JUDGMENT
1. Through the Memorandum of Appeal dated 23rd May, 2024 the Appellant appeals against the Judgement of Honourable J.A Agonda, Principal Magistrate delivered on 22nd January, 2024 on grounds inter alia
a) The learned trial magistrate erred in law and in fact in finding that the termination of the claimant’s employment was unfair and unlawful.
b) The learned trial magistrate erred in law and in fact in finding that the procedure followed in terminating the claimant’s service on account of redundancy was unfair, unprocedural and not in accordance with the law.
c) The learned trial magistrate erred in law and in fact in finding that the claimant was not issued with a one month’s notice.
d) The learned trial magistrate erred in law and in fact in finding that the claimant was not issued the requisite redundancy notice or given an opportunity to make representations regarding the same.
e) The learned trial magistrate erred in law and in fact in finding that the claimant was entitled to the maximum 12 month’s compensation.
f) The learned trial magistrate erred in law and in fact in finding that the claimant was entitled to payment for the balance of the contract period in addition to the compensation for unlawful termination.
2. The Appellant therefore prayed that the Appeal be allowed. The judgment delivered on 22nd January, 2024 in Ruiru SPM’s Court ELRC No. E017 of 2023 be set aside and costs of the appeal be provided for.
3. The Appeal was disposed of by written submissions.
APPELLANT’S SUBMISSIONS
4. The Appellant’s advocate Mr. Kimani, submitted among others that the appellant notified its employees via a memo dated 24th March, 2023 and termination letter dated 28th March, 2023 of the intended redundancy. According to Counsel, the respondent admitted that he was the only employee of the appellant in the department. The other employees were an accountant, verger, youth pastor and cleaner. According to Counsel, the respondent took issue with the recruitment of the new accountant when the previous one resigned but he did not apply for the vacancy because it was a junior position and that he did not possess the requisite license from ICPAK to practice accountancy.
5. On the issue of one month’s notice of redundancy and termination, counsel submitted that the termination letter dated 28th March, 2023 was clear. It stated that the letter served as a notice of termination of employment and redundancy effective 1st May, 2023. This according to counsel was a month’s notice. The respondent during this period was on paid leave.
6. On the issue of leave, counsel submitted that the trial court was in error in awarding the respondent 52 days of leave yet the claimant was only entitled to 26 days of leave for each complete year of service. The claimant was employed on 27th January, 2022 and had completed on year in January, 2023. The claimant thereafter worked from February to April, 2023 and was only entitled to pro rata leave for three months. The claimant took his leave from the date of the termination letter dated 28th March, 2023 and was paid pro rata leave amounting to Kshs. 11,582/-. According to counsel 52 days would amount to leave for two years.
7. On the issue of 12 month’s salary as compensation for unfair termination, counsel submitted that the court made this award without any justification. There were no aggravating circumstances like malice in the termination to warrant the award. Concerning award for the balance of the contract, Mr. Kimani submitted that the court was not entitled to make this award as it amounted to double compensation having awarded the respondent 12 months’ salary.
RESPONDENT’S SUBMISSION
8. Counsel for the Respondent Ms. Wanja submitted that the only issue for determination in the appeal was the redundancy and this was governed by section 40 of the Employment Act. According to counsel, the section envisions two notices before declaration of redundancy. In this regard, counsel relied on the case of Kenya Airways Limited v. Aviation & Allied Workers Union Kenya & 3 Others [2014] eKLR. The respondent only got to know his employment was being terminated upon being issued with the termination letter. The purported internal memo relied on by the appellant did not make reference to declaration of redundancy. Counsel therefore submitted that failure to observe the requirements of section rendered the termination unfair. Mr. Kimani further submitted that the memo made no reference to the criteria applied in singling out the respondent for redundancy nor was there any effort to absorb the respondent into any new projects or any other office within the appellant.
9. On the issue of leave, counsel submitted that the appellant had confirmed in writing that the respondent had accumulated a total of 52 leave-days having not gone on leave the previous year due to pressure of work. The appellant had duly approved the respondent’s leave application for 26 days which was to start on 31st March, a day before he was issued with the termination letter. According to counsel, the appellant’s actions were contrary to section 40(1)(e) of the Act which required that prior to termination on grounds of redundancy, pending leave days should be paid in cash.
