Peter Ochieng Belthazar AND Agripina Vata Kiting’a AND 2 Others VS Lead Human Capital Limited AND Coastal Bottlers Limited

[Appeal from the judgment of Hon. L. Sindani delivered on 9 May 2024 in Mombasa MCELRC No.405 of 2020]

The appeal arises from the judgment delivered on 9 May 2024 in Mombasa MCELRC No.E405 of 2020. The appellants are seeking that the judgment be set aside and the claim allowed with costs.

The background of the appeal is a claim filed by the appellants on the basis that they were employed by the respondents, the 1^st respondent being a subsidiary of the subsidiary of the 2^nd respondent as the principal employer and entangled in a triangular relationship. The 1^st respondent and other subsidiaries would be responsible for administrative duties and issuing employment contracts while the 2^nd respondent provided working tools such as motor vehicles and paid the appellants through the 1^st respondent.

The 1^st appellant was employed as a driver by the 2^nd respondent from 1988 to 2009, then the subsidiary, Asego Warehouse Services 2009 to 2013, Career Directions Limited from 2013 to 2016, Smart Human Capital Limited from 2016 to March 2020, and the 1^st respondent from March to June 2020 at a monthly wage of Ksh.40, 044. He worked for a total of 32 years.

The 2^nd appellant was employed as a driver by the 2^nd respondent subsidiary Career Directions Limited from 2015 to 2016, Smart Human Capital Limited from 2016 to March 2020, and the 1^st respondent from March to June 2020 earning Ksh.40, 044 and worked for 4 years and 6 months.

The 3^rd appellant was employed as a driver by the 2^nd respondent subsidiary Asego Warehouse Services 2011 to 2013, Career Directions Limited from 2013 to 2016, Smart Human Capital Limited from 2016 to March 2020, and the 1^st respondent from March to June 2020 earning Ksh.40, 044. He worked for 9 years and 2 months.

The 4^th appellant was employed as a driver by the 2^nd respondent subsidiary, Career Directions Limited 2015 to 2016, Smart Human Resource Capital Limited from 2016 to March 2020 and the 1^st respondent from March to June 2020 at a wage of Ksh.40, 044 per month. He worked for the respondents for 5 years and 6 months.

The appellants claimed that they were not privy to the outsourcing agreements between the respondents or the named subsidiaries as their former employments were not formerly terminated or due benefits paid. They continued to undertake the same duties under the control of the respondents until 22 June 2020 when the respondent summarily dismissed them without due process or payment of terminal dues. At the time of summary dismissal, the appellants had contracts ending on 28 February 2021. The summary dismissal was discriminatory since out of the 18 employees issued with notices to show cause, only the appellants were singled out at a time when the COVID pandemic had affected many families.

The 1^st appellant claimed the following dues;

1. Payment for the unexpired contract period of 8 months Ksh.320,352;
2. Severance pay for 32 years Ksh.640,704;
3. 12 months compensation Ksh.480,528;
4. General damages for breach of contract;

The 2^nd appellant claimed the following dues;

1. An order of reinstatement; or
2. Payment for the unexpired contract period of 8 months Ksh.320,352;
3. Severance pay for 4 ½ years Ksh.90,099;
4. 12 months compensation Ksh.480,528;
5. General damages for breach of contract;

The 3^rd appellant claimed the following dues;

1. An order of reinstatement; or
2. Payment for the unexpired contract period of 8 months Ksh.320,352;
3. Severance pay for  9 years 2 months Ksh.180,090;
4. 12 months compensation Ksh.480,528;
5. General damages for breach of contract;

The 4^th appellant claimed the following;

1. An order of reinstatement; or
2. Payment for the unexpired contract period of 8 months Ksh.320,352;
3. Severance pay for  5 ½ years Ksh.110,121;
4. 12 months compensation Ksh.480,528;
5. General damages for breach of contract;

In response, the respondents denied the claims that there was employment between the parties or other subsidiaries. The two respondents are separate legal entities not connected in any way other than that the 2^nd respondent is a client of the 1^st respondent who supplies workers to provide specific and identified assignments and such a relationship cannot give rise to allegations of co-employers in any way or at all and the appellants had no proof of employment. The alleged control over the appellants by the respondents is denied. The 1^st respondent employed them on agreed terms and had control and supervision. The 2^nd respondent had nothing to do with the payment of salaries or other benefits to the appellants as alleged.

The appellants had respective employment contracts between themselves and their respective employer and there were no derivative employment relationships with the respondents. The appellants were undertaking special assignments contracted to the 1^st respondent by the 2^nd respondent and as part of the contract, the 2^nd respondent provided specialized tools for such work. In this regard, the appellants have admitted to being employed by several employers in separate contracts. There is no proof of employment between any appellant and the 2^nd respondent as alleged. The appellants were found to have been involved in criminal activities which were to be detrimental to the interests of the respondents leading to their summary dismissal. The 1^st respondent received information that the appellants were siphoning fuel from motor vehicles allocated to them to work with the 2^nd respondent. There were police investigations and on 22 June 2020 the 1^st respondent proceeded and terminated employment under the law. This did not involve the 2^nd respondent in any manner. The claims made should be dismissed with costs.

