Van Leer East Africa Ltd v Baiba Dhidha Mjidho [2007] KECA 44 (KLR)
The bottom line
#Kenya's Court of Appeal cut a retrenched manager's award from Kshs 7.7 million to Kshs 103,480, ruling collective agreements don't cover non-union staff.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether a management-level employee who is not a member of the trade union is entitled to enforce the redundancy provisions of a Collective Bargaining Agreement between the employer's association and the union
- 2.Whether section 16A(1)(e) of the Employment Act (Cap 226) applies to all employees irrespective of management status
- 3.Whether a plaintiff who does not plead a Collective Bargaining Agreement in his plaint can rely upon it
- 4.What was the respondent's monthly salary for the purpose of computing terminal dues
- 5.Whether provident fund payments are relevant to the computation of severance pay under section 16A(1)(e)
- 6.Whether the award under the competition/non-competition clause of the contract of employment was justified in liability and quantum
- 7.Whether the learned Judge's mathematical computation of the total award could stand
Key legal issues
#Enforceability of a CBA against a non-union management employee
The CBA's redundancy provisions do not apply to the respondent, who was neither a union member nor shown to be represented by the union, and the CBA was not pleaded.
The CBA defined 'employee' as covering employees represented by the union. It was not pleaded that the respondent was represented by the union or a member of it. The Court held it was not open to a party to rely on an agreement to which it was not a party and which had not been pleaded as applicable.
Applicability of section 16A(1)(e) Employment Act to management employees
Section 16A(1)(e) applies to all employees; management status is irrelevant.
The Court examined the wording of section 16A(1)(e) of Cap 226 and found nothing in it or elsewhere in the Act restricting its application to non-management employees. The subsection's notice entitlement therefore applies equally to a management-grade employee declared redundant.
Meaning of 'salary' and 'wages' for computing terminal dues
Salary means basic salary only; allowances and provident fund arrangements are excluded from the computation.
The Court held that the correct basis of calculation was the basic monthly salary on the last pay slip (Kshs. 139,253/=), not a gross figure. Provident fund payments by or to an employee are irrelevant to the ascertainment of amounts due under section 16A(1)(e), which relates to 'wages'.
Rate of severance pay on redundancy
Severance pay is at 15 days pay per completed year of service under the Act, not the 23 days provided in the unenforceable CBA.
Since the CBA could not be relied upon, the statutory formula in section 16A(1)(f) governed. The Court recalculated severance as 15 days pay for each of the 14 completed years of service, based on the basic salary, yielding Kshs. 974,769.60.
Damages for breach of the non-competition clause
The award of Kshs. 3,379,440/- was erroneous in liability and quantum; the employee bore the burden of proving unreasonable refusal and resulting loss.
The competition clause imposed on the employee the burden of proving damages from an unreasonable refusal to release him from the restrictive undertaking. The trial Judge made no finding of unreasonableness, led no evidence of the salary the competitor would have paid, and quantified the loss on the wrong basis (the appellant's own salary figures).
Effect of absence of cross-appeal
The Court could not disturb the trial Judge's disallowance of the leave claim in the absence of a cross-appeal, though it signalled the finding was arguably wrong.
The respondent did not cross-appeal against the disallowance of the 85 days accrued leave claim, which the trial Judge had treated as a general damages claim. The Court stated it would otherwise have been inclined to reverse, since a statutory claim is not a claim for general damages for breach of contract.
Whether termination on reorganisation amounted to redundancy though not pleaded as such
The facts pleaded in paragraph 6 of the plaint adequately pleaded a redundancy as defined in section 16A(2), so the trial Judge was right to treat the dismissal as redundancy.
Although the plaint did not use the word 'redundancy' or cite section 16A, the admitted paragraph 6 pleaded termination on account of worldwide structural and management reorganisation and abolition of the plaintiff's position, which are the elements of redundancy as defined in section 2 of the Trade Disputes Act as applied by section 16A(2).
Legal principles established
#- A Collective Bargaining Agreement between an employers' association and a trade union does not bind an employer in relation to a management employee who is not a member of the union and who was not a party to the agreement.
