Labor & Employment - Deloitte
Labor & EmploymentMay 2019
ContentsKenyan Labour Laws3Employment and Labour(institutions)8The employment contract11 Contracts of service vs forservice12 Contents of the employmentcontract13 Terms of employment14Termination & Dismissal17ELRC Judgement on Employmentand Labour27Proposed Amendments to Empl Act 2019 Deloitte Limited2
Kenyan labour laws 2019 Deloitte Limited3
Kenyan labour lawsThe ConstitutionContains provisions on fundamental rights and freedoms of the individual Freedom from discrimination (Art. 27) Freedom of association (Art. 36) Right to fair labour practices (Art. 41) Protection from slavery, servitude and forced labour (Art. 30). Provides for Employment and Labour Relations Court (Art.162 (2) (a)) 2019 Deloitte Limited4
Kenyan labour lawsThe Employment Act, 2007 Contains general principles of employment (forced labour, discrimination andsexual harassment) Contains the legal provisions that relate to the rights and duties of employersand employees Provides the basic conditions of employment Includes provisions relating to employment contracts Termination of employmentThe Employment and Labour Relations Court Act, 2011 Establishes the Employment and Labour Relations Court (“ELRC”) ELRC is given exclusive original and appellate jurisdiction to hear anddetermine all disputes in accordance with Article 162(2). ELRC is also given the power to make orders in exercise of its jurisdiction. 2019 Deloitte Limited5
Kenyan labour lawsThe Labour Relations Act, 2007An Act that consolidates the law relating to trade unions and trade disputesThe Labour Institutions Act, 2007Establishes the various labour institutions which include The National Labour Board (advise the Minister on all matters concerningemployment and labour, Committee of Inquiry (appointed by the minister to inquire into any matterconnected with or relevant to any trade dispute(s) in general, Labour Administration and Inspection (Labour Officers, Employment Officersand Medical Officers) Wages Council (to advice the minister on the remuneration and otherconditions of employment of any category of employees in any sector). 2019 Deloitte Limited6
Kenyan labour lawsOccupational Safety and Health Act, 2007This statute provides for the safety and welfare of employees and all personslawfully present at workplaces.Common lawThese are developed judicial decisions and considerations on the interpretation ofcontractual provisions and statutory provisions. 2019 Deloitte Limited7
Employment and labourBodies and Institutions 2019 Deloitte Limited8
Employment and Labour Relations Court (“ELRC”) Established by Article 162 (2) of the Constitution and the Employment andLabour Relations Court Act, Equivalent to the High Court. High Court has no jurisdiction to deal with any of the matters under theexclusive jurisdiction of the ELRC – disputes between employer and employee Has the jurisdiction to enforce labour rights in Article 41 and jurisdiction tointerpret the Constitution and fundamental rights and freedoms. 2019 Deloitte Limited9
Trade UnionsWhat are they?An association of employees that regulate relations between employees andemployers.Employer ObligationAn employer is under an obligation to recognise a trade union for the purposes ofcollective bargaining.Collective BargainingCollective bargaining - where representatives of management and the unionsmeet and negotiate terms and conditions of employment in good faith. 2019 Deloitte Limited10
The employment contractRights & Obligations 2019 Deloitte Limited11
Contracts of service Versus contracts for serviceWhat is the difference?A contract of service is an agreement between an employer and an employee.A contract for service –where an independent contractor, is engaged for a fee tocarry out an assignment or project.Only employees are entitled to the statutory rights of employees.How to know the difference?4 tests.Supervision(Determination of whatshould be done & how) 2019 Deloitte LimitedIntegration(Subject s of work12
Contents of the employment contractStatutory minimum The name, age, permanent address and sex of the employee; the name of the employer; the job description of the employment; the date of commencement of the employment; the form and duration of the contract; the place of work; the hours of work; the remuneration; and the intervals at which remuneration is paid;Additional Terms? 2019 Deloitte Limited13
Terms of employmentEmployer duties Duty to pay wages Duty to indemnify employee Duty to take care of theemployee’s safety and workingconditions 2019 Deloitte Limited14
Terms of employmentEmployee dutiesDuty to give personal serviceDuty to obey reasonable ordersDuty of reasonable care and indemnitySecret profitsDuty to confidentiality 2019 Deloitte Limited15