The trial court heard the parties and held that summary dismissal was justified and the claims made were not justified and hence dismissed the suit with costs to the respondents.

Aggrieved, the appellant filed this appeal on 16 grounds. These include that the trial court erred in law and fact by finding that there was no employment relationship between the appellants and the 2^nd respondent and exonerating it from the claimants even after finding that they were offering services to the respondents. The finding that summary dismissal was justified was in error as there was no proof of the required standard and the reasons given for such sanction were not justified. Relying on the anonymous letter and internal audit report which the respondents acted on which had no evidential value and hence not authentic and it was contrary to Section 43(1) of the Employment Act.

Other grounds for appeal are that the trial court erred in finding that there was sufficient cause to suspect the appellants\' involvement in the alleged loss of fuel especially that the anonymous letter and internal audit report which the respondents acted upon had no evidential value and was produced contrary to Section 43(2) of the Employment Act. The alleged loss of fuel that happened at the hands of the appellants had no evidence. The hearing lacked fairness and the disciplinary hearing on 20 June 2020 lacked due process. The alleged disciplinary proceedings on 22 June 2020 did not take place as alleged. By relying on the previous disciplinary hearing allegedly held on 25 March 2020 and failing to take into account that such matter had been spent and overtaken by events and hence not a justified basis for the termination of employment was in error.

The appellants\' further grounds are that the trial court erred by failing to find that the 2^nd disciplinary hearing on 20 June 2020 which was alleged to have extended to 22 June 2020 was an extension of the hearing held on 25 March 2020. The appellant did not attend and hence null and void leading to unlawful termination of employment. The request for a working day for preparation for the hearing was not granted leading to a violation of rights. The appellants were not allowed another shop floor representative during the hearing and the alleged shop steward who attended was not chosen by the appellants. The allegations that there was fuel loss at the hands of the appellants were without proof and the termination of employment was unfair and without justification.

Only the appellants attended these appeal proceedings and filed written submissions.

The appellants submitted that under Section 2 of the Employment Act, an employer is defined to include one who enters into a contract of service and includes an agent, foreman, manager or such person or company. The 2^nd respondent was the 1^st respondent agent.

The 1^st respondent admitted employing the appellants and it sourced employees for the 2^nd respondent. The 2^nd respondent made payments to the appellants and its witness Joseph Ng’ang’a admitted that the 2^nd respondent used to direct the appellants on their operations including the routes to take, fueling and items to sell which amounts to control and supervision. They could not carry on with employment in the absence of the 2^nd respondent and hence, the trial court erred in finding that the 2^nd respondent was not an employer.

The appellants submitted that the reasons given for termination of employment were unfair contrary to Section 43 of the Employment Act. The respondents relied on the audit report which was the main reason leading to the termination of employment but it lacked evidential value. The appellants were able to demonstrate that they received notices to show cause dated 18 June 2020 on 19 June 2020 to attend the hearing within a day. Despite requesting for the postponement to be able to prepare for the hearing, the respondents declined and instead issued notices of summary dismissal. The letters relied on notices to show cause issued on 3 February 2020 while events leading to the termination of employment are alleged to have occurred on 20 June 2020 and the hearing on 26 June 2020 which is contradictory. In the case of Waweru v Keroche Breweries Limited [2022] eKLR, the court held that sections 35, 40, 41 and 43 of the Employment Act are mandatory and must be secured before termination of employment.

The respondents failed to discharge their legal mandate and the appeal should be allowed.

Determination

This is a first appeal. The court is required to review the entire record of appeal, reassess the findings and make its conclusions. However, the court must take into account that the trial court had the opportunity to hear the parties in evidence.

At the heart of the appeal is the relationship between the appellants and the 2^nd respondent and the grounds leading to termination of employment.

On the one hand, the appellants assert that the 2^nd respondent was an employer and the 1^st respondent its subsidiary. That the 2^nd respondent exercised control over them and hence is liable to settle the claims made.

However, in response to the claim, the respondents filed a response and the 1^st respondents admitted that they were the employers of the appellants. Under paragraph (5) of the response, the respondent\'s case is that;

… The 1^st respondent avers that the claimants were sorely employees of the 1^st respondent which employed them on agreed terms and which exercised control and supervision over them to the exclusion of the 2^nd respondent…

In the Memorandum of Claim, the appellants acknowledge that they were last employed under contract by the 1^st respondent.

In evidence, the respondents called Joseph Ng’ang’a human resources manager of the 2^nd respondent who testified that the 2^nd respondent contracted the 1^st respondent to supply short-term employees of various skills depending on the needs of the 2^nd respondent and its business operations.

