Weathering the Storm: Steps an Employer Can Take to Mitigate the Effects of the COVID-19

Posted on April 1st, 2020

The emergence of the COVID-19 pandemic has created unprecedented instability in the employment sector with employers currently faced with the difficult balancing act of ensuring business continuity and sustainability while at the same time ensuring the safety and well-being of employees.

Many businesses are undergoing massive financial challenges during this period and are being forced to take drastic measures such as termination of employment by declaring redundancies, in a bid to remain afloat. Declaring redundancy is a drastic and last-line measure, and an employer should consider other measures which might serve to keep the business in operation and keep the staff component intact, before resorting to declaring redundancies. Whichever measure one takes, employers are encouraged to abide by the present legal frameworks governing the employment regime in Kenya which are heavily weighted towards the protection of fair labour practices in accordance with Article 41 of the Constitution.

Below is a discussion on the measures an employer can put in place to mitigate the effects of the COVID-19 pandemic:

a) Annual leave

Section 28 of the Employment Act, 2007 (the Act) provides for paid annual leave for not less than twenty-one (21) working days for every twelve (12) consecutive months of service.

The question that arises is whether an employer can compel an employee to go on annual leave during this period especially for employees who cannot work remotely. This can be effected with the consent of the employee.

b) Unpaid leave

An employment relationship is governed by the general principles of contract law as much as it is regulated by the Constitution and statute. There are no statutory or constitutional provisions on unpaid leave. It is, however, possible to have such provisions included in contracts of employment and/or an employer’s internal policies.

Section 10(5) of the Act requires consultation with the employee before any change or amendment of the terms of employment. These changes must thereafter be captured in writing and the employee notified of the same. Where the contract of employment and/or employer’s internal policies do not provide for unpaid leave, an employer may send an employee on unpaid leave upon consultation with the employee and the employee consenting to the same. This must be made expressly in writing.

c) Sick leave

Section 30 of the Act provides for sick leave of not less than seven (7) days with full pay and thereafter seven (7) days with half pay. The Regulation of Wages (General) Order provides that an employee is entitled to a maximum of thirty (30) days sick leave with full pay and thereafter to a maximum of fifteen (15) days sick leave with half pay in each period on twelve (12) months consecutive service.

The courts have held that employers should apply the provisions in the Order since they are more advantageous to employees than those in the Act.

If employees fall sick during this period, they are entitled to sick leave in line with the foregoing provisions or any internal policies the employer might have and that may have more advantageous terms on sick leave.

d) Reduction in working hours

As a mechanism to deal with lower demand in production during this period, an employer may consider a reduction in working hours for employees. This will require employees to only work for specified shorter periods with duties spread out across the workforce as a sustainability measure. Like any other alteration to the employment contract, the same should be done in consultation with and written consent by the employee.

Furthermore, on 25th March 2020, the President through a presidential address on state interventions to cushion Kenyans against economic effects of COVID-19 issued a directive on the coming into force of a daily curfew from 7 p.m. to 5 a.m. from 27th March 2020. The directive exempted those offering specified essential services, and the same was formally gazetted through Legal Notice No. 36 issued under the Public Order Act (Cap 56).

Following skirmishes which broke out between law enforcement officers and members of the public on the first few days of the curfew, it was further directed that employers should release their employees from work earlier than usual, so that those who use public transport are able to beat rush-hour traffic and get home in good time.

Therefore, employers might be forced to adjust the working hours and have more flexible working arrangements for their employees who do not offer essential services to ensure that they are in a position to adhere to the curfew.

Any measures to facilitate the above must be in consultation with the employee.

e) Reduction in remuneration

Across both the public and private sector various organisations are using pay-cuts as an alternative to declaring redundancies. Some of the pay-cuts are voluntary and others have been proposals at various rates through certain levels or grades of employment. As with any other change in the terms of employment, a reduction in remuneration can only be done upon consultation with an employee and obtaining his or her consent on the same. Again, this must be done in writing.

If parties consult and agree to salary cuts or unpaid leave, the employee will not be able to recover such underpaid on unpaid salaries when normal business operations resume, unless it is a specific term in the agreement.

f) Working from home

Employers can have their employees working from home or working remotely if it is possible, except where those employees are working in critical and essential services. Employees who cannot work remotely can take annual leave during this period. However, the consent of the employees should be sought.

g) Working in shifts

Employers can employ a shift system to reduce the number of employees who are in the workplace at any given time. With a reduced number of staff present in the office during any given shift, this will also go towards ensuring compliance with the directives on social distancing in the workplace.

h) Redundancies

Some employers may be forced to declare some employees redundant if circumstances become unsustainably dire. In such eventuality, employers will be required to strictly adhere to the provisions of redundancy under the Act, which include issuing a mandatory notice of intention to terminate employment on account of redundancy and consultation with the employees before ultimately terminating employment. Both these mandatory processes take no less than one (1) month and in certain cases may take up to three (3) months based on terms of employment and Collective Bargaining Agreement (if any). More importantly, under the Act, it is clear that employees have to be paid all dues owing to them before the redundancy can be deemed to have taken effect, thus serious financial consideration must be taken before taking this route. This might prove difficult to employers due to the prevailing financial times.

i) Insolvency

The COVID-19 pandemic has significantly affected business operations across the world resulting in cases where an employer is unable to meet its financial obligations to its employees and therefore gets into an insolvency situation. The options available in such circumstances are provided for in the Act and the Insolvency Act No. 18 of 2015 (the Insolvency Act).

