, applying materially identical reasoning to a common set of facts, delivered eight separate judgments on the same day, each differing only in the names of the parties and the arithmetic of the individual awards.
3. Before turning to the merits, this Court considers it necessary to make a passing observation on the manner in which the trial court disposed of the consolidated causes. The object of consolidating suits, or of directing that they be heard together on a common evidential record, is to save judicial time, spare the parties the expense and inconvenience of relitigating the same facts eight times over, and guard against the ever-present risk that separately reasoned decisions on identical facts will diverge and produce inconsistent outcomes. Having taken the entirely proper and efficient step of hearing the eight causes together on one evidential record, the trial court would, in this Court's respectful view, have better served the ends of judicial economy and the coherence of the record by rendering a single consolidated judgment addressing the common questions once, with a schedule setting out the individual reliefs due to each Claimant, rather than replicating, eight times over, several pages of identical analysis differing only in names and figures. This observation is made only in passing, for the guidance of the trial courts generally, and does not found any ground of appeal nor affect the disposal of this appeal.
B. BACKGROUND
4. The Appellants were, at all material times, employees of the Respondent, a company carrying on the business of providing outsourced manpower services to industrial clients. Each of the Appellants was deployed by the Respondent to work at the premises of Tata Chemicals Magadi Limited in Mombasa County, in various capacities and for varying periods, the shortest being six years and the longest thirteen years.
5. The Respondent's commercial contract for the supply of manpower services to Tata Chemicals Magadi Limited came to an end on 31st March 2021 and was not renewed. By notices dated 27th February 2021, the Respondent informed each of the Appellants that, the Respondent's contract with Tata Chemicals having ended and no alternative site or position being available within the Respondent's operations, their respective employments would stand terminated with effect from 31st March 2021. The Respondent notified the Mombasa County Labour Office of the development on 1st March 2021.
6. Following the termination, the Respondent tabulated what it described as “gratuity” for each of the affected employees and issued each of the Appellants with a Certificate of Service dated 10th April 2021, reflecting their respective periods of continuous service. It is common ground that a new service provider took over the provision of manpower services at the Tata Chemicals Magadi site with effect from 1st April 2021, and that each of the Appellants was thereafter engaged by that incoming service provider at the same site, such that none of them experienced a single day of unemployment.
7. The particulars of each Appellant's employment, as pleaded and as borne out by the respective Certificates of Service, may conveniently be tabulated as follows:
# Appellant Cause No. Period of Service Years Monthly Salary (Kshs)
1 Justus Nzilu Mutua E751/2021 1.6.2008 – 31.3.2021 13 30,000
2 Kyalo Mkiti E743/2021 1.1.2011 – 31.3.2021 10 23,000
3 Josphat Murigi Ngigi E744/2021 1.9.2013 – 31.3.2021 8 23,000
4 Richard Nzomo Mateli E745/2021 1.9.2010 – 31.3.2021 11 25,000
5 John Karimi Wambu E747/2021 1.1.2011 – 31.3.2021 10 32,000
6 William Muthemba Njihia E748/2021 1.2.2015 – 31.3.2021 6 23,039.45
7 Jackson Mwakughu Mongo E749/2021 2010 – 31.3.2021 11 22,000
8 George Edward Otieno E750/2021 1.5.2011 – 31.3.2021 10 28,500
C. PROCEEDINGS BEFORE THE TRIAL COURT
8. By their respective Statements of Claim, each dated 9th November 2021, the Appellants sought payment of terminal dues comprising, in various combinations depending on their individual circumstances, payment in lieu of accrued annual leave, one month's salary in lieu of notice under section 40(1)(f) of the Employment Act, severance pay computed at fifteen days' pay for each completed year of service under section 40(1)(g) of the Employment Act, arrears of house allowance, arrears arising from underpayment of the statutory minimum wage (in the case of the 6th Appellant), and damages equivalent to twelve months' salary for unlawful termination by redundancy. The 1st Appellant additionally pleaded that his employment, spanning 1st June 2008 to 31st March 2021, had proceeded through an initial casual engagement, a fixed-term contract from 15th May 2018 to 14th May 2019, and thereafter continuous unbroken service to the date of termination.
9. The Respondent entered appearance and filed a separate Statement of Response dated 17th January 2022 in each suit. Critically, at paragraph 19 of each Statement of Response, the Respondent pleaded as follows:
“...Further, the respondent avers that the Claimant is not entitled to them as he was NOT unfairly terminated from employment but terminated on account of redundancy after due process being followed.”