Terms of employmentEmployee Rights Basic minimum conditions of employment (subject to any other written law,court order, CBA, or written contract that provides better conditions) Hours of work (1 rest day in a week). Annual leave (21 day with full pay). Maternity leave. Sick leave (7 days with full pay thereafter 7 days with ½ pay per year subjectto notification). Housing. Water. Food (where agreed in the contract). Medical attention.Employer must display a statement on the employee’s rights under the Act in aconspicuous place, which is accessible to all the employees 2019 Deloitte Limited16
Termination & dismissal 2019 Deloitte Limited17
Forms of termination Effluxion of time Termination by notice Mutual separation Summary Dismissal (Section 44 of the Employment Act) -When an employerterminates the employment of an employee without notice or with less noticethan that to which the employee is entitled. Basis for summary dismissal isthat the employee has fundamentally breached their obligations arising underthe contract of service. Redundancy (Section 40 of the Employment Act) Constructive Dismissal 2019 Deloitte Limited18
Forms of terminationProcess of Dismissal (Section 41 of the Employment Act -Notification and hearingbefore termination on grounds of misconduct)Grounds (General)Gross MisconductPhysical incapacityPoor performance Employer must explain the reason for which he is considering termination andgive the employee the right of representation during this explanation. Employer must hear and consider any representations made by the employeeon the grounds of misconduct or poor performance together with those of theEmployee’s representativeExplanation 2019 Deloitte LimitedNotice toShow CauseDisciplinaryHearingDecisionAppeal19
Forms of terminationRedundancy (Section 40 Employment Act)What constitutes a redundancyLoss of employment,occupation, job or career By involuntary means No fault of the employee Termination at the initiativeof the employerEmployer must demonstratethat Services of anemployee are superfluousNot a result of anemployee’s performance,conduct or actions 2019 Deloitte LimitedThere are key aspects toconsider in the redundancyof roles: The substance orrationale for theredundancies and The process in effectingthe decision.20
RedundancyCommon reasons for redundancyEconomicdownturn –CommercialjudgmentFactors beyondthe control of anemployerEmployerconsiders thatthere are toomany employeesemployed in aparticular area oroverall 2019 Deloitte LimitedCeasing of workRequirements of abusiness foremployees tocarry out work ofa particular kindceasing ordiminishingMechanisation ofmodes ofproduction &reorganisation ofthe business oradoption of a newbusiness strategy21
Procedural Steps of a Redundancy ExercisePage subtitleNotice (intendedredundancy)Oral communication ofthe intention does notamount to notice underthe lawIssuance of 1 monthwritten notice to thelabour officer.Each labour officer incharge of the area wherethe employees areemployed must beserved with a noticeEach employee affectedby the redundancy to beserved personally with1-month written noticeMandatory contents ofthe notice:the reasons for andextent of the redundancyFor unionized employee,Union must be notified ofthe intended redundancy 2019. Deloitte Touche Tohmatsu Limited.22
Procedural Steps of a Redundancy ExercisePage subtitleConsultationSelectionTerminationExplaining the reasons for theredundancy and the plannedredundancy programmeInvolves determination ofthe employees to bedeclared redundantExplaining the criteria to be usedin selectionSelection criteriaprovided for in law –seniority in time, skill,ability, and reliabilityMust only take place after expiryof the 1 month notice periodissued after the initial notice ofintention to carry out aredundancy.Invite employees to share theirconcerns and address themDiscussing any possiblealternative to minimizeterminationsExplain the package to be offeredto employees who are selectedUnion representatives entitled torepresent the employee inconsultations 2019. Deloitte Touche Tohmatsu Limited.The rationale for selectionmust ultimately bedefensibleThe exact considerationsmade and full results of theselection process are not forpublicationIssuance of termination lettersand certificates of service toemployees selected forredundancyEmployees will be advised oftheir final dues in the terminationlettersTermination may be by notice orby payment in lieu of notice.23
Procedural steps of a redundancy exerciseRedundancy Package Salary for the period worked up to date of termination Notice pay Accrued leave paid in cash Severance pay – paid for every completed year of service Pension as applicable under the applicable pension rules 2019 Deloitte Limited24
Unfair dismissalWhat amounts to unfair dismissal?Validityemployer fails to prove that the reason for thetermination is validFor a fair reasonlack of capacity, incompatibility, bad conduct, basedon operational requirements of the employerFair procedurewhere the employer fails to prove that he hasemployed fair procedure in effecting the terminationJustice and equityEmployer fails to prove that it acted in accordancewith justice and equity in terminating the employee 2019 Deloitte Limited(how was the decision arrived at? How was thedecision communicated? How was appeal dealt with?Consistency, any warning letters etc)25
