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ELRCPartially AllowedCause No. 78 of 2004

DIRECTORATE OF PERSONNEL MANAGEMENT (GOK) v UNION OF KENYA CIVIL SERVANTS [2005] KEELRC 1 (KLR)

Industrial Court of Kenya
27 May 2005
7,127 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Industrial Court ruled the Government could retrench civil servants without consulting their union, but they must receive full terminal benefits before leaving.

What this practically means

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Executive summary

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This first-instance award of the Industrial Court of Kenya at Nairobi (Chemmuttut, J presiding, with Members Kilonzo and Jahazi) determined a trade dispute notified under Section 14 of the Trade Disputes Act, Cap. 234, referred urgently after the Union of Kenya Civil Servants threatened a strike over a demand for a 600% salary increase. The Court disposed of three issues. First, the issue of review of terms and conditions of service was dismissed as withdrawn by mutual agreement. Second, on the Government's Intended Voluntary Early Retirement Scheme, the Court held the scheme was genuinely voluntary, and that the decision whether retrenchment is necessary is exclusively an administrative matter on which the Government need not consult the Union, following Supreme Court of Pakistan authority on management's right of bona fide reorganisation. The Union's demands for consultation and halting of the scheme were rejected in toto, though the Court recommended raising the golden handshake from Kshs.80,000 to Kshs.120,000 and directed that no employee be retired without full terminal benefits. Third, on the salary award announced on 28th/29th July 2004, the Court found the award fair given the large membership and the Government's budgetary constraints, held the 600% demand economically untenable since it covered a period when the Union was deregistered and had never formally submitted demands, and made a nil award for now while ordering the parties to commence formal negotiations on better terms immediately. The Court also urged the Union's national officials to control branch officials and shopstewards.

Questions the Court framed

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

  1. 1.Whether the Government should implement the salary award announced on 29th July 2004 or grant the Union's demand for a 600% salary increase
  2. 2.Whether the Intended Voluntary Early Retirement Scheme was voluntary or targeted, mandatory and coercive, and whether the Government was obliged to consult the Union before implementing it
  3. 3.Review of terms and conditions of service of civil servants (withdrawn by mutual agreement)

Key legal issues

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01

Whether the Voluntary Early Retirement Scheme was voluntary and whether the Government was obliged to consult the Union

Holding

The scheme was voluntary as employees were at liberty to opt to retire or remain; the Government was not obliged to consult the Union on the reduction of staff, and the Court would not halt the scheme

Reasoning

The Court held 'voluntary' means free choice without compulsion, and employees could choose to retire or remain. It distinguished redundancy/retrenchment as involuntary loss of employment, holding that the decision whether retrenchment is necessary is a purely administrative function of the employer, drawing on Supreme Court of Pakistan authority. So long as the reorganisation is bona fide and not tainted by bad faith, victimisation or unfair labour practice, the Court cannot interfere.

p. 4
02

Whether the Union's demand for 600% salary increase should be granted

Holding

A nil award was made; the demand was economically untenable as it covered a period (1980-2004) when no relationship existed between the parties and the Union never formally submitted its demands

Reasoning

The Union was banned in 1980 and only re-recognized on 14th May 2004, so no industrial relationship existed for most of the period claimed. The Union also failed to formally submit demands for counter-proposals. The Court noted employer ability to pay is decisive and the quantum is best determined by an expert body such as the Treasury. The EPD report supporting the claim was of no value to the Court.

p. 9
03

Review of terms and conditions of service of civil servants

Holding

Dismissed as withdrawn by mutual agreement of the parties

Reasoning

During the proceedings the parties mutually agreed to withdraw this issue for negotiations between them, and the Court accordingly dismissed it as withdrawn.

p. 4
04

Meaning and principles of redundancy and retrenchment and the 'last in, first out' rule

Holding

Redundancy and retrenchment mean the same thing - involuntary and permanent loss of employment from excess manpower; the LIFO rule may be departed from for sound and valid reasons

Reasoning

The Court adopted the statutory definition of redundancy under Section 2 of the Act and equated retrenchment with the discharge of surplus labour in a continuing industry. It held the employer must justify both the necessity and the manner of the retrenchment, and may depart from LIFO where an employee is inefficient, unreliable or habitually irregular, provided reliable evidence supports the departure.