10. The Respondent's pleaded case was, in substance, that its contract with Tata Chemicals Magadi Limited had ended, that it had computed and tabulated terminal dues for all affected employees, that some employees (the Appellants included) had not collected the cheques prepared for them, and that the Respondent had negotiated with the incoming service provider for the absorption of the affected employees, who were accordingly absolved by the new company.
11. At the close of pleadings, the trial court gave directions for hearing. The 1st Appellant, Justus Nzilu Mutua, testified as the sole witness for the Claimants on 4th July 2023. He adopted his witness statement dated 9th November 2021 and the documents filed with his list of documents as his evidence-in-chief. In cross-examination he confirmed that he began working at the Magadi site in 2008, that the Respondent's contract at the site ended on 31st March 2021, that a new employer took over, that he and his colleagues were absorbed by the new company, and that he did not remain unemployed for even a single day thereafter. He maintained, in re-examination, that the Respondent's tabulation had been unacceptable to him because it recognised only three years of his service instead of his full thirteen years. By consent of the parties, the trial court directed that this evidence would apply across all eight related files.
12. The Respondent called a single witness, Johnson Asega, its Operations Manager, who testified on 1st February 2024. He adopted his witness statement dated 31st August 2022 and produced the Respondent's documents. He testified that the Respondent's contract with Tata Chemicals ended in 2021, that another company took over the provision of manpower services, that the Respondent computed dues described as “gratuity” for the affected employees, and that 38 employees were affected in total, of whom most, but not all, collected their cheques. In cross-examination, RW1 made a number of material concessions. He admitted that the Appellants were not parties to the commercial contract between the Respondent and Tata Chemicals, and that there was no express provision in the Appellants' contracts of employment making their employment automatically contingent on the continuation of that commercial contract. He confirmed that the Certificates of Service issued to the Appellants recorded their full, undiminished years of service, and that the computation exhibited by the Respondent was a computation of gratuity, not of severance pay, and that nothing in the documentation described the sums paid as severance. He conceded that he had not produced any document evidencing the terms on which the incoming service provider engaged the Appellants, nor any agreement between the Respondent and the incoming provider for the transfer of the Appellants' accrued terminal liabilities.
D. THE IMPUGNED JUDGMENTS OF THE TRIAL COURT
13. The trial court applied identical reasoning in all eight judgments delivered on 3rd April 2025. Relying on the statutory definition of redundancy in section 2 of the Employment Act, and on the authorities of Jane I. Khalechi v Oxford University Press EA Limited (2013) eKLR and Chepman v Goonvean & Rostowracj China Clay Limited (1973) All ER 1973, the trial court reasoned that redundancy is concerned with positions and not employees, and held, in each judgment, as follows:
“The circumstances in this case are that the Claimant never lost employment. Through the initiative of the Respondents, the Claimants and other employees were absorbed by a third-party company that the Respondent proposed. This therefore means that there was no loss of job by the Claimant and the rest as the offices remained and people continued working in their respective positions. In this case therefore, I find that the Respondent mitigated loss of jobs by letting its employees remain in employment. The Claimant remained in the same position as before and he never stayed out of employment even for one day then there was no redundancy and or unlawful termination by redundancy as claimed. The claim for a declaration that the Claimant was unlawfully terminated through redundancy therefore fails.”
14. On that footing, the trial court dismissed, in each of the eight suits, the claims for a declaration of unlawful termination by redundancy, for one month's salary in lieu of notice, for severance pay, and for damages for unlawful redundancy. In each suit, the trial court nevertheless awarded such sums as leave pay, house allowance (or underpayment of the statutory minimum wage, in the case of the 6th Appellant), and gratuity computed by the Respondent at the point of exit, together with interest, and either 50% of the costs of the suit or an order that each party bear its own costs, the eight resulting awards ranging from Kshs 14,024.96 to Kshs 167,681.35.
E. THE MEMORANDUM OF APPEAL
15. Aggrieved, the Appellants filed a Memorandum of Appeal dated 30th April 2025, setting out five grounds of appeal, namely, that the learned trial Magistrate erred in law and in fact:
in finding that there was no redundancy, disregarding the Respondent's express admission in its pleadings and submissions that the Appellants were terminated on account of redundancy;
in relying on extraneous facts not pleaded by the Respondent;
in misapplying section 40 of the Employment Act and finding that there was no redundancy despite the Respondent's admissions and the evidence of non-compliance with the mandatory provisions of that section;
in misapplying section 40(1)(g) of the Employment Act and failing to award severance pay despite admissions that the Appellants' years of service, as reflected in their Certificates of Service, had not been considered in the tabulation of severance pay, and that severance had not been paid; and
in failing to award notice pay, severance pay, damages for unlawful redundancy, and full costs of the suits, despite the Respondent's admissions and the weight of the evidence on record.
