Linda Nzemba Mcgaw v Crown Motors Group Ltd [2021] KEELRC 1033 (KLR)

REPUBLIC OF KENYA

IN THE EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA AT NAIROBI

CAUSE NO 536 OF 2017

LINDA NZEMBA MCGAW.......................................CLAIMANT

VERSUS

CROWN MOTORS GROUP LTD.......................RESPONDENT

JUDGMENT

1. This is a claim against the Respondent by which the Claimant seeks compensation for alleged wrongful termination. The Respondent has disputed the claim. It denies liability generally and denies that the Claimant is entitled to the remedies sought.

2. The parties filed their respective pleading. In addition, they filed their respective witness statements and lists of documents.

3. The Claimant’s case is that by a contract dated 1st July 2015, the Respondent engaged her services as a Human Resource Manager. This was on permanent and pensionable basis.

4. She contends that she worked for the Respondent diligently and helped the Respondent meet its targets as her performance was exemplary.

5. The Claimant asserts that despite this exemplary performance, she received a letter from the Respondent’s Managing Director on 27th October 2016 terminating her services with the Respondent allegedly on account of redundancy.

6. The Claimant asserts that the letter was abruptly delivered, without prior notice to or consultations with her on the impending termination. She asserts that the termination caused her humiliation, mental and bodily anguish and embarrassment as she was unable to meet her financial obligations as and when they fell due.

7. The Claimant further states that she was expectant at the time of her termination. However, as a result of the dismissal, she underwent so much anguish that she lost the pregnancy.

8. The Claimant asserts that the termination was handed to her in total disregard for the law on redundancy as set out under the Employment Act and international law on the matter. Further, the events resulting in her irregular release from her job were executed in a manner that blatantly violated her constitutional protections. In consequence, she prays for compensation as set out in the Memorandum of Claim.

9. The Respondent entered appearance on 3rd April 2017 and filed a Memorandum of Response. In the reply, the Respondent basically denies the Claimant’s assertions save for the fact that she was its employee and that she was relieved of her job on account of redundancy.

10. The Respondent states that it was experiencing a downturn in its revenues at the time. That as a result, it was faced with the reality of shutdown unless it took measures to ensure its survival. These included staff cuts through redundancy declarations.

11. The Respondent asserts that the Claimant was unfortunately affected by the decision and was laid off. The Respondent asserts that it did everything within the law in the process and even offered counseling services to the Claimant.

12. It is the Respondent’s case that processing of the redundancy was lawfully executed, the decision was not actuated by ulterior motive as suggested by the Claimant and that the Respondent dutifully paid the Claimant all her redundancy dues. That the Claimant was also issued with a Certificate of Service and upon the foregoing, the Claimant released the Respondent from all other financial claims arising from and or associated with the contract of service between the parties.

13. On the trial date, the parties entered consent to have the cause disposed of on the basis of the totality of the documents on record. As rule 21 of the Employment and Labour Relations Court (Procedure) Rules, 2016 permits this, I granted the request and adopted the parties’ consent as an order of the court.

14. Consequently, the parties were to file their written submission on the matter. However, only the Claimant did file the submissions. The submissions, in large part restate the Claimant’s view point on the dispute.  Save where it is necessary, I will not reproduce them here.

15. After careful evaluation of the record, I think that two issues present for determination in this matter. These are:-

a) Whether the Claimant’s contract of service with the Respondent was lawfully terminated on ground of redundancy.

b) Whether the Claimant is entitled to the prayers sought in the claim.

16. On the first issue, I will rely on the provisions of the Employment Act and the Constitution of Kenya 2010 as pleaded by the Claimant. Of particular significance is article 41 of the Constitution on the right to fair labour practice. This is a broad constitutional dictate seeking to ensure fairness in the engagements of the social partners at the workplace.

17. In my view the right encapsulated under article 41 of the Constitution is sufficiently wide so as to cover the issues under consideration in this cause. An employer has a duty to ensure a redundancy process is undertaken in a manner that is objectively fair in line with the law as part of his constitutional duty to ensure a fair labour practice.

18. With regard to the requirements of section 40 of the Employment Act, I can do no better than to reproduce the views of the Court of Appeal on the matter in Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] eKLR.In the appeal, the court observed that section 40 of the Employment Act prescribes seven preconditions to be observed in processing a valid redundancy. It identified them as follows:-

a.  if the employee to be declared redundant is a member of a union, the employer must notify the union and the local labour officer of the reasons and the extent of the redundancy at least one month before the date when the redundancy is to take effect;

b. if the employee is not a member of the union, the employer must notify the employee personally in writing together with the labour officer;

c. in determining the employees to be declared redundant, the employer must consider seniority in time, skill, ability, reliability of the employees;

d. where the terminal benefits payable upon redundancy are set under a collective agreement, the employer shall not place an employee at a disadvantage on account of the employee being or not being a member of a trade union;

e. the employer must pay the employee any leave due in cash;

f. the employer must pay the employee at least one month’s notice or one month’s wages in lieu of notice; and

g. the employer must pay the employee severance pay at the rate of not less than 15 days for each completed year of service.