The Act provides under sections 43 and 45 that for termination of an employment relationship to be fair and lawful the employer must prove that the reasons for the same are fair and valid. The current slumped business environment would constitute valid and fair reasons for termination of an employment relationship if the employer is able to show that it is unable to meet its financial obligations as a result of the COVID-19 pandemic.

Section 66 of the Act provides that where an employee or his representative makes an application to the Minister in writing and the Minister is satisfied among other reasons that the employer is insolvent, then the Minister shall, subject to the provisions of section 69 of the Act, pay the employee out of the National Social Security Fund the amount which in the opinion of the Minister the employee is entitled to in respect to the debt.

Section 68 of the Act then sets out the debts which apply when an employer is insolvent, and these include:

  1. Any arrears of wages in respect of one (1) or more months, but not more than six (6) months or part thereof
  2. An amount equivalent to the period of notice that the employer would be required to give to the employee in case of termination in accordance to the Act
  3. Any pay in lieu of annual leave days earned by the employee but not taken

Section 69 of the Act to which section 66 is subject to limits the total amount payable to an employee in respect of any debt in case of insolvency to KES. 10,000 or one half of the monthly remuneration whichever is greater in respect of any one month payable.

The Insolvency Act caters to payment of wages by the employer in an insolvency situation. The Second Schedule of the Insolvency Act sets out the order of priority of debts where the secured creditors get first priority and dues payable to employees are second priority claims as set out at paragraph 2 thereof “all wages or salaries payable to employees in respect of services provided to the bankrupt or company during the four months before the commencement of the bankruptcy or liquidation” to the extent that they remain unpaid.

Paragraph 3 (2) of the Second Schedule to the Insolvency Act then limits the amount payable to any one employee to not more than KES 200,000 as at the commencement of the bankruptcy or liquidation, as the case may be.

Therefore, employees claiming unpaid benefits will be ranked as second priority claims if the claim is merited and accrues before or because of the commencement of the insolvency proceedings and any payments made to the employees by the employer are limited to four (4) months before the commencement of the insolvency proceedings and further limited to not more than KES 200,000 in relation to an amount payable to any one (1) employee.

j) Compliance with directives by Government

On 14th March 2020, the Ministry of Labour through the Directorate of Occupational Safety and Health Services issued an advisory following the COVID-19 outbreak. The directive states that employers should formulate policies on infection control plans that should guide the organization. The directive outlines that such a policy should include:

  • Steps that the organization will take in the promotion and practice of hygiene
  • Modalities of holding meetings and travel control mechanisms both business travel and commute to and from work for the employees
  • Safe food handling in the workplace
  • Possible mechanisms of working from home
  • Channels of reporting any suspected COVID-19 cases

From the above, it is clear that more obligations are placed on employers in the health sector as they are expected to provide their employees with effective personal protective equipment, the maintenance of the protective gear and training of the employees. However, it is key that every employer takes the necessary step of coming up with a relevant policy as outlined above and they may consult the Directorate of Occupational, Safety and Health Services on the same.

The Ministry of Health has been at the forefront in issuing directives that apply to all citizens within the country. The directives are not specifically directed to employers or employees however they are complementary of the directives issued by the Ministry of Labour and Social Protection. Therefore, employers have an obligation to ensure that they are up to date with the directives and the same is implemented in the workplace.

Working together during the storm

Employers are encouraged to work towards remaining in operation during these uncertain times, to the extent possible. This may be achieved through co-operation with government guidelines aimed at reducing the spread of COVID-19 and in consultation and consent with employees on workable amendments to the terms and conditions of employment. Together, the storm can be weathered.


This alert is for informational purposes only and should not be taken as or construed to be legal advice. If you have any queries or need clarifications, please do not hesitate to contact Chacha Odera, Managing Partner, Georgina Ogalo-Omondi, Partner, Sandra Kavagi, Associate, Anne Kadima, Associate, Rosemary Sossion, Associate, or your usual contact at our firm for legal advice relating to the COVID-19 pandemic and how the same might affect you.

A ‘Dicey’ Matter: The Fate of Employees in Mergers and Acquisitions

Posted on February 3rd, 2020

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There has been a rise in mergers and acquisitions transactions (M&A Transactions) in Kenya even as business entities grapple with tough economic times and the ability to stay afl oat in the evolving business market. Th e recent acquisition of National Bank of Kenya Limited by KCB Bank PLC, the merger of NIC Group PLC and Commercial Bank of Africa Limited, the acquisition of Quick Mart and Tumaini Self Service Supermarkets by Sokoni Retail Kenya to form a single retail operation and the proposed acquisition of one hundred percent (100%) of the issued share capital of De La Rue Kenya Limited (a subsidiary of De La Rue PLC) by American firm HID Corporation Limited are some of the notable M&A Transactions that have taken place in Kenya in 2019. All these recent M&A Transactions have brought to the fore, among other issues, the fate of employees in the merging entities. In most instances, a high number of employees are declared redundant and thereaft er, have to wait for fresh advertisements of positions by the merged or acquiring entity and apply to be recruited.

Employment and labour law considerations feature highly during M&A Transactions. More often than not, such transactions lead to loss of employment due to the restructuring of the target company, or the change in character and identity of the transferring entity. Unlike other contracts involving assets and liabilities of the transferor, contracts of employment are currently not assignable to the acquiring entity under Kenyan law.

Other than setting out the basic conditions of employment and addressing the legal requirements for engagement and termination of employees, both the Employment Act, 2007 and the Labor Relations Act, 2007 are silent on the effect of M&A Transactions on employees. In practice, the contracts of employment are terminated on account of redundancy subject to compliance with the conditions as set out under section 40 of the Employment Act.