10. On the issue of maximum compensation, counsel submitted that the discretion was exercised based on the surrounding factors. According to Ms. Wanja, at the time of termination, the appellant was aware that the respondent’s wife was expecting a child so the termination left him struggling to provide for the family. Counsel further submitted that the respondent served the appellant with due diligence and dedication yet the termination was done in a public and shameful manner which any reasonable person could construe as excommunication. The appellant removed the respondent from all church WhatsApp groups including those consisting of only members and not necessarily employees. This caused a lot of speculation about the respondent.
11. Concerning the award for the remainder of the contract, counsel submitted that where in fixed term contracts the reasons reason for termination is found to be unfair, an employee is entitled to full payment for the remainder of the contract. In this regard counsel relied on the cases of Thierry Poussard v. Bradely Ltd [2019] eLKR, Jacquiline Kwamboka v. International Energy Technik [2014] eKLR and Joash Ngaira v. Uwezo Foundation & 2 Others [2018]eKLR.
DETERMINATION
12. This appeal turns around four issues, namely:
i. Whether the trial court erred in finding that the respondent was declared redundant in contravention of the provisions of section 40 of the Employment Act hence unfair termination
ii. Whether the trial Court erred in awarding the claimant 52 days of leave.
iii. Whether the trial Court erred in awarding the claimant the maximum 12 months’ salary as compensation for unfair termination.
iv. Whether the trail court erred in awarding the claimant payment for the remainder of his contract.
13. This Court as first appellate Court is guided by the principles set out in several decided cases by it or the Court of Appeal. For instance the Court of Appeal for East Africa in the case of Peters –vs- Sunday Post Limited [1958] EA 424 stated as follows:
“…the appropriate standard of review established in cases of appeal can be stated in three complementary principles:
i. First, on first appeal, the Court is under a duty to reconsider and re-evaluate the evidence on record and draw its own conclusions;
ii. In reconsidering and re-evaluating the evidence, the first appellate court must bear in mind and give due allowance to the fact that the trial court had the advantage of seeing and hearing the witnesses testify before her; and
iii. It is not open to the first appellate court to review the findings of a trial court simply because it would have reached different results if it were hearing the matter for the first time.
14. On the issue of redundancy, section 40 of the Act provides for what is required of an employer when intends to declare a redundancy. It provides as follows:
40. (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 given 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.
14. Deducible from the above section, the first stage in the intention to declare redundancy is the one month’s notice to the Union where the employees to be declared redundant are members of a union and the labour officer in charge of the area where the employees are employed. The notice is required to state the reasons for, and the extent of, the intended redundancy. The notice from its nature is intended to trigger discussions among the employer, the union and the labour officer on the intended redundancy, the rationale for it and to ensure the intended redundancy complies with the law and any CBA in force. Where an employee is not a member of a union, the notice is given to the employee personally and the labour officer.
15. Once the issue of redundancy is settled on, the employer is required to give such employee one month’s notice or pay in lieu of notice. Further, where leave is due, the same is to be paid to such employee in cash.
16. By a memo dated 14th March, 2023, the appellant informed the respondent among others of the reorganization of the Church to fit its transformative agenda. The memo informed the respondent that during the reorganization some roles will be redefined while others will be reassigned. The memo concludes by informing the respondent that further information will be provided as may be appropriate. By a subsequent letter dated 28th March, 2023, the appellant wrote to the respondent informing him that with reference to the memo 24th March,2023 (sic) concerning reorganization of roles and tasks, the church management decided that his position of Property and Programs Officer be abolished with effect from 1st May, 2023. Consequently, the letter served as a notice of termination of employment due to redundancy effective 1st May, 2023. The respondent was therefore required to take leave as per his entitlement and report to the Vicar’s office on 28th April, 2023 for necessary handing over and clearance. This letter was followed by a letter dated 9th April, 2023 to the Commissioner of Labour informing him of the termination of the respondent on account of redundancy.
17. The Court observes that the memo dated 14th March, 2023 was not shared with the Labour Commissioner and further that between the date of the memo and 24th March, 2023 when the claimant was terminated on account of redundancy was a period of 9 days. Which implies that if the appellant intended to terminate the respondent’s service on account of redundancy then it failed to meet the requirements of section 40(1)(a) and (b).
