REDUNDANCY COMMENTARY – LABOUR LAWS
Introduction
As the COVID-19 pandemic continues to ravage through the world, organisations are having a difficult time striking that precious balance between the cost of production and achieving its objectives. Due to economic difficulties, employees have found themselves in an unfortunate state where they have been let go by the employers. However, some employers have also used this avenue to maliciously terminate employees’ contracts all in the name of redundancy.
The principal Act governing redundancy is the Employment Act, 2007 (which I shall subsequently refer to as the Act) and the International Labour regulations. Redundancy is defined under S.2 of the Act to mean; 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 (unnecessary, especially through being more than enough) and the practices commonly known as ‘abolition of office’, ‘job or occupation’ and ‘loss of employment’.
The Employment Act under S. 40 (1) lays out the strict guidelines which an employer has to adhere to when declaring an employee redundant. These are:
a. where the employee is a member of a trade union, the employer must notify:
• the union; and
• the labour officer in charge of the area where the employee is employed,
b. of the reasons for, and the extent of, the intended redundancy 30 days before the date of the intended date of termination on account of redundancy;
c. where an employee is not a member of a trade union, the employer notifies:
• the employee personally in writing; and
• the labour officer;
d. the employer has, in the selection of employees to be declared redundant had due regard to seniority in time (‘Last In, First Out’ – LIFO principle) and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
e. 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;
f. the employer has where leave is due to an employee who is declared redundant, paid off the accrued leave in cash;
g. 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
h. the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen (15) days’ pay for each completed year of service.
The employer MUST comply with these guidelines as was held in the cases of Hesbon Ngaruiya Waigi – v – Equitorial Commercial Bank Limited (2013) eKLR and Francis Maina Kamau – v – Lee Construction (2014) eKLR. If the employer fails to strictly comply with the provisions of S. 40 (1) of the Act, then said redundancy will be tantamount to unfair termination thus offending S.45 of the Employment Act.
For unfair termination, S.45 (2) of the Act provides that termination of employment by an employer is unfair if the employer fails to prove: –
(a) that the reason for the termination is valid;
(b) that the reason for the termination is a fair reason—
(i) related to the employee’s conduct, capacity or compatibility; or
(ii) based on the operational requirements of the employer; and
(c) that the employment was terminated in accordance with fair procedure.
S. 45 (3) further provides that an employee who has been continuously employed by his employer for a period not less than thirteen months (over one year) immediately before the date of termination shall have the right to complain that he has been unfairly terminated.
Section 43 of the Act requires the employer to provide justifiable reasons for terminating an employee’s contract. The Act states: –
(1) In any claim arising out of termination of a contract, the employer shall be required to prove the reason or reasons for the termination, and where the employer fails to do so, the termination shall be deemed to have been unfair within the meaning of section 45.
(2) The reason or reasons for termination of a contract are the matters that the employer at the time of termination of the contract genuinely believed to exist, and which caused the employer to terminate the services of the employee.
The Court of Appeal in Kenya Airways Limited – v – Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR stated that:
The employer must justify the redundancy. Notice of the intended redundancy should be issued to the employees likely to be affected and another notice issued to the labour officer. The notices under section 40(1) of the Act are mandatory. Both the notices themselves and their duration of 30 days under this provision are mandatory. Section 40(1) of our Employment Act does not expressly state the purpose of the notice. Although it also does not expressly provide for consultation between the employer and the employees or their trade unions before the final decision on redundancy is made, on my part I find the requirement of consultation provided for in our law and implicit in the Employment Act itself.
Additionally, the court agreed with the lower court that consultation before a final decision is reached, is mandatory and that the employer should avoid subjective criteria in terminating the employees’ contract on redundancy.
Things to be taken into account during consultation:
• Employees affected by the redundancy should be consulted individually and informed that their positions are at risk of redundancy and also allowed the chance to challenge the process and highlight the flaws in it;
• The employer should discuss the selection criteria with the employee at the consultation stage;
• In Industrial Court of Kenya Cause No. 390 of 2010, David Omutelema v. Thomas De La Rue, the Industrial Court (now Employment & Labor Relations Court) stated that consultations must be with an open mind. The employees affected by the redundancy should be encouraged to express their views individually. The employer should carefully consider the feedback from all stakeholders before the making of the decision. Accordingly, the notice of termination comes after all other processes have been exhausted, and a decision made.
From the above decision (the Kenya Airways case), for any termination of employment under redundancy to be lawful, it must be both substantially justified and procedurally fair:
1. To establish substantive justification the appellate court looked at the definition of redundancy under Section 2 of the Employment Act. The employer must prove that the loss of employment in redundancy cases has to be by involuntary means and at the initiative of the employer, brought about by operational requirements of the employer e.g., reduction of head count so as to respond to adverse market condition or improve efficiency. While the Court should be eternally vigilant to ensure that the reasons given are not pre-textual, it is not for the Court to substitute its judgment for that of the employer. The Court found that Industrial Court had overstepped its limited role of review when it essentially trashed the reasons given by Kenya Airways and held that the Company facing a cyclical downturn which could address by being run more efficiently rather than laying off its staff.
2. Procedural fairness is comprised two aspects:
1. Firstly, the employer must strictly comply with the provisions of Section 40 (1) of the Employment Act for termination on account of redundancy to be lawful, which consist of issuance of notices in the prescribed manner and statutory period as detailed above, (unless the CBA or contract of employment stipulates a longer period). The purpose of the provision requiring notice to be given is to elicit consultation between the Kenya is a state party to the International Labour Organization (ILO) and is bound by the ILO conventions. Article 13 of Recommendation No. 166 of the ILO Convention No.158- Termination of Employment Convention, 1982 which requires consultation between the employers on the one hand and the employees or their representatives on the other before termination of employment under redundancy. The requirement of consultation is implicit in the principle of fair play under Section 40 (1) of the Employment Act.
The purpose of the notice under Section 40 (1) (a) and (b) of the Employment Act 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”. Such consultations must be genuine rather than pre-textual- going through the motions merely to comply with the law
2. Selection Criteria- The employer must develop and apply an objective process for identifying the employees who will be affected by the redundancy. This must, of necessity be related to the reasons of the redundancy. Selection must be not the basis of such invidious factors such as participation in protected union activities or race, gender etc
Conclusion
The learned judge in Agnes Ongadi vs Kenya Electricity Transmission Company Limited (2016) eKLR, held that, “a redundancy, a restructuring or reorganization commenced with the sole purpose of laying off specific employees is a sham. Such is not justified and cannot be sanctioned by the court. There must be a rationale, justification and participation of the employees upon the employer setting out clear criteria to be followed. Where there are available jobs/positions, the employer must demonstrate that the available employees cannot be redeployed or engaged in such and that a layoff is the last option available.”
And as was stated in Josphat Cosmas Onyango vs Tribe Hotel Limited, it is an office and not an individual that is declared redundant.
Consultations should be undertaken and are meant to allow the employer and the employees to discuss and negotiate a way out of the intended redundancy, if possible, or the best way of implementing it if it is unavoidable as stated by the Court of Appeal in the case of Barclays Bank of Kenya Ltd & Another vs GM & 20 others, (Civil Appeal No. 296 of 2016).
NB: The consultations must be real and meaningful and not a charade.
In the unfortunate event that there is no solution in sight, meaning that redundancy is inevitable, measures should be taken to ensure that as little hardship as possible is caused to the affected employees.
NB: If you have any questions on the issue of redundancy, contact Obwogi Jonathan @ jona.obwogi@gmail.com, an associate at Hussein, Hibo & Associates Advocates.