Murata Sacco Society Ltd v Banking Insurance and Finance Union (Kenya) (Civil Appeal 3 of 2020) [2025] KECA 173 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that disguising redundancies as early retirement is wrongful termination, and employees can receive both gratuity and provident fund benefits.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the learned Judge erred in holding that the termination of the appellant's former employees was wrongful
- 2.Whether the learned Judge erred in granting general damages for purported unlawful termination
- 3.Whether the learned Judge erred in ordering the payment of gratuity despite the establishment of a provident fund
Key legal issues
#Whether the termination of the Grievants was wrongful
Yes. The stated reason - reduction of staff outlay - was in substance a redundancy, and the Sacco bypassed the rigorous redundancy procedure in clause 10 of the CBA and section 16A of the repealed Employment Act. The retrenchment was also not voluntary as required by clause 12.
The court re-evaluated the evidence as a first appellate court. The reason given for retiring the over-45 cohort matched the CBA definition of redundancy. The retrenchment of the under-45 cohort lacked the voluntariness clause 12 required; receipt acknowledgements could not cure the want of prior consent. The court endorsed the trial court's finding that the process failed statutory requirements.
Whether the trial court had jurisdiction to award compensation of three months' gross salary for each Grievant
Yes. Section 15(1)(ii) of the Trade Disputes Act permitted compensation of up to twelve months' monetary wages for wrongful dismissal, and the calling of the award 'damages' did not offend the repealed Employment Act.
The Trade Disputes Act governed at the time of termination. Its section 15(1) empowered the Industrial Court to award compensation up to twelve months' wages instead of or in addition to reinstatement. Vulnerability of the older employees and breach of the CBA justified an award beyond one month's pay in lieu of notice; three months was not excessive.
Whether gratuity was payable despite the provident fund
Largely yes. The 2006 CBA contained both a gratuity clause (9(a)) and a provident fund clause (34), so both benefits were intended; gratuity was only removed prospectively by the 2008 CBA. However, gratuity up to December 2005 had been converted into the contributory scheme as employee contributions and was repaid with pension, so a further claim for that period would be double payment.
Juxtaposing the 2006 and 2008 CBAs showed the parties intended both gratuity and provident fund benefits under the 2006 CBA, and the 2008 CBA prospectively deleted gratuity. Contributions made after January 2006 were genuinely from salary, so gratuity for that later period was separately payable; the pre-2006 gratuity had already been paid through the pension account.
Legal principles established
#- Where a CBA expressly provides for both gratuity and a contributory provident fund, an employee is entitled to both benefits; only a subsequent CBA deleting the gratuity clause can remove that entitlement, and only prospectively.
- An employer cannot disguise a redundancy as retirement or retrenchment to avoid the rigorous redundancy procedure in the contract or statute; termination effected in that manner is wrongful and the affected employees should have retained their employment.
- Acknowledgement of receipt of terminal dues by employees cannot sanitize a retrenchment that was not voluntary or preceded by the required consent and consultation.
- Under section 15 of the (repealed) Trade Disputes Act, the Industrial Court could award compensation for wrongful dismissal of up to twelve months' monetary wages in addition to, or instead of, reinstatement, and an award described as 'damages' within that cap was within jurisdiction.
- An appellate court will not disturb an award of damages unless it is inordinately high or low as to represent an entirely erroneous estimate or was made on wrong principles.
Court orders
#- 1.The Grievants are not entitled to gratuity for the period up to the last day of December 2005, the appeal succeeding only to that extent
- 2.The trial court's awards of wrongful-termination findings, 3 months' gross salary compensation, and gratuity from January 2006 onwards stand
- 3.Each party to bear its own costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- Employment and Labour Relations Court
- null
- Jurisdiction invoked
- First appellate jurisdiction over the Employment and Labour Relations Court (the judgment invokes its duty 'as a first appellate Court' to re-evaluate evidence); no specific constitutional or statutory provision is quoted
Relief refused
#Setting aside the trial court's finding of wrongful termination and the award of compensation of 3 months' gross salary
The retrenchment/early retirement was in fact a redundancy disguised as retirement, conducted without compliance with clause 10 of the CBA or section 16A of the repealed Act, and the compensation award was within the trial court's power under section 15 of the Trade Disputes Act
Setting aside the award of gratuity under clause 9(a) of the 2006 CBA
The 2006 CBA provided for both gratuity and provident fund; gratuity was only deleted prospectively by the 2008 CBA
Gratuity for the period up to December 2005
The lump sum gratuity up to December 2005 was transitioned into the contributory provident scheme as employee contribution and paid out with pension; a second payment would be double payment
Costs
Each party to bear its own costs of this appeal.
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.
The exercise was clearly a redundancy disguised as a retirement or retrenchment and voluntary early retirement.
The acknowledgement could not sanitize a process which was still born because of want of prior consent by the Grievants.
We see no reason why, if expressly agreed by the parties in a CBA, like here, Gratuity should not be paid to an employee in addition to benefits under a Provident Fund.
To that extent a claim for Gratuity up to December 2005 would be a claim for double payment. The short period after January 2006 is different because, henceforth, the contribution by each Grievant to the Provident Scheme was 5% of basic salary and not through his/ her gratuity.
Indubitably, there is merit in the argument by the appellant that a second payment of the gratuity which had been transitioned as contribution into the provident fund is not defendable. Only to that extent does the appeal succeed. That is, the Grievants are not entitled to gratuity for the period up to the last day of December 2005. Each party to bear its own costs of this appeal.
Issues in the judgment
#The judgment states two different dates for the trial court's judgment: 7th October 2018 in the opening paragraph and 7th October 2014 when discussing the impugned judgment. The 2014 date appears in the body discussing the trial court's decision.
The same 2017 case cited by the parties is rendered inconsistently within the judgment as '748 Air Services Limited v Theuri Munyi' and '780 Air Services Aviation v Theuri Munyi'.
The trial court's quoted judgment awards three months' gross salary 'based on the last salary received at of 31st April 2007', a date that does not exist (April has 30 days).
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Corrugated Sheets Limited v Kalama & 10 others (Appeal E021 of 2024) [2025] KEELRC 1091 (KLR)[2025] KEELRC 1091 (KLR)3 Apr 2025applied
Cite this brief
#Cite this brief
Caselaw, "Murata Sacco Society Ltd v Banking Insurance and Finance Union (Kenya) (Civil Appeal 3 of 2020) [2025] KECA 173 (KLR)", Case Analysis (2025). Civil Appeal (not expressly numbered in the judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/173/eng@2025-02-07
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.