19. I hasten to add that in terms of section 43 of the Employment Act, the employer is bound to prove the reasons for termination of a contract of service or run the risk of the court presuming in favour of the unlawfulness of the termination in terms of section 45 of the Act. For purposes of termination on account of redundancy, the employer should be able to demonstrate that the reason for termination was valid and that it related to his/her operational requirements.

20. Did the Respondent adhere to these statutory and constitutional requirements in declaring the Claimant redundant? From the record, it appears to me that only some of the edicts were observed by the Respondent. For instance, there is evidence that the Respondent paid the Claimant her redundancy dues.

21. Similarly, there is evidence that the Respondent took out and caused to be served a redundancy notice on the Labour Office, Nairobi where the Claimant was stationed. The Respondent has provided a letter in this respect dated 22nd September 2016. This letter has not been specifically disputed by the Claimant. As the letter is dated 22nd September 2016 and the redundancy took effect on 27th October 2016, more than one month down the line, I think that the Respondent met the requirement relating to issuance of the notice of intended redundancy to the local labour office.

22. The notice addresses the reason and extent of the proposed redundancy. According to the document, the redundancy had been necessitated by a downturn in the motor industry in Kenya which had adversely affected the Respondent’s business. As a result, some twenty employees had to be offloaded as part of the Respondent’s response to the adversity in order to remain afloat.

23. But that is as far as the Respondent went in complying with the law on redundancy before it released the Claimant. Apart from her termination letter, there is no evidence that the Respondent served the notice of intended redundancy on the Claimant. There is also no evidence to demonstrate how the Respondent undertook the selection of the employees, including the Claimant, who were eventually terminated.

24. In my view therefore, the Respondent failed to meet all the procedural requirements for declaration of a valid redundancy. As was observed in Christopher Melly Kipkoech v K-Rep Bank Limited [2015] eKLR, the redundancy provisions under section 40 of the Employment Act are meant to be strictly observed and no redundancy declared in disregard of the section can be valid.

25. Consequently, although the Respondent may have had valid reasons for the intended redundancy, it nonetheless failed to adhere to the procedure in processing it. The redundancy is therefore declared as procedurally flawed and the resultant termination unfair.

26. The other issue to be considered is whether the Claimant is entitled to the reliefs sought. Most of the reliefs are monetary in nature.

27. Before venturing into the issue, one critical matter that presents itself and which must be addressed is whether the court is precluded by the pretrial settlement between the parties from awarding the Claimant further compensation. This is because determination of this particular aspect of the case will eventually impact on the decision whether or not to award compensation in this suit.

28. In the Respondent’s Memorandum of Response, it alludes to the fact of having paid redundancy dues to the Claimant and the Claimant having released it from further claims relating to and arising from the contract of service between them. At paragraphs 21 and 22 of the reply the Respondent states as follows:-

‘’ The Respondent avers that it procedurally terminated the contract of employment and made the following payments which were acknowledged and received by the Claimant:

Description    Gross Amount in (Ksh)

i) October salary      188,680. 00

ii) 1 month salary in lieu of notice  188,000. 00

iii) Redundancy pay

(15 days per year worked)   147,325. 00

iv) Leave days encashment    136,633. 00

TOTAL GROSS AMOUNT   661,118. 83

Further, the Respondent issued the Claimant with both a recommendation letter and a certificate of service. Upon the foregoing, the Claimant expressly confirmed that she had no other financial claim from Crown Motor Group Limited.’’

29. It has been previously observed that a pretrial settlement between parties to a dispute could have the effect of closing the dispute between them with the consequence that the court will be deprived of jurisdiction to revisit the settled question. In Nairobi Cause No 1822 of 2016 Christine Juma Were v Kenafric Industries Ltd(unreported), I considered this very same question.

30. I observed that the Court of Appeal has provided guidelines on determining the effect of pretrial settlements on future litigation on the same question in several of its decisions. I then looked at a number of the decision as here below:-

31. In Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] eKLR the court observed as follows regarding the effect of pre-trial settlements on further demands for payments through litigation:-

‘’We would agree with the trial court that a discharge voucher per se cannot absolve an employer from statutory obligation and that it cannot preclude the Industrial Court from enquiring into the fairness of a termination. That is however, as far as we are prepared to go. The court has, in each and every case, to make a determination, if the issue is raised, whether the discharge voucher was freely and willingly executed when the employee was seized of all the relevant information and knowledge’’.

