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ELRCPartially AllowedCause No. 48 of 2001· [2002] KEELRC 18 (KLR)

KENYA ENGINEERING WORKERS’ UNION v NDUME LTD [2002] KEELRC 18 (KLR)

Industrial Court of Kenya
31 October 2002
CCCharles P. ChemmuttutAKA.K. KerichJKJ.M. Kilonzo
1,298 words in judgment
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The bottom line

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Kenya's Industrial Court approved a wage settlement but refused to backdate it, ruling employers cannot be forced into arrears that could destroy jobs.

What this practically means

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Executive summary

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This Industrial Court award arose from a Notification of Dispute dated 13th December 2000, certified by the Labour Commissioner under Section 14(7) and (9)(e) of the Trade Disputes Act, Cap. 234, between the Kenya Engineering Workers' Union and Ndume Ltd covering fourteen issues including wages, allowances, leave, redundancy and gratuity. After several adjournments for negotiation, the parties settled all issues except the effective date, signing a memorandum of settlement providing for 8% annual increases in basic minimum and general wages, housing allowance of Kshs.800 rising to Kshs.850, leave travelling allowance of Kshs.800, a 6% safari allowance increase, and retention of existing CBA clauses. The Court entered a consent award in those terms. On the disputed effective date, the Company, relying on audited accounts by Ernst & Young showing losses from 1998 to 2001, creditors of over Kshs.22m against Kshs.6m in debts owed to it, and a depressed agriculture-based market, urged 1st January 2002 to avoid liquidation and preserve 43 jobs. The Union demanded back-dating to 1st May 1999. Applying its earlier observation in Cause No. 31 of 2001 (Brollo Kenya Ltd.) that employer and employees must support each other in hard times, the Court held that retrospectivity is not claimable as of right and must be weighed against the employer's paying capacity. It fixed the effective date at 1st January 2002, with both Members concurring. No costs order was made.

Key legal issues

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01

Whether consent settlement on 13 issues should be adopted as an award

Holding

The Court awarded in terms of the signed memorandum of settlement

Reasoning

The parties negotiated an amicable settlement on all issues except the effective date, signed by the Union's General Secretary and the Company's representative, and jointly prayed for a consent award. The Court adopted the settlement verbatim, including the wage increments, allowances and retention of the outgoing CBA clauses.

p. 2
02

The effective date of the collective agreement

Holding

Effective date fixed at 1st January 2002, not 1st May 1999

Reasoning

The Company proved substantial losses from 1998 to 2001 through audited Ernst & Young accounts, heavy creditors (Kshs.22m against Kshs.6m owed to it) and a declining agriculture-based business. Back-dating would cost about Kshs.2m in arrears and risk liquidation, costing 43 unionisable employees their jobs. Balancing the parties' interests, the Court declined retrospective effect to safeguard existing jobs; the two Members concurred.

p. 3

Legal principles established

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  • Retrospective effect of an award is not a matter of right; the court must consider the paying capacity of the employer
  • In financial hardship, employer and employees must mutually accommodate each other until the company's position improves

Court orders

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  1. 1.Award entered in terms of the parties' memorandum of settlement covering basic minimum wages (8% each year), general wage increase (8% each year), housing allowance (Kshs.800 first year, Kshs.850 second year), leave travelling allowance (Kshs.800) and safari allowance (raised by 6%)
  2. 2.Retention of the outgoing CBA clauses on annual leave, sick leave, medical treatment, compassionate leave, redundancy, death of an employee, gratuity/retirement benefits and transport for workers
  3. 3.Effective date of the collective agreement fixed at 1st January 2002, rejecting the Union's demand for retrospective effect from 1st May 1999

Authorities

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Legislation

  • Trade Disputes Act, Cap. 234, Laws of KenyaSection 14(7) and (9)(e)

Cases cited (1)

  • Cause No. 31 of 2001 between this Union and Brollo Kenya Ltd.
Jurisdiction invoked
Trade Disputes Act, Cap. 234, Section 14(7) and (9)(e) - dispute referred with statutory certificate of the Labour Commissioner

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, "KENYA ENGINEERING WORKERS’ UNION v NDUME LTD [2002] KEELRC 18 (KLR)", Case Analysis (2002). Cause No. 48 of 2001. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2002/18/eng@2002-10-31

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