p. 5

Legal principles established

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  • Whether redundancy or retrenchment is necessary is exclusively and purely an administrative matter; the employer/Government is not obliged to consult the union or take its consent, provided the action is bona fide and not vitiated by bad faith, discrimination or victimisation
  • An employer has an inherent and unfettered right to effect bona fide reduction of surplus staff on grounds of economy, which the Court will not disturb where honestly arrived at
  • The court will only interfere with a government pay structure in glaring cases where it is patently unjust, or where a category of employees has been ignored or their increase patently disproportionate to similar employees
  • An employer may depart from the 'last in, first out' rule in redundancy for sufficient and valid reasons, but the departure must be justified by sound and valid reasons or the action may be treated as mala fide or an unfair labour practice

Court orders

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  1. 1.Issue (c), review of terms and conditions of service, dismissed as withdrawn
  2. 2.The Union's demands for consultation on and halting of the Voluntary Early Retirement Scheme rejected; Government at liberty to proceed with the reduction/redundancy/retrenchment provided no employee is retired unless terminal benefits have been paid in full, except normal pension disbursed periodically
  3. 3.Recommendation that the golden handshake payment be raised from Kshs.80,000 to Kshs.120,000
  4. 4.Nil award on the salary issue for now
  5. 5.Parties ordered to commence formal negotiations on better terms and conditions of service for unionisable civil servants immediately

The bench

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

Wrote the judgment

JK
majority
MJ
majority
Jurisdiction invoked
Trade Disputes Act, Cap. 234, Section 14(7) and (9)(e) - Notification of Dispute with statutory certificate from the Labour Commissioner

Relief refused

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Union's demand for 600% salary increase for unionisable civil servants in Job Groups 'A' to 'L'

The demand was economically untenable and unsustainable; the Union had no relationship with the Government for the claimed period (Union banned 1980, re-recognized 14th May 2004) and never formally submitted demands; the quantum is for an expert body such as Treasury

p. 9

Union's demand that the Voluntary Early Retirement Scheme be halted and discontinued until full consultation and agreement

Whether redundancy or retrenchment is necessary is exclusively an administrative matter; the Government has an inherent, unfettered right to effect bona fide reduction of surplus staff without consulting the Union

p. 5

Costs

No costs order made in the award.

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.

In the circumstances, we consider the demands of the Union that the Government should have consulted it in the matter of reduction or redundancy or retrenchment of the employees and that the Court should halt and discontinue the same as untenable and onerous, and we reject them in toto. The Government is, therefore, at liberty to proceed or continue with the reduction or redundancy or retrenchment of the employees provided that no employee shall be retired unless he or she has been paid his or her terminal benefits in full, except normal pension which is disbursed periodically.
p. 6Final orders - Voluntary Early Retirement Scheme
Accordingly, we are constrained to make a nil award for now, but we order that the parties must commence formal negotiations on better terms and conditions of service for unionisable civil servants immediately.
p. 9Final orders - salary award
In our opinion, the question whether redundancy or retrenchment is necessary or not is exclusively and purely an administrative matter; and the Government is not under an obligation to consult the Union or take its consent.
p. 5Management prerogative in redundancy
the Government has the inherent, unfettered and fundamental right to effect bona fide reduction of surplus staff on the ground of economy and to determine the size of its workforce, and the Court cannot sit in judgement when it is honestly arrived at and is not vitiated by bad faith, discrimination or victimisation.
p. 5Right to determine workforce size
This being the case, the same is dismissed as withdrawn.
p. 4Dismissal of withdrawn issue
we are persuaded to recommend that the amount of Kshs.80,000/- should be raised to Kshs.120,000/-.
p. 5Golden handshake recommendation

Issues in the judgment

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minor

The judgment records the issues in dispute as referring to a salary award announced on 29th July 2004, while the press release reproduced in the judgment is dated 28th July 2004

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, "DIRECTORATE OF PERSONNEL MANAGEMENT (GOK) v UNION OF KENYA CIVIL SERVANTS [2005] KEELRC 1 (KLR)", Case Analysis (2005). Cause No. 78 of 2004. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2005/1/eng@2005-05-27

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