JUDGMENT
1. Through the Memorandum of Appeal dated 5th September, 2024 the Appellant appeals against the Judgement of Honourable C. K Cheptoo, Principal Magistrate delivered on 3rd May, 2024
2. The Appeal was based on the grounds that: -
a) That the honourable learned Principal Magistrate erred in law and fact by failing to consider that the Appellant satisfied the conditions set out in the Employment Act, 2007 on the issue of Redundancy.
b) That the honourable learned Principal Magistrate erred in law and fact by failing to consider that the Claimant did not rebut the evidence and submissions laid before it on the criteria followed before declaring a party redundant therefore arriving at a wrong conclusion.
c) That the honourable learned Principal Magistrate erred in law and fact by failing to consider that the Respondent herein was paid a one-month salary in lieu of notice as per the law thereby arriving at a wrong conclusion.
d) That the honourable learned Principal Magistrate erred in law and fact by erroneously tabulating the Respondent’s dues based on the wrong criteria thereby arriving at the wrong conclusion.
e) That the honourable learned Principal Magistrate by failing to consider the glaring inconsistencies in the Respondent’s testimonies, admissions and evidence adduced therefore arriving at an erroneous determination and declaring that the termination was again based on gross misconduct.
3. The Appellant therefore prayed that the Appeal be allowed and that the Judgment of the Hon. Principal Magistrate delivered on 3rd May, 2024 and consequential orders be set aside and vacated in entirety and substituted with an order allowing the appeal.
4. The respondent filed a Cross-Appeal dated 21st November, 2024 and averred among other that:
i) THAT the Honorable Learned Principal Magistrate erred in law and fact by holding that the respondent/appellant's gross salary is KES 25,000 and failing to consider the following facts and evidence:
a. Failing to consider the facts and evidence as contained in Clause 8 of the respondent/appellant's employment contract, which explicitly provides that the gross salary is KES 15,000 per month;
b. Failing to consider the facts and evidence as contained in Clause 8 of the respondent/appellant's employment contract which explicitly provides that the KES 10,000 is a reimbursement intended to cover expenses incurred in the course of duty;
c. Failing to draw a distinction between salary, which is compensation for services rendered, and reimbursement, which is compensatory payment for costs incurred by the employee on behalf of the employer.
d. Failing to consider the Respondent's uncontroverted testimony to the effect that the reimbursement of KES 10,000 was not consistently paid monthly, further substantiating the fact that the additional amount was a reimbursement and not part of the gross salary.
e. Failing to consider the fact that reimbursement is not an income and therefore not taxable under income tax laws since they do not form part of the employee's earnings.
f. Failing to consider the fact that reimbursements are intended solely to cover costs incurred on behalf of the employer.
g. Failing to consider the facts and evidence in the respondent/appellant's pay slip which explicitly indicates that the gross salary is KES 15,000 and that the taxable pay is predicated on the same.
ii) THAT the Honourable Learned Principal Magistrate erred in law and fact by failing to find that the Respondent's gross salary of KES 15,000 constitutes a significant underpayment compared to the statutory minimum wage requirement of KES 29,169.00 as stipulated in the wage order.
iii) THAT the Honourable Learned Principal Magistrate erred in law and fact
by awarding the respondent/appellant KES 4,169 instead of KES 14,169
as the difference between the statutory minimum wage and the gross
salary paid.
5. The respondent therefore prayed that:
a. The Judgment of the trial court delivered on 3rd May, 2024 be affirmed with additional order directing the payment of the difference in the underpayment amounting to Kshs. 220,000/- being the difference in underpayment of Kshs. 10,000/- per month for 22 months.
b. The trial court’s judgment be affirmed with an additional order dismissing the appellant’s case.
6. The Appeal was disposed of by written submissions.
APPELLANT’S SUBMISSIONS
7. The Appellant’s Advocate Mr. Nyamagwa submitted among others that the trial magistrate erred in law and fact in finding that the respondent’s employment was wrongfully terminated as that decision was not supported by evidence. According to Counsel, the respondent was terminated on account of redundancy and that the Appellant complied with provisions of section 40 of the Employment Act while doing so.
8. Counsel submitted that the Appellant wrote a letter to the respondent informing him of the intention to declare him redundant. This letter according to Counsel was produced in evidence by the respondent’s witness. The letter informed the respondent that he would be paid in lieu of notice. Further, the Labour Officer for the area was informed through a letter dated 14th January, 2021. This according to Counsel was in accordance with section 40 of the Act. Counsel submitted that section 40 was silent on the number of days of informing the Labour Officer.
