Kenya Revenue Authority v Otieno & 3 others

2. 2. The respondent [KRA] to pay each of the petitioners and the 60 other aected ocers 10 months’ gross monthly salaries at the last monthly rate prior to the termination of the secondment contracts (Less PAYE) and the amount due to each be computed as part of the decree. 3. The amount in (2) above be paid by 31.12.2023 failing interest to be payable thereon at court rates from the date of this judgment till full payment. 4. The respondent [KRA] to pay costs of the petition. The respondents had led a petition against the appellant claiming for; a. A declaration that the respondent’s unilateral decision to summarily terminate the secondment of the petitioners and aected ocers by various letters dated 31st January 2023 which resulted to reduction of their salaries and other work benets was unprocedural, unlawful, unconstitutional, involved unfair/discriminatory treatment and amounts to unfair and unlawful termination from employment. b. An order do issue compelling the respondent [KRA] to compensate the petitioners and all aected ocers’ salaries that would have been earned in their respective positions at the respondent’s oces for the remainder of their respective contractual term from the month of February 2023 without any deductions whatsoever and without any further delay. c. An order for general and aggravated damages as compensation for the remainder of the respective contract periods being for unlawful, unfair, discriminatory and unprocedural termination of the petitioners and aected ocer’s secondment and termination of service, the anxiety and emotional suering occasioned by the respondents’ actions to unilaterally terminate the employment of the petitioners and aected ocers without any reasonable cause. Particulars of damages i. 12 months pay as compensation ii. 3 months’ Notice pay iii. Health cover for one year equivalent iv. Relocation costs equivalent to one month pay v. 30 working days accrued leave for the year 2023 vi. General damages for loss of legitimate expectation equivalent to three months pay. a. An order for general and aggravated damages including exemplary damages for breach of the petitioners’ and all aected ocers constitutional rights including the right to non-discrimination, fair administrative action, right to human dignity and self-worth. b. Interest on sums awarded in (c) and (d) at court rates from the date of termination until payment in full. c. That costs of this petition be borne by the respondents. d. That this Honourable court be pleased to grant any further orders as it may deem t to further the ends of justice. https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 2

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3. The facts leading to the petition were that at various times the appellant in liaison with the National Police Service invited qualied individuals to apply for vacant positions in its Investigations and 4. Enforcement Department. The respondents and other aected ocers applied for the jobs and, through a competitive recruitment process, were selected and placed to various stations of the appellant. They were issued with letters of secondment to serve at the appellant’s oces for a period of 3 years from the date of the contracts, and others had their secondment contracts extended for a period of 2 years. The letter of secondment provided for varied terms of service including benets. However, before the lapse of the respective contractual periods, the respondents and other aected ocers were issued with notices of termination of secondment dated 31st January 2023, signed by the appellant’s Deputy Commissioner for Human Resource. The letters of termination were forwarded to the respective respondents and other aected ocers on 3rd February 2023, when they had already started working in the month of February. The letters stated that the respondents and other aected ocers would only be paid salary and allowances up to and including 31st January 2023. Vide a notice dated 17th February 2023, the respondents were redeployed to the National Police Service in various stations and in the ranks that they had served before the secondment. 5. It was averred that as a consequence of the said untimely termination, the salaries of the respondents and other aected persons were signicantly reduced and they are no longer entitled to the benets they had been receiving upon secondment, such as health cover. Further, the salary reduction adversely aected their lifestyle and that of their families. The respondents lamented that the termination subjected them to mental anguish as they struggled to cope with the sudden new turn of events. It was pleaded that the appellant violated Articles 10, 19, 27, 41, 47, 48, and 50(1) of the Constitution, and clause 8 of the KRA Code of Conduct and Ethics to the extent that the decision of termination was unconstitutional, irregular, unlawful, arbitrary and discriminatory. The respondents argued that the resolution of the appellant was irregular as it was made without any notice or justiable reason contrary to section 4 of the Fair Administrative Action Act, 2015. The decision also violated fair labour practices under Articles 232(2) and 236 of the Constitution by not making reference to any meeting that was conducted by the appellant in which the resolution to summarily terminate the respondent’s secondment was made. The appellant was also criticised for failing to take into account the respondents’ and other aected ocers’ legitimate expectation, having projected their nancial positions for the subsequent 3 years. 6. The appellant opposed the petition in a replying adavit and supplementary adavit dated 15th June 2023 and 24th June 2023 respectively, sworn by Peter Kiambi, an ocer in its Human Resource Division. The appellant explained that termination of the secondment contracts was done in line with the provisions of the contract that stated, ‘The secondment contract will be terminated on account of disciplinary cases or other grounds.’ The termination was also in line with section 42(3) of the Public Service Commission Act, 2017 which provides that, ‘Where it is no longer necessary for a public ocer on secondment to remain seconded and the secondment period has not lapsed, the public ocer shall be entitled to revert to the public oce held before the secondment.’ The appellant averred that it was amenable to pay the respondents and other aected ocers salary for 3 working days being the 1st to 3rd of February 2023, since it was evidenced that they were in oce during that period. 7. The appellant further stated that reduction in salary and alleged loss of benets that the respondents and other aected persons enjoyed during secondment cannot form a valid claim because the benets were temporary and only applicable during that period. It denied breaching any provision of the Constitution or the Kenya Revenue Authority Act, 1995, as alleged. The appellant averred that the secondment was done pursuant to the Guidelines on Secondment in the Public Service of October https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 3

