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ELRCPartially AllowedCause Number 24 of 2014

Christopher Okwako & 21 others v Sai Eden Roc Hotel [2014] KEELRC 24 (KLR)

Industrial Court of Kenya
18 December 2014
2,595 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled a hotel fire was force majeure, not unfair dismissal, but still ordered notice pay, December wages, and refunds of salary deductions.

What this practically means

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Executive summary

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Twenty-two former employees of Sai Eden Roc Hotel in Malindi - kitchen stewards, cooks, barmen, stewards, waitresses, gardeners, cleaners, clerks and administrators - filed a joint claim seeking approximately Kshs 9,620,473 in terminal benefits following termination of their contracts on 17th December 2013 after a fire gutted the Hotel's kitchen, administration block, restaurant and reception. They claimed one month's notice pay, leave, December 2013 salary, refunds of 25% salary deductions, and 12 months' salary each as compensation and damages for unfair termination. The Respondent denied legal capacity to be sued, contending the Claimants had contracts with independent management companies; it explained the deductions as an agreed consensual deferral during poor business performance caused by coastal insecurity, and said employees agreed to seek alternative employment pending rehabilitation of the Hotel. The Respondent did not attend the hearing, which proceeded ex parte before Rika J. The Court held the correct entity was sued, since employers should not hide behind multilayered business formations, and the Claimants, on routinely renewed short-term contracts, were to be treated as regular employees entitled to the full benefit of the Employment Act 2007. The 25% deductions were an acceptable salary deferral during business crises, but the Respondent abused the arrangement and failed to pay the deferred arrears. The termination itself was attributed to force majeure and was held not unfair, so compensation and damages were refused. Leave, contract dues, pending dues and public holiday claims failed for want of supporting material, and costs and interest were declined as inimical to good industrial relations.

Questions the Court framed

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

  1. 1.Whether the Claimants sued the correct/legal entity capable of being sued
  2. 2.Whether the 25% salary deductions were lawful and refundable
  3. 3.Whether the termination of the Claimants' contracts was unfair and unlawful
  4. 4.What terminal benefits and dues are payable to the Claimants

Key legal issues

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01

Whether the correct entity was sued

Holding

The Respondent's objection that the Claimants sued the wrong entity or a nonentity failed; the Claimants sued a known business that employed them under various names and styles from the same address

Reasoning

The contracts showed successive employers (Platinum Resort, Eden Roc Hotel, Pride Inn Hotels, Sai Eden Roc Hotel) all sharing P.O. Box 350 Malindi. The Court held it would ask too much of employees to uncover the various legal and business forms assumed by the employer, so long as the employer is identifiable with a physical presence and known managers.

p. 3
02

Lawfulness of 25% salary deductions

Holding

The deductions were agreed as a temporary deferral during business crises, reviewable upon business improvement, but the Respondent abused the arrangement and failed to pay the arrears; refund ordered

Reasoning

Employers and employees may agree to defer part of salary during crises as an alternative to layoffs, but the arrangement must be in writing and deferred salaries are not forfeited. The Respondent continued deducting even when revenue exceeded the agreed targets of Kshs 7 million and beyond, and paid inconsistently.

p. 4
03

Whether termination was unfair

Holding

Termination was occasioned by force majeure - the fire of 17th December 2013 - and was not unfair; no compensation or damages awarded

Reasoning

The fire was an interruption, not a destruction, of the business. It made continued employment impossible in the foreseeable future. The Respondent agreed employees would seek alternative self-sustenance pending restoration, and left the door of re-employment open. Parties had since moved on with no firm offer of re-employment and no claimant expressing a wish to return.

p. 4
04

Terminal dues payable

Holding

Each Claimant awarded one month salary in lieu of notice, 17 days' salary for December 2013, and refund of the 25% deductions; other claims rejected for lack of supporting material

Reasoning

Notice pay and December wages were established by the evidence. Leave, leave allowance, contract dues, pending dues and public holiday overtime claims failed because insufficient material was availed and some prayers were incomprehensibly pleaded.

p. 5

Legal principles established

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  • Employees suing a business that has operated under multiple names and legal forms need only identify the employer as a known business entity; they cannot be hindered by the employer's multilayered business formations
  • Employees on short-term contracts renewed routinely are to be treated as regular employees entitled to the full benefit of the Employment Act
  • Employer-employee agreements to defer part of salary during business crises must be in writing and do not extinguish the deferred amounts
  • Termination occasioned by force majeure, such as a fire destroying the workplace, is not unfair and does not attract compensation or damages

Court orders

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  1. 1.Declaration that termination of the Claimants' contracts of employment was by force majeure and not unfair as to warrant damages or compensation
  2. 2.Respondent to pay each of the 22 Claimants, within 30 days of delivery of the Award: 1 month salary in lieu of notice
  3. 3.Respondent to pay each Claimant 17 days' salary for work done in the month of December 2013
  4. 4.Respondent to refund 25% salary deductions over the period indicated in the Statement of Claim, for each Claimant
  5. 5.Other prayers rejected

The bench

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

majority

Wrote the judgment

Jurisdiction invoked
Industrial Court Procedure Rules 2010, Rule 27(1)(a) - dispute in employment and labour relations referred under the Industrial Court's jurisdiction

Relief refused

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12 months' salary compensation for unfair termination

Termination was by force majeure, not unfair; the parties separated through an unexpected disruptive event

p. 5

12 months' salary general damages for unfair termination

Rejected for the same reason - no unfair termination established

p. 5

Leave and pro-rata leave; leave allowance; contract dues; other pending dues; public holiday overtime

Insufficient material was availed to support these claims

p. 5

Costs and interest

Orders for costs and interest would not serve good industrial relations given the circumstances

p. 5

Costs

No order for costs - costs and interest declined, each party to bear their own costs implicitly (Court declined to order 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.

Employers normally adopt multilayered legal and business formations, and Employees should not be hindered in enforcement of employment obligations, on the basis that the real character of the Employer is unknown. It is enough that the Employer is identifiable.
p. 4Identification of employer entity
They were to be treated as regular Employees and the full benefit of the Employment Act 2007, extended to them.
p. 4Renewed short-term contracts treated as regular employment
Employers and Employees may agree during times of business crises to have part of the Employees’ salary deferred until the business improves. It becomes an acceptable alternative to lay- offs. Such arrangements must be in writing.
p. 4Salary deferral arrangements in business crises
Parties separated through force majeure. The fire was a disruptive and unexpected event, affecting the Claimant’s completion of their contracts to 31st December 2013, and their legitimate expectation for immediate renewal of the contracts.
p. 4Force majeure termination
Termination shall be treated as regular termination, with the effect that the Respondent shall, within 30 days of the delivery of this Award, pay to each of the 22 Claimants, the following;
p. 5Final orders

Issues in the judgment

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minor

Judgment refers to 'Charles Okwako' in the findings while the first Claimant is named 'Christopher Okwako'

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, "Christopher Okwako & 21 others v Sai Eden Roc Hotel [2014] KEELRC 24 (KLR)", Case Analysis (2014). Cause Number 24 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/24/eng@2014-12-18

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