In some instances, the Competition Authority of Kenya (the Authority) established under the Competition Act, 2010 undertakes a public interest assessment to ascertain the extent to which the M&A Transaction will cause a substantial loss of employment and impose conditions to mitigate such as has been in case of the acquisition of National Bank of Kenya Limited by KCB Bank PLC where the Authority approved the merger on condition that KCB Bank PLC retains ninety percent (90%) of the employees from National Bank of Kenya Limited for a period of at least eighteen (18) months. This was also seen in the merger between NIC Group PLC and Commercial Bank of Africa Limited where the Authority approved the merger on condition that both entities retain all the employees for a period of at least one (1) year.

Proposed Law

The Kenya Law Reform Commission, a statutory body established under the Kenya Law Reform Commission Act, 2013 with the mandate to review all the laws of Kenya to ensure that they are modernised, relevant and harmonised with the Constitution of Kenya, 2010, recently prepared a draft Employment (Amendment) Bill, 2019 (the Bill) which amongst other provisions, proposes to amend the principal Act (being the Employment Act, 2007) by introducing a new section 15A which provides for the transfer of employees during M&A Transactions.

The proposed section 15A provides that such transfer of employees shall not operate to terminate or alter the terms and conditions of service as stipulated in the original contracts of the employees. It also creates an obligation on the transferor to notify and consult with the affected employees or their representatives regarding the anticipated transfer, the implications of such transfer and the measures that the transferor envisages will be taken to mitigate such implications. Further, the Bill provides that any dismissal taking place prior or subsequent to the transfer shall amount to summary dismissal if such dismissal is premised on the transfer.

Essentially, the Bill seeks to eliminate the difficulties occasioned during M&A Transactions by ensuring that the employees are not left out in the cold when their employer is bought out. It also creates an obligation for the transferor to inform and consult with the employees who shall be affected in an M&A Transaction. This has been the practice in other jurisdictions such as the United Kingdom and even closer home, in neighbouring Uganda.

The Bill borrows heavily from the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations) as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 applicable in England and Wales. TUPE Regulations are aimed at protecting the rights of employees in M&A Transactions in England and Wales by imposing obligations on employers to inform and, in other cases, consult with representatives of affected employees. Failure to comply with these obligations attracts penalties and sanctions to the employer.

Critique

While the proposed law could be seen as a relief for employees who are mostly losers in M&A Transactions, it brings with it several challenges and may potentially make M&A Transactions even more complex and strenuous, particularly on the part of the transferee.

Firstly, all the transferor’s rights, powers, duties and liabilities in connection with any employment contract shall be transferred to the transferee. Further, the transferee shall be liable for all the employees’ dues dating back to the commencement of the employment contract. This also means that the transferee shall shoulder all the liabilities that arose from the transferor’s engagements with its employees, including but not limited to cases initiated by and against the transferor.

Secondly, the proposed amendment as currently drafted may subject the parties in M&A Transactions to unnecessary costs and restrictions. It may not be practical to place the transferee under an obligation to automatically retain all the employees of the transferor without any loss of benefits or contractual dues. Such a provision shall defeat the purpose of M&A Transactions, as most of them are geared towards restructuring the business for purposes of reducing operational costs.

With respect to the dismissal of employees immediately prior or subsequent to an M&A Transaction, the proposed amendment as currently framed might open a pandora’s box as it may operate as a blanket protection to all employees including those whose contracts may be terminated for valid reasons during the transition period. The proposed amendment as drafted protects employees against redundancy processes while creating a higher standard of proof against the transacting parties with regards to any termination disputes arising in the course of an M&A Transaction.

Further, the proposed amendment fails to appreciate the contractual rights and obligations of parties with respect to employment and M&A Transactions. There should be provision to allow the transferee to freely negotiate alternative arrangements and contractual obligations with the transferor’s employees and maybe set the standards that should guide this process. By doing so, the parties would have a better chance to make agreements that are favourable to all.

Conclusion

While the issue of how to deal with employees and employment contracts remains a challenge in M&A Transactions in Kenya, the proposed amendments to the Employment Act will no doubt come as a sigh of relief for many employees who have long viewed themselves as collateral damage in M&A Transactions. However, the proposed amendment is likely to increase the cost of undertaking M&A Transactions in Kenya which may well end up being counterproductive as regards the rationale for which the M&A Transaction was carried out in the first place.

Housing Fund Levy Set to Take Effect Next Month

Posted on April 16th, 2019

By Geoffrey Muchiri | Georgina Ogalo-Omondi

The Principal Secretary in the Ministry of Housing and Urban Development has today announced the coming to effect of the Housing Fund Levy (the levy) introduced, under the Finance Act, 2018.

The employer and the employee shall each be required to contribute 1.5% of the employee's monthly basic salary to a maximum of Kenya Shillings Five Thousand (KES 5000). Voluntary contributions will also be accepted to the scheme at a minimum of Kenya Shillings Two Hundred (KES 200) per month.

According to the notice, the levy shall fall within other payroll statutory deductions such as PAYE, NSSF and NHIF that are deducted by an employer every month. The first contribution shall be due by May 9th 2019.

The purpose of the levy is to finance the Affordable Housing Scheme under the Big 4 Agenda which will enable employees to purchase a home under the scheme, transfer the contributions to a pension scheme, transfer the contributions to another person under the scheme or, as cash to self, spouse, or a dependent child.

We shall update you as this matter unfolds.


Should you require further information on this subject please contact Geoffrey Muchiri (Partner) or Georgina Ogalo-Omondi(Partner).

Penalties for Non-Compliance With the Retirement Benefits Act, 1997

Posted on October 17th, 2018

Parliament amended the Law on Retirement Benefits through the Finance Act, 2018 following its enactment on September 21, 2018. Changes specific to the Retirement Benefits Act, 1997 were back-dated to July 1, 2018.