9. On the issue of leave and severance pay, counsel submitted that after the respondent was declared redundant, his dues were calculated as per the breakdown of his terminal dues. This included severance pay and other outstanding dues. According to Mr. Nyamagwa, the trial court agreed with this however the respondent did not show up to collect his cheque.
10. On selection criteria counsel submitted that the appellant considered seniority of all employees and that the respondent was among the last persons employed by the respondent. The respondent therefore established a reasonable, fair and objective selection criteria. In this regard counsel relied on the case of Dennis Leak Ojuok vs. Population Services Kenya [2022] eKLR. Counsel therefore submitted that the redundancy was valid and the appeal should be allowed.
RESPONDENT’S SUBMISSION
11. Counsel for the respondent Mr. Odete on the other hand submitted that the appeal was all about whether termination was lawful and fair. It did not in any way contest the trial court’s award against the appellant for notice pay, underpayment, house allowance, unpaid salary and public holidays. At the core of the appeal was the contention that the trial magistrate failed to consider that the appellant satisfied the conditions set out in the Employment Act on the issue of redundancy.
12. According to counsel, redundancy is provided for under section 40 of Act and that the conditions outlined by the law were mandatory and not left to the choice of the employer. The Act requires of the employer to among others give reasons for and the extent of the intended redundancy not less than a month before. Where the employee is not a member of a union, he should be notified personally in writing and the labour officer. Counsel submitted that it was not in contention that the letter of redundancy was dated 15th January, 2021 and further that the notice to the labour officer of the area was dated 14th January, 2021. The respondent’s employment was terminated on 15th January, 2021 the very same day as the notice to the labour officer. This according to counsel was in contravention of the law which requires one month’s notice.
13. Counsel submitted that by sidestepping the legal safeguard of one month’s notice period, the appellant undermined the law, the employment contract and the role of the Labour Officer whose involvement was crucial in ensuring that redundancy process was lawful, justified and did not unfairly prejudice the employee. In this regard counsel relied on the case of Addah Adhiambo Obiro vs. Ard Inc. (2014)eKLR.
14. Mr. Odete further submitted that from the record it was discernible that the appellant failed and or refused to pay the respondent his terminal dues despite having his account details and remained adamant even after being served with a demand letter dated 1st February, 2021.
15. Regarding cross-appeal, Counsel submitted that trial court erred in law and fact by holding that the respondent’s basic salary was Kshs. 25,000/- and not Kshs. 15,000/- and further that in holding so, the trial magistrate failed to find that the respondent’s pay of Kshs. 15,000/- constituted gross underpayment compared to statutory minimum wage which was Kshs. 30,627/- for a driver of 10 ton heavy commercial lorry as stipulated in the Regulation of Wages (General)(Amendment) Order, 2018 L.N. No. 2 of 2019. As a result the trial court awarded the respondent only Kshs. 4,169/- instead of Kshs. 15,629.45 as the difference between the statutory minimum wage and what was actually paid to the respondent. Clause 8 of the respondent’s contract tabled in evidence explicitly provided that that the basic salary was Kshs. 15,000/- per month and Kshs. 10,000/- reimbursement intended to cover expenses incurred in the course of duty.
16. According to Counsel reimbursement of money being a refund made to restore someone back to the position they were before they made the payment could not be construed as income. Further Income Tax, section 5(2) provided that reimbursement was intended to cover expenses incurred by the employee in the course of duty and therefore not taxable since they did not form part of employee’s earnings.
17. The trial court therefore failed to draw the distinction between basic pay, which is compensation for services rendered and reimbursement which is compensatory payment for costs incurred by the employee on behalf of the employer. Counsel therefore submitted that the respondent was entitled to a sum of Kshs. 11,458.45 being the monthly difference in underpayment for a period of 22 months totalling to Kshs. 252,085.90
18. Counsel further submitted that the trial court while delivering its judgment, erroneously applied the Regulation of Wages (General)(Amendment) Order 2017 yet the applicable Order was the one of 2018-L.No. 2 of 2019 which set the basic pay at Kshs. 30,627.45. Counsel therefore urged the Court to take judicial notice of the error and adjust the basic pay awarded accordingly.
19. Counsel concluded by urging the court to uphold that the appellant had failed to comply with the procedural and substantive requirements of section 40 of the Employment Act rendering the redundancy unlawful and unfair and dismiss the appeal but for the reasons submitted, uphold the cross-appeal.
DETERMINATION.
20. The court has considered the grounds in the Memorandum of Appeal, the Record of Appeal and submissions filed by the Appellant’s counsel herein and reiterate that principles which guide this court in an appeal from a trial court are now well settled. In Gitobu Imanyara & 2 Others vs Attorney General [2016] eKLR the Court of Appeal stated that:-
An appeal to this court from a trial by the High 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 nor heard the witnesses and should make due allowance in this respect.
