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IndustrialPartially AllowedCause 62 of 2001· [2000] KEIC 1 (KLR)

Kenya Engineering Workers’ Union v Reliance Industries Ltd (Cause 62 of 2001) (Employment and Labour) [2000] KEIC 1 (KLR)

Industrial Court of Kenya (Employment and Labour)
9 July 2003
CCCharles P. ChemmuttutJKJM KilonzoAKAK Kerich
4,932 words in judgment
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The bottom line

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Kenya's Industrial Court raised workers' wages and allowances at Reliance Industries but rejected bigger union demands like 40% annual increases, enhanced severance pay and backdating.

What this practically means

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Executive summary

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This Industrial Court award arose from a Ministerial reference under Section 8 of the Trade Disputes Act, Cap. 234, of a dispute between the Kenya Engineering Workers' Union and Reliance Industries Ltd concerning the renewal of a collective agreement affecting 17 unionisable employees. The Union demanded, among other things, a 40% general wage increase per year, a 30% house allowance, enhanced severance pay on redundancy, automatic confirmation of casuals, shopstewards' rights, paid suspension with a 10-day determination period, improved safari and leave travelling allowances, a long service award, and a retrospective effective date of 1st March, 2000. The Company pleaded inability to pay, citing poor business performance, bank-loan dependence and competition, and relied on a voluntary 20% wage increase already granted. Guided by reports of the Economic and Planning Division, the Court partly allowed the claims: it ordered basic minimums raised to statutory minimum rates, a 10% annual general wage increase (20% over two years), house allowance improved to 17.5%, leave travelling allowance of Kshs.1,750, funeral contribution of Kshs.10,000 and revised safari allowance rates. It rejected the demands on redundancy severance, casuals' automatic confirmation, job classification, shopstewards' rights, suspension, and long service award, and refused retrospective effect, fixing the effective date at 1st March, 2003, for two years.

Key legal issues

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01

Basic monthly minimum wages

Holding

Basic minimums to be brought up to statutory minimum rates under the General Wages Orders 2000-2003

Reasoning

The EPD established that the parties' basic minimum wages had been overtaken by statutory wage rates effective 1st May, 2000 and 1st May, 2001, with some categories earning below the statutory minimums. Since minimum wages represent a wage floor that must be paid regardless of profitability, the Court ordered the basic minimums raised to the current statutory minimum rates.

p. 3
02

General wage increase

Holding

Additional general wage increase of 10% each year (20% for the two-year period) awarded

Reasoning

The Union's demand of 40% per year (80% total) was considered very high and unreasonable given the small workforce and the voluntary 20% increase already granted. Weighing the parties' submissions, cost of living compensation entitlements and the company's ability to pay, the Court awarded a more modest 10% per year.

p. 4
03

House allowance

Holding

House allowance improved from 15% to 17.5% of basic monthly wage

Reasoning

The Court found decent accommodation scarce and unaffordable, particularly in urban centres, and invoked section 9 of the Employment Act obliging every employer to provide reasonable housing or sufficient rent. Guided by Wage Guideline 2(ii) and (iv) and prior awards, it enhanced the allowance by 2.5%.

p. 5
04

Suspension of employees

Holding

Demand for paid suspension with determination within 10 working days rejected

Reasoning

Relying on Warburton v Taff Vale Railway Company and Hamley v Pease & Partners, the Court held suspension is not an implied term of the master-servant contract and a suspended employee remains entitled to wages. As to duration, no hard and fast rule can be laid down; enquiry periods depend on standing orders and the circumstances of each case.

p. 9
05

Effective date and duration

Holding

Effective date fixed at 1st March, 2003, for two years; retrospective effect from 1st March, 2000 refused

Reasoning

Retrospective effect is discretionary and exceptional; it cannot predate the first proposals (27th March, 2000), the company had already granted increases, and the Court must consider the financial impact on the company's paying capacity. The demand for back-dating was found utterly untenable.

p. 10

Legal principles established

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  • Management must pay minimum wages whether or not it earns profits; no employee should earn less than the statutory minimum rate of pay
  • The primary objective in deciding wage-increase disputes is the ability of the company to pay and the restoration of peace, harmony and good will in the industry
  • The employer's power to suspend an employee is not an implied term of the contract of employment; a suspended employee remains entitled to wages
  • Retrospective effect of an award cannot be claimed as of right; the fixation of the effective date is discretionary

Court orders

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  1. 1.Basic minimum wages be brought up to the current statutory minimum rates of pay pursuant to the General Wages Orders for the years 2000 to 2003
  2. 2.Additional general wage increase of 10% each year, or 20% for the two years' period
  3. 3.House allowance improved from 15% to 17.5% of the individual employee's basic monthly wage
  4. 4.Leave travelling allowance of Kshs.1,750/= payable when an employee proceeds on annual leave
  5. 5.Company's contribution towards funeral expenses of an employee who dies in employment enhanced to Kshs.10,000/=
  6. 6.Safari allowance rates revised: Breakfast Kshs.130/=, Lunch Kshs.200/=, Supper Kshs.250/=, Accommodation Kshs.500/=
  7. 7.Effective date of the collective agreement to be 1st March, 2003, for a duration of two years
Jurisdiction invoked
Section 8 of the Trade Disputes Act, Cap. 234 (reference by the Minister for Labour)

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, "Kenya Engineering Workers’ Union v Reliance Industries Ltd (Cause 62 of 2001)  (Employment and Labour) [2000] KEIC 1 (KLR)", Case Analysis (2003). Cause 62 of 2001. Source: https://new.kenyalaw.org/akn/ke/judgment/keic/2000/1/eng@2000-07-09

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