32. InCoastal Bottlers Limited v Kimathi Mithika [2018] eKLR,the court said as follows regarding these agreements:-

‘’Whether or not a settlement agreement or a discharge voucher bars a party thereto from making further claims depends on the circumstances of each case. A court faced with such an issue, in our view, should address its mind firstly, on the import of such a discharge/agreement; and secondly, whether the same was voluntarily executed by the concerned parties’’.

33. In, Trinity Prime Investment Limited v Lion of Kenya Insurance Company Limited [2015] eKLR, the court said this of pretrial settlements:-

‘’The execution of the discharge voucher, we agree with the learned judge, constituted a complete contract. Even if payment by it was less than the total loss sum….’’.

34. I then attempted to set out what in my view were general guidelines that are necessary in dealing with questions relating to the effect of pre-trial settlements on further claims by the parties affected by such settlements through future litigation. I mentioned the following as some of the guidelines:-

a) As a general principle a pretrial settlement operates as a contract between the parties.

b) It is to be considered as generally binding on the parties unless it is assailed on the usual grounds that will vitiate a contract.

c) Such settlements may, although not always, constitute a full settlement of the issues under consideration with the consequence that parties to them may not pursue further settlements on the same subject either in court or otherwise.

d) There is no general principle that such settlements will inevitably discharge an employer from his/her statutory obligations under a contract of service.

e) In order to determine whether the pretrial settlement operates as a bar to further claims by the parties to it, a trial court or other arbiter must consider: the import of the settlement; whether the parties executed the agreement freely; and whether they had relevant information and knowledge regarding the settlement.

f) The mere existence of a pretrial settlement should not be construed as taking away the court’s jurisdiction to inquire into the lawfulness of a termination of a contract of service.

35. I think that the same guidelines have application to the current case. I will therefore rely on them in examining the effect of the settlement dated 27th October 2016 on the jurisdiction of the court to reopen the issue of monetary compensation.

36. As stated earlier on in this judgment, the Respondent asserts that the Claimant was paid Ksh. 661,118. 83 in settlement of her dues. In the voucher dated 27th October 2016 appearing as document number 3 on the Respondent’s list of documents, the Claimant expressed herself as follows:-

‘’I acknowledge receipt of the above stated Gross Payout Amount as my Redundancy Final Dues package in full and confirm I have no other financial claim from Crown Group Limited.’’

37. The voucher is signed and bears the name of the Claimant. When the Claimant made the averment in paragraphs 21 and 22 of its response to the claim the Claimant did not file a rejoinder disputing it. This can only be construed to mean that the Claimant does not dispute this averment.

38. The Claimant does not suggest that the voucher was signed under duress or some other form of undue influence. And neither does she say that she did not have clear knowledge and information on the effects of the voucher.

39. I have considered the import of the voucher. It was to settle the Claimant’s redundancy dues where after the Claimant committed that she had no other financial claim against the Respondent. This statement constituted a declaration that all monetary compensations that may be due to the Claimant had been abandoned in exchange for the payments she received.

40. Importantly, in the termination letter dated 27th October 2016, the Claimant made yet another promise to the Respondent. She said:-

‘’ I confirm I have read understood and acknowledge the contents of this letter. I hereby indemnify the Company of any future Claims to this lay off.’’

I have referred to this letter because the parties mandated me by their consent, to evaluate all the documents on record in order to make the final decision.

41. The term indemnify has been described to mean ‘’to compensate someone for harm or loss’’ or ‘’to secure someone against legal liability for their actions’’. Therefore, the above statement by the Claimant can only be understood to mean that by it, she elected not to pursue this matter further and that in the event she did this, she would compensate the Respondent for any harm or loss that will arise from such endeavour.

42. To my mind therefore, the Claimant voluntarily shut the door to future claims for further compensation and this election must be respected by the court. The current claim for compensation is therefore unmerited in so far as it goes against the grain of a prior voluntary agreement between the parties.

43. But even if I were wrong on this point, I have considered the payments that the Respondent made to the Claimant. To my mind, they appear to agree with the guidelines under section 40 of the Employment Act so that if the Respondent had properly followed the release procedure, the matter would have been fully settled. I think that it will therefore be inequitable to order any further compensation in the circumstances.  I will therefore dismiss this claim but without any order as to costs.

DATED, SIGNED AND DELIVERED ON THE 10TH DAY OF SEPTEMBER 2021

B O M MANANI

JUDGE

In the presence of:

…………………………………..for the Claimant

…………………………………..for the Respondent

ORDER

In view of the declaration of measures restricting court operations due to the Covid-19 pandemic and in light of the directions issued by his Lordship, the Chief Justice on 15th April 2020, this judgment has been delivered to the parties online with their consent, the parties having waived compliance with Rule 28 (3) of the ELRC Procedure Rules which requires that all judgments and rulings shall be dated, signed and delivered in the open court.

B O M MANANI

JUDGE