Below, we highlight some of the key changes:

Trustees

Trustees who fail to submit a copy of audited accounts to the Retirement Benefits Authority (RBA) will be penalised Kenya Shillings One Hundred Thousand (KES 100,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Fund managers

Fund managers who fail to submit an investment return to the RBA by the due date will be penalised Kenya Shillings Ten Thousand (KES 10,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Administrators

Administrators who fail to submit an investment return will be penalised Kenya Shillings Ten Thousand (KES 10,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Employers

Where there is non-remittance by an employer, the RBA will direct the employer to pay the contributions and interest accrued to the scheme in full within a specified period as well as a five per cent (5%) penalty on unremitted contributions or Kenya Shillings Twenty Thousand (KES 20,000), whichever is higher and paid within seven (7) days of receiving a notice.

The RBA will also issue a temporary cessation order from deductions from employees until the employer is able to remit the employee emoluments. If the employer is unable to remit as required, the RBA will facilitate members to join other schemes where their contributions shall be remitted.

Medicare in the Employment Context

Posted on September 12th, 2018

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Co-Authored by Clifford Odhiambo

Introduction

Former United Nations Secretary-General Kofi Annan once famously said —”It is my aspiration that health finally will be seen not as a blessing to be wished for, but as a human right to be fought for.”  The right to health is now universally recognized as an integral part of human rights. In Kenya, the right to health has been categorized as a socioeconomic right that has its footing in Article 43 of the Constitution which provides that: “Every person has the right to the highest attainable standard of health, which includes the right to health care services…”

Health and medical care are intrinsically linked; although one never needs medical care when one is healthy, good health, once lost, is restored through good medical care. In what way therefore does the right to medical care play out in the employment context? Do employers have the duty to guarantee to their employees the right to health as enshrined in the Constitution? Does the Employment Act cast any obligation upon employers to ensure (or try their best to ensure) the good health of their employees?

The Employment Act on the Right to Health

Part V of the Employment Act lists all the duties of employers in relation to contracts of employment. Of particular note in the context of the health is the employer’s duty to provide medical attention, prescribed under section 34 of the Employment Act. The duties are set out as follows:

 (1) An employer shall ensure the provision sufficient and of proper medicine for his employees during illness and if possible, medical attendance during serious illness.

 (2) An employer shall take all reasonable steps to ensure that he is notified of the illness of an employee as soon as reasonably practicable after the first occurrence of the illness.

 (3) It shall be a defence to a prosecution for an offence under subsection (1) if the employer shows that he did not know that the employee was ill and that he took all reasonable steps to ensure that the illness was brought to his notice or that it would have been unreasonable, in all the circumstances of the case, to have required him to know that the employee was ill.  

The Court’s interpretation of section 34 of the Employment Act

The Employment and Labour Relations Court is a specialist Court set up under Article 162 of the Constitution to hear and determine matters pertaining to employment and labour relations. While it is the duty of Parliament to enact and pass legislation, the duty of interpreting the law is vested in the Courts.

The Employment and Labour Relations Court was recently called upon to interpret section 34 of the Act in the case of Eddie Mutegi Njora v Mega Microfinance Co. Ltd [2015] eKLR.

  • Brief facts of the case

On 26th July 2008 the Claimant was employed as an Administrative Officer with the Respondent but a written contract of employment was only issued to him on 22nd February 2011 and was backdated to 26thJuly 2008. The Claimant was also simultaneously engaged with Mega Initiative Welfare Society which was a sister entity to the Respondent company. The terms of the Claimant’s contract were that he would be paid Kshs. 40,000.00 per month as his salary; be entitled to 30 days leave per year; and an in-patient medical cover. The contract of employment was not issued immediately as is required by law and as a result the Claimant did not know his terms and conditions of work. On 27th June 2011 the respondent issued the Claimant with a letter notifying him that his contract of service would end on 31st July 2011. Upon termination of contract, the Respondent filed suit seeking:-

  1. a) Accrued leave;
  2. b) 3 years’ service pay
  3. c) Unpaid medical cover; and
  4. e) Compensation for not being issued with an employment contract
  • Decision of the Court

Upon hearing the case, the Court pronounced itself as follows with regard to employer’s duty under section 34 of the Act:-Where an employer provides a medical cover, such a cover is to ensure the employer has taken a progressive step to ensure all employees are covered in terms of medical care and attention at all times. Where an employer has not provided such a medical cover, once an employee is unwell, such information should be brought to the attention of the employer as soon as it is reasonably practical.

The employer then has a duty to address the matter as appropriate where such sickness has been brought to their attention. The evidence by the Claimant is that he remained without a medical cover from March to July 2011 and therefore should be compensated for lack of such a medical cover.

The Claimant however failed to submit any evidence of sickness and need for medical attention that was brought to the attention of the Respondent and that the Respondent failed to address such a  situation or that the Claimant was forced to incur medical bills and the respondent failed to reimburse. The duty here is for the respondent to ensure the provision sufficient and of proper medicine for his employees during illness and if possible, medical attendance during serious illness as under section 34(1) of the Employment Act.

 Conclusion

The Court, in its application of section 34 of the Employment Act, adopted a literal approach and did not cast any greater burden upon employers to provide medical care for employees than what the Act expressly provides for.

There was no suggestion by the Court that an employer must obtain medical cover or insurance for employees but the Court did acknowledge that an employer that elects to do so (provide medical cover) is taking progressive steps towards ensuring its employees have the necessary medical care and attention at all times.

