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:
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:
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.
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.
Kenya has marked slight over a year since the Supreme Court rendered its decision on the nullification of the presidential elections held on 8th August, 2017. The dust having settled, it is an appropriate time to reflect on the historic decision, albeit from a legal perspective.
Kenyans went to the polls on 8th August, 2017 to elect their president. Uhuru Muigai Kenyatta was declared the winner with his closest challenger Raila Amolo Odinga coming in second from a field of eight (8) candidates. Mr. Odinga and his running mate, Stephen Kalonzo Musyoka were dissatisfied with the way the elections were conducted and the outcome of the said presidential elections. Mr. Odinga and Mr. Musyoka challenged the declaration of results by the Independent Electoral and Boundaries Commission (IEBC) at the Supreme Court of Kenya in Raila Amolo Odinga & Another –vs- IEBC & Others (2017) eKLR (the 2017 Presidential Election Petition). This was the second time the result of a presidential election was being challenged in the Supreme Court the first one having been challenged in the year 2013.
After receiving arguments from counsel representing the parties, the Supreme Court delivered its judgment on 1st September, 2017. By a majority decision of four (4) to two (2), the Court held that the presidential elections was not conducted in accordance with Constitution of Kenya, 2010 (the Constitution) and the applicable law thereby rendering the declared result invalid, null and void. The Court proceeded to order the IEBC to organise a fresh presidential election in conformity to the Constitution and the applicable election laws, within sixty (60) days of the judgment.
In this article, we discuss the position of the law as relates to the application of section 83 of the Elections Act, 2011 (the Elections Act) to the determination of election petitions. This section sets the standard of proof for election petitions in Kenya. The position on the interpretation of the provisions of section 83 of the Elections Act and its application to the determination of election disputes was settled in the 2017 Presidential Election Petition. Elections in Kenya are governed by the Constitution and other principal legislations in addition to the Elections Act include the Independent Electoral and Boundaries Commission Act, 2011 (the IEBC Act) and the Election Offences Act, 2016 (the Elections Offences Act). The Constitutional threshold is set out in Articles 10, 38, 81, 86, 88 and 138 and the principles cutting across all these Articles include integrity, transparency, accuracy, accountability, impartiality, simplicity, verifiability, security and efficiency as a free and fair election by way of secret ballot, free from violence and an election conducted by an independent body in transparent, impartial, neutral, efficient, accurate and accountable manner.
Section 83 of the Elections Act provides that:
“No election shall be declared to be void by reason of non-compliance with any written law relating to that election if it appears that the election was conducted in accordance with the principles laid down in the Constitution and in that written law or that the non-compliance did not affect the result of the election.”
The term “or” used makes the two limbs of the provisions of section 83 of the Act disjunctive under our law unlike under English law which is conjunctive where the term “and” is used in a similar provision in the English Act. The conjunctive term has also been used in the Election laws of various Commonwealth countries such as Nigeria, Ghana,Zambia, Tanzania and Uganda.
The Supreme Court explained the disjunctive application of section 83 of the Elections Act to be that an election can be nullified if it showed either that the elections were not conducted in accordance with the Constitution and the written law relating to elections or that the noncompliance affected the result of the election. In other words, a petitioner who proves that conduct of the election in question substantially violated the principles laid down in the Constitution as well as other written law on elections, will on that ground alone, void an election. A petitioner will also be able to void an election if he is able to prove that although the election was conducted substantially in accordance with the principles laid down in our Constitution as well as other written law on elections, it was so fraught with irregularities or illegalities as to affect the result of the election. The Supreme Court majority however rejected the English position that even trivial breaches of the law should void an election stating that that position was not realistic; in recognition of a global truism that the conduct of an election is rarely perfect. Applying this test to the evidence presented before them on the presidential elections conducted in Kenya in August of 2017 the Supreme Court in its majority decision found that the elections were neither transparent nor verifiable and that on that ground alone and on the basis of the interpretation of section 83, they had no choice but to nullify the election and to direct the IEBC to conduct fresh presidential elections.
The Supreme Court discussed at length the quantitative and the qualitative test as a basis of determining whether an election result ought to be voided. In a paper titled Election Technology Law and theConcept of “Did the irregularity affect the result of the elections?”’ prepared by Hon. Justice Prof. Otieno-Odek prior to the determination of the 2017 Presidential Election Petition, the author discusses the quantitative and qualitative test. Justice Odek states that the quantitative element consists of requirements for an accurate, verifiable and accountable system while the qualitative element requires that elections must be free from violence, intimidation, improper influence and corruption and that there must also be transparency and administration of elections in an impartial, neutral and efficient manner. The quantitative test is therefore most relevant where the numbers and figures are in question whereas the qualitative test is most suitable where the quality of the entire election process is questioned and the Court has to determine whether or not the election was free and fair.
In the Court of Appeal decision of Daniel Ongong’a Abwao vs Mohamed Ali & 2 Others (2018) eKLR which was an appeal filed by a voter within Nyali Constituency against the decision of the High Court upholding the election of Mohamed Ali Mohamed as the Member of the National Assembly for Nyali Constituency, this threshold was applied by the Court and it was found that the appellant was unable to prove that the elections substantially violated the principles laid down in the Constitution as well as other written laws on elections. The appeal was dismissed.