16. The Appellants sought an order allowing the appeal, setting aside the trial court's finding that there was no redundancy and its dismissal of the claims for severance pay, and substituting therefor a finding that the Appellants were unlawfully terminated by redundancy, with the reliefs claimed in the respective Statements of Claim allowed as prayed, together with costs of the trial court and of this appeal.
F. THE APPELLANTS' SUBMISSIONS
17. Counsel for the Appellants submitted, first, that it is trite law that parties are bound by their pleadings, and that the trial court's finding, at paragraph 2 of the impugned judgments, that the Respondent's response “denied redundancy” was factually incorrect and a misdirection, given the Respondent's own unambiguous pleaded admission, at paragraph 19 of each Statement of Response, that the Appellants were “terminated on account of redundancy after due process being followed.”
18. Secondly, counsel submitted that section 40 of the Employment Act is couched in mandatory and conjunctive terms, relying on Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others [2014] eKLR, where Maraga JA (as he then was) held:
“Section 40(1) of the Employment Act, which provides for the implementation of the redundancy decision, provides in mandatory terms that ‘[a]n employer shall not terminate a contract of service on account of redundancy unless … [he] complies with the … conditions’ therein stipulated. … All the paragraphs of this subsection are clearly conjunctive meaning that they all have to be satisfied for termination on account of redundancy to be lawful.”
19. Thirdly, it was submitted that the Respondent had failed to demonstrate any agreement transferring the Appellants' accrued years of service, and hence its severance liability, to the incoming service provider, and that even if there had been such a transfer of employees, the Respondent remained obligated to settle the Appellants' outstanding claims before the transfer, relying on Elizabeth Washeke and 62 Others v Airtel Networks (K) Ltd & Another [2013] KEELRC 572 (KLR), where the court held, in terms which counsel urged the Court to adopt:
“...The act of outsourcing without securing the claimant's terms and conditions as agreed with the 1st respondent was tantamount to a termination. The other alternative available to the 1st respondent was to declare the claimants redundant, pay severance pay and let them engage with the 2nd respondent on new terms... This labour practice was an unfair labour practice. To demonstrate this, the respondent did not submit any evidence that indeed there was an agreement as between them to have the terminal service years transferred as between themselves... They were issued with Certificates of Service effectively severing their employment relationship with the 1st respondent.”
20. Fourthly, counsel submitted that, as of the notice date of 27th February 2021, several of the Appellants had no subsisting written contract, their fixed-term renewals having lapsed in 2019, such that the burden lay on the Respondent, under sections 9(2) and 10(7) of the Employment Act, to produce evidence of the terms of engagement, a burden the Respondent had not discharged.
21. Fifthly, relying on Daniel Mburu Muriu v Hygrotech East Africa Ltd [2021] eKLR, counsel submitted that both substantive and procedural fairness apply to redundancy in the same manner as to any other termination, and that an employer who fails either test is liable for unfair or unlawful termination. Counsel computed severance pay for each Appellant at fifteen days' pay per completed year of service, using the years of service reflected in the respective Certificates of Service (which RW1 had conceded were accurate), and sought damages equivalent to twelve months' salary for unlawful redundancy, together with full costs.
G. THE RESPONDENT'S SUBMISSIONS
22. The Respondent, in submissions dated 16th June 2026, opposed the appeal in its entirety. It adopted the factual background set out in the Appellants' submissions, save that it took issue with the characterisation of paragraph 19 of the Statements of Response as an unqualified admission of redundancy within the technical meaning of sections 2 and 40 of the Employment Act. The Respondent's position was that the Appellants remained in uninterrupted employment at all times and that the statutory mischief of redundancy accordingly never arose.
23. The Respondent submitted that section 2 of the Employment Act defines redundancy conjunctively with actual job loss, and is not triggered by a mere change of employer or payroll administrator; that it was undisputed, and indeed conceded at paragraph 22 of the Appellants' own submissions, that the Appellants never lost employment, were absorbed by a third-party company, remained in the same positions, and never stayed out of employment for even a day; and that this finding was fortified by section 10(5) of the Employment Act, under which a transfer of an undertaking does not interrupt the contract of service, which continues in force as though no transfer had occurred.