The Court however did confirm that the employer has a duty to provide proper medicine to its employees during illness, and medical attention during serious illness. Whilst the Court found that the employer has a duty to know of any illness affecting an employee, there is an equal duty owed by employees to inform the employer of the same.

At the Very Least: Basic Minimum Conditions of Employment

Posted on September 12th, 2018

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Co-authored by Clifford Odhiambo

Introduction

Contracts of employment were known for many years as “master and servant” contracts. The terminology obviously now has archaic connotations and is no longer found in modern legislation. Simply put, a contract of employment means an agreement whether oral or in writing and whether expressed or implied, to employ or to serve as an employee for a period of time, and includes a contract of apprenticeship or indentured learnership but does not include a foreign contract of service. Familiarization with the laws which have been passed to govern employment relationships and that define the basic terms and conditions of employment are crucial.

A basic condition of employment constitutes a term of any contract of employment, except to the extent that any other law provides a term that is more favorable to the employee or a term of the contract of employment that is more favorable than what is set out in law, thus such favorable terms and conditions of service shall apply. This article shall look at the following basic conditions: basic minimum wage, house allowance, hours of work, annual leave, maternity leave, paternity leave, sick leave, water, food and medical attention.

Basic minimum wage

Under the General Order under the Regulations of Wages and Conditions of Employment Act (though the Act has since been repealed the regulations under the Act are still in force by virtue of Section 63 of the Labour Relations Act) no person shall be employed at a basic minimum wage less favourable to him than that which is applicable to him under the Regulation of Wages  (Amendment) Order 2015 which defines minimum rates of wages in cities and municipalities and Regulations of Wages (Agricultural Industry) (Amendment) Order 2015 which provides wage guidelines of agricultural areas. Minimum wage is normally reviewed every two years according to the Wages guidelines. The last minimum wage review was in June 2015.

House allowance

Section 31 of the Employment Act obligates employers to provide reasonable housing accommodation for each of their employees, either at or near to the place of employment or shall pay to the employee such sufficient sum, as rent, addition to the wages or salary the employee as will enable the employee to obtain reasonable accommodation. This provision does not apply to an employee whose contract of service contains a provision which consolidates as part of the basic wage or salary of the employee, an element intended to be used by the employee as rent. The General Order provides for 15% of the basic salary as housing allowance in addition to basic salary, if free housing is not provided. Where the employer cannot provide housing, then the employer is under an obligation to pay to the employee house allowance to enable the employee to access reasonable housing. Provision of housing or in lieu thereof therefore is a basic minimum right of the employee and there is a correlative duty upon the employer to provide housing or pay housing allowance. The employer should therefore in the contract of employment state whether the salary is inclusive of the house allowance or not.

Hours of work, overtime and weekly rest

The normal working week shall consist of not more that fifty-two (52) hours of work for day employees and sixty (60) hours for night employees per week with one rest day in every seven days. Overtime shall be payable for time worked in excess of the normal number of hours per week at one and one-half (1.5) times the normal hourly rate and for time worked on the employee’s rest day or public holiday at two (2) times the normal hourly rate. Furthermore, overtime plus time worked in normal hours per week shall not exceed in any period of two consecutive weeks – one hundred and forty-four (144) hours for employees engaged in night work and one hundred and sixteen (116) hours for all other employees.

Annual leave

An employee is entitled, to a minimum of twenty one (21) days annual leave with full pay after every twelve months of consecutive service. Where in a contract of employment an employee is entitled to leave days in excess of the minimum specified above, the employer and employee may agree on how to utilize the leave days. Section 74(1)(f) of the Employment Act obligates an employer to keep a record of the annual leave entitlement of every employee, days taken and due. According to the Act, in any legal proceedings where an employer fails to produce such records it will be the burden of the employer to prove or disprove an alleged term of employment

Maternity and paternity leave

A female employee shall be entitled to three months maternity leave with full pay and on expiry of the maternity leave she shall have the right to return to the job which she held immediately prior to her maternity leave or to a reasonably suitable job on terms and conditions not less favourable than those which would have applied, had she not been on maternity leave. No female employee shall forfeit her annual leave entitlement on account of having taken her maternity leave. A male employee shall be entitled to two weeks paternity leave with full pay.

Sick leave

After two consecutive months’ service with an employer an employee is entitled to sick leave with full pay up to a maximum of thirty days and thereafter to a maximum of fifteen days with half pay, in each period of twelve months’ consecutive service, subject to the employee producing a certificate of incapacity signed by a qualified medical practitioner or a person acting on his behalf in charge of a dispensary or medical aid centre. This is according to the General Order.

Food, water and shelter

Every employer is duty bound to provide sufficient supply of wholesome water for the use of his employees at the place of employment and, as the case may be, within a reasonable distance of any housing accommodation provided for them by him.  Section 33 of the Employment Act states, an employer shall, where the provision of food has expressly been agreed to in or at the time of entering into a contract of service, ensure that an employee is properly fed and supplied with sufficient and proper cooking utensils and means of cooking, at the employer’s expense. The law does not impose any obligation on the employer to provide food but if contractually agreed upon the above is the basic minimum required.

Medical attention

The employer is required to provide sufficient and proper medicine to his employees during times of illness and if possible medical attendance during times of emergency. This obligation stems from section 34 of the Employment Act. The attitude of the courts in interpreting Section 34 of the Act is also aptly captured in the recent case of Eddie Mutegi Njora v Mega Microfinance Co. Ltd [2015] eKLR in which Mbaru J observed that:

Where an employer provides a medical cover, such a cover is to ensure the employer has taken a progressive step to ensure all employees are covered in terms of medical care and attention at all times. Where an employer has not provided such a medical cover, once an employee is unwell, such information should be brought to the attention of the employer as soon as it is reasonably practical. The employer then has a duty to address the matter as appropriate where such sickness has been brought to their attention….”

