COVID-19: The Strategies Available to a Kenyan Employer

Background

A myriad of issues confronts employers during this pandemic. One of the critical challenges for employers has been how to treat employees when they have no incoming revenue stream to maintain the wage bill.

The Covid-19 pandemic exposes the gaps that exist in Kenya employment laws when dealing with an unprecedented situation.

Below we discuss are some of the strategies available to Kenyan employers.

Unpaid Leave

Employers who are unable to sustain their employee wages during this period may require their employees to take unpaid leave.

There are no legal provisions under the laws of Kenya for unpaid leave. Section 28 of the Employment Act,2007 guarantees the Employees right to paid leave.

The employees can only take unpaid leave with their written consent or if the contracts of employment or the employer internal employment rules allow.

Salary Cut

Section 10 (1) of the Employment Act, 2007 sets out the Employment particulars that must be in a contract of employment.

These particulars include the remuneration, scale or rate of remuneration, the method of calculating that remuneration and details of any other benefits.

Where any matter stipulated in subSection 10(1) changes, the employer under Section 10 (5) of the Employment Act, 2007 should revise the contract to reflect the change in consultation with the employee and notify the employee of the change in writing.

Our Kenya Courts have emphasized the need for consultation and agreement before a salary cut. For instance, in the case of Joseph Wanjohi Wambugu v Paws Africa Safaris Limited [2018] eKLR

1. The claimant, in this case, stated that the employer unilaterally slashed his salary, first by 25% and subsequently by 50%.
2. The employer, on the other hand, pleaded that due to a depressed economic environment triggered by post-election violence in 2008, it was unable to sustain the obtaining staff salaries and that all employees, including the claimant, agreed to take a pay cut, as a way of navigating through the harsh economic times.
3. The court concluded that the 25% salary reduction was with the full knowledge and acquiescence of the claimant, and he could not claim withheld salary on account of this reduction. Regarding the 50% reduction, however, the court found that this was a unilateral decision taken by the employer.

Similarly, in Ibrahim Kamasi Amoni v Kenital Solar Limited [2018] eKLR, the court agreed with the claimant that the reduction of his salary was unilateral. The court stated that for a reduction to be valid, an employer must obtain the approval of the employee by communicating the reduction in writing. The court also pointed out that the salary is a fundamental term of employment whose reduction hurts the employee’s livelihood and should not be done unilaterally or arbitrary by an employer.

In the case of Ronald Kampa Lugaba v Kenol Kobil Limited [2016] eKLR, the court stated that the critical word in Section 10 (5) of the Employment Act,2007 is “consultation.”

An employee’s pay cannot, therefore, be unilaterally varied without prior consultations and agreement in writing between the employee and the employer.

Termination of fixed-term contracts

Fixed-term employment contracts are entered into for a specific period and automatically terminate on the expiry date.

The fixed-term employment contract will naturally end, and the termination thereof will not (necessarily) constitute a dismissal.

At common law, an employment contract for a fixed-term terminates automatically upon the expiry of the period unless the parties agree, expressly or tacitly, to renew it.

Fixed-term contracts, as a general rule, carry no rights and obligations beyond their date of expiry, and the employer has the discretion to renew or not to renew.

Most recent decisions of the Employment and Labour Relations Court of Kenya hold that fixed-term contracts carry no expectation of renewal.

In Bernard Wanjohi Muriuki v. Kirinyaga Water & Sanitation Company Limited & Another in IC at Nairobi, Cause No. 1541 of 2010, which was relied on by the court in the reported case of Teresa Carlo Omondi v Transparency International – Kenya [2017] eKLR, the court upheld the discretion of an employer in the renewal of fixed-term contracts. The court held that an employer had no obligation to give reasons for not renewing a contract. Further requiring an employer to provide reasons is the same as asking an employer to explain to a potential employee why they have rejected their job application.

An employer should consider the implications of Kenya Union of Domestic Hotels Educational Institutions Hospitals and Allied Workers v Office of the Vice-Chancellor, Kibabii University [2017] eKLR. The court decided that keeping staff on fixed-term contracts and requiring them to keep applying for the jobs is unfair labor practice.

Termination of Employment Contract with Notice

Under Section 35 (1) of the Employment Act, an employer can pursue the termination of an employment contract of service with notice:

1. An employer may terminate a contract for payment of daily wages may at the end of the day without notice;
2. An employer may terminate a contract for the payment of wages at intervals less than a month may by notice equivalent to that period; and 
3. A 28 days notice in writing may terminate a contract for the payment of monthly wages or where payment is in a duration exceeding one month.

An employer must ensure that the notice is explained to the employee orally in a language they understand if the employee is unable to understand the notice of termination.