Possible consequences of unfair dismissalDamages/Remedies1) Payment in lieu of 1months’ notice;2) The wages due for theperiod of time for whichthe employee has worked3) The equivalent of anumber of month’s wagesor salary not exceeding 12monthsAny payments madefor unfair terminationare subject tostatutory deductions.Very rear cases,Reinstatement of theemployee 2019 Deloitte Limited26
ELRC Judgement onemployment and labourCase law 2019 Deloitte Limited27
Judicial considerations on employment and LabourOn Voluntary Early Retirement (“VER”)agreementsApplication of constitution on EmploymentDisputesCivil Appeal No. 72 of 2017 - National Bank ofKenya Limited v Hamida Bana & 103 others[2017] eKLRSection 45 (3) was rendered unconstitutionalin Samuel G. Momanyi v. The Hon. AttorneyGeneral and SDV Transami KenyaLimited, Petition No. 341 of 2011 (2012) eKLRThe terms of the VER ought to be fully capturedand strictly adhered toThe Court’s mandate is only to interpret the termsprovided under the scheme in issue and enforcethe same.Mutual separation: It is open to an employer andemployee at any time during the currency of acontract of employment to terminate the contractby agreement.The agreement of mutual release will be effectiveand shall override other restrictions placed on thetermination of the contract by the original contract. 2019 Deloitte LimitedSection 45 (3) “An employee who has beencontinuously employed by his employer for a periodnot less than thirteen months immediately beforethe date of termination shall have the right tocomplain that he has been unfairly terminated”NB Certain ELRC judges have refused to uphold theabove decision.Civil Appeal No. 50 of 2014 Judicial ServiceCommission v Gladys Boss Shollei & another[2014] eKLRWhere termination of employment breaches thefundamental rights and freedoms of an employee,the applicable Constitutional provisions apply.28
Judicial considerations on employment and LabourFair Procedure (sec 41)Fair Procedure (sec 41)Mary Chemweno Kiptui v Kenya PipelineCompany Limited [2014] eKLRSamuel Uche Ajaegbu v Eagle Vet KenyaLimited [2018] eKLRCourt held that:The court held that the summary dismissal wasunfair for non-compliance with section 41 of theAct. In this case, the summary dismissal camewithout notice and there was no disciplinaryhearing at all.Section 41 of Employment Act is couched inmandatory terms.Where an employer fails to follow these mandatoryprovisions, whatever outcome of the process isbound to be unfair as the affected employee hasnot been accorded a hearing in the presenceof their union representative or in thepresence of a fellow employee of their ownchoice.The employee must be informed through a noticeas to the charges and given a chance to submit adefence followed by a hearing in due cognizance ofthe fair hearing principles as well as natural justicetenets 2019 Deloitte LimitedWithout such notice and hearing, it is difficult toshow how the employer ascertained the allegationsprior to summarily dismissing the claimant.The Court’s also held that the purported reasonsfor termination as set out in the letter oftermination remained mere allegations and as atthe time of termination, it cannot be said that theemployer had valid or genuine reasons fortermination.29
Judicial considerations on employment and LabourDoctrine of Constructive DismissalFacts of the case:Not defined in the Employment ActThe Claimant was transferred from Kenyato Uganda, retransferred to Kenya then toMozambique, all within a very shortnotice.Maria Kagai Ligaga v. Coca Cola East and Central AfricaLimited [unreported].Court held that:Constructive dismissal occurs where an employee is forcedto leave his job against his will, because of hisemployer’s conduct. Although there is no actual dismissal,the treatment is sufficiently bad, that the employee regardshimself as having been unfairly dismissed.The basic ingredients in constructive dismissal are:a) The employer must be in breach of the contract ofemployment;She was never allowed to settle in anyposition or market and was finallyrepatriated to Kenya and moved from onetown to the other at considerabledisruption to her family life.She resigned, and the Court foundresignation was involuntary and amountedto constructive dismissal. The Claimantwas granted monetary compensation.b) The breach must be fundamental as to be considered arepudiatory breach;c) The employee must resign in response to that breach; andd) The employee must not delay in resigning after the breachhas taken place, otherwise the Court may find the breachwaived. 2019 Deloitte Limited30
