P J Petroleum Equipment Ltd v Agina (Appeal E041 of 2022) [2024] KEELRC 1091 (KLR)
The bottom line
#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 trial magistrate erred in awarding maximum compensation of 12 months' salary without assigning reasons
- 2.Whether the trial magistrate erred in awarding house allowance of Kshs 108,000/- despite pay slips showing a house allowance component
- 3.Whether the award of gratuity of Kshs 60,000/- had any legal or factual basis
- 4.Whether the award of leave days of Kshs 60,000/- was justified
Key legal issues
#Maximum compensation for unfair termination
The award of maximum compensation without reasons was erroneous; substituted with 4 months' gross wages (Kshs 80,000/-) based on about 3 years' service and a monthly wage of Kshs 20,000/-
Compensation under section 49 of the Employment Act is a discretionary remedy that must be exercised judiciously by reference to the factors in section 49(4). The trial magistrate awarded the maximum 12 months' compensation without setting out any reasons, committing errors of law and fact. Considering the length of service of about three years and the monthly wage of Kshs 20,000/-, the Court found compensation equivalent to four months' gross wages appropriate.
House allowance
Award of Kshs 108,000/- set aside because pay slips proved a house allowance of Kshs 2,500/- was included in the salary
The employer produced pay slips showing a house allowance component of Kshs 2,500/- per month. Pay slips are a statutory requirement under section 20 of the Employment Act and carry evidential value which the trial magistrate ignored. The Court therefore set aside the entire award of house allowance.
Gratuity
Award of Kshs 60,000/- set aside as there was no pleading or contractual/legal foundation for gratuity
The record of appeal contained no pleading seeking gratuity. Gratuity is ordinarily a contractual payment, not provided for in the Employment Act, 2007, which is the employment law of general application. Without a contractual or evidential foundation, the award could not stand and was set aside.
Accrued/commuted leave
Leave award varied to Kshs 40,909/- for 45 accumulated days, computed using the monthly salary divided by 22
Section 28 of the Employment Act entitles an employee to at least 21 days' annual leave on full pay. Over three years the Respondent was entitled to 63 days but took only 18, accumulating 45 days which the employer should have commuted. Applying the customary formula of dividing the monthly salary by 22 to obtain the daily rate and multiplying by 45, the award was recalculated at Kshs 40,909/-.
Legal principles established
#- A first appellate court must re-evaluate, re-assess and re-analyse the evidence on the record and determine whether the conclusions of the trial court should stand, giving reasons either way.
- The award of compensation for unfair termination is a judicial discretion to be exercised with reference to the factors in section 49(4) of the Employment Act, 2007, and failure to give reasons is an error of law and fact.
Court orders
#- 1.The judgment of the Senior Resident Magistrate is set aside and substituted with judgment for compensation of Kshs 80,000/- and leave of Kshs 40,909/-, total Kshs 120,909/-
- 2.The awards for house allowance and gratuity are set aside in entirety
- 3.Each party to bear own costs of the Appeal
- 4.The Respondent to have costs before the Senior Resident Magistrates Court
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- On appeal from
- Senior Resident Magistrates Court
- Jurisdiction invoked
- First appeal to the Employment and Labour Relations Court against the judgment of the Senior Resident Magistrates Court in an employment claim
Relief refused
#House allowance of Kshs 108,000/-
Pay slips produced in evidence showed the Respondent was already receiving a house allowance of Kshs 2,500/-, which the trial magistrate failed to consider
Gratuity of Kshs 60,000/-
No pleading or evidence founded the claim; gratuity is contractual and not provided for in the Employment Act
Costs
Each party to bear own costs of the Appeal. The Respondent to have costs before the Senior Resident Magistrates Court.
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.
This being a first appeal, we are reminded of our primary role as a first appellate court namely, to reevaluate, re-assess and reanalyse the extracts on the record and then determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.
The award of compensation where unfair termination of employment has been found is an exercise of discretion that should be exercised judiciously, and the factors the Court ought to consider in exercising the discretion are set out in section 49(4) of the Employment Act, 2007.
Based on the length of service, this Court is of the view that compensation equivalent to 4 months’ gross wages of Kshs 80,000/- would be appropriate.
To get the commuted amount, the Court will use the customary formula of dividing the monthly salary by 22 to get the daily rate which multiplied by 45 days gives a sum of Kshs 40,909/-.
For clarity, the awards for house allowance and gratuity are set aside in entirety.
The Appellant has partly succeeded. Each party to bear own costs of the Appeal. The Respondent to have costs before the Senior Resident Magistrates Court.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "P J Petroleum Equipment Ltd v Agina (Appeal E041 of 2022) [2024] KEELRC 1091 (KLR)", Case Analysis (2024). Kisumu Appeal No. E041 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1091/eng@2024-05-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.