REDUNDANCY

By tloBlog

Redundancy as defined in Section 2 of the Employment Act of 2007 refers to the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.

Redundancy as defined in Section 2 of the Employment Act of 2007 refers to the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.

Termination of an employee by an employer on grounds of redundancy is provided for in Section 40 of the Employment Act. These provisions are mandatory in nature and this was discussed in Hesbon Ngaruiya Waigi v Equitorial Commercial Bank Limited (2013) eKLR where the Court held that the conditions set out in Section 40 are mandatory and are not left to the choice of the employer. This is because redundancies affect workers’ livelihoods and where this must be done by an employer, they must put into consideration the provisions of the law.

ISSUES FOR CONSIDERATION IN REDUNDANCY

  1. Issuance of a notice

If the employee is a member of a trade union, the employer must notify the union and the labour officer in charge of the area of the intended redundancy. If the employee is not a member of a trade union, the employer must notify the employee personally in writing and the labour officer.

These notifications must take place not less than a month prior to the intended termination.

In Kenya Union Of Journalists and Allied Workers v Nation Media Group Limited [2013] eKLR it was stated that the union shall be notified of an employer’s intention to declare employees redundant by giving 30 days’ notice before such redundancy takes effect. This further discussed in Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] eKLR where the Court of Appeal required that notice to the employee and the labor office should be given in one month.

  • Reasons for termination

Notice of impending termination is not enough, the employer needs to provide reasons as to why the employee is redundant and hence must be let go. A failure to provide reasons could lead to the employee claiming unfair termination provided for under Section 45 of the Employment Act. In Philomena Wachara Obenge v Easy Mart Limited (2012) eKLR, it was held the disclosure of reasons for termination of employment is not an academic exercise but rather, a requirement of fair play, and an explanation should be given accordingly.

  • Selection criteria

In choosing who is to be terminated as a result of redundancy, the employer must have due regard to seniority in time (Last In First Out Principle) and skill, ability and reliability of each employee of the particular class of employees affected by the redundancy. The employer is supposed to use objective selection criteria to determine who is to be terminated.

In Williams v Compair Maxam Ltd [1982] ICR 156 it was held that the employer will seek to establish criteria for selection, which so far as possible does not depend solely upon the opinion of the person making the selection but can be objectively checked against such things as attendance record, efficiency at the job, experience, or length of service.

Furthermore, the court in Aviation and Allied Workers Union v Kenya Airways Ltd & 3 others [2012] eKLR stated that an employer should avoid subjective criteria. It must however be noted that the Last In First Out Principle must be exercised with caution as it may not be suitable in every situation as was seen in this case where Murgor J noted that:

“… the sole application of this principle would be detrimental to the employer as continuity and succession planning within the organization could be jeopardized.”

In Doris Kairuthi Kaaria & 59 others v Kenya Methodist University [2017] the Court stated that criteria of skill, ability, and reliability, the employer ought to have, prior to the redundancy, instituted objective qualifications for skill, reliability and ability attached to the office held by the workers against which the skills, ability and reliability possessed by the individual workers targeted in the redundancy will be scored or measured against.

  • Consultations

Consultations involve the employer explaining the reasons as to why the redundancy is to take place as well as the selection criteria that is to be used in the process. Consultations also provide a forum for employees to voice their concerns with the employer in order for them to be addressed. During this process, any alternative may be proposed in order to reduce the number of people to be terminated.

While not provided for in the Employment Act, in Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR, a majority of the Court of Appeal agreed with the lower court that consultation was mandatory.

Furthermore, Maraga J emphasized in the case that consultations are a requirement as per Article 13 of Recommendation No. 166 of the ILO Convention No. 158 – Termination of Employment Convention, to which Kenya is party to and which applies to Kenya by virtue of Article 2(5) and 2(6) of the Constitution of Kenya, 2010. Moreover, the requirement of consultation is implicit in the principle of fair play under Section 40 (1) of the Employment Act. 

The court in Barclays Bank of Kenya Ltd & Another vs GM & 20 others, (Civil Appeal No. 296 of 2016) agreed with the decision in the Kenya Airways case where it was held that real consultations are an imperative requirement. It was further emphasized that the consultation must be real and not cosmetic, citing with approval the New Zealand case of Cammish vs Parliamentary Service (1996) 1 ERNZ 404 stating thus:

“Consultation has to be a reality, not a charade. The party to be consulted must be told what is proposed and must be given sufficiently precise information to allow a reasonable opportunity to respond. A reasonable time in which to do so must be permitted. The person doing the consulting must keep an open mind and listen to suggestions, consider them properly, and then (and only then) decide what is to be done.”

OTHER IMPORTANT CONSIDERATIONS

  • 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;
  • The employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
  • 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
  • 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.

QUESTION OF UNFAIR TERMINATION ON ACCOUNT OF REDUNDANCY

The failure of an employer to follow due procedure in termination or substantially justify the termination due to redundancy amounts to unfair termination as provided for in Section 45 of the Employment Act, as was seen in Aviation Allied Workers Union Kenya & 3 others v Kenya Airways Limited, whereby 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. The trial court and the Court of Appeal held in favor of the Union stating that the termination had been procedurally unfair citing that Kenya Airways did not have valid reasons for the terminations, there was no meaningful consultation conducted and the process for selection of the affected employees was flawed.

In Kombo Kai Mtoro v Panal Freighters Ltd [2013] eKLR, the employer did not inform the Local Labour Officer about the declaration of redundancy of the Claimant. The employer did not also copy the termination letter to the local Labour Officer. Consequently, the Court held that the dismissal was unprocedural and substantively unfair.

Additionally, in Francis Maina Kamau v Lee Construction [2014] eKLR, the Claimant’s employment was terminated because the project in which he was working had come to an end. The Court noted that there had been no evidence that the Respondent complied with any of the conditions set out in Section 40 of the Employment Act, 2007. Consequently, the Court found that the termination of the Claimant’s employment was unfair within the meaning of Section 45 of the Act. The same was held in Jackson Muiruri Mwangi v Sinohydro Corporation (K) Limited [2016] eKLR where Claimant stated that he was employed by the Respondent as a driver effective 8 July 2009. He worked as such until 14 April 2012 when his employment was terminated on account of reduction of work in the Respondent Company without following procedure or substantially justifying it.

If the termination is deemed to have been unfair, the employee is entitled to any of the remedies enlisted in Section 49 of the Employment Act, which include:

  • Payment of wages of the employee for the period for which notice would have been given.
  • Payment of wages, the equivalent of a number of months wages or salary not exceeding twelve months based on the gross monthly wage or salary of the employee at the time of dismissal.
  • Re-instatement of the employee.

CONCLUSION

From the foregoing, where termination of employment is on grounds of redundancy, the employer has to:

  1. Issue a general notice to all employees of the impending termination of employment on account of redundancy.
  2. Select the employees to be declared redundant after checking their seniority, skills, ability and reliability through a structured and comparative selection criterion. The criteria should be applied uniformly to all employees.
  3. Issue a 30 days’ notice in writing to the employees targeted in the redundancy exercise and the labour office. For employees who are members of a trade union, the notice should be directed to the union.
  4. Consult with the employees targeted for redundancy.
  5. Pay the employees declared redundant one month’s wages if the notice period is shorter than a month.
  6. Pay all pending leave days in cash to the redundant employees.
  7. Pay the employees declared redundant a severance pay of not less than 15 days’ pay for each year of completed year of service.