Termination on account of redundancy
2 years ago
This has to be the longest post in the blog, so be warned as you proceed. It is also one of the most searched topics.
“To all typists: – You must have noticed the installation of the latest voice recognition software in your respective bosses’ offices. Unfortunately, this means that your services are no longer required. Your last day of employment shall be on Friday, 31st (which is four weeks away). Please arrange to collect your salary cheque on that day after clearing with all departments. The company wishes you all the best in your future endeavours.”
A redundancy is defined in the Employment Act, 2007 as: –
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.
In Kenya, redundancies are popularly referred to as ‘retrenchment’.
If the employee is unionisable then the CBA will provide the procedure to be followed prior to terminating an employment contract on account of redundancy. This will incorporate the procedures spelt out in the Employment Act and may include additional obligations such as giving the employee first priority should a job opening arise etc.
Notify the employee, the union (where the affected employees are unionisable) and the labour officer in charge for the area where the employee is employed, of the intended redundancy and of the reasons for and the extent of the redundancy.
The notice should not be for less than 30 days and it cannot be paid off in lieu, it must run its full course.
It has been held by the Court of Appeal that where the employee is unionisable, the notice should be issued to the union only and not to the employee – Thomas De La Rue (K) Ltd v David Opondo Omutelema  eKLR – http://kenyalaw.org/caselaw/cases/view/83724.
It is quite clear to us that section 40(a) and 40(b)provide for two different kinds of redundancy notifications depending on whether the employee is or is not a member of a trade union. Where the employee is a member of a union, the notification is to the union and the local labour officer at least one month before the effective redundancy date. Where the employee is not a member of the union, the notification must be in writing to the employee and the local labour officer…
The Court of Appeal has now clarified that only one notice should be issued – Africa Nazarene University v David Mutevu & 103 others  eKLR.
It has been held both by the Court of Appeal and by the Employment & Labour Relations Court that this first notice opens up the door for a consultative process with the key stakeholders – trade unions and employees. In holding as such, our court have relied on ILO Convention 158 on Termination of Employment Convention, 1982 as well as on ILO Recommendation 166 on Termination of Employment Recommendation, 1982.
The Convention is only binding upon the countries that have ratified it (Kenya has not) whereas the Recommendation has no binding force and is meant to provide guidelines which may or may not be adopted through legislation in ILO member countries. The Convention should not be binding in Kenya since we have not ratified it but in light of the court holdings, particularly of the Court of Appeal, employers are expected to consult (I think this is generally a good thing). The main purpose is to consult on measures that can be taken to avert or minimise the redunduncies and to mitigate the effects of the redundancy.
The relevant provisions of the Convention are: –
CONSULTATION OF WORKERS’ REPRESENTATIVES
Article 13 (1) When the employer contemplates terminations for reasons of an economic, technological, structural or similar nature, the employer shall:
(a) provide the workers’ representatives concerned in good time with relevant information including the reasons for the terminations contemplated, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out;
(b) give, in accordance with national law and practice, the workers’ representatives concerned, as early as possible, an opportunity for consultation on measures to be taken to avert or to minimise the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment.
NOTIFICATION TO THE COMPETENT AUTHORITY
Article 14 (1) When the employer contemplates terminations for reasons of an economic, technological, structural or similar nature, he shall notify, in accordance with national law and practice, the competent authority thereof as early as possible, giving relevant information, including a written statement of the reasons for the terminations, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out.
14. (3) The employer shall notify the competent authority of the terminations referred to in paragraph 1 of this Article a minimum period of time before carrying out the terminations, such period to be specified by national laws or regulations.
The relevant provisions of the Recommendation are: –
Article 19(1) All parties concerned should seek to avert or minimise as far as possible termination of employment for reasons of an economic, technological, structural or similar nature, without prejudice to the efficient operation of the undertaking, establishment or service, and to mitigate the adverse effects of any termination of employment for these reasons on the worker or workers concerned.
(2) Where appropriate, the competent authority should assist the parties in seeking solutions to the problems raised by the terminations contemplated.
Consultations on Major Changes in the Undertaking
Article 20 (1) When the employer contemplates the introduction of major changes in production, programme, organisation, structure or technology that are likely to entail terminations, the employer should consult the workers’ representatives concerned as early as possible on, inter alia, the introduction of such changes, the effects they are likely to have and the measures for averting or mitigating the adverse effects of such changes.
(2) To enable the workers’ representatives concerned to participate effectively in the consultations referred to in subparagraph (1) of this Paragraph, the employer should supply them in good time with all relevant information on the major changes contemplated and the effects they are likely to have.