Conclusion

In conclusion, it is important to for the employers to understand their obligation and ensure implementation of minimum employment conditions in compliance with statutory provisions, to improve the employee-employer relationship and overall advancement of economic development and social justice.

Redundancy Process: Getting it Right

Posted on September 12th, 2018

By Walter Amoko | Georgina Ogalo-Omondi

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Running a business is no easy task, running it profitably is even more difficult. Since the advent of liberalization in 2003, redundancy has become progressively more common in Kenya. Rapidly shifting markets driven mainly but not exclusively by technological innovation; uncertain economic times including cyclical downturns which in this age of globalization has world-wide effects, like the 2007-2008 economic melt-down; increased demand by shareholders for better  performance etc, make existing business models superfluous pretty quickly. An inevitable consequence of adjusting the business model every so often is a reduction on head-count as positions or on occasion departments that were once crucial require elimination. However, this must be done within the framework of existing laws.

Redundancy is defined under Section 2 of the Employment Act, 2007 as the loss of employment, occupation, job or career by involuntary means through no fault of an employee. It involves termination of employment at the initiative of the employer, where the services of an employee are superfluous. Redundancy may arise under various circumstances including but not limited to the practices commonly known as abolition of office, job or occupation and loss of employment. Examples of these circumstances are:

  1. the employer has ceased, or intends to cease continuing business;
  2. the requirement for employees to perform work of a specific type or to conduct it at the location in which they are employed has ceased or diminished; or
  3. re-organization of the workforce resulting in is less work and changes in conditions that result in the new job being quite different from the old

If the intended action of termination of employment arises from the above definition or examples of circumstances leading thereto, Section 40(1) of the Employment Act provides for the substantive and procedural legal requirements to be met by the employer to effect a termination of employment on account of redundancy as follows:-

“An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following  conditions:-

  1. 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;
  2. where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;
  3. 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;
  4. 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;
  5. the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
  6. the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and
  7. 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.”

In summary Section 40 (1) of the Employment Act prohibits an employer from terminating the services of an employee on account of redundancy unless the employee’s union is notified or in the case where the employee is not a member of a union then the employee is notified personally in writing and the local labour officer is also informed in both cases. The employer is also expected to consider seniority, skill, ability and reliability of each employee; pay off pending leave in cash, pay one months’ wages in lieu of notice and severance pay. For a termination on account of redundancy to be fair and lawful, an  employer must  adhere to  the requirements set out in Section 40(1) of the Employment Act, 2007, unless the parties have entered into an agreement to the contrary with terms greater than the minimum statutory requirements which may be through a contract of employment or Collective Bargaining Agreement (CBA).

Over the past couple of years there has been an increase in claims filed in the Employment and Labour Relations Court against termination on account of redundancy. One of the most notable of these claims was Industrial Cause No. 1661 of 2013 Aviation Allied Workers Union Kenya & 3 others v Kenya Airways Limited, wherein over 400 employees of the airline were rendered redundant following a restructuring exercise. The Union filed a claim seeking a declaration of unfair termination on account of redundancy claiming proper procedure was not followed in accordance with Section 40 of the Employment Act,  an  order  for  reinstatement  of the affected employees and in the alternative payment for pecuniary loss and maximum compensation of twelve (12) months for loss of employment. The trial court found in favour of the Union on grounds that the Respondent did not have valid reasons for the terminations as all the airline was facing was a cyclical crisis which did not affect its bottom line. The trial Court also found that procedure employed by the airline was flawed as there was no meaningful consultation and the process for selection of the affected employees was flawed reeking of pre-selection and bad faith. It ordered immediate reinstatement of employees and payment of salaries for the period that the employees were out of employment.

The airline which was represented by the firm of Oraro & Company Advocates both before the  Employment  and Labour Relations Court and the Court of Appeal successfully appealed – Civil Appeal No. 46 of 2013 Kenya Airways v Aviation Allied Workers Union Kenya & 3 others. There were three  separate judgments  basically upholding  the position of Kenya Airways in all matters except one in which two judges found the process fell short, that being the selection criteria. Thus while the judgment in the Industrial court was in most reversed, by a majority of two to one, the employees were awarded damages for a limited period rather than reinstatement. From this decision for any termination of employment under redundancy to be lawful, it must be both substantially justified and procedurally fair:

  1. To establish substantive justification the appellate court looked at the definition of  redundancy  under  Section  2 of  the Employment  The  employer  must prove  that the loss of employment in redundancy cases has to be by involuntary means and at the initiative of the employer, brought about by operational  requirements  of  the employer e.g. reduction of head count so as to respond to adverse market condition or improve efficiency. While the  Court should be eternally vigilant to ensure that the reasons given are not pre-textual, it is not for the Court to substitute its judgment for that of the employer. The Court found that Industrial Court had overstepped its limited role of review when it essentially trashed the reasons given by Kenya Airways and held that the Company facing a cyclical downturn which could address by being run more efficiently rather than laying off its staff.
  2. Procedural fairness is comprised two aspects:
    1. Firstly, the employer must strictly comply with the provisions of Section 40 (1) of the Employment Act for termination on account of redundancy to be lawful, which consist of issuance of notices in the prescribed manner and statutory period as detailed above, (unless the CBA or contract of employment stipulates a longer period). The purpose of the provision requiring notice to be given is to elicit consultation between the Kenya is a state party to the International Labour Organization (ILO) and is bound by the ILO conventions. Article 13 of Recommendation No. 166 of the ILO Convention No.158- Termination of Employment Convention, 1982 which requires consultation between the employers on the one hand and the employees or their representatives on the other before termination of employment under redundancy. The requirement of consultation is implicit in the principle of fair play under Section 40 (1) of the Employment Act. The purpose of the notice under Section 40 (1) (a) and (b) of the Employment Act is to give the parties an opportunity to consider “measures to be taken to avert or to minimize the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment”. Such consultations must be genuine rather than pre-textual- going through the motions merely to comply with the law
    2. Selection Criteria- The employer must develop and apply an objective process for identifying the employees who will be affected by the redundancy. This must, of necessity be related to the reasons of the redundancy. Selection must be not the basis of such invidious factors such as participation in protected union activities or race, gender etc

