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ELRCPartially AllowedNot stated in excerpt· [2024] KEELRC 2372 (KLR)

Osawo v Chuna Co-operative Savings and Credit Society Limited (Cause 606 of 2019) [2024] KEELRC 2372 (KLR)

Employment and Labour Relations Court
27 September 2024
2,683 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A retired Sacco employee won his Kshs 7.1 million gratuity claim under a CBA, though pension and NSSF contributions were deducted.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent Sacco from 1984 until his early retirement in 2018 as a unionisable employee, sued for Kshs 7,119,820/= being gratuity of two months' salary per year worked under clause 7(D)4 of the CBA plus baggage and passage allowance, and compensatory damages for breach of contract. The Respondent denied the claim, asserting the Claimant was permanent and pensionable, that it had contributed 12.5% of his basic salary to the Chuna Sacco Staff Pension Scheme and NSSF, that gratuity under the CBA applied only to contractual staff or on death, and citing a 2018 State Department for Co-operatives Inquiry Report which it said rendered dual pension and gratuity payments illegal. The court framed two issues: entitlement to gratuity and entitlement to general damages. It held the CBA binding since it remained in force until jointly revised and was never revised. Relying on the Court of Appeal's decision in Board of Management Ng'araria Girls Secondary School v KUDHEIHA Workers, it held that Section 35(6) of the Employment Act does not bar superior retirement benefits agreed in a CBA, provided pension and NSSF contributions are deducted to avoid double payment. Adopting the Claimant's last salary of Kshs 104,525/= from his payslips, the court awarded the gratuity of Kshs 7,119,820/= less the Respondent's pension and NSSF contributions, refused general damages for want of a basis, and ordered each party to bear their own costs.

Key legal issues

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01

Entitlement to gratuity under the CBA upon early retirement

Holding

The Claimant is entitled to gratuity of two months' salary per year worked under clause 7(D)4 of the CBA, computed on his last salary of Kshs 104,525, less the Respondent's pension and NSSF contributions

Reasoning

The court found the CBA binding since it was between the Respondent and the Claimant's union and had never been jointly revised, so it remained in force at retirement in 2018. Section 35(6)(b) of the Employment Act excepts gratuity under a CBA. Following the Court of Appeal in Ng'araria Girls, the court held superior CBA benefits are payable, deducting the 12.5% pension and NSSF contributions to avoid double payment. The Respondent produced no evidence to displace the last salary shown on the payslips.

p. 5
02

Compensatory or general damages for breach of contract

Holding

The prayer for general damages was refused as no basis was laid for it

Reasoning

The court noted that general damages for breach of contract in employment matters require a strong basis, with compensation governed by Section 49 of the Employment Act. Relying on D K Njagi Marete v Teachers Service Commission, where the Court of Appeal refused general damages absent a laid basis, the court declined the award since the Claimant had already been compensated through the gratuity payable under the CBA.

p. 6

Legal principles established

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  • A CBA that has not been jointly revised remains in force and binding between the parties beyond its initial three-year term
  • Section 35(6) of the Employment Act does not preclude parties from agreeing to gratuity or retirement benefits over and above statutory social security, but pension and NSSF contributions are deductible from CBA gratuity

Court orders

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  1. 1.That the claimant be paid his gratuity pay of Kshs 7,119,820/- less contributions made by the Respondent to the Pension Scheme and NSSF
  2. 2.Each party shall bear their own costs

Authorities

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Legislation

  • Employment ActSection 35(6)(b)
  • Employment ActSection 35(5)
  • Employment ActSection 35(6)
  • Employment ActSection 49

Cases cited (5)

  • Bamburi Cement Limited vs William Kilonzi
    (2016) eKLR
  • Bamburi Cement Limited vs Farid Aboud Mohamed
    (2016) eKLR
  • Board of Management Ng'araria Girls Secondary School v KUDHEIHA Workers
    [2017] eKLR
  • D K Njagi Marete v Teachers Service Commission
    [2020] eKLR
  • Industrial Court Case No. 871 of 2012 (Rika, J.)
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment and Labour Relations Court Act and the Employment Act, 2007

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, "Osawo v Chuna Co-operative Savings and Credit Society Limited (Cause 606 of 2019) [2024] KEELRC 2372 (KLR)", Case Analysis (2024). Not stated in excerpt. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2372/eng@2024-09-27

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