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2016. It asserted that the termination was lawful and fair and thus the reliefs sought by the respondents were unmerited. Moreover, they were not entitled to any compensation as they were released back to their principal employer, the Kenya Police Service. The court was ultimately urged to dismiss the petition with costs. 8. At the end of the trial, the learned Judge delivered a judgment on 30th October 2023, holding in favour of the respondents and other aected ocers as aforementioned. 9. The appellant was aggrieved by that judgment and led this appeal, on 9 grounds which, in summary, are that the learned Judge erred by; a. Holding that termination of the secondment was not proper. b. Disregarding the law and treating termination of the secondment contract as termination of employment. c. Allowing the petition in disregard of the doctrine of constitutional avoidance. d. Disregarding provisions of section 3 of the Employment Act and awarding the respondents damages of 10 months. e. Awarding the respondents compensation without sucient proof of any damages suered. f. Unjustly enriching the respondents by granting them the award of 10 months salary when they had their full salary from their employer for the same period. g. Awarding the respondents 10 months salary in damages and relying on section 49 of the Employment Act when the appellant was not their employer. h. Awarding the respondents excessive compensation for work not done. 10. The appellant prays that the appeal be allowed with costs and the impugned judgment and consequential orders be set aside and be substituted with an order dismissing the petition dated 17th April 2023. 11. The parties’ advocates on record led written submissions and bundles of authorities which they highlighted at the hearing of the appeal. 12. For the appellant, Mr. Muhoro Kiriiri submitted that even though the respondents claimed that they had lost income when their secondment contract was terminated, no pay slip from their parent employer was presented before court to establish this fact. 13. Counsel faulted the trial court for relying on section 49 of the Employment Act when there was no employer-employee relationship between the appellant and the respondents. Mr. Muhoro contended that at all material times the respondents remained employees of the Kenya Police Service. He questioned the basis upon which the award of 10 months’ salary was made to the respondents, arguing that it was plucked from the air. Counsel submitted that in view of the fact that the respondents continued to receive salaries from their parent employer, the award amounted to unjust enrichment. Referring to the Zimbabwean case of Sports And Recreation Commission v. Sagittarius Wrestling Club And Anor. 2001 (2) ZLR 501 (S), as cited by the High Court in Lugo v. Director Of Public Prosecutions [2022] KEHC 10574 (KLR), counsel contended that the respondents’ petition had violated the doctrine of constitutional avoidance. 14. Mr. Muhoro cited section 42(3) of the Public Service Commission Act which provides that, ‘Where it is no longer necessary for a public ocer on secondment to remain seconded and the secondment https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 4