The annulment of the presidential elections by the Supreme Court of Kenya triggered the introduction of the Election Laws Amendment Bill, 2017 (the Bill) in Parliament to amend various provisions of the Elections Act, the IEBC Act, the Election Offences Act. The Bill, despite strong opposition from a section of Kenyans, was passed by Parliament, the Senate and finally transmitted to the President for assent. The President neither assented to the Bill nor returned it to Parliament and after fourteen (14) days of its passing, the Bill became law by virtue of the provisions of Article 116 of the Constitution. The law was published in the Kenya Gazette on 2nd November 2017 thus becoming effective as the Election Laws Amendment Act No. 34 of 2017 (the Election Laws Amendment Act).
The Katiba Institute Petition Following the passing of the Election Laws Amendment Act, Katiba Institute & 3 Others vs Attorney General & 2 Others (2018) eKLR (the Katiba Institute Petition) was a Constitutional Petition filed contending that the amendments were unconstitutional. Under the amendments, section 83 of the Election Act now reads as follows:
“(1) A Court shall not declare an election void for non-compliance with any written law relating to that election if it appears that- (a) the election was conducted in accordance with the principles laid down in the Constitution and in that written law; and (b) the non-compliance did not substantially affect the result of the election.”
The petitioners’ argument was that by amending the law from a disjunctive test to a conjunctive one by use of the word “and” instead of “or”, it would be difficult to challenge an election even where there was violation of Constitutional principles.
The High Court (Mwita J) delivered its decision in the Katiba Institute Petition on 6th April, 2018 noting that any amendments to the election laws must be forward looking in order to make elections more free, transparent and accountable, than to shield mistakes that vitiate an electoral process. The Court therefore held that “there was no constitutional compulsion or rational in amending section 83 of the Act to remove the disjunctive word ‘or’ and introduce the conjunctive word ‘and’ so that only where there are failures in complying with the constitution and election laws and they substantially affected the results should an election be nullified. Removing the twin test for annulling faulty election results negates the principles of electoral system in the Constitution… allowing such an amendment would be to ignore constitutional principles in our transformative Constitution that there should be free, fair, transparent and accountable elections.” The Court declared that the amendment of section 83 along with other specified sections of the Elections Act was invalid.
The position as relates to the interpretation of section 83 of the Election Act is now settled both by the Supreme Court of Kenya and also by the other Superior Courts. It is now for Parliament to effect the necessary changes by deleting the amended section 83 of the Act and restoring the initial disjunctive provision. Our fidelity to the Constitution that we gave unto ourselves should be maintained and upheld at all times.
It is apt to close with the words of the Supreme Court in the 2017 residential Election Petition:
“Therefore, however burdensome, let the majesty of the Constitution reverberate across the lengths and breadths of our motherland; let it bubble from our rivers and oceans; let it boomerang from our hills and mountains; let it serenade our households from the trees; let it sprout from our institutions of learning; let it toll from our sanctums of prayer; and to those, who bear the responsibility of leadership, let it be a constant irritant…
It is also our view that the greatness of a nation lies not in the might of its armies important as that is, not in the largeness of its economy, important as that is also. The greatness of a nation lies in its fidelity to the Constitution and strict adherence to the rule of law, and above all, the fear of God. The Rule of Law ensures that society is governed on the basis of rules and not the might of force.”
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
Weathering the Storm: Steps an Employer Can Take to Mitigate the Effects of the COVID-19
A ‘Dicey’ Matter: The Fate of Employees in Mergers and Acquisitions
The Last Word: A Look at Section 83 of the Election Act, 2011
Strength in Numbers: The Way Forward in Collective Bargaining Agreements
The upsurge in the number of strikes called in recent times by various cadres of workers, including teachers, doctors, nurses and lecturers, has witnessed a common thread – an outcry for the implementation of Collective Bargaining Agreements (CBAs) between the workers and their respective employers. This has caused a natural spike in the Kenyan public’s interest in the concept of a CBA - what it is, what it entails and what its implementation means for both the workers and the employers.
What is a CBA?
The concept of collective bargaining is entrenched in the Constitution of Kenya under Article 41 which provides for rights relating to labour relations, including the right to fair labour practices, the right to reasonable working conditions, the right to join and participate in the activities of a trade union and the right to go on strike. Article 4(d) specifically provides for collective bargaining on terms that, “every trade union, employers’ organisation and employer has the right to engage in collective bargaining.”
Section 2 of the Labour Relations Act, 2007 (the Act) defines a “collective agreement” as a written agreement concerning any terms and conditions of employment made between a trade union and an employer, group of employers or organisation of employers. On the other hand, a “recognition agreement” is defined as an agreement in writing made between a trade union and an employer, group of employers or employers’ organisation regulating the recognition of the trade union as the representative of the interests of unionisable employees, employed by the employer or by members of an employers’ organisation.