Measures to Avert or Minimise Termination
Article 21. The measures which should be considered with a view to averting or minimising terminations of employment for reasons of an economic, technological, structural or similar nature might include, inter alia, restriction of hiring, spreading the workforce reduction over a certain period of time to permit natural reduction of the workforce, internal transfers, training and retraining, voluntary early retirement with appropriate income protection, restriction of overtime and reduction of normal hours of work.
Article 22. Where it is considered that a temporary reduction of normal hours of work would be likely to avert or minimise terminations of employment due to temporary economic difficulties, consideration should be given to partial compensation for loss of wages for the normal hours not worked, financed by methods appropriate under national law and practice.
Article 23(1) The selection by the employer of workers whose employment is to be terminated for reasons of an economic, technological, structural or similar nature should be made according to criteria, established wherever possible in advance, which give due weight both to the interests of the undertaking, establishment or service and to the interests of the workers.
The Court of Appeal decision was in the case of Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others  eKLR (http://kenyalaw.org/caselaw/cases/view/101491/). This was a huge case where about 450 employees of Kenya Airways sued the airline for unfair termination.
On the issue of consultations, 2 out of 3 of the Judges held that consultation was mandatory…
As the observed before, the statutory law of South Africa which requires consultation before contemplation of termination on account of redundancy is not applicable in Kenya where the statutory law does not provide for pre-redundancy consultation…
I disagree with Mr. Mwenesi that the appellant’s letter of 1st August 2012 did not constitute the notice envisaged by Section 40(1)(a) of the Employment Act as it did not have the names of the affected staff and there was no notice addressed to the appellant’s individual employees. My understanding of this provision is that when an employer contemplates redundancy, he should first give a general notice of that intention to the employees likely to be affected or their union. It is that notice that will elicit consultation between the parties, and I will shortly show that consultation is imperative, on the justifiability of that intention and the mode of its implementation where it is found justifiable. At that initial stage, the employer would not have identified the employee(s) who will be affected. So that notice cannot have the names of the employees as Mr. Mwenesi contended. It does not have to a calendar month’s notice as Mr. Mwenesi contended. The Act requires one month’s notice. The period runs from the date of service of that notice. It is after the conclusions of the consultations on all issues of the matter that notices will be issued to the affected employees of the decision to declare them redundant…
Kenya is a State party to the International Labour Organization (ILO), which it joined in 1964 and is bound by the ILO conventions [my comments – we are only bound by the Conventions that we have ratified]. Article 13 of Recommendation No. 166 of the ILO Convention No. 158-Termination of Employment Convention, 1982-requires consultation between the employers on the one hand and the employees or their representatives on the other before termination of employment under redundancy. It reads:…
I am of the firm view that the requirement of consultations implicit in these provisions. The purpose of the notice under Section 40(1) (a) and (b) of the Employment Act, as is also provided for in the said ILO Convention No. 158-Termination of Employment Convention, 1982, is to give the parties an opportunity to consider “measures to be taken to avert or to minimise the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment.” The consultations are therefore meant to cause the parties to discuss and negotiate a way out of the intended redundancy, if possible, or the best way of implementing it if it is unavoidable. This means that if parties put their heads together, chances are that they could avert or at least minimize the terminations resulting from the employer’s proposed redundancy. If redundancy is inevitable, measures should to be taken to ensure that as little hardship as possible is caused to the affected employees. In the circumstances, I agree with counsel for the 1st respondent that consultation is an imperative requirement under our law.
Based on the above, the employer is not expected to have the names of those who will be affected by the time the first notice is being issued. The employer should have the numbers and categories of employees who will be affected as well as the proposed selection criteria. The list of those to be declared redundant is confirmed after the consultations and when it’s clear whose job has not been saved through the mitigation measures which may be udnertaken.
Determine the specific employees who will be impacted by the redundancy.
The employer must examine the employees in the various affected categories, for example, drivers could be one category and packers could be another category. The employees should be examined on the basis of their skills, ability and reliability and seniority.
In Kenya Plantation and Agricultural Workers’ Union v Harvest Limited  eKLR, the Court held that: –
Section 40(1) (c) of the Act clearly provides that in selecting employees for redundancy, the employer shall have regard to seniority in time and to skill, ability and reliability of each employee of the particular class of employees affected by the redundancy.