24. On the question of the pleaded admission, the Respondent submitted that admissions bind a party only as to matters of fact, and not as to legal conclusions, relying on Choitram v Nazari [1984] KLR 327 and Kenya Commercial Bank Ltd v Osebe [1982] KLR 296, for the proposition that while parties are bound by their pleadings, it is for the court to determine the legal effect of the facts pleaded. It was submitted that the Respondent's descriptive use of the word “redundancy” in its pleadings could not, by itself, amount to a concession of statutory redundancy within the meaning of section 2, and that the trial court was entitled, indeed obliged, applying Selle v Associated Motor Boat Co. Ltd & Others [1968] EA 123, to determine the true legal character of the termination from the totality of the evidence rather than from a single word in the pleadings. The Respondent further relied on Galaxy Paints Co. Ltd v Falcon Guards Ltd [1999] eKLR for the proposition that issues for determination flow from the pleadings, and sought to distinguish Elizabeth Washeke on the footing that, unlike in that case, the Respondent here issued written notice, notified the Labour Office, and ensured that not a single Appellant suffered a day's unemployment.
25. In the further alternative, the Respondent submitted that even if the Court were to find that a redundancy within the meaning of section 40 occurred, the process substantially complied with the statutory conditions: written notice was issued on 27th February 2021; the Labour Office was notified on 1st March 2021; the selection criteria were not discriminatory, since the termination affected the entire complement of employees at the Tata Chemicals site; and terminal benefits were computed and paid by reference to the Appellants' full recorded years of service. On the question of the nomenclature used by RW1, the Respondent submitted, relying again on Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others and on G4S Security Services (K) Ltd v Joseph Kamau & 468 Others [2018] eKLR, that this was a matter of labelling and not of substance, that continuation of service after the expiry of a written contract on unchanged terms constitutes an implied renewal by conduct, and that any shortfall in the sums paid ought to be addressed by way of a top-up order rather than a wholesale, duplicated award of severance pay in addition to sums already paid, to avoid double compensation for identical years of service.
26. On damages, the Respondent submitted that an award of twelve months' salary, calibrated for cases of actual unemployment, would be manifestly excessive and disproportionate where the Appellants suffered no interruption of income or employment whatsoever, and that section 49(4)(m) of the Employment Act required the Court to take into account any compensation already paid by the employer upon termination. On costs, the Respondent relied on Mbogo and Another v Shah [1968] EA 93 and Supermarine Handling Services Ltd v Kenya Revenue Authority [2010] eKLR for the proposition that an appellate court will not disturb a trial court's discretion on costs absent demonstrated misdirection, and on Mohamed Mohamoud Jabane v Highstone Butty Tongoi Olenja [1986] KLR for the proposition that a first appellate court will not lightly differ from findings of fact made by a trial court that had the benefit of seeing and hearing the witnesses. The Respondent urged the Court to dismiss the appeal in its entirety with costs.
H. ANALYSIS AND DETERMINATION
27. This Court has considered the record of appeal, the pleadings, the evidence adduced before the trial court, the impugned judgments, the grounds of appeal, and the rival submissions of both counsel. Sitting as a first appellate court, this Court is not bound to accept the findings of fact of the court below. As the Court of Appeal held in Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123:
“This court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen or heard the witnesses and should make due allowance in this respect.”
28. Since the eight suits arose from a single termination exercise, were heard on a common evidential record, and were disposed of by the trial court on identical reasoning, this Court will likewise determine the appeal in a single judgment, setting out at the end a schedule of the individual reliefs due to each Appellant.
29. The following issues arise for determination:
whether the parties are bound by the Respondent's pleaded admission that the Appellants were terminated on account of redundancy, and whether the trial court properly disregarded that admission;
whether the termination of the Appellants' employment amounted to redundancy within the meaning of section 2 of the Employment Act;
whether the redundancy, if established, was both substantively justified and carried out in compliance with section 40 of the Employment Act;
what reliefs, if any, the Appellants are entitled to; and
who should bear the costs.
(i) Whether the parties are bound by the Respondent's pleaded admission
30. It is a foundational principle of civil procedure, applicable with equal force to proceedings before the Employment and Labour Relations Court, that parties are bound by their pleadings. Pleadings serve a purpose that is both practical and constitutional: they define, with clarity and precision, the issues in controversy between the parties; they give each party fair and adequate notice of the case it is called upon to meet, so that it may marshal its evidence and arguments accordingly; they relieve the court of the task of speculating as to the real dispute between the parties; and they guard against trial by ambush, in which a party is confronted, whether at trial or on appeal, with a case never pleaded and which it had no opportunity to meet. A court, no less than the parties, is bound by the pleadings, for it would be a manifest denial of a fair hearing for a court to found its decision on a case never pleaded by either side.
