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Court of AppealPartially AllowedCivil Appeal No. 117 of 2013· [2018] KECA 55 (KLR)

The National Social Security Fund v Grace K. Kazungu & 1 other

Court of Appeal
20 December 2018
4,512 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~18 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal confirmed NSSF wrongly retired two managers but cut their payouts, ruling that paying notice salary cannot excuse breaking mandatory notice rules.

What this practically means

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Executive summary

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The National Social Security Fund appealed against a judgment of the Industrial Court (Abuodha J.) which upheld claims by two managers, Grace K. Kazungu and Darlington Z. O. Kemoni, that their retirement under the Fund's 50-year rule on 4th January 2010 was wrongful, un-procedural and discriminatory. The trial court had awarded each claimant seven months' salary for unfair termination and sixty months' salary for discrimination. The Court of Appeal, in a unanimous first appeal, framed two pivotal issues: whether the contracts were wrongfully terminated and whether the quantum of damages was justified. It held that Regulation 5.8(b) of the Code of Regulations required six months' notice of retirement under the 50-year rule, that the seven days' notice given was not a six-month notice, and that payment of six months' salary in lieu of notice could not cure or waive the obligation to comply with the peremptory regulation; the finding of wrongful termination was affirmed. The Court also affirmed that the 2010 Constitution is not retroactive, disapproving the trial court's reliance on Articles 10, 22(1) and 23(3), but found discrimination proved on the facts because comparable employees were given an election option denied to the respondents. The Court found both the sixty-month discrimination award and the seven-month unfair termination award unexplained and unjustified, and substituted six months' gross salary for each head for each respondent, deducting the notice pay already received. The appeal partially succeeded: the trial award was set aside and reduced awards, interest, and costs orders substituted, with each party bearing its own costs of the appeal.

Key legal issues

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01

Whether termination under the 50-year retirement rule without the six months' notice required by Regulation 5.8(b) was wrongful despite payment in lieu of notice

Holding

Termination was un-procedural and wrongful; payment in lieu of notice cannot waive compliance with the mandatory six months' notice

Reasoning

Regulation 5.8(b) required either party to give six months' notice of intention to retire under the 50-year rule. The appellant gave only seven days' notice. The Court held the regulation is peremptory and must be observed to the letter; payment of salary in lieu of notice cannot cure a flagrant violation, as that would give one party an upper hand in the employment relationship. The trial court's finding of wrongful termination was upheld.

p. 4
02

Whether the 2010 Constitution applied retroactively to the 2010 terminations

Holding

The 2010 Constitution is not retroactive and could not found the trial court's awards based on Articles 10, 22(1) and 23(3)

Reasoning

The trial judge had held Articles 10 and 22(1) of the Constitution bound the appellant regarding terminations effected on 4th January 2010, before promulgation on 27th August 2010. The Court of Appeal affirmed that the 2010 Constitution is not retroactive, though it found discrimination was nevertheless established on the facts.

p. 3
03

Whether discrimination was established despite the constitutional non-retroactivity

Holding

Discrimination was proved: the respondents were denied the election option extended to comparable employees

Reasoning

The Court found the respondents were not given the equal opportunity extended to another employee (Mrs. Edwina Ombado) to elect to serve until age 60 or retire under the 50-year rule. Discrimination in employment occurs when an individual receives unequal treatment based on a trait unrelated to job performance, and an employer must prove the action complained of was fair.

p. 4
04

Whether the quantum of damages awarded by the trial court was justified

Holding

Both the 60 months' discrimination award and 7 months' unfair termination award were set aside and replaced with six months' salary for each head

Reasoning

The trial judge gave no explanation for arriving at seven months' compensation and no analysis of comparable awards; an appellate court may disturb quantum where the judge took into account an irrelevant factor, left out a relevant one, or the amount is inordinately high or low. Comparative labour jurisprudence supports an average of six months' salary compensation for wrongful and unfair termination.

p. 5
05

Whether damages for discrimination could be awarded where not specifically prayed for

Holding

Discrimination damages could stand because the issue was left to the court for decision, notwithstanding absence from the pleadings

Reasoning

While a court cannot grant a remedy neither pleaded nor prayed for, a court may base its decision on an unpleaded issue if it appears from the course of the trial that the issue was left to the court. The respondents submitted discrimination was pleaded at paragraph 7:2(b)(vi) and canvassed at the hearing; the Court nonetheless substituted a reduced award.

p. 4

Legal principles established

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  • Payment of salary in lieu of notice cannot cure or waive the obligation to comply with a mandatory notice requirement in an employer's regulations
  • A court cannot grant a remedy that has neither been pleaded nor prayed for, save where the issue was left to the court for decision at trial
  • A trial court must give reasons and justify awards of compensation for unfair termination by reference to statutory parameters and comparable awards
  • The 2010 Constitution is not retroactive in its application
  • Employees are expected, under Section 49(1) of the Employment Act, to reasonably mitigate their losses

Court orders

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  1. 1.The award of damages and compensation by the Employment and Labour Relations Court in the judgment dated 21st February 2013 set aside
  2. 2.1st and 2nd respondents awarded six months' gross salary as compensation for wrongful and unfair termination (Ksh. 2,157,636/= for 1st respondent; Ksh. 1,514,994/= for 2nd respondent)
  3. 3.1st and 2nd respondents awarded six months' salary as compensation for discrimination (Ksh. 2,157,636/= for 1st respondent; Ksh. 1,514,994/= for 2nd respondent)
  4. 4.Total awards: Ksh. 4,315,272/= to 1st respondent and Ksh. 3,029,988/= to 2nd respondent, subject to statutory deductions and taxes
  5. 5.Interest on total sums at court rates from 21st February 2013
  6. 6.Appellant to bear costs of the suit before the Employment and Labour Relations Court
  7. 7.Each party to bear its/her/his own costs in this appeal
On appeal from
Industrial Court (now Employment and Labour Relations Court) at Nairobi
Industrial Court Cause No. 703 of 2010
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate statutory framework (judgment styled 'Being a first appeal, it is our duty to analyze and re-assess the evidence on record')

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "The National Social Security Fund v Grace K. Kazungu & 1 other", Case Analysis (2018). Civil Appeal No. 117 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/55/eng@2018-12-20

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.