Ishmael Otieno Ondigo v African Portland Cement Company Limited [2015] KEELRC 886 (KLR)

REPUBLIC OF KENYA

IN THE INDUSTRIAL COURT OF KENYA

AT NAIROBI

CAUSE NO. 1423 OF 2013

ISHMAEL OTIENO ONDIGO ……………......…...… CLAIMANT

VERSUS

AFRICAN PORTLAND CEMENT

COMPANY LIMITED ……………………...……...  RESPONDENT

Mr. Wesonga for the Claimant

M/S Oyombe for the Respondent

JUDGMENT

1.       The suit was brought vide a Memorandum of Claim dated 3rd September 2013 seeking maximum compensation of twelve (12)  months salary for alleged unlawful termination of employment and payment of terminal benefits to wit;

two months’ salary in lieu of notice in Kshs.302,000. 00;

salary for the month of July to November 2010 – Kshs.755,000. 00;

pay in lieu of leave days not taken for 10 years in Kshs.1,510,000. 00;

gratuity at 25% of the monthly salary for ten years worked in the sum of Kshs.4,530,000. 00; and

certificate of service.

2.       Brief facts of the Claim

The Claimant was first employed by the Respondent in 1999 as a  casual, sales clerk, without any written contract.  He worked in this capacity until the year 2007 in Kisumu.

3.       From 5th December 2002 the Claimant worked on six months fixed contracts.  The Claimant produced three fixed term letters of  appointment dated 5th December 2002, 12th August 2003 and 9th  December 2004.

4.      By a letter dated 18th December 2008, the Claimant was deployed as a Depot Supervisor Kisumu.

5.       By a letter dated 30th September 2009, the Claimant was     appointed Regional sales Representative for West / Central    Nyanza in acting capacity.  On 30th November 2009, the Claimant received a contract of employment as

Regional Sales  Executive.  The terms of the appointment included a gross salary   of Kshs.151,000. 00 comprising a basic monthly salary of  Kshs.111,000. 00 and house allowance of Kshs.40,000. 00.

6.      The Claimant reported to Sales Manager.  The appointment was   on two years contract to end on 30th November 2011 and was   placed on three (3) months’ probation.

7.       Upon completion of probation period, termination of contract was  by giving two (2) months’ notice or payment of salary in lieu of notice.

8.       The Claimant was entitled to thirty (30) working days leave per  year and upon taking leave was entitled to 30% of the basic salary as leave travelling allowance.

9.      By a letter dated 14th July 2010, the Claimant was suspended from    employment with immediate effect on allegations that he had  caused the Respondent loss of 11,173 bags of cement at Kisumu  Depot valued at Kshs.9,357,406. 00.

This followed close of year stock taking exercise conducted on 30th June 2010, which revealed    that the Claimant had made unauthorized credit sales to non-  guaranteed customers for 6,840 bags of OPC Cement valued at

Kshs.6,142,320. 00  It was  further noted that 4,333 bags of PPC  cement valued at Kshs.3,215,806 could not be accounted for.

10.     According to the Respondent, this liability and / or potential loss to  the company was realized during the tenure of the Claimant as the Regional Sales Executive, based at Kisumu.  The Claimant was held fully responsible and accountable

for the loss to the company.

11.      Investigations followed the suspension and the Claimant was  required to show cause within fourteen (14) days why stern disciplinary action should not be preferred against him and further Claimant was to demonstrate how

the company would recover  this liability.

12.     The Claimant was to keep away from the place of work during the period of suspension unless required to report by management.

13.     The Claimant in his sworn testimony, admitted that he had sold cement on credit as alleged to boost regional sales.  That he was    aware of the policy not to sell to non-guaranteed customers on credit.  But over the years he had made

such sales on credit without getting any objection from the Respondent.  That instead  he had gotten commendation and promotion for his good work in growing the cement sales in the region.

14.     In his defence the Claimant stated that some customers who had    taken cement on credit, reflected in the notice to show cause had  already paid their debt.  That upon receiving the notice he had collected outstanding debts of

over 6 million Kenya shillings.  That he worked under great pressure and was inhibited from collecting   the remaining debts because he was not allowed to go to the company premises and therefore could not access the relevant

record while under suspension.  The uncollected balance was  approximately Kshs.3. 2 million.  The Claimant offered to pay the iability and gave personal cheques to the Respondent to cover the balance.

15.     The Claimant stated that he had at all times acted in good faith   and was working to meet the targets set for him by the Respondent.  That his predecessors had also sold on credit to meet    the target and he had only followed suit.

16.     The Claimant admitted that cement was sold on cash basis and   only on credit to guaranteed customers.  However, in practice, the sales department made credit sales to customers who were well   known to the Respondent.