31. It is not in dispute, and it bears repeating, that at paragraph 19 of each of its eight Statements of Response dated 17th January 2022, the Respondent pleaded, in terms that admit of no ambiguity, that the Claimant “was NOT unfairly terminated from employment but terminated on account of redundancy after due process being followed.” That is not a stray or equivocal remark buried in an affidavit; it is a considered plea in the Respondent's own defence, repeated verbatim in all eight Statements of Response, and never once amended, withdrawn, or qualified at any stage of the proceedings below.
32. The Respondent, through its submissions on appeal (though notably not through its pleadings or its witness's testimony at trial), sought to characterise this plea as a mere descriptive turn of phrase incapable of amounting to a concession of redundancy within the technical meaning of section 2 of the Employment Act, relying on Choitram v Nazari [1984] KLR 327 and Kenya Commercial Bank Ltd v Osebe [1982] KLR 296 for the proposition that admissions bind a party only as to matters of fact and not as to legal conclusions. This Court accepts the general proposition, correctly extracted from those authorities, that a court is not bound by a party's own legal characterisation of a set of facts, and remains free, and indeed duty-bound, to apply the correct legal label to facts that are established. That, however, is not the difficulty facing the Respondent in this appeal. Paragraph 19 does not merely borrow the word “redundancy” as loose vernacular; it is an assertion of the historical fact that the Claimant's employment was brought to an end because his services, or the position he held, had become superfluous to the Respondent's requirements, and that this was done “after due process being followed.” That is a plea of fact, going to the very reason for termination, not a plea of law.
33. What the Respondent in truth attempts, in its submissions, is not merely to argue the correct legal label attaching to admitted facts, but to advance an entirely different set of facts, namely, that there was a transfer of an undertaking within section 10(5) of the Employment Act which preserved unbroken continuity of the Appellants' contracts with a new employer. That is a case theory that appears nowhere in the Respondent's pleadings. It was not put to the Appellants' witness in cross-examination as the Respondent's case; it does not feature in RW1's witness statement or his evidence-in-chief; and the Respondent never sought leave to amend its Statements of Response to plead it. A party cannot, having pleaded and maintained one case at trial, be permitted on appeal to substitute an entirely different, unpleaded case merely because it now appears more advantageous. As the authorities relied upon by the Respondent itself confirm, issues for determination flow from the pleadings, and a court cannot pronounce judgment on matters not properly placed before it by the pleadings (Galaxy Paints Co. Ltd v Falcon Guards Ltd [1999] eKLR).
34. It follows that the trial court, in holding at paragraph 2 of each impugned judgment that the Respondent's response “denied redundancy,” fell into clear and demonstrable error. That was not what was pleaded. The trial court then compounded that misdirection by resorting, in its analysis, to the unpleaded theory that the Appellants had been absorbed by a third party such that there was no loss of job, a theory drawn from the evidence of continued engagement with the incoming service provider rather than from the Respondent's pleaded case. Ground 2 of the Memorandum of Appeal, that the trial court relied on extraneous facts not pleaded by the Respondent, is accordingly well founded, as is Ground 1. The Respondent's plea at paragraph 19 of its Statements of Response, being a plain, unqualified, and repeatedly maintained admission that the Appellants were terminated on account of redundancy, binds the Respondent as to that fact, and the trial court was obliged to determine the appeal on that pleaded footing. The Respondent's submission that there was a transfer of business preserving continuity of employment, resting as it does on a case never pleaded and standing in direct tension with the Respondent's own admission of redundancy, stands on quicksand; the authorities cited in its support, addressing as they do the different factual premise of a preserved and continuous employment relationship, cannot avail the Respondent once the fact of redundancy is taken, as it must be, as established.
(ii) Whether the termination amounted to redundancy within section 2 of the Employment Act
35. Section 2 of the Employment Act defines redundancy as:
“the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.”
