Introduction
The law governing industrial relations is of crucial importance to the economy of any country. Both the investors and their employees always want to know the rules and terms of their engagement. The employment law in Kenyan constitution defines the rights and obligations of both the employers and the employees. It is for this reason that in employment relations, the hallowed principle that the law should be certain and predictable so that both employers and employees know what their minimum responsibilities and entitlements are, has been firmly established.
What is redundancy?
Section 2 of the Employment Act No 11 of 2007 (the Act) defines redundancy 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 practice commonly known as abolition of office, job or occupational loss of employment.”
There are two broad aspects of this definition. The first one is that the loss of employment in redundancy cases has to be by involuntary means and at the initiative of the employer. It should not be a contrived situation. It has to be non-volitional. In most cases an economic downturn, brought about by factors beyond the control of the employer, which leaves the employer with no option but to take an initiative the consequence of which will be inevitable loss of employment.
The second aspect is that the loss of employment in redundancy has to be at no fault of the employee and the termination of employment arises “where the services of an employee are superfluous” through “the practices commonly known as abolition of office, job or occupation and loss of employment.”
For termination of employment under redundancy to be lawful, it must be both substantially justified and procedurally fair. Both are clearly mandatory requirements. Part VI of the Employment Act 2007 in a nutshell outlaws unreasonable or unjustified termination of employment, Section 40(1) of the Employment Act, which provides for the implementation of the redundancy decision, provides in mandatory terms that “[a]n employer shall not terminate a contract of service on account of redundancy unless … [he] complies with the … conditions” therein stipulated. As this is the central provision in the second issue of fair play in redundancy that we need to determine in this this appeal, I need to set out it verbatim. It reads:
An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions –
- Where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labor officer in charge of the area where the employee is employed of the reasons for, and the extend of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;
- Where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labor officer;
- The employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
- 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 an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service.”
All the paragraphs of the above subsections are clearly conjunctive meaning that they all have to be satisfied for termination on account of redundancy to be lawful. 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 minimize 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.
Section 40(1) of the Employment Act requires employers contemplating redundancy to give the employees or their trade union notice of at least one month. In addition to providing the parties with an opportunity to try and avert or minimize terminations resulting from redundancy and mitigate the adverse effects of such terminations, the other objective of a reasonable notice, as was stated in the English case of Williams v. Compare Maxam Ltd11 is: “To enable the union and employees who may be affected to take early steps to inform themselves of the relevant facts, consider possible alternative solutions and, if necessary, find alternative employment in the undertaking or elsewhere.”
Unless the circumstances are such that it would be an utterly futile exercise to hold any meaningful negotiations, consultation has to be real and not cosmetic. The New Zealand Chief Judge succinctly expressed this point in
the case of Commish v. Parliamentary Service12: “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.”
The other important aspect of procedural fairness in redundancies is the criteria employed to determine the employees to be laid off. This requirement is expressly provided for in Section 40(1)(c) of the 12 [1996] 1 ERNZ 404, at p. 417. Employment Act which places the burden of proving its compliance on the employer. In addition, Article 15 of the Supplementary Provisions to the ILO Recommendation No. 119–Termination of Employment Recommendation, 1963, concerning reduction of the work force also provides that:
“(1) The selection of workers to be affected by a reduction of the work force should be made according to precise criteria, which it is desirable should be established wherever possible in advance, and which give due weight both to the interests of the undertaking, establishment or service and to the interests of the workers.
Sub-Article (2) of that Article enumerates the criteria to be employed as including the:
“(a) need for the efficient operation of the undertaking, establishment or service; (b) ability, experience, skill and occupational qualifications of individual workers; (c) length of service; (d) age; (e) family situation; or (f) such other criteria as may be appropriate under national conditions, the order and relative weight of the above criteria being left to national customs and practice.”
The “seniority in time” in Section 40(1)(c) of the Employment Act and the “length of service” in Article 15 of the above ILO Recommendation No. 119–Termination of Employment Recommendation, 1963, in my view, embrace the ILO principle of “last-in-first-out” and is among the criteria to be considered.
REMEDIES FOR UNLAWFUL TERMINATION
The remedies available for wrongful and unfair termination are provided at section 49 of the E.A. and include: “
- The wages which the employee would have earned had the employee been given the period of notice to which he was entitled under this Act or his contract of service;
- Where dismissal terminates the contract before the completion of any service upon which the employee’s wages became due, the proportion of the wage due for the period of time for which the employee has worked; and any other loss consequent upon the dismissal and arising between the date of dismissal and the date of expiry of the period of notice referred to in paragraph(a)which the employee would have been entitled to by virtue of the contract; or
- 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.”
The reliefs under section 49 of the Employment Act are discretionary in nature. This position has been affirmed by the Supreme Court in Ken freight (E.A) Limited v Benson K Ngāti [2019] ELK as follows:
“When giving an award under Section 49 of the Employment Act, a court of law is expected to exercise judicial discretion on what is fair in the circumstances. The Black’s Law Dictionary 9th edition at page 534 defines judicial discretion as follows: “the exercise of judgment by a judge or court based on what is fair under the circumstances and guided by the rules and principles of law; a court’s power to act or not to act when a litigant is not entitled to demand the act as a matter of right”
CONCLUSION
Redundancy is a legitimate ground for terminating a contract of employment provided there is a valid and fair reason based on operational requirements of the employer and the termination is in accordance with a fair procedure. As section 43(2) provides, the test of what is a fair reason is subjective.
Disclaimer
The information provided in this article is intended for general legal advice and does not constitute legal advice for any specific transaction or case as each transaction presents a unique legal context, it is advisable to retain a legal adviser for specific transactions.
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