We are yet to see the effect of the decision of the Court of Appeal being adopted by the Employment and Labour Relations Court in similar matters. While this is based on casual empiricism, there seems to be some resistance to the lessons of the case. In the meantime, employers contemplating redundancy are well advised to ensure that every substantive and procedure ‘Ts’ and ‘Is’ are crossed and dotted.

Is Collective Bargaining Dead in the Public Sector?

Posted on September 12th, 2018

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Article 2 of the International Labour Organisation (ILO) Convention No. 154 defines collective bargaining as:

 “all negotiation which take place between an employer, a group of employers or one or more employers’ organizations, on the one hand, and one or more workers’ organisations on the other, for:

a) determining working conditions and terms of employment; and/or

b) regulating relations between employers and workers; and/or

c) regulating relations between employers or their organisations and a workers’ organisation or workers’ organisations.”

Simply put, collective bargaining is the joint determination by employees and employers of the problems of the employment relationship.  Article 41 of the Constitution entrenches the right to fair labour practices including that “every trade union, employer’s organization and employer has a right to collective bargaining”. Collective bargaining is therefore a constitutionally guaranteed right which ought to be enjoyed by all Kenyan workers.

Historically, collective bargaining has played a key role in the improvement of the terms of service of employees as it is through the leveraging of their collective strength in numbers that employees are able to effectively negotiate with an otherwise more powerful employer.

Collective bargaining assumes that two parties i.e. employer and employee, will engage in negotiations and eventually agree on a collective bargaining agreement which would be contractually binding between the two parties. It goes without saying, then that no third party should be involved in the collective bargaining process otherwise it would cease to be collective bargaining as envisaged by the law.

The public sector commands a fair share of the labour market in Kenya. According to the Kenya National Bureau of Statistics, approximately 30% of Kenya’s total labour force works in the public sector. Out of this, the only persons expressly excluded from the enjoyment of the rights guaranteed under Article 41 are individuals serving in the Kenya Defence Forces and the National Police Service. The rest of public sector workers are entitled to full enjoyment of the rights under Article 41, including the right to collective bargaining.

Enter the controversy created by the Salaries and Remuneration Commission (SRC);the SRC is established under Article 230 of the Constitution as one of the independent commissions with powers under Article 230 (4) to:-

  1. set and regularly review the remuneration and benefits of all State officers; and
  2. advise the national and county governments on the remuneration and benefits of all other public officers.

That the SRC is not the employer of public officers is plain, and thus it should have no direct role in collective bargaining. Yet the most important and often controversial item on the negotiating table is that of salary; the proverbial “elephant in the room”. However the role of setting, reviewing and advising on the remuneration of state and public officers is bestowed upon the SRC pursuant to Article 234 (4), and thus the question that arises is what is left of collective bargaining if the most important item is off the table?

In Teachers Service Commission (TSC) v Kenya National Union of Teachers & Others (2015) eKLR the Employment and Labour Relations Court (ELRC), as the court of first instance, found that the SRC had no role to play in collective bargaining between the  teachers’ unions and the employer – TSC and further found that SRC’s advice to TSC on the teachers’ remuneration could not possibly be binding (i.e. leaving room for negotiation of salaries between employer and unions and upholding the ideal of collective bargaining). The Court pronounced itself thus:-

 “Looking at the provisions of Article 230 of the Constitution as well as the provisions of Section 11 of the SRC Act, it is clear that SRC has the mandate of setting and regularly reviewing the remuneration and benefits of all State officers and advising the National and County Government on the remuneration and benefits of all other public officers.

 The Court therefore reiterates that the TSC has the mandate to set and review the remuneration of teachers upon advice by SRC.  The Court further restates that TSC is not bound by the advice of SRC in setting and reviewing remuneration of teachers. A plain and holistic interpretation of Articles 230(4) as read with Article 259(11) of the Constitution supports this finding by the Court.  TSC needs only prepare a budget for allocation of funds by the National Treasury and approval by the National Assembly.  However TSC must take into consideration the advice by SRC without necessarily being bound by it. Acting otherwise would be contrary to the Constitutional order…”

However, on appeal, the Court of Appeal disagreed with the decision of the Employment and Labour Relations Court, and held as follows:-

“I hereby come to the conclusion and finding that the advice given by SRC is binding. The advice is binding because to hold otherwise would render the functions of SRC under Article 230 (5) idle; it would render SRC ineffective and irrelevant; it will introduce a discretionary concept of pick and choose in Kenya’s governance structure. An interpretation that renders a constitutional Article idle and an Independent Commission ineffective does not pass the threshold of constitutionality. SRC is a constitutional organ and the trial judge erred in interpreting the Constitution in a manner that renders SRC’s singular and exclusive mandate in Article 230 (5) (a) idle and ineffective. The trial court misapprehended the doctrine of separation of functions which is keystone in Kenya’s governance structure. In holding that SRC has a non-binding advisory role in the determination remuneration and benefits of public officers, the trial court disregarded the central and exclusive juridical competence of SRC in the determination of fiscal sustainability of the total public compensation bill as per Article 230 (5) (a) of the Constitution.