36. It is important to be precise about what this definition requires and what it does not. It requires, first, that the loss of employment be involuntary and initiated by the employer; secondly, that the employee be at no fault; and thirdly, that the employee's services, in relation to that employer, have become superfluous. What the provision does not do is direct the court's gaze prospectively, to what subsequently becomes of the employee after the employer has, at its own initiative, brought the employment relationship to an end. The loss of employment with which section 2 is concerned is the loss of the specific job held with the particular employer who terminates it; it is not a prospective or continuing inquiry into whether the employee thereafter secures alternative employment, whether with a new employer at the same station or elsewhere. Once the Respondent's operational need for the Appellants' services came to an end, on account of the expiry of its own commercial contract with Tata Chemicals, the redundancy, from the Respondent's perspective as employer, had already crystallised; what the Appellants did next, including securing engagement with the incoming service provider, is a subsequent and independent fact that cannot retroactively unmake an already completed redundancy.
37. The trial court's reliance on Chepman v Goonvean & Rostowracj China Clay Limited (1973) All ER 1973, for the proposition that it is not redundancy where the requirements of the business for the affected employees continue just the same as before, does not assist the Respondent once this distinction is appreciated. The requirement that continued was Tata Chemicals' need for manpower services at its Magadi site; that is not the same as the Respondent's own continuing need for the Appellants as its employees. On the Respondent's own pleaded and admitted case, once its commercial contract with Tata Chemicals ended, it had, in its own words, “no alternative site or position” to offer the Appellants. Its need for the Appellants' services, as an employer, was accordingly and definitively at an end; that the underlying tasks continued to be performed, at the same site, for the same principal, but now for a different employer, does not detract from the fact that it was the Respondent's requirement for the Appellants that had become superfluous.
38. The redundancy asserted, and admitted, in this case rests on a genuine operational cause, wholly unconnected to any fault of the Appellants: the expiry, through no act of the Appellants, of the commercial contract on which their engagement depended, and the absence of any alternative deployment within the Respondent's own operations. This Court accordingly finds, as did the Respondent plead and admit, that the termination of the Appellants' employment on 31st March 2021 was a termination on account of redundancy, substantively justified on genuine operational grounds. The learned trial Magistrate erred in holding, in effect, that redundancy had not been established.
(iii) Whether the redundancy was procedurally fair and complied with section 40
39. A finding that a redundancy is substantively justified does not end the inquiry. Section 40(1) of the Employment Act provides, in mandatory and, as the Court of Appeal held in Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others [2014] eKLR, conjunctive terms, that an employer shall not terminate a contract of service on account of redundancy unless it complies with each of the stipulated conditions, including notice to the employee and to the local labour office, adherence to fair and non-discriminatory selection criteria, and payment of severance pay. As held in Daniel Mburu Muriu v Hygrotech East Africa Ltd [2021] eKLR, both substantive and procedural fairness apply to a termination on redundancy just as they apply to any other termination, and an employer who fails either limb of that conjunctive test is liable for unfair or unlawful termination.
40. On notice, the evidence establishes that the Respondent issued written notice to each of the Appellants on 27th February 2021, more than one calendar month before the effective date of termination of 31st March 2021, and separately notified the Mombasa County Labour Office of the termination on 1st March 2021, a fact expressly acknowledged in the Appellants' own submissions. This Court finds that the notice requirements of section 40(1) were satisfied.
41. On selection, there is no suggestion, and none was pleaded or proved, that the Appellants were singled out on any discriminatory or arbitrary basis; the termination affected the entire complement of employees engaged at the Tata Chemicals Magadi site as a consequence of the expiry of a single commercial contract. This limb of section 40 is accordingly satisfied.
42. The more substantial question concerns consultation. It is well established in our law that consultation is an indispensable ingredient of a fair redundancy, and not a mere formality. In Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others [2014] eKLR, the Court of Appeal explained the purpose of the requirement thus:
“The consultations are therefore meant to cause the parties to discuss and negotiate a way out of the intended redundancy, if possible, or the best way of implementing it if it is unavoidable. This means that if parties put their heads together, chances are that they could avert or at least minimize the terminations resulting from the employer's proposed redundancy. If redundancy is inevitable, measures should be taken to ensure that as little hardship as possible is caused to the affected employees. … [C]onsultation is an imperative requirement under our law.”
43. Similarly, the Court of Appeal in The German School Society & Another v Ohany & Another [2023] KECA 894 (KLR) held that “consultation is an essential part of the redundancy process and ensures that there is substantive fairness. The employer should ensure that it carries out the process as fair as possible and that all mitigating factors are taken into consideration.” The rationale underlying these authorities is not consultation for its own sake, but consultation as the mechanism by which the hardship of redundancy is minimised, and, where possible, the loss of livelihood that redundancy threatens is averted altogether.
