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Introduction

Voluntary early retirement (VER) is normally spoken of in the context of an organizational restructure or down-sizing. It is seen as one of the alternatives to a redundancy.

VER is not dealt with in the Employment Act or in any of the other labour laws. International Labour Organization Termination of Employment Recommendation, 1982 (No. 166) at Part III requires employers and employees to seek alternatives to termination of employment on account of redundancy.

The hope and desire of any employer is for as many as are offered to take up the VER thereby enabling the employer to avoid legal risks associated with redundancies.

retirementLegal position

VER is an offer which becomes contractually binding on being accepted by the employee. It is not a termination initiated by the employer, but a consensual termination, proposed by the employer.

VER should be voluntary. The employee may accept or refuse the offer and should not be punished for declining.

Where there exists coercion or unduly influence, the VER agreement will be nullified and the same may be termed as an unlawful termination.

A VER Agreement supersedes any provision in the contract of employment and/or CBA on termination. The terms should, therefore, be carefully scrutinized.

There is nothing legally wrong with the terms of a VER being less favourable than those previously offered by a company. This was the issue in National Bank of Kenya Limited v H B & 103 others [2017] eKLR, the Court of Appeal held that it did not matter that the employees got less favourable terms. What matters is that the parties voluntarily agreed to the terms.

In Communication Workers of Kenya v Telcom Kenya Limited [2017] eKLR the court held that;

The fortunes and circumstances of employers are a moving target and it is therefore not always possible to guarantee standard Voluntary Early Retirement (VER) terms for all staff for all time. It is not possible to establish an immutable precedent in Voluntary Early Retirement (VER). Applicable terms may vary depending on the circumstances which the employer finds itself”.

There is a difference between VER and early retirement especially if the latter is provided in the employee policies, CBA or any other governing documents. Whereas VER is elective based on parameters set out by the employer and the employee may opt for it or choose not to, the terms of early retirement are based on the employment contract.

Que: is it ok to have a disparity between the terms of a VER and the terms offered for a redundancy? In National Bank of Kenya Limited v H B & 103 others [2017] eKLR, the Court of Appeal was of the view that it does not matter that the employees got less favourable terms. What matters is that the parties voluntarily agreed on the terms of the VER.

 

About Anne Babu

Anne is an Advocate of the High Court of Kenya and the Founding Partner of Anne Babu & Co. Advocates. She has practiced employment law for over 10 years. She is a repository junkie and a lover of editing.

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Comments

  1. Robert Ngetich says:

    Thank you for the informative features. What process should an aggrieved party follow where there exists coercion or undue influence on Voluntary Early Retirement ?

    1. Anne Babu says:

      Refuse to take it up.

  2. Robert Ngetich says:

    Thank you for your response. The aggrieved party did in fact apply for the voluntary separation due to coercion and undue influence. In the application letter the instances of coercion and undue influence were cited but the employer did not address them and proceeded to accept the purported voluntary separation. Is there recourse in a court of law in such instances?

    1. Anne Babu says:

      Yes, seek damages for constructive dismissal.

  3. Jerry Owinyo says:

    Thank you Anne for this gold mine of information.

    My company has put up an offer for a voluntary separation package from the 1st to the 19th of August, which I am really keen on applying.

    I was however to apply for maternity leave by the end of the same August. How to I ensure that my maternity leave days are included in the voluntary separation package, as it states that all accrued leave days will be paid.

    Thank you in advance.

    1. Anne Babu says:

      The employer is bound to pay for the leave only if it falls within your time as an employee.

  4. Philip odaga says:

    Very informative

  5. Jay Ogunda says:

    Thank you for such an informative piece. My question is: Can an employee apply for early retirement from their end and get their benefits or they just resign and loss the benefits even after working for the employer for quite some time?

    1. Anne Babu says:

      Thank you for the compliments. Early retirement is not provided for in the labour laws, it is therefore governed by the terms of the organization’s policies.

  6. Rono says:

    Hi Anne, I became visually impaired in 2015 due to a decease , my employer advised me to retire on medical grounds and they sent me to their doctor for assessment who recommended retirement on medical grounds. I accepted but the company insisted that I write a letter to that effect, all this while I was undergoing treatment for a different decease that affected mY CNS I yielded to their advise and the letter to be retired .After two years the insurance gave me salary for one year only I am disable and and I had expected more than that, I worked for a bank. Please advisr

    1. Anne Babu says:

      Pole sana for the physical challenges. An employer is permitted to let an employee go once they receive confirmation from a doctor that the employee is not in a position to do the work they were employed to do. Unfortunately, there is no obligation on the employer to give the employee a package in such an instance. In your case, you were fortunate enough to have the medical cover that paid you for an extra one year. Compensation is only due if the illness is work related in which case WIBA applies.

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