The court holds that the idea of last in first out satisfies the seniority criterion. As far as skill, ability and reliability are concerned, it is the opinion of the court that the employer must have, prior to the redundancy exercise, instituted objective qualifications for skill, ability and reliability 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. The employer, in the court’s opinion, must demonstrate the objective score sheet and the ranking of the targeted employees against that score sheet with respect to the selection factors set out in section 40(1) (c) of the Act failing which, it is difficult to establish compliance with the section.
The court also holds that the selection parameters in section 40(1) (c) are not in alternative so that in a redundancy process, the employer must establish that all the parameters have been taken into account and in an objective manner. It is the opinion of the court that the employer enjoys the discretion to place given weights on each of the parameters but none can be applied in exclusion of the others.
In Thomas De La Rue (K) Ltd v David Opondo Omutelema  eKLR, the Court observed as follows:-
The second issue under section 40 relates to the selection criteria. In determining the employees to be declared redundant, section 40 (c) requires the employer to consider seniority in time, skill, ability, reliability of the employees. Although Mrs Guserwa, learned counsel for the respondent argued that there was no evidence adduced by the appellant to show that it had applied the criteria set out in section 40 (c) to the employees who were to be declared redundant, Exhibits Resp 4 and Resp 5 showed that 12 Kugler operators, among them the respondent, were evaluated on 14 criteria covering skill levels, ability, performance appraisal record, attendance, reliability and dependability, length of service and disciplinary record. The respondent scored an average16.5 out of a possible 35 points. Two other Kugler operators, who had scored 17 and 14.5, were selected for redundancy with the respondent.
In Kenya Union Of Domestic Hotels Educational Institutions And Hospital Workers (Kudheiha) v Aga Khan University Hospital Nairobi  eKLR, the Court quoted from the case of Banking Insurance and Finance Union (Kenya) versus Murata Sacco Society Limited, Cause No. 616 of 2010 where the Court held:
Thus reading the applicable law together with jurisprudence on how a redundancy should be undertaken, conducted and or processed; it involves the existence of genuine business reasons that require consultations, development of a pre-set criteria looking at seniority of affected staff; skill, ability, reliability and the class of each employee before arriving at the decision to terminate. Such a process must involve the Union without disadvantaging employees not Unionised and as of importance, the Labour Officer responsible for the area where the Respondent employer is situate must be informed and involved. The Labour Officer is the government representative, neutral in the redundancy process to advice both the employer and employees on the applicable law and adherence to best practice especially as regards the set criteria. The inclusion of the Union where applicable and the Labour Officer is not optional; the law is framed in mandatory terms. Any resultant redundancy process without compliance with the law is unprocedural and a breach to the employment contract. Such breach where pleaded is curable by payment of damages.
In the Kenya Airways case, 2 of the judges held as follows on the issue of the selection criteria: –
I do not agree with the learned Judge that the “last-in-first-out” principle in Section 40(1)(c) must always be employed. The employer can use all or any of the criteria in that paragraph. In the present technological age, if the “last-in-first-out” principle is held to be mandatory, it may defeat the employer’s objective of employing modern technology to carry out his business because it may be that the last employees to be employed, who according to this principle should be the first to exit, are the ones with the technological know how that the employer requires….
On whether LIFO was the sole criteria to be adopted to the exclusion of the other lawful criteria, I do not agree with the Industrial Court that LIFO is the sole mandatory criteria to be applied in redundancies. It is evident that section 40 (1) (c) requires the employers to apply all the selection criteria specified, with due regard to seniority in time, skill, ability and reliability of each employee. A sole application of LIFO would no doubt, be detrimental to any employer, as continuity and succession planning within the organization could be jeopardized.
The burden is on the employer to demonstrate the rationale behind selecting one employee over the other.
This is not the time to get rid of the employee you do not like; only cases that have gone full circle, whether arising from a performance issue or from a misconduct issue, can be used against an employee in assessing their skill or ability or reliability.
The selection rationale should be documented so that it can be produced in court should the redundancy be challenged.
The redundancy must be legitimate, simply changing the title of a position, without a legitimate change to the job description and skill set will not suffice; it will be clear that one is trying to get rid of an employee through the back door.
It is only after the lapse of the 30 days that the employer can go ahead and terminate the contract on account of redundancy. The notice period will be the termination notice period spelt out in the contract and this can be paid off in lieu.
As regards the payments due to an employee who is declared redundant, the most significant payment is the severance; which should not be less than 15 days’ pay for each year worked. No severance is due for incomplete years worked unless the contract provides for pro-rating of severance in such cases. Similarly, no severance is due for employees who are on fixed term contracts and who are declared redundant during the first year of the contract.
Other payments due to the employee are the salary up the last day worked and payment in respect of accrued leave and any other contractual payments.
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