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period has not lapsed, the public ocer shall be entitled to revert to the public oce held before the secondment.’ He further placed reliance on the Guidelines on Secondment in the Public Service of October 2016, specically paragraph 5 thereof which prescribes the terms and conditions during secondment. Counsel asserted that the respondents were not terminated but were merely reverted to the positions they held before secondment, without any loss of their salaries and entitlements. Mr. Muhoro concluded by urging us to allow the appeal. 15. In opposition to the appeal, Mr. Timothy Khasogo, holding brief for Mr. Charles Kanjama, SC for the respondents, submitted that contrary to the appellant’s contention, the respondents produced before court their pay slips before termination and after termination, showing the reduction in their salaries. Counsel urged that the appellant did not present any evidence in court to demonstrate that it consulted the principal employer before terminating the secondment of the respondents. Mr. Khasogo defended the trial court’s award of 10 months salary and invited us to peruse the impugned judgment and note the reasons that the learned judge gave therefor. Counsel asserted that the learned Judge was right in applying the provisions of the Employment Act considering that during secondment, the respondents entered into an express contract with the appellant as their employer and were obligated to work at its oces during the entire contractual period of 3 years. To buttress this argument, he drew our attention to the denition of secondment and the obligations of both employer and employee during secondment as discussed by this Court in Kenya Methodist University v. Kaungania & Another [2022] KECA 90 (KLR). The Court stated; “ 22. […] secondment is dened in Oxford Dictionary as the act of transferring a worker temporarily to another employment or position, and therefore under another employer. In eect, the employee does not undertake any work for the original employer during the period of secondment. Therefore, in a situation where a person is employed on secondment, the substantive and principal employer in our view is the person or entity that has assigned the employee specic duties which are remunerated by a salary or wages during that period of employment. The person or entity that seconds such a person is the nominal employer whose powers and duties are reinstated once the secondment ends and are residual during the period of secondment. […] 24. In the present appeal, the position of the Appellant as the principal employer was reinforced by the fact that it actually entered into contracts of employment with the Respondents, …The Trial judge therefore did not err in nding that the parties were bound to the three years’ secondment and upon giving the approval for the Respondents’ secondment the Presiding Bishop of the Methodist Church in Kenya became functus ocio as he was a residual employer.” 16. Mr. Khasogo urged that the import of the foregoing decision is that the respondents and other aected ocers, being employees of the appellant, ought to have been treated as such in all aspects including following due process of termination of employee contracts as provided for in law. Further, on reliance of this Court’s decision in Kenya Education Staff Institute v. Kenya Union Of Post-primary Teachers (kuppet), Minister For Education & Minister Of State For Public Service [2020] KECA 898 (KLR), it was submitted that the appellant should have followed the procedure laid out in law when terminating the services of employees on secondment. Counsel armed the trial court’s nding that https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 5

