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Court of AppealPartially AllowedCivil Appeal (not stated in judgment)

Postal Corporation of Kenya v Tanui (Civil Appeal 127 of 2015) [2019] KECA 489 (KLR)

Court of Appeal
19 July 2019
PWP. N. WakiDMD. K. MusingaPKP. O. Kiage
8,148 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~33 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal upheld a manager's unfair dismissal win but halved the payout, ruling employers must share evidence and hold real hearings.

What this practically means

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Executive summary

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The Postal Corporation of Kenya appealed against a decision of the Employment and Labour Relations Court (Rika, J.) which found that the summary dismissal of its former General Manager in charge of Finance and Strategy, in the wake of losses from the Postapay EFT product, lacked substantive justification and procedural fairness, and awarded him 12 months' gross salary compensation, proportionate gratuity, leave pay and notice pay totalling Sh.5,901,502. As the first appellate court, the Court of Appeal re-evaluated the evidence and deferred to the trial court's credibility findings. It rejected the appellant's challenge to the salary computation of Sh.355,500 (the figure was admitted in the pleadings), upheld the award of proportionate gratuity for the 21 months served (gratuity earned 'during the period served' is payable where the employer, not the employee, terminates the contract and there is no gross misconduct, consistent with Bamburi Cement), and affirmed that gross salary under Section 49(1)(c) generally comprises basic salary plus contractual allowances, following Ongaya, J. in the Maisha Bora Sacco case. On the core issue, the Court held that the employer failed to discharge its burden under Sections 43, 45 and 47(5) of the Employment Act, and that the disciplinary process fell short of the Section 41 minimum standards: the forensic audit report was withheld, the Board invitation gave no reasons, the right to be accompanied was not honoured, and the hearing lasted less than five minutes. The Court distinguished the Kenya Revenue Authority case on letters-only hearings as inapplicable to Section 41. However, it found the maximum 12-month compensation award unbalanced because the trial court ignored Section 49(4) and Parliament's policy of capping awards. The appeal was allowed only to that extent: the compensation was reduced to six months' gross salary (Sh.2,133,000), and otherwise dismissed with no orders as to costs, the appellant being a public institution protecting taxpayers' money.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the Learned Judge erred in making an award based on erroneous computation of the gross monthly salary (Sh.355,500 vs Sh.348,000)
  2. 2.Whether the respondent was entitled to a full (proportionate) gratuity payment as part of the award despite not completing the contract term
  3. 3.Whether the respondent was entitled to be paid all allowances as part of the gross salary used in computing compensation
  4. 4.Whether the summary dismissal of the respondent was substantively justified and procedurally fair
  5. 5.Whether the award of maximum compensation of 12 months' gross salary under Section 49(1)(c) of the Employment Act had a proper legal basis

Key legal issues

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01

Burden of proof in unfair termination claims

Holding

The employer bears the burden of justifying the grounds of termination and proving valid and fair reasons; it failed to discharge that burden here.

Reasoning

Relying on Section 47(5) of the Employment Act and this Court's decision in Pius Machafu Isindu, the Court held that the employee proves that termination occurred, then the employer must justify it under Sections 43 and 45. The charges related largely to systemic failures and a flawed Afripayments contract predating or beyond the respondent's control; he in fact mitigated losses. The trial court's credibility findings on the respondent deserved deference.

p. 11
02

Procedural fairness of the disciplinary hearing

Holding

The dismissal process fell short of the Section 41 minimum standards: the audit report was withheld, the invitation to the Board gave no reasons, and the employee was not told of his right to be accompanied.

Reasoning

The Court distinguished the Kenya Revenue Authority case on exchanges of letters as good law generally but inapplicable to Section 41 hearings. A technical appearance of less than five minutes before the Board, without supply of the forensic audit report or explanation of grounds, was irregular. Even an accused in a criminal trial is entitled to the statements supporting the charges.

p. 13
03

Whether allowances form part of gross monthly salary under Section 49(1)(c)

Holding

Gross salary generally means basic salary plus allowances, affirming Ongaya, J.'s construction in the Maisha Bora Sacco case, subject to case-by-case examination of allowance types.

Reasoning

The Act uses 'wages', 'allowances', 'gross wages' and 'gross salary' as separate elements of remuneration but does not define 'gross salary'. Common sense and Black's Law Dictionary support inclusion of allowances payable under the contract; however, allowances dependent on actual performance (per Pravin Bowry and Leakey) may be excluded. The trial court's figure of Sh.355,500 stood, being supported by unchallenged evidence and the pleadings.

p. 9
04

Entitlement to proportionate gratuity on premature termination

Holding

Gratuity earned 'during the period served' is payable where the employer terminates the contract and the employee is not guilty of gross misconduct.