- A party cannot rely on an agreement whose existence and applicability has not been pleaded.
- Section 16A of the Employment Act applies to all employees irrespective of management status.
- In their ordinary meaning, the words 'wages' and 'salary' do not include allowances, provident fund arrangements or other additional payments.
- Severance pay for redundancy under section 16A(1)(f) of the Employment Act is at the statutory rate of 15 days pay for each completed year of service, not the higher CBA rate.
- To recover under a non-competition clause providing an indemnity, an employee must prove that the employer's refusal to waive the clause was unreasonable, that damage was suffered as a result, and the quantum of that damage.
Court orders
#- 1.The High Court judgment awarding the respondent Kshs. 7,685,420.85 plus interest and costs is set aside
- 2.Judgment is substituted with judgment in favour of the respondent for Kshs. 103,480/=, being Kshs. 1,787,078/= less Kshs. 1,683,548/= already paid pursuant to the preliminary decree dated 14th October 2003
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Mombasa
- HCCC No. 159 of 2003
- Jurisdiction invoked
- First appeal to the Court of Appeal against the judgment and decree of the High Court (statutory appellate jurisdiction; no constitutional article cited in the judgment)
Relief refused
#Award under the Collective Bargaining Agreement redundancy provisions (23 days per completed year)
The CBA does not bind the employer in relation to a non-union employee who was not a party, and it was not pleaded
Bonus for year 2003 of Kshs. 174,066.25
Not allowed by the learned Judge below, who found no evidence to support it
Damages under the competition clause (Kshs. 3,379,440/-)
No finding of unreasonable refusal and no proof of loss or its quantum
85 days accrued leave outstanding (Kshs. 394,550/=)
The trial Judge disallowed the item as a claim for general damages and the respondent did not cross-appeal, so the Court of Appeal was precluded from disturbing that finding
Costs
No express costs order appears in the judgment; the only costs reference is to the costs of the suit awarded by the superior court, which was subsumed in the judgment set aside.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
We have decided that the provisions of the Collective Bargaining Agreement between the Engineering and Allied Industries Employers Association of the First Part and the Kenya Engineering Workers Union of the Second Part are not binding on the appellant employer in relation to the respondent employee who was not a party to that agreement, the breach of which had not been pleaded in the plaint.
There is nothing in the wording of that sub section or elsewhere in that Act to suggest that the management status of the employee is relevant to the application of section 16A 1 (e) of Cap 226 and we find that it is irrelevant.
The number of days applicable in the formula provided in the Act is 15 days only and not 23 days.
We consider that the word "salary" means just that and does not include other additional payments of allowances etc.
the award of damages to the respondent for alleged breach of the Competition clause was erroneous both as to liability and as to quantum and the appeal against that award is upheld.
We substitute for that judgment a judgment in favour of the respondent for Kshs.103,480/= being Kshs.1,787,078 less Kshs.1,683,548/= being the amount paid by the appellant to the respondent pursuant to the preliminary decree dated 14th October 2003.
The final finding of the learned judge in giving judgment in favour of the respondent against the appellant for a total of Kshs.7,685,420.85 cannot be upheld and it is hereby set aside.
Issues in the judgment
#The judgment twice uses identical wording to hold that a party cannot rely on an unpleaded agreement 'to which the appellant was not a party', although in the second instance the context indicates the respondent was the party unable to rely on it - a drafting slip in the judgment.
The judgment contains mathematical corrections to the trial Judge's figures and an unexplained additional sum of Kshs.149,454/= within the award below, leaving the composition of the set-aside judgment unclear.
Ground 8 of the memorandum of appeal referred to a payment of Kshs. 5,893,951/= which could not be verified from the record of appeal.
The judgment bears a Mombasa station heading but is dated and delivered at Nairobi, and the memorandum of appeal is dated 27th April 2006 while the judgment is dated 29th June 2007.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Van Leer East Africa Ltd v Baiba Dhidha Mjidho [2007] KECA 44 (KLR)", Case Analysis (2007). Civil Appeal 86 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2007/44/eng@2007-06-29
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.