44. Measured against that purpose, the evidence in this case, unusually, discloses that the very object which consultation is designed to achieve was in fact achieved. RW1's uncontroverted testimony was that the Respondent negotiated with the incoming service provider for the absorption of the affected employees, that all the Appellants were introduced to and taken up by that incoming provider, and that not one of them suffered a single day of unemployment. Where the outcome that consultation exists to secure, namely, the avoidance of unemployment and the minimisation of hardship to the affected employees, has in fact been achieved through the employer's own initiative in securing alternative engagement for every affected employee, this Court is satisfied that the purpose underpinning the consultation requirement was substantially achieved in this case, and that the process was, in that respect, procedurally fair.
45. This Court accordingly finds that the redundancy in this case was both substantively justified, on account of the genuine expiry of the Respondent's commercial contract with Tata Chemicals and the absence of alternative deployment, and procedurally fair, the Respondent having issued timeous notice, applied non-discriminatory selection, and achieved the substantive object of consultation by securing continued, uninterrupted engagement for every affected employee.
(iv) Severance pay: distinguishing gratuity from the statutory entitlement
46. This finding of procedural fairness does not, however, dispose of the distinct question of severance pay under section 40(1)(g) of the Employment Act, which requires that “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.” It is necessary, at this juncture, to draw a clear distinction between gratuity and severance pay, a distinction the Respondent's submissions elide.
47. Gratuity is not a creature of statute. As the trial court itself correctly observed in each of the impugned judgments, gratuity “is not provided for in the law. It is at the discretion of the employer and as provided in the contract of employment or CBA.” It is typically a discretionary or contractually agreed benefit, rewarding an employee's completed service, and its incidents, rate, and conditions are a matter of the employer's own policy or contractual undertaking, not of statutory command. Severance pay, by contrast, is a specific, mandatory, statutory entitlement, arising only and precisely upon a lawful termination by redundancy, calculated at a fixed statutory minimum rate of fifteen days' pay per completed year of service, and designed for the particular purpose of cushioning an employee against the sudden and involuntary loss of livelihood that redundancy, by definition, occasions. The two payments arise from different legal sources, serve different purposes, and are not interchangeable. An employer cannot discharge its mandatory statutory obligation to pay severance pay by unilaterally computing and tendering a different, discretionary payment under the label of gratuity; to permit that would be to allow employers to contract, or simply compute, their way out of a statutory floor that Parliament has deliberately made mandatory.
48. RW1 candidly conceded, in cross-examination, that the computation the Respondent tabulated and paid was a computation of gratuity, and that nothing in the Respondent's documentation described the payment as severance pay. He further conceded that the Certificates of Service issued to the Appellants recorded their full, undiminished years of service, that these were not disputed, and that he had not produced any document demonstrating that the Appellants' accrued years of service, and the corresponding severance liability, had been assumed by the incoming service provider. On this evidence, the Respondent plainly did not pay severance pay as required by section 40(1)(g); it paid a different, discretionary benefit under a different name. The Respondent's submission that this is merely a question of “labelling and not of substance” cannot be sustained: the substance of the matter is that the sums paid were neither computed at the statutory rate of fifteen days per completed year, nor tendered as, nor accepted in satisfaction of, the statutory severance obligation.
49. At the same time, this Court is alive to the legitimate concern, pressed by the Respondent, against double compensation for one and the same period of service. Equity and common sense require that the gratuity sums already computed and paid to each Appellant, referable as they are to the identical years of service now used to compute statutory severance, be credited against, and set off from, the severance pay now found to be due. This produces a fair result: the Appellants receive, in total, no less than the statutory minimum to which section 40(1)(g) entitles them, while the Respondent is given full credit for what it has already paid, and no Appellant recovers twice over for the same years of service.
50. Applying the rate of fifteen days' pay per completed year of service to the years and monthly salaries established in the record (which mirror the Appellants' own computations, themselves derived from the undisputed Certificates of Service), and crediting the gratuity sums already paid and awarded by the trial court, the severance pay additionally due to each Appellant is set out in the schedule at the foot of this judgment.
(v) Notice pay and compensation under section 49(1)(c)
51. As to notice pay under section 40(1)(f), this Court has already found that the Respondent issued written notice on 27th February 2021, more than a calendar month ahead of the effective date of termination of 31st March 2021. Payment in lieu of notice is a substitute for notice not given; where, as here, actual notice of the requisite length was given and worked out, no additional payment in lieu of notice falls due. Ground 5 of the Memorandum of Appeal, insofar as it relates to notice pay, accordingly fails.