21. The Judgment of the trial court was entered against the Appellant with costs on the basis that the Respondent’s termination on account of redundancy was unlawful and unfair for noncompliance with section 40 of the Employment Act.
22. The Court has carefully reviewed and considered the judgment of the trial court alongside the grounds of appeal and cross appeal as well as submission by Counsel as required of it as the first appellate Court. From the judgment of the lower Court, it is noted that the Court in justifying its finding that the termination contravened section 40 of the Employment Act, noted that the respondent was terminated on 15th January, 2021 and further that the appellant informed the Labour Officer of the respondent’s termination by a letter dated 14th January, 2021. The Court however found that the appellant did not issue the respondent and the Labour Officer with the required one month’s notice under the Act. The Court has perused the record and no such notice was exhibited. The trial court further noted that the appellant did not provide any evidence of the criteria applied in identifying those to be declared redundant and that the respondent was paid one month’s salary in lieu of notice.
23. From the proceedings before the trial Court, the appellant’s witness RW1 stated that he informed the respondent of the intended redundancy but the notice was not filed in court and that she served the respondent with a redundancy notice dated 15th January, 2021.
24. From the foregoing no more is needed to prove that the appellant did not comply with provisions of section 40 of the Act. Termination of employment on account of redundancy must comply with the provisions of section 40 of the Act and failure to do so would lead to a finding that the termination was unfair within the meaning of section 45 of the Act. This ground of appeal therefore fails.
25. Regarding the reliefs sought before the trial court, that court having found that the appellant in declaring the respondent redundant did not comply with section 40 of the Act proceeded to award the respondent Kshs. 498, 511/- which comprised of:
Kshs.
i. One month’s salary in lieu of notice………………..29,169
ii. Wrongful termination…………………………………175,014
iii. Underpayment……………………………………………79,211
iv. House allowance…………………………………………98,445
v. Unpaid salary…………………………………………. 102,092
vi. Public holidays…………………………………………..14,580
26. It is noteworthy that the appellant while contending that the trial court relied on a flawed finding in calculating the respondent’s terminal dues, did not submit on what they considered to be the correct criteria. Besides these heads of award or any of them never formed any of the grounds of appeal. The Court therefore deems them correct.
27. The respondent cross-appealed contending the trial court erred in taking into account the reimbursable payment included in the respondent’s payslip as part of his salary. The respondent further contended that the trial court applied the wrong Wage Order in determining the minimum wage payable to the respondent.
28. On the issue of reimbursable payment, the Income Tax Act and the respondent’s employment contract was clear on this. The Income Tax Act was clear that the reimbursable payments were expenses incurred by an employee on behalf of an employer in carrying out his official duties hence do not constitute taxable income. To this extent, the trial court ought to have taken Kshs. 15,000/- as the respondent’s basic salary.
29. On the issue of gazetted minimum wage, Regulation of Wages (General)(Amendment) Order as gazetted was the law and therefore the Court takes judicial notice thereof. The respondent was terminated in January, 2021 hence the applicable Minimum Wage Order was the one of 2018 placing the respondent’s minimum wage at Kshs. 30,627/-
30. The trial court awarded the claimant Kshs. 175,014/-for wrongful termination. There is no such award in the Employment Act. The Court having found that the respondent was unfairly terminated must have meant compensation for unfair termination under section 49 of the Act. The trial Court however did not justify the criteria used in arriving at this figure but since this a matter of law, this Court as the first appellate Court has power to assess the amount of compensation payable in accordance with the law
31. The respondent was employed by the appellant in February, 2019 and declared redundant on 14th January, 2021. Meaning he had worked for the respondent for almost two years. Taking into account the fact that during this period there was outbreak of Covid-19 pandemic and many establishments closed and or declared redundancies an award of three months’ salary is reasonable in the circumstances.
32. In conclusion the Court finds and hold that the appeal is without merit and the same is hereby dismissed with costs. The Cross-appeal succeeds and the award of the lower court is adjusted taking into account the respondent’s basic pay and the applicable Minimum Wage Order as follows:
i. One month’s salary in lieu of notice…………………30,627
ii. 3 months’ salary for unfair termination ………….91,881
iii. Underpayment for 22 months………………………220,000
iv. House allowance…………………………………………98,445
v. Unpaid salary…………………………………………. 102,092
vi. Public holidays…………………………………………..14,580
Total: 557,625
33. It is so ordered.
Dated at Nairobi this ……… day of…………. 2025
Delivered virtually this……… day of ………….2025
Abuodha Nelson Jorum
Presiding Judge-Appeals Division