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HOSEA NJERU KAGONDU v KENYA UNION OF COMMERCIAL FOOD AND ALLIED WORKERS [2012] KEELRC 157 (KLR)

Industrial Court of Kenya
13 December 2012
MOMaureen Onyango
1,042 words in judgment
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The bottom line

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Kenya's Industrial Court ruled that employment compensation awards must have PAYE and statutory deductions applied, regardless of what a judge orders.

What this practically means

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Executive summary

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This is a ruling of the Industrial Court at Nairobi on a notice of motion filed by the Respondent after a judgment of 7th March 2012 by Hon Justice Isaac E.K Mukunya (retired) awarded the Claimant Kshs.3,000,000 for wrongful dismissal. The parties had consented to payment of a Kshs.500,000 deposit with the balance in monthly instalments, but the Respondent deducted PAYE of Kshs.119,655 from the deposit, prompting the Claimant to instruct auctioneers. The Respondent then moved the Court for stay of execution, satisfaction of the decree per the consent agreement, and a declaration that the decretal sum was subject to PAYE and other statutory deductions. Two issues fell for determination: whether the application was properly before the Court, and whether the decree was subject to PAYE. The Court held the motion properly grounded in Section 12 of the Industrial Court Act, 2011 (it was not a review under Section 16). On taxation, the Court held that section 49(2) of the Employment Act mandatorily subjects payments under it to statutory deductions; the Income Tax Act obliges employers to deduct PAYE; and Article 210 of the Constitution permits no exemption except by law. The Claimant's two authorities were distinguished. The application succeeded, with the Court restating that all payments under the decree are subject to statutory deductions including PAYE. No express costs order was recorded.

Questions the Court framed

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

  1. 1.Whether the decree is subject to deduction of PAYE
  2. 2.Whether the application is properly before the court

Key legal issues

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01

Whether the application is properly before the court

Holding

The application is properly before the Court under Section 12 of the Industrial Court Act; it is not a review under Section 16

Reasoning

The Claimant argued the motion was irregular because it was brought under Section 12 instead of Section 16 of the Industrial Court Act, 2011. The Court held Section 12 confers wide powers to give appropriate relief, while Section 16 governs review. Since the Respondent's application sought stay of execution and clarification of the decree's tax status, not a review, Section 12 was the proper basis.

p. 2
02

Whether the decree is subject to deduction of PAYE

Holding

The decree is subject to statutory deductions including PAYE under section 49(2) of the Employment Act, 2007 and Article 210 of the Constitution

Reasoning

Section 49 of the Employment Act provides that payments under it shall be subject to statutory deductions; 'shall' is mandatory and leaves no judicial discretion. The Court had found an employment relationship, and the Income Tax Act obliges employers to deduct PAYE from employment income, failure being an offence. Article 210 permits no tax exemption except by law, and none applied. The authorities cited by the Claimant were distinguished.

p. 2

Legal principles established

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  • Payments under section 49 of the Employment Act are mandatorily subject to statutory deductions; a judge has no discretion to exempt them
  • No person is exempt from payment of tax unless exempted by law (Article 210 of the Constitution)

Court orders

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  1. 1.Application certified as properly before the Court under Section 12 of the Industrial Court Act
  2. 2.All payments due from the Respondent to the Claimant in respect of the decree are subject to statutory deductions including PAYE as provided in section 49(2) of the Employment Act, 2007

The bench

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

MO
majority

Wrote the judgment

Jurisdiction invoked
Section 12 of the Industrial Court Act, 2011

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.

For the avoidance of doubt, I wish to restate that all payments due from the Respondent to the Claimant in respect of the decree herein is subject to statutory deductions including PAYE as provided in sections 49 (2) of the Employment Act 2007.
p. 3final orders - taxation of decree
The words “Shall” connote that it is mandatory. The section does not give a judge an option to decide whether or not the benefits under the Section are taxable.
p. 2mandatory statutory deductions under section 49 Employment Act
The Constitution of Kenya provides at Article 210 that no person shall be exempt from payment of tax unless exempted by Law.
p. 2constitutional position on tax exemption

Issues in the judgment

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minor

The judgment does not record an express costs order despite the motion seeking costs against the Claimant

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, "HOSEA NJERU KAGONDU v KENYA UNION OF COMMERCIAL FOOD AND ALLIED WORKERS [2012] KEELRC 157 (KLR)", Case Analysis (2012). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2012/157/eng@2012-12-13

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