Reasoning

The appointment letter committed to gratuity at 25% of basic salary earned during the period served. Since the employer reserved the right to terminate prematurely and gross misconduct was not established, the employee could not be penalised for the employer's own choice to end the contract. Bamburi Cement supports this: gratuity is payable where dismissal is unjustified and wrongful.

p. 6
05

Award of maximum compensation under Section 49(1)(c)

Holding

The maximum 12-month award lacked a balanced consideration of Section 49(4) factors and was reduced to six months' gross salary.

Reasoning

Following CMC Aviation and Ol Pejeta, maximum awards require reasoned application of Section 49(4). The trial court ignored Parliament's intent in capping compensatory awards, comparable awards, and the fact that the respondent had already received gratuity, notice and leave pay; with only 15 months of contract remaining, a 12-month award virtually paid him for unearned term. Injured feelings and difficulty finding employment are doubtful considerations.

p. 15

Legal principles established

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  • Section 41 of the Employment Act prescribes the minimum standards of a fair procedure before termination, comprising four elements: explanation of grounds in a language the employee understands, the reason for considering termination, entitlement to have another employee of choice present, and hearing and considering representations.
  • A show-cause letter process is not the same as a hearing; the employer must explain the charges, produce the evidence relied on (such as an audit report), and allow the employee to respond with evidence and witnesses.
  • An appellate court will not interfere with maximum compensatory awards under Section 49(1)(c) where the trial court gives no reasons grounded in Section 49(4); awards of maximum compensation require a firm factual and legal foundation.
  • Gross monthly salary for purposes of Section 49(1)(c) compensation is generally basic salary plus allowances, though each case must examine the nature of the allowances.
  • Proportionate gratuity is payable where the employer, not the employee, prematurely terminates the contract and the employee is not guilty of gross misconduct.

Court orders

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  1. 1.Appeal succeeds only to the extent that the award of 12 months' gross salary compensation is set aside and substituted with an award of six months' gross salary (Sh.355,500 x 6 = Sh.2,133,000)
  2. 2.Appeal otherwise dismissed
  3. 3.No orders as to the costs of the appeal

The bench

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One judgment of the whole court — no separate or dissenting opinions.

PW
majority
DM
majority
PK
majority
On appeal from
Employment and Labour Relations Court (trial court)
not stated
Jurisdiction invoked
First appellate jurisdiction under the Court of Appeal Rules, Rule 29(1)(a) (re-evaluation of evidence); appealed from the Employment and Labour Relations Court

Relief refused

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The balance of the appellant's grounds of appeal challenging the findings on salary computation, gratuity, allowances, and substantive and procedural fairness of the dismissal

The appellant failed to discharge its burden of proving valid reasons for dismissal and fair procedure; the trial court's findings were well founded

p. 13

Costs of the appeal against a public institution

The appellant is a public institution whose only interest was protecting taxpayers' money

p. 15

Costs

No orders as to the costs of the appeal; each party to bear own costs

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

It is our further view that Section 41 provides the minimum standards of a fair procedure that an employer ought to comply with.
p. 12Fair hearing standards under Section 41 Employment Act
An Employer should not merely recite the grounds listed in a letter to show cause and then ask the Employee if there is anything to add or subtract; the Employer must make an effort to explain the charges to the Employee at the hearing, call evidence in showing the truthfulness of those allegations, and if there are Witnesses, allow the Claimant the opportunity to question the Employers' Witnesses.
Content of a fair disciplinary hearing
In view of what we have stated above, we think the award was inordinately high and was not based on a balanced consideration of the applicable principles. We interfere with it to the extent that it is set aside and substituted with an award of six months gross salary; Sh.355,500 x 6 = Sh.2,133,000.
p. 15Disposition - substitution of compensation award
It is to that extent only that this appeal succeeds, but is otherwise dismissed. As the appellant is a public institution and its only interest was protecting taxpayers' money, we make no orders as to the costs of the appeal. Orders accordingly.
p. 15Final orders and costs
The employer must prove the reasons for termination/dismissal (section 43); prove the reasons are valid and fair (section 45); prove that the grounds are justified (section 47 (5), amongst other provisions.
p. 10Employer's burden of proof in dismissal

Issues in the judgment

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minor

The judgment does not state the appeal case number or a neutral citation; the case title is inferred from the proceedings (the respondent is referred to as 'Tanui' in the quoted trial court passages).

minor

Typographical variant in the quoted trial court judgment: 'Section 41 (1)' refers to termination 'on the grounds of misconduct; poor to performance or physical in capacity', apparently a corruption of 'poor performance or physical incapacity'.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Postal Corporation of Kenya v Tanui (Civil Appeal 127 of 2015) [2019] KECA 489 (KLR)", Case Analysis (2019). Civil Appeal (not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/489/eng@2019-07-19

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