Fundamentally, the notices terminating employment were issued by the 1^st respondent. The employment contracts were issued by the 1^st respondent.

The respondents produced contracts of employment between the 1^st respondent and the appellants. These comprise valid and legitimate employment contracts between the appellants and their employer, the 1^st respondent.

The respondents are separate and distinct entities.

Upon admission of employment, the 1^st respondent is the legal holder of the title, employer.

The court appreciates that outsourcing of labour has gained momentum in the country even though this is not addressed under the Employment Act. The changing dynamics at the shop floor have led employers on the path of concentrating on their core business leading to outsourcing of labour in areas which are supportive of the core function.

In the case of Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR, the Court of Appeal in addressing a case of outsourcing labour held that;

…in this age of heightened technology, increased mechanization, and an increasingly skilled workforce, there are diverse business concepts which when effected, can cost-effectively facilitate the expansion and growth of a business, while reducing workforce requirements. Outsourced services are one such widely accepted business concept, which enables a company to focus on core business, reduce overheads, increase cost and efficiency savings, and manage cyclical resource demands. It is not designed to deprive Kenyans of their jobs.

In Wrigley Company (East Africa) Limited v Attorney General & 2 others & another [2013] eKLR the court appreciated that an employer is allowed to outsource non-core functions of its business.

In the case of Kenya Union of Commercial Food and Allied Workers v Agricultural Society of Kenya [2017] eKLR, while submitting a cost-benefit analysis to show financial savings arising from the outsourcing arrangement, the Agricultural Society of Kenya demonstrated that it was ill-equipped to supervise the security services function. The provision of security services is not part of the core function of the Agricultural Society of Kenya and an outsourcing arrangement undertaken within the law cannot therefore be faulted.

In this case, the 2^nd respondent admitted to engaging the 1^st respondent and outsourced labour and the appellants were hence employees of the 1^st respondent and not both respondents.

Under the employment relationship, the 1^st respondent dismissed the appellants through notices dated 22 June 2020 on the basis that they had been issued with notices to show cause dated 3 February 2020 and they responded on 5 February. A disciplinary hearing was conducted on 26 March 2020 in the presence of a union representative but the appellants failed to give satisfactory explanations for their gross misconduct. Further investigations were conducted leading to subsequent hearings and the appellants were found adversely involved in the loss of fuel, and mismanagement of detriment to property. The appellant also refused to attend a disciplinary hearing on 26 June 2020 which was found to be contrary to Section 44(4) (e) and (g) of the Employment Act leading to summary dismissal.

The appellants explained their conduct that the matters leading to the notices issued on 3 February 2020 were different from issues relating to the hearing on 26 June 2020 and they requested the employer for a day to be able to prepare for the hearing but this was declined. However, the motions of Section 44(4) of the Employment Act are that the employer is allowed to dismiss the employee from his employment even on short notice if the matters at hand are gross misconduct. While employment subsisted, the 1^st respondent as the employer had the latitude to direct and conduct disciplinary action against the appellants for any gross misconduct.

The appellants cannot justify failure to attend a disciplinary hearing upon notice by the employer. Recourse was to attend and at the hearing, seek for more time to prepare. Refusal to attend as directed by the employer resulted in gross misconduct. In Matsesho v Newton (Cause 9 of 2019) [2022] KEELRC the court held that Section 44 of the Employment Act allows the employer to summarily terminate an employee for gross misconduct without notice or if he elects, with less notice than that contemplated under section 35. In effect, the termination of employment through summary dismissal is lawful and valid.

The failure to attend the disciplinary hearing further compounded the gross misconduct. In the case of Daniel Otieno Okun v Kenyatta University [2020] eKLR, the court addressed a similar case as herein where the employee was invited to attend a disciplinary hearing but took the view that he could only do so once some members of the panel were removed. He was found to have frustrated his employment by failing to adhere to lawful and proper directions by the employer.

In the case of Energy Regulatory Commission v John Sigura Otido [2021] eKLR the court held that;

An employee who squanders the internal grievance handling mechanisms provided by an employer cannot come to Court and say “I refused to talk with those people and therefore I was not heard, order them to pay me.” It is not the role of the Court to supervise the internal grievance handling processes between employers and employees. The role of the Court is to ensure that such processes are undertaken within the law.

In this case, whatever demands the appellants had against the respondents, given the chance to attend the disciplinary hearing, they should have obliged and exploited the chance to agitate their case. Taking the standpoint that they could not attend since the matters addressed went back to March 2020 and in their view these had been addressed in error.

Ultimately, the 1^st respondent being the employer terminated employment lawfully and as allowed under Section 44 of the Employment Act. The trial court cannot be faulted for dismissing the claim.

Accordingly, the appeal is found without merit and is hereby dismissed. The respondents did not attend these proceedings. No orders on costs.

Delivered in open court at Mombasa on this 17 day of October 2024.

M. MBARŨ

JUDGE