17.      The Claimant told the Court that he had a team of employees who consummated the sales and collected the money who   included the Depot Sales Clerk who was answerable to the   Finance Manager.  At the time the Deport Sales

clerk was M/S Lucy Atieno.  She oversaw the general operations of the Depot   including stocking and delivery of cement in and from the depot   or other sources.

18.     The Claimant also stated that the Deport sales supervisor overseessales in the sub-region and collected payments from customers.  His name at the time was Mr. Andrew Omondi.

19.     The Claimant said that he could not process the sales without the   assistance and approval by the two employees.  They worked as a team at the Kisumu Branch and the Respondent’s head office was at all material times aware of

sales on credit to known, non-  guaranteed customers.

20.    The Claimant stated that he never had any intention to defraud   the Respondent or cause any losses to the Respondent.  That stock   reconciliation was done on a daily basis and the team kept track     of the sales.

Impromptu audits were also done to vet the    procedures on a three (3) months basis by internal Auditors.  External Audit was done annually.

21.     The Claimant said that he did not deserve the dismissal  because he had a good track record and would have been able       to recover all credit sales had he been accorded opportunity.

22.     By a letter dated 18th November, 2010, the Claimant was  summarily dismissed.  This followed a written explanation against the charges levelled against him in the notice to show cause dated 14th July 2010 and subsequently

attended hearing on diverse dates to make representations on the matter.

23.     The Claimant was found guilty of making unauthorized sale of cement on credit worth Kshs.9,352,406. 00 to non-guaranteed customers occasioning loss of revenue to the company.

24.    The management noted that the Claimant was able to collect some money from the customers, but todate, a colossal amount still remained unaccounted for by the Claimant.

25.     The summary dismissal was effective from 18th November 2010. Liabilities to the company were to be recovered from his terminal  dues.

26.    The Respondent did not state the amount of terminal dues owed to the Claimant.

27.     The Claimant stated that in terms of the Respondent’s disciplinary code Clause 10. 2, the Claimant ought to have received a warning  letter for “failure to follow laid down policies, rules and procedures on operations”

which offence he had admitted to with reasonable mitigating circumstances.

28.     The Claimant aggrieved by the summary dismissal, instructed his   Advocates to write a letter of demand dated 30th June 2013, followed by this suit.

29. Reliefs sought

The Claimant produced a payslip for the month of December 2009 indicating the gross pay of Kshs.151,000. 00 which he earned monthly at the time of termination.

The Claimant told the Court that, due to the mitigating circumstances, at worst his employment ought to have been   terminated normally as opposed to summary dismissal.

30.    He therefore claims;

Notice pay

Two months’ salary in lieu of notice, in terms of the contract of  service which has no provision for summary dismissal in the sum of   Kshs.302,000. 00.

Salary for July to November 2010

During the time of suspension the Claimant was not paid any    salary.  The suspension started from 14th July 2010 to the date of  dismissal, which was 18th November 2010.

This was a period of four (4) months and four (4) days.  The   Claimant seeks Kshs.755,000. 00 salary for this period.

The Court notes that the letter of suspension did not state that the suspension was to be without pay.

The contract of employment was silent on this matter.

31.     The Respondent however, relies on Clause 12. 1 of the Respondent’s Human Resource Policy which according to the Respondent  provides that no salary is payable during the suspension period.

The manual is not referenced in the contract of employment and   no evidence was tendered to show that the document was part  and parcel of the Claimant’s terms and conditions of service.

The provision provides for a maximum sixty (60) days period of suspension.

It also provided that suspension without pay was in respect of  “serious misconduct disciplinary cases which are criminal in  nature”.No evidence was led to show that the charges levelled   against the Claimant were criminal in nature.

To the contrary, all  the evidence led by both parties indicate that the claimant had  disregarded company credit policy with the sole purpose of   achieving set sales targets.  That this was a practice overlooked by    the Respondent over a long

period of time and was not criminal    in nature.

32.     The Court finds that the Claimant’s letter of suspension did not  suspend him without pay; his contract of employment did not provide for suspension without pay, and the charges levelled against him were not criminal in nature and therefore

he was entitled to payment of salary for the period of suspension in the   sum of Kshs.755,000. 00.

33. Payment in lieu of leave for ten years

It cannot be disputed that the Claimant served the Respondent in  various capacities from early 1999 up to 18th November 2010 a period of more than ten (10) years.  The Claimant was up to 2007, employed on short term contracts.

The written contracts    presented before Court did not provide the terms and conditions of service.

34.    However the Claimant told the Court that he was not granted  annual leave for the entire period he served the  Respondent.

35.     Indeed, the Respondent in its Memorandum of Defence admits that the Claimant was not granted leave for the entire period he  worked stating that the Claimant was not entitled to any  payment in lieu of leave days not taken for ten (10) years because       “the Claimant was employed on a temporary basis by the  Respondent intermittently and whenever he qualified for leave, it   was paid to him or he availed it.”