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the termination of the secondment contracts amounted to violation of Article 10, 41 and 47 of the Constitution. 17. On reliance of section 4(3) of the Fair Administrative Action Act and section 43(1) of the Employment Act, which require an employer to demonstrate the reasons for termination in a claim arising out of termination of a contract of employment, as well as this Court’s decision in Ufanisi Freighters (k) Limited v. Nyamai [2023] KECA 297 (KLR), Mr. Khasogo faulted the appellant for failing to issue the respondents with notice or reasons for termination. They were also not given an opportunity to respond to the said termination letter. Counsel argued that in view of the appellant’s admission that the respondents were not terminated on account of any misconduct or repeated misdemeanors, then the termination violated fair labour practices. He dismissed the appellant’s assertion that the petition violated the doctrine of constitutional avoidance, arguing that the Employment and Labour Relations Court has jurisdiction to hear any dispute relating to employment including a dispute raising constitutional violations arising from an employment relationship. In support of that argument various authorities were cited including Public Service Commission & 4 Others v. Cheruiyot & 20 Others [2022] KECA 15 (KLR) and Mackenzie Moulding Mogere & Johnson Murigu Ndoria v. Trustees Of Telposta Pension Scheme, Attorney General, Retirement Benefits Authority, Telkom (k) Limited & Postal Corporation Of Kenya Staff Pension Scheme [2017] KECA 330 (KLR). 18. Concerning whether the learned Judge erred in awarding the respondents one month notice pay and nine months compensation, counsel submitted that the respondents were entitled to 12 months compensation being the maximum compensation for unfair termination under section 49(1)(c) of the Employment Act. However, the trial court reduced it to 9 months and added one month compensation in lieu of notice, upon considering the mitigating factor that they had reverted to their initial employment. To counsel, the appellant had not demonstrated that the learned Judge misdirected himself in making the award, and urged us not to interfere with his exercise of discretion. In conclusion Mr. Khasogo invited us to dismiss the appeal with costs for being devoid of merit. 19. In a brief reply to the respondents’ submissions, Mr. Muhoro reiterated that section 49 of the Employment Act was not available to the respondents as they were on secondment. 20. We probed Mr. Muhoro whether the letter of termination gave the grounds for termination especially in view of the provisions of the rst clause of the secondment letter which stated that, ‘The secondment is for a period of three (3) years unless otherwise terminated on disciplinary or other grounds.’ In answer, counsel admitted that the letter of termination did not give reasons for termination. 21. I have given due consideration to the submissions and authorities cited by both counsel and the entire record, consistent with our duty as a rst appellate court to proceed by way of a re- hearing and to subject the evidence to a fresh and exhaustive re- evaluation before arriving at our own inferences of fact. see Rule 31(1) of the Court of Appeal Rules, Selle v. Associated Motor Boat Co. [1968] EA 123 and Abok James Odera T/a A. J. Odera & Associates v. John Patrick Machira T/a Machira & Co. Advocates [2013] eKLR. 22. From the record of appeal and submissions, the twin issues that emerge for determination are, whether the secondment contracts of the respondents and other aected ocers were unfairly terminated and whether they were entitled to 10 months gross salary compensation. 23. To begin with, it is observable that the appellant has consistently argued that there was no employeremployee relationship between the respondents and itself and thus, provisions of the Employment Act, particularly section 49, should not have been applied to it. The appellant asserts that at all material times the respondents and other aected ocers were employees of the Kenya Police Service, their parent employer. On this decisive issue, I nd the decision in Kenya Methodist University v. Kaungania https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 6

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& Another (supra), an authority cited by the respondents, to be persuasive. In that case this Court held that where a person is employed on secondment, the substantive and principal employer is the person or entity that has assigned the employee specic duties which are remunerated by a salary or wages during that period of employment. Accordingly, it follows that in this case, the appellant was the principal employer of the respondents and other aected ocers during the period of secondment, and thus there was an employer-employee relationship. I am also in agreement with the learned Judge’s nding to the eect that considering that termination of the secondment contracts was with respect to service of the respondent and not the National Police Service, section 3 of the Employment Act was inapplicable. The section provides that the Act is not applicable to the armed forces, the Kenya Police, the Kenya Prisons Service or the Administration Police Force, and the National Youth Service. 24. Turning to the issues for determination, the appellant contends that the respondents were not terminated but were merely reverted to their principal employer, without any loss of salaries and entitlements. Further, the termination was in accordance with the law, specically section 42(3) of the Public Service Commission Act and the Guidelines on Secondment in the Public Service Commission of October 2016. Conversely, the respondents arm the learned Judge’s nding that the termination of the secondment contracts amounted to violation of Article 10, 41 and 47 of the Constitution. Moreover, the decision was made without any notice or justiable reason. It is worth noting that in determining this issue, the learned Judge referred to the secondment contract, being the document that provided for the terms and conditions of the secondment. The learned Judge upon considering the rst clause, which provided that the secondment would be for 3 years unless terminated on account of disciplinary cases or other grounds, observed and correctly so, that no disciplinary cases had been initiated against the respondents and other aected ocers. Additionally, there was no ‘other grounds’ disclosed in the letter of termination of the secondment. As a matter of fact, during the hearing we inquired from Mr. Muhoro whether the letter of termination indicated any reasons for the termination and he admitted that none were stated. In the circumstances, I concur with the learned Judge that unquestionably, the appellant was bound by the terms of the secondment contract and its failure to explain the grounds for termination leads to the inescapable conclusion that the termination was unfair, in line with section 45(2) of the Employment Act. 25. The need to prove reasons for termination of a contract of employment has been emphasised by this Court in several decisions including Ufanisi Freighters (k) Limited v. Nyamai [2023] KECA 297 (KLR), where the Court stated thus; “ 21. It is notable in this regard that the burden was upon the appellant as the employer to prove on a balance of probabilities the reason for the dismissal as provided in section 43 of the Employment Act as follows: 1. In any claim arising out of termination of a contract, the employer shall be required to prove the reason or reasons for the termination, and where the employer fails to do so, the termination shall be deemed to have been unfair within the meaning of section 45. 2. The reason or reasons for termination of a contract are the matters that the employer at the time of termination of the contract genuinely believed to exist, and which caused the employer to terminate the services of the employee.” See also Kenya Union Of Commercial, Food & Allied Workers v. Kisii Bottlers Limited [2021] KECA 402 (KLR) https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 7