18. The respondent however in calculating the claimant’s terminal benefits (page 88 of the record), offered to pay the claimant in lieu of notice and severance pay at 15 days pay for each complete year of service. This was in line with section 40(1)(f) and (g) of the Act.
19. From the foregoing, it would seem that the appellant only omitted to issue the respondent with the requisite notice under section 40(1)(b) of the Act. The other requirements were however met. The notice as observed earlier is necessary to trigger discussions over the intended redundancy with the employee and the labour officer and to ensure if carried out, it is done in accordance with the law. It is acknowledged that a redundancy entails loss of employment through no fault of the employee and being a business decision, neither the labour officer nor the Court can prevent the employer from effecting a lawful redundancy. A discussion around it is however necessary to enable the parties explore other options and come to the conclusion that it is inevitable in the circumstances.
20. In this particular case, the respondent through the memo of 14th March, 2023 was informed of the impending reorganization which would result in reorganization and reassignment of roles. The memo further informed him of further communication to come on the issue. It therefore cannot be said that the respondent was totally in the dark about the appellant’s reorganization and its impact on employees. Failure by the appellant to specifically engage him on the matter as stipulated by law is what renders the termination unfair within the meaning of section 45 of the Employment Act. To this extent, the trial magistrate was justified to so find.
21. On the issue of leave days, the trial Court in its judgment (page 143 of the record) sufficiently considered the evidence on the matter and in the Court’s view arrived at a fair decision that the respondent was entitled to 52 days of leave. The Court will therefore not disturb this award.
22. On the issue of award of 12 month’s salary as compensation for unfair termination, the trial Court stated:
“…On issue of damages for unfair termination, having found that the claimant was unfairly dismissed, he is entitled to compensation for unfair dismissal. Having worked for one (1) year (2) months. As per the contract of employment and payslips, the claimant was earning Kshs. 64,530 per month and taking into account all relevant factors in line with the finding that the claimant’s termination was unfair and the circumstances that led to his dismissal, I award the claimant Kshs. 770/= for unfair termination.
23. An award of 12 months’ salary is the maximum compensation allowed under section 49 of the Act. It ought therefore to be made in exceptional cases and where there is clear evidence of unreasonableness, malice or disproportionality in resorting to termination of service. The trial magistrate in justifying the award made reference to the finding that the termination was unfair and all relevant factors. The Court however did not disclose or elaborate further what these relevant factors were. This Court observed earlier that the appellant complied with the rest of the requirements of section 40 save for the issuance of the requisite notice to the respondent. The Court further noted that the respondent was aware of the impending reorganization of the appellant. Taking these into account and the fact that the respondent had only worked for the appellant for slightly over one year, an award of 12 month’s salary was excessive in the circumstances. The Court taking into account the foregoing observations will revise the award to six months’ salary as compensation for unfair termination. This ground of appeal therefore succeeds to that extent.
24. The trial Court in addition to ordering compensation for unfair termination ordered payment for the balance of the 3 year contract amounting to Kshs.1,419,660/-. The respondent’s contract at clause 17 provided for termination where either party would give one month’s notice or payment in lieu. It therefore meant that the contract could be ended prematurely and at the whim of either party. Besides, contracts of employment can be brought to an end by other vagaries of life such as illness or death of the employee or insolvency of the employer in case of a corporation. It is therefore erroneous to award for the balance of the contract unless specifically agreed by the parties in the contract. This award is therefore set aside.
25. In conclusion this appeal is disposed of as follows:
i. The respondent’s termination of employment on account of redundancy was contrary to section 40(1)(a) and (b) of the Employment Act hence unfair.
ii. The trial Court was justified in awarding the respondent 52 days of leave.
iii. The award of 12 months’ salary as compensation for unfair termination was unjustified and excessive in the circumstances. The Court revises the same to six months’ salary amounting to Kshs. 387,180/-
iv. The award of Kshs. 1,419,660/- on account of the balance of the contract is hereby set aside.
v. The award herein is in addition to any payment already made to the respondent on account of his terminal dues as calculated in the annexture to the letter dated 23rd March, 2023.
vi. The award shall be subject to taxes and statutory deductions
vii. The appeal being partially successful, each party shall bear their own costs.
26. It is so ordered.
Dated at Nairobi this ……… day of…………. 2025
Delivered virtually this……… day of ………….2025
Abuodha Nelson Jorum
Presiding Judge-Appeals Division