36.    The Respondent did not provide any documentary evidence to show that the Claimant ever went on leave or was paid in lieu of  leave.  The employer is mandated under Section 28 of the Employment Act, to give an

employee after every twelve consecutive months of service with the employer not less than twenty one working days of leave with full pay.

37.     The contract of appointment dated 10th November 2009,  provided the Claimant with thirty (30) working days leave.

38.     The Claimant seeks payment of Kshs.1,510,000. 00 for the entire period of ten (10) years as payment in lieu of leave days not taken.

39.    The proviso to Section 90 of the Employment Act provides that employment claims are time barred after three (3) years “or in the    case of continuing injury or damage within twelve (12) months next after cessation thereof.”

40.    Failure to grant the Claimant annual leave which is a statutory  obligation constitutes a continuing injury for the entire period the employee is at work and therefore, the claim is not time barred.

41.     The Claimant having proved on a balance of probabilities that he  was not granted any leave days, the Court awards him payment in lieu of leave as prayed in the sum of Kshs.1,510,000. 00.

42. Gratuity at 25% for the ten (10) years worked.

The Claimant relies on the Employee Handbook page 17 and The Human Resource manual produced as Appendix 3(1) at page 12 of the statement of Claim.

Although the Claimant was registered with NSSF and   contributions were made, the Claimant submitted that this was an    additional benefit given to all employees on contracts.  Indeed at

the time of termination the Claimant was on a two years contract.

Clause 2. 0.6. 2 titled contract of employment provides inter alia  “All employees on contract will be paid gratuity at the end of  contract period.”

43.    Clause 4. 1 of the Human Resource Manual titled pension / gratuity   provides “All employees on fixed term contract shall be paid gratuity as per their contract of employment in line with labour laws.”

44.    The contract of employment, is silent on this matter.  The Respondent while admitting that the Human Resource Policy provided for payment of gratuity to employees on contract, qualifies that provision in that Clause 11. 6.13 of the same policy

document, excluded employees who had been summarily dismissed from getting gratuity.  The Respondent further states    that, the Claimant is excluded from gratuity payment by dint of  Section 35(5) and 6(d) of the Employment Act,

because he was registered with NSSF and the Respondent contributed to the fund on his behalf.

45.    The Court finds that, the Claimant is not entitled to payment of gratuity because it was not provided for in his contract of   employment, he was a member of NSSF and the employer contributed to the fund on his behalf.

46. Leave Allowance for ten (10) years.

This allowance was provided for travel purposes, upon taking  leave.  It is clear that the Claimant was not granted leave for the   ten (10) years he worked for the Respondent.  This claim does not arise and same is dismissed.

47.     Damages for unfair termination.

The Claimant admitted that he had flouted company policy          though he justified the deviation on the basis that;

it was a practice by his predecessors with a view to meet set sales targets;

this practice was in respect of known customers and he had done it in good faith with the sole aim of boosting targets;

he had collected substantial portion of the uncollected debts and would have collected the balance if he had been afforded humble opportunity;

he had taken personal liability and offered his personal postdated cheques to cover the uncollected balance;

he had a very good track record for the period of ten (10) years, hence the promotions he had received.

48.    The Employment Act provides for minimum terms of employment   to all employees.  However, where a contract of employment  provides superior terms to an employee to those provided by the  Act, the parties are bound by the terms of

the written contract.  Accordingly, the Respondent was bound to terminate the employment of the Claimant in terms of the contract of employment and not to summarily dismiss him.

49.    As a matter of fact, there was no immediate cessation of  employment as is contemplated in a summary dismissal.  The Claimant was subjected to disciplinary process that took four (4)    months to complete.

50.    The Court therefore commutes the summary dismissal to normal    termination of employment in terms of the contract of  employment dated 30th November 2009.  The Claimant is  therefore entitled to payment of two (2) months’

salary in lieu of  notice in the sum of Kshs.302,000. 00.

The Claim for compensation does not arise following this finding by the Court.

51.     In the final analysis, the Court awards the Claimant as against the  Respondent;

two months’ salary in lieu of notice in the sum of Kshs.302,000. 00;

salary for the period of suspension from the month of July to November 2010 in the sum of Kshs.755,000. 00;

payment in lieu of leave for ten (10) years in the sum of Kshs.1,510,000. 00;

total award Kshs.2,567,000. 00;

the award is payable with interest at Court rates from date of this judgment till payment in full;

the Claimant is to be paid costs of the suit;

the Respondent to provide the Claimant, certificate of service within thirty (30) days from date of this judgment.

Dated and Delivered at Nairobi this 19th day of June, 2015.

MATHEWS NDERI NDUMA

PRINCIPAL JUDGE