 The advice given by SRC is binding because the advice is not merely an opinion that is given by a friend, it is advice that has a constitutional underpinning; it is binding because it emanates from a constitutional organ with exclusive constitutional mandate to determine fiscal sustainability of the total public compensation bill; it is binding because the principle of effectiveness require that all provisions of the constitution must be given effect. SRC advice is not an advice in personam, it is an advice in rem as it limits and determines remuneration rights and entitlements of public officers. Being an advice in rem, SRC advice binds all persons, state organs and independent commissions. 

Regrettably, the Court of Appeal did not reconcile the competing and/or conflicting provisions of the Constitution in a manner that advances the right to collective bargaining. The effect of the Court of Appeal’s decision was to give SRC carte blanche to dictate the salaries and remuneration of all workers in the public sector, effectively destroying the right of the said workers to collective bargaining with the employer. There can be no collective bargaining when one side’s position is entrenched or cast in stone.

Employment & Labour

Posted on July 19th, 2018

Our Employment & Labour practice area has been recognised for advising on contentious and non-contentious matters relating to termination & dismissal, redundancy and discrimination, employment contracts, employment policies and procedures, review of HR manuals & policies and staff restructuring. The practice advises clients in various sectors including banking & financial services, health services, manufacturing, non-governmental organisations, telecommunications and hospitality.

Chambers & Partners has consistently recognised our Employment & Labour practice area as one of the market’s top practices. The firm was ranked in the 2021 rankings, with interviewed clients noting that they are "impressed by their follow-through on issues," further referring to the team as "extremely professional and knowledgeable." In addition, Legal 500 also ranked the firm tier 1 in employment practice noting our strength in handling both contentious and non-contentious employment matters and our experience in handling redundancies, retrenchments, employee benefits and collective bargaining arrangements.


The firm has been involved in landmark employment disputes in Kenya including:

  • Representing a Kenyan bank against a claim for constructive dismissal and discrimination of an employee. The award is set at USD 300,000.
  • Representing a railway corporation in a claim worth USD 4.3 million brought by its former employees to enforce an award made by the Industrial Court and a claim for unfair dismissal after a strike which led to their dismissal.
  • Representing a national airline in a class action for reinstatement of over 440 employees following a redundancy process undertaken wherein the Court was in favour of the employees and ordered reinstatement and back-pay of salary. The matter value is USD 1 million.
  • Assisting a humanitarian organization, in the review and revision of the internal staff regulations.
  • Representing a faith based community school operating from Mathare Valley (one of Kenya’s oldest and largest slums) on employment claims. The matter value is USD 3,000.
  • Advising a multinational Information and Communications Technology company on the Employment Act, 2007 and the necessary regulatory compliance required.
  • Representing a five-star luxury hotel in two employment claims of unfair terminations and fraud allegations against the employees.
  • Representing a prominent building contractor in East Africa against two rival unions within the organisation The matter value is USD 50,000.

Recent Insights

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Related Services

Corporate & Commercial, Dispute Resolution, Restructuring & Infrastructure


For more information about our Employment & Labour practice, please contact Chacha Odera (Senior Partner).  Alternatively click here to download our Employment & Labour profile.

Key Contacts
George Oraro SC
Founding Partner

 

 

E: goraro@oraro.co.ke

Chacha Odera
Senior Partner

 

 

E: chacha@oraro.co.ke

Sandra Kavagi

Posted on July 9th, 2018

Sandra Kavagi

Senior Associate

 

T: +254 709 250 000/709 250 742

E: sandra@oraro.co.ke

 

 

Sandra is a Senior Associate in the dispute resolution practice group and specialises in employment & labour law. With over 7 years’ experience, she has advised clients in education, financial services, and public sector. Sandra advises local and international clients in banking and commercial litigation, constitutional law, environmental law, employment, and labour law, election petitions, fraud and land disputes. 

Sandra has advised an academic institution in formulating Collective Bargaining Agreements. She also successfully defended a company in an employment claim filed by casuals who wanted to be accorded similar employment terms as permanent staff.

Sandra holds a Bachelor of Laws (LLB) from Moi University and a post-graduate diploma in Law from the Kenya School of Law

“Sandra is an Associate in the Litigation Department and specialises in Dispute Resolution”

Experience
  • Successfully prosecuted an application in the environment and land court to strike out a plaint for a suit that had been filed without the consent or approval of the plaintiff company.
  • Assisted a leading local architectural firm in an arbitration dispute against the County Government of Kitui for a claim of approximately USD 27.5 million.
  • Part of the team that represented an international outdoor advertising company against the Kenya National Highway Authority on appeal in a constitutional petition.
  • Successfully defended an application by a union which alleged to represent pensioners who had retired.
  • Part of a team that successfully defended an election petition of a prominent politician in the coastal region.
  • Assisted in the representation of a public Kenyan university in relation to the provision of security services before the Public Procurement Administrative Review Board (PPARB).

About Us

Oraro & Company Advocates is a full-service market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 10 partners, 4 senior associates, 10 associates, 1 lawyer and 36 support staff, the Firm has been consistently ranked by leading legal directories such as Chambers Global, IFLR 1000 and Legal 500 as a top-tier firm in Kenya.

Oraro & Company Advocates is an affiliate member of AB & David Africa.

Contact Us

Oraro & Company Advocates
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P. O. Box 51236 - 00200, Nairobi, Kenya.
T: +254 709 250 000
E: legal@oraro.co.ke | W: www.oraro.co.ke

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