Judicial considerations on employment and LabourDoctrine of Constructive DismissalRecognition of trade unionsKenneth Kimani Mburu & another v KibeMuigai Holdings Limited [2014]Industrial Court Cause No. 122 of 2013 –Kenya Hotels & Allied Workers Union v NewVictoria Hotel [2013] eKLRThe doctrine of constructive dismissal wasexplained by Justice Rika at the Industrial Court inthis case as follows“The conduct by the employer must be shown tobe so intolerable that it made it considerablydifficult for the employee to continueworking.At the heart of constructive dismissal is breach ofthe duty of trust and confidence. Theemployer’s behaviour must be shown to havedestroyed or seriously undermined trust andconfidence. 2019 Deloitte Limited The Court ordered the respondents to recognizethe new union on the basis that it represented asimple majority of the unionisable employees . Respondent ordered to start negotiations leadingto the signing of a Collective BargainingAgreement and immediately start paying theunion dues to the claimants in respect ofemployees who had given their indication to jointhe union.31
Judicial considerations on employment and LabourCoca Cola East & Central Africa Limited vMaria Kagai Ligaga [2015] eKLRApplication of arbitration clauses inemployment contractsThe legal principles relevant to determiningconstructive dismissal were determined as follows:Industrial Court Cause No. 626 of 2013 JamesHeather – Hayes v African Medical andResearch Foundation (AMREF) [2014] eKLRa) There must be a repudiatory breach of thefundamental terms of the contract throughconduct of the employer.b) The conduct of the employer must be afundamental breach going to the root of thecontract of employment or which shows that theemployer no longer intends to be bound by oneor more of the essential terms of the contract. It would be unnatural to oust arbitration, aninternationally recognized practice of AlternativeDispute Resolution or any pretensions where thiswas clearly the intention of the parties . The Employment Act and other laws do not bararbitration in employment contractsc) There must be a causal link between theemployer’s conduct and the reason for employeeterminating the contract.d) An employee may leave with or without noticeso long as the employer’s conduct is theeffective reason for termination.e) The employee must not have accepted, waived,or conducted himself to be estopped fromasserting the repudiatory breach; the employeemust within a reasonable time terminate theemployment relationship pursuant to thebreach. 2019 Deloitte Limited32
Judicial considerations on employment and labourRedundancyOn discriminationCivil Appeal 236 of 2015 - Africa NazareneUniversity v David Mutevu & 103 others[2017] eKLRCivil Appeal No. 42 Of 2015 Ol PejetaRanching Limited v David Wanjau Muhoro[2017] eKLR There no requirement to issue two notices underthe Employment Act for redundancy Trial Court had found the respondent wasdiscriminated against on basis of race, as hewas paid less than his colleagues doing thesame work. The requirement to issue a separate notice tothe Labour Officer, simultaneously with thetermination notice, is mandatory. Procedure and rules on redundancy should beadhered to. Failure to observe the same would be a completemisapprehension of the law and practice. Trial Court ordered the respondent to pay theappellant 12 months’ gross pay in compensationfor unfair termination. The appeal held that the trial Judge was correctin finding that there was evidence ofdiscrimination based on race. The Court of appeal however held that quantumof damages was erroneous 2019 Deloitte Limited33
Judicial considerations on employment and labourSexual HarassmentTaxation of decreesC A S v C S Limited [2016] eKLRCause No. 379N of 2009 - D K Njagi Marete vTeachers Service Commission [2017] eKLRThe employer was found to be in breach of theEmployment Act for failure to have a sexualharassment policy.Protection of WagesPeterson Ndung’u & 5 Others v. KP&LCompany Limited [2014]An employee’s salary remains protected under theEmployment Act, even during suspension.A suspension without pay, offends the principles offair labour practices and Protection of Wages. 2019 Deloitte LimitedAn award made by the court for payment ofcompensation for unfair dismissal is subject tostatutory deductionsSec 49(2) of the Employment Act providesthat “any payments made by the employerunder this section shall be subject tostatutory deductions”The legislature uses the word “shall” undersubsection 49 (2) which is indicative of amandatory directive to the employer who pays anymoney pursuant to a recommendation of a LabourOfficer or order of the court to make statutorydeductions from a gross monthly payment madepursuant to subsection 49 (1) (c).34
Employment Act(Amendment) Bill 2019Highlights 2019 Deloitte Limited35
Employment Act (Amendment) Bill 2019Key HighlightsCasual employeeexcludes a piecerate worNon-competeclauses inemploymentcontracts will bevoid –Post
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