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:
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:-
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:
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.
At the very least: Basic minimum conditions of employment
Medicare in the employment context
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.
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