Ordinarily, the employer first enters into a recognition agreement with the trade union so as to recognise the trade union for purposes of collective bargaining. The recognition agreement has to be in writing, in line with the provisions of section 54(3) of the Act and it sets out the terms upon which the employer recognises a trade union. Thereafter, the employer and the trade union may negotiate and enter into a CBA which sets out the terms and conditions of employment of the workers.
Simply put, the recognition agreement is the initiating document that provides the enabling environment for trade unions and employers to enter into a CBA. A CBA covers a number of issues affecting the employees concerned, including; hours of work, salaries payable percentages of salary increments, promotions of the employees and the process to be followed in case of termination of their services including redundancy.
Legal Effect of a CBA
Section 59(5) of the Act provides that a CBA becomes enforceable and shall be implemented upon registration by the Employment and Labour Relations Court (ELRC) and shall be effective from the date agreed upon by the parties. Registration of a CBA with the ELRC is therefore a mandatory requirement for it to be legally valid and enforceable. This is the main issue that plagued the 2016/2017 doctors’ strike where doctors in the public sector were seeking a three hundred per cent (300%) pay increase pursuant to a CBA between the doctors’ union and the Ministry of Health on behalf of the Kenyan Government. The Government’s position was that the CBA had never been registered with the ELRC and was therefore unenforceable.
The Act further provides that once a CBA is signed, it becomes binding on the parties to the agreement, for the period of the agreement, while the terms of the CBA are incorporated into the employment contracts pursuant to the provisions of section 59(3) of the Act.
For example, during the recent doctors’ and nurses’ strikes, issues of promotions and allowances took centre stage and the case advanced in support by the unions was that these were matters covered under the respective CBAs and ought therefore to be implemented as part and parcel of the employment contracts.
Applicability and Relevance
Due to changing circumstances in the world of business and financial constraints in the current world economy, many private companies have been re-structuring their businesses and cutting-back on the number of employees that they maintain. As a result, there is a marked increase in the number of terminations of employment, on account of redundancy.
The challenge that these companies are facing in carrying out the redundancy processes is that whether out of omission or commission, they often times do not comply with the prescribed procedures set out in the CBA. Matters such as giving the concerned union at least one (1) month’s notice before effecting a redundancy process and the fact that the company usually has to consider compensating the employees for the number of years served for example, are issues that companies do not always take into consideration.
The concerned employees end up suing the company, whether as individuals or through their unions and the ELRC has not hesitated to apply the provisions of the Act, by finding that the terms of the CBA are binding and ought to be implemented.
Court Decisions
There have been several key decisions handed down by the ELRC in connection with CBAs. In the case of Kenya Plantation & Agriculture Workers Union v Coffee Research Foundation (2014) eKLR the Union brought that claim on behalf of ten (10) Claimants who were the Respondent’s security guards. Here, the ten (10) Claimants had worked for the Respondent for periods exceeding five (5) years, during which the Respondent had concluded a CBA with the Union. The CBA contained a thirteen per cent (13%) wage increment for each year and benefits including termination benefits under the retrenchment clause, which the Respondent chose to ignore when it terminated the Claimants’ services. The ELRC found that the Respondent had discriminated against the Claimants and ordered implementation of the CBA with respect to pay in arrears underpayment of wages and pay of redundancy benefits.
In Kenya Union of Commercial Food and Allied Workers v Kenya National Library Service (2016) eKLR, the Respondent had concluded a CBA with the Claimant union but the Respondent had partly implemented the CBA by paying new salaries, allowances and part of the arrears. The balance which was left unpaid, it was argued by the Respondent, was an amount that had been factored into the Respondent’s 2014/2015 budget submitted to the parent Ministry, but no funds had been availed to enable the Respondent implement the CBA. It was the Respondent’s defence therefore that they had not refused to fully implement the CBA but that its hands were tied by the unavailability of funds from the National Treasury.
The ELRC was unimpressed and held that once a CBA has been registered, as was the case in the claim before it, section 59(5) of the Act had already taken effect and therefore the CBA was binding and enforceable and failure to implement any part of the CBA gave the wronged party a remedy of specific performance. The ELRC further held the view that since the Respondent was claiming inability to pay due to acts of a third party, nothing prevented it from joining any such party/parties to the case for them to bear responsibility of the owing dues. In the upshot of its decision, the ELRC entered Judgment for the Claimant against the Respondent for specific performance of the terms of the CBA.
Cases such as the above set strong precedents for the notion that there are no shortcuts to implementing a CBA.
Way Forward?
Public bodies and private entities alike ought to appreciate that collective bargaining is a constitutionally guaranteed right, duly entrenched under the Bill of Rights and that there can be no avoiding of CBAs. All parties ought to be keen at the negotiation table of CBAs, so that they fully understand what they are binding themselves to. If any terms seem complex or difficult to decipher, it is advisable to consider seeking legal advice on the same so that those provisions are well interpreted and understood by the parties prior to agreeing to the same.
Employers also need to consider the long term financial effects of CBAs before negotiation and execution, as it is no defence to blame a third party for non-compliance with a CBA. Unions also need to be aware of the necessary steps to be taken to ensure that a CBA is legally valid and enforceable, so as not to become unstuck at the crucial time of agitating for implementation of the CBA.
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