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26. The appellant argued that termination of the secondment was done in accordance with Guidelines on Secondment in the Public Service of October 2016. Just like the learned Judge, I am of the considered view that since both the secondment letter and the termination letter did not refer to the said Guidelines, the appellant is precluded from invoking them at these later stages. Similarly, the appellant’s reliance on section 42(3) of the Public Service Commission Act does not suce given that no evidence was tendered to show that it was no longer necessary for the respondents and other aected ocers to remain seconded. 27. In view of my nding that termination of secondment of the respondents and other aected ocers was unfair, it then follows that section 49 of the Employment Act on the remedies available for unfair termination was applicable and the learned Judge cannot fairly be castigated for invoking that provision. The learned Judge reasoned that the respondents and other aected ocers were entitled to the maximum 12 months gross salaries, as compensatory damages. However, in light of the fact that they had reverted back to their ranks in the National Police Service, the court awarded them nine months gross salary and one month salary in lieu of termination notice. In the result, the learned Judge awarded each respondent and aected ocer 10 months’ gross salary. Bearing in mind that award of remedies under section 49 is a question of judicial discretion, and cognizant of the fact that the objective of remedies is to compensate the claimant, and not necessarily punish the employer, I am inclined to interfere with judgment of the learned Judge by reducing the compensatory damages to three (3) months’ gross salary in addition to the one (1) month pay in lieu of notice. I do so on the basis that the termination was not accompanied by any patent or egregious abuse of rights or rank malice to justify Nine-months compensation. 28. In the end my considered view of the appeal is that it should partly succeed. I would therefore set aside the learned Judge’s order number two (2) and substitute it with an order that; a. The appellant to pay each of the respondents and the 60 other aected ocers Four (4) months’ gross monthly salary at the last monthly rate prior to the termination of the secondment contracts (Less PAYE) and the amount due to each be computed as part of the decree. As Kantai and Achode, JJ.A agree, those are the orders of the Court. JUDGMENT OF KANTAI, JA. 1. I have had the advantage of reading in draft the judgment of my learned brother Kiage, JA. I am in full agreement and I have nothing useful to add. 2. The appellant was wrong in the way it treated the respondents and the respondents were entitled to be compensated. The respondents, however, returned to their employer Kenya Police Service and the compensation awarded by the trial Judge was high and excessive in the circumstances. JUDGMENT OF L. ACHODE JA. 1. I have had the advantage of reading in draft the judgment of Hon. P. O. Kiage JA. I am in full agreement with his reasoning and conclusions and therefore, have nothing useful to add. DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF DECEMBER, 2024. P. O. KIAGE ............................... JUDGE OF APPEAL https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 8

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S. OLE KANTAI ............................... JUDGE OF APPEAL L. ACHODE ............................... JUDGE OF APPEAL I certify that this is a true copy of the original. Signed DEPUTY REGISTRAR https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1959/eng@2024-12-20 9

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