52. As to compensation for unfair termination under section 49(1)(c) of the Employment Act, such compensation is the remedy for a termination found to be substantively unjustified or procedurally unfair, or both. Having found, for the reasons set out above, that the redundancy in this case was both substantively justified and carried out with procedural fairness, there is no unfair termination in respect of which compensation under section 49(1)(c) could arise. It would, moreover, sit uneasily with a finding that the Respondent achieved the very object that fair process demands, the avoidance of unemployment for every affected employee, to nonetheless visit upon it an award of twelve months' compensation calibrated for cases of actual job loss and income interruption, neither of which occurred here. The claim for damages for unlawful redundancy, pleaded and pressed at twelve months' salary, is accordingly dismissed.
(vi) Other reliefs: house allowance, underpayment, and leave pay
53. The trial court's awards in respect of house allowance (in favour of the 1st, 5th, and 8th Appellants), underpayment of the statutory minimum wage and the corresponding house allowance underpayment (in favour of the 6th Appellant), and payment in lieu of accrued annual leave (in favour of all Appellants), were not challenged in the Respondent's submissions on appeal and are not otherwise shown to be erroneous. Those awards, being unchallenged, are upheld and shall stand as ordered by the trial court, together with interest thereon as directed in the respective judgments.
(vii) Costs
54. The award of costs is a matter that lies within the discretion of the trial court, and an appellate court will not lightly interfere with the exercise of that discretion save where it is demonstrated that the trial court misdirected itself, took into account matters it ought not to have considered, failed to consider matters it ought to have considered, or thereby arrived at a decision that is plainly wrong (Mbogo and Another v Shah [1968] EA 93). The trial court's costs orders in the eight suits, apportioned between 50% of costs and each party bearing its own costs, reflected the mixed and partial success recorded by the Appellants on the several heads of claim before it, and this Court is not satisfied that any misdirection has been demonstrated in respect of those orders. They shall accordingly not be disturbed.
55. As regards the costs of this appeal, the appeal succeeds only to the limited extent of the severance pay now found to be due, the Appellants having failed on their claims for notice pay and for compensation for unfair termination, and having succeeded only in part, and after set-off, on severance pay. In these circumstances of divided and partial success, this Court considers it just that each party bear its own costs of the appeal.
I. DISPOSITION
56. For the foregoing reasons, this Court finds that the appeal has merit only to the extent set out below, and it is hereby ordered that:
The appeal is allowed in part.
The finding of the trial court, in each of the eight impugned judgments, that there was no redundancy is set aside and is substituted with a finding that each of the Appellants was terminated on 31st March 2021 on account of a genuine redundancy which was both substantively justified and procedurally fair.
Each Appellant is awarded severance pay under section 40(1)(g) of the Employment Act, computed at fifteen days' pay for each completed year of service, less credit for the sums already paid and received as gratuity, in the amounts set out in the schedule below.
The claims for one month's salary in lieu of notice and for compensation/damages for unlawful redundancy under section 49(1)(c) of the Employment Act are dismissed.
The awards made by the trial court in respect of house allowance, underpayment of wages, and leave pay, are not disturbed and stand as ordered.
The trial court's orders as to the costs of the respective suits are not disturbed.
Each party shall bear its own costs of this appeal.
Interest shall run on the additional sums awarded by way of severance pay under paragraph (c) above at court rates from the date of this judgment until payment in full.
SCHEDULE OF SEVERANCE PAY DUE ON APPEAL
Appellant Statutory Severance (Kshs) Less Gratuity Paid (Kshs) Net Severance Now Awarded (Kshs) Total Award (Trial Court Award + Net Severance) (Kshs)
Justus Nzilu Mutua 195,000.00 39,176.00 155,824.00 321,000.00
Kyalo Mkiti 114,999.00 20,000.00 94,999.00 119,023.96
Josphat Murigi Ngigi 91,999.20 10,000.00 81,999.20 96,024.16
Richard Nzomo Mateli 137,499.45 22,000.00 115,499.45 141,874.43
John Karimi Wambu 159,999.00 16,000.00 143,999.00 247,198.96
William Muthemba Njihia 69,118.20 20,000.00 49,118.20 216,799.55
Jackson Mwakughu Mongo 120,999.45 19,000.00 101,999.45 140,248.45
George Edward Otieno 142,500.00 27,525.00 114,975.00 224,437.00
It is so ordered.