Section 36 of the Employment Act provides for payment in place of notice. Therefore if the employer terminates a contract without notice, they are required to pay the employee the remuneration which they were entitled to earn during the notice period.

The requirement of the notification and hearing before termination apply.

Redundancy 

According to Section 2 of the Employment Act, 2007 redundancy is “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 the abolition of office, job or occupation and loss of employment”.

Redundancy carries with it legal implications in terms of the individual employment rights arising from redundancy dismissals; and collective labor law rights in connection with information and consultation.

Employment law in Kenya identifies the economic rights enshrined in the Constitution of Kenya and has responded to the effect of redundancy on the individual through the law of unfair dismissals, information, and consultation obligations.

Individuals have the right not to be dismissed unfairly because of redundancy.

Section 40 of the Employment Act requires an Employer to meet the procedural requirements before the employer terminates a contract of service on account of redundancy.

Before an employer terminates a contract of service on account of redundancy, they must comply with these conditions:

1. Notify the trade union where the employee is a member of a trade union and the area labor officer. The notice should state the reasons for, and the extent of, the intended redundancy. The notice should be issued not less than a month before the date of the proposed redundancy date of termination;
2.  Notification to the employee personally in writing and the labor officer where the employee is not a member of a trade union;
3. Selection Criteria. The employer should consider the seniority in time, the skill, ability and reliability of each employee affected by the redundancy, in the selection of employees to be declared redundant;
4. Section 40(1)(c) of the Employment Act requires the employer not to place an employee at a disadvantage due to their membership in the trade union where the collective agreement between an employer and a trade union sets out terminal benefits payable upon redundancy;
5. Payment by the employer the leave due to an employee who is declared redundant;
6. Payment of not less than one month’s notice or one month’s wages instead of the one month’s notice to the employee declared redundant; and
7. Payment of severance pay. The rate of payment is not less than fifteen days’ pay for each completed year of service to the employee declared redundant.

An employer must comply with the notification conditions, the redundancy selection methodology conditions and the payment of terminal dues requirements set out in Section 40 of the Employment Act.

The Kenyan law does not prescribe the extent of explanations, the explanations to staff must be as detailed as possible, and within fair labor practices. It should be clear that positions and not employees have become redundant. Communication should not be a decision that is initially communicated by the employer, but a proposal that ushers in constructive social dialogue.

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.

It is probably in the area of selection that most employers find difficulty and are found liable for unfair dismissal. The employer must make sure that the selection is fair and objective. There may be more than one fair method of selection for redundancy; the issue for the employer will be whether the procedure which is adopted is reasonable. In the absence of such evidence, a court may well find the dismissal unfair.

In Kenya Union of Domestic, Hotel, Education, Institutions and Allied Workers [KUDHEIHA] v. Rabai Road Primary School Industrial Court of Kenya Cause Number 231 of 2010, Justice I.E.K Mukunya found that while the employer had correctly terminated the contract of the employee for economic reasons the employer failed on fairness and awarded compensation.

Redundancy & Discrimination

Employers should not discriminate directly or indirectly, against an employee or prospective employee or harass an employee or prospective employee.

Discrimination may arise during the recruitment, training, promotion, in the terms and conditions of employment, termination of employment, or any other matters arising out of employment.

The Employment Act, 2007 provides that race, colour, pregnancy, sex, marital status, language, religion, political or other opinions, nationality, ethnic or social origin, disability, or HIV status are grounds of discrimination.

In the case of Aviation and Allied Workers Union v Kenya Airways Ltd & 3 others [2012] eKLR the Court while finding that Kenya Airways had discriminated on the grounds of race and nationality stated that Kenya Airways did not explain what the new business model was in which the selected employees could not fit.

The employer must ensure the selection criteria is objective and not subjective and within the provisions of Section 5 so that claims for discrimination do not arise.

Redundancy and Unfair Dismissal

Any employee dismissed because of redundancy has the right not to be unfairly dismissed. Common complaints concern failure to inform and consult, unfair selection, and failure to consider alternative employment.

It is necessary for an employer to establish valid reason or reasons for termination, and demonstrate that it followed a fair procedure as required under Sections 43 and 45 of the Employment Act,2007. An unfair redundancy process results in an unfair termination. 

A fair redundancy procedure involves notification to employee, their trade union, and the government of the intended redundancy.

In an unfair dismissal claim under redundancy, it is for the employer to prove that the dismissal was because of redundancy.

Conclusion

Employers are encouraged to retain their employees as long as it is financially feasible to do so during this COVID-19 pandemic.

Employers are also encouraged to follow the proper legal procedure while executing the options available to them to avoid claims such as unfair termination by employers after they have implemented these strategies.