Butali Sugar Mills Ltd v Kenya Union of Sugar Plantation & Allied Workers

other allowances. That however, the pay slip provided to the mill cane tractor drivers only indicated the tonnage delivered and bonus attained when they surpassed their daily target. The respondent contended that all employees not provided with housing by the employer were entitled to a 15% house allowance. It further noted that other tractor drivers, including those working in the cane yard, were paid a house allowance. 3. The respondent thus sought a declaration that the appellant’s action is discriminatory, an order for compensation of house allowance to the mill cane tractor drivers for the period of the CBA and payment of the allowance like other employees, and an order for compensation on violation of constitutional rights under Article 10(2)(b), 21(1&2), 22, 27(2)(3)(5)(6), 41(1), 43, 159(2)(e) of the Constitution of Kenya. The union also sought costs and interest for the suit. 4. The appellant opposed the suit through a defence to memorandum of claim dated 5th March, 2020. The appellant maintained that mill cane tractor drivers were engaged on a piece-rate contractual basis, earning a consolidated salary inclusive of house allowance as under clause 24 of the CBA. It argued that this was standard practice in the sugar industry and therefore not discriminatory. Further, that the engagement of mill cane tractor drivers on piece rate basis was within the provisions of Section 18 of the Employment Act. The appellant noted that clause 45 of the CBA provided for incentive pay for mill cane tractor drivers, and that it settled all their dues, which were inclusive of their house allowance. It also contended that the respondent had not demonstrated any violation of constitutional rights to warrant such compensation. 5. The respondent did not call a witness but opted to rely on the pleadings, documents on record, and nal submissions. 6. At the hearing, the appellant’s witness, Daniel Kayondi, testied that the appellant had dierent categories of drivers with dierent job descriptions and terms. He conrmed that some drivers were entitled to house allowance, except for mill cane drivers who were on a consolidated salary. While conrming that house allowance did not appear as an item in the mill cane drivers’ pay slips, he asserted that the law is superior to the CBA. He noted that the CBA did not provide for itemized pay statement. 7. The trial court rendered judgment in the matter, observing that the mill cane tractor drivers did not have contracts providing for consolidated salaries as envisaged under Section 31(3) of the Employment Act, and neither did the CBA provide otherwise. The trial court found that the mill cane tractor drivers were entitled to housing provided by the respondent or an allowance to cover rent, as under Section 31(3). The trial court thus declared that the appellant’s action not to pay house allowance to mill cane tractor drivers oends Section 31(1), (2) & (3) of the Employment Act, and that the appellant should pay them house allowance from March 2021. Each party was to bear their own costs, considering the ongoing social partnership. 8. The appellant is dissatised with that decision and led a memorandum of appeal dated 15th November, 2021. The appellant raises eleven grounds of appeal which we summarize as follows: the learned trial Judge erred in law and fact by failing to consider that the CBA which did not provide for payment of house allowance to the mill cane track drivers amounted to a binding contract between the parties; the learned trial Judge erred in law and fact by failing to consider that the mill cane tractor drivers were engaged on xed-term written contracts which were piece rates and in which they were paid a consolidated salary which was inclusive of house allowance; the learned trial judge erred in nding that the appellant was in contravention of Section 31(1), (2) and (3) of the Employment Act, 2007 and that the mill cane tractor drivers did not have contracts providing for consolidated salaries, which were inclusive of house allowance, and that the learned Judge erred in failing to consider the evidence by the appellant. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 2

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9. The appellant prays that: the appeal be allowed; the declaration by the trial court nding the appellant’s action not to pay house allowance to mill cane tractor drivers as oending Section 31(1), (2) and (3) of the Employment Act be set aside; the order compelling the appellant to start paying the mill cane tractor drivers house allowance from March 2021 be set aside; and the appellant be awarded costs of this appeal and in the ELRC. 10. In the appellant’s written submissions dated 10th July, 2021, it was submitted that piece work is a recognized form of employment under Section 2 of the Employment Act. It was argued that the pay slips issued to the mill cane tractor drivers did not itemize house allowance because it was included in the amount paid to the said drivers for the sugarcane delivered to the appellant. That Section 20(3) of the Employment Act provides that the requirement to give an employee a written statement for wages or salary paid does not apply to an employee engaged on piece-rate for any period not exceeding six months. That the consolidated salary paid to mill cane tractor drivers is inclusive of house allowance, making them exempt from additional house allowance payments under Section 31(2)(a) of the Employment Act. They relied on various authorities, including Mboo Wambua & 29 others v Export Trading Company Limited [2018] eKLR and Wilfred K. Onyango v DHL Excel Supply Chain Kenya Limited [2017] eKLR, in support of the view that piece rate pay is all-inclusive and house allowance is not payable in piece rate contracts. 11. The appellant argued that clause 24 of the CBA and the company’s payment structures were not discriminatory, as dierent terms governed dierent classes of employees based on their specic job nature and specic contractual arrangements. The appellant maintained that the trial court failed to consider the evidence regarding the piece-rate nature of the drivers’ contracts. The appellant contended that it had proved its case on a balance of probabilities and met the threshold for setting aside the trial court's judgment and decree. 12. The respondent’s submissions are dated 2nd June, 2026. The respondent asserted that it provided the trial court with copies of the mill cane drivers’ pay slips and contracts, which showed they were not paid house allowance. That on the other hand, the appellant failed to provide documentary evidence proving that the mill cane drivers’ consolidated salary specically included house allowance. Relying on the Court of Appeal’s holding in Chemelil Sugar Company v Ebrahim Ochieng Otuon & 2 others [2015] eKLR, the respondent urged that the burden lies with the employer to prove through documentary evidence that a consolidated salary includes house allowance, which the appellant failed to do. The respondent noted that the court explained in Vipingo Ridge Limited v Swalehe Ngonge Mpitta [2022] eKLR that the word ‘consolidate’ in relation to a wage means to combine two or more or all the various items that go into the remuneration package, whose details remain matters of fact to be determined by evidence. 13. When this appeal came up for plenary hearing before us Mr. Fundi learned counsel appeared for the appellant, while Mr. Bagada, learned counsel appeared for the respondent. They canvassed the appeal through reliance upon the respective parties’ written submissions already summarized above. 14. This is a rst appeal. Our jurisdiction as a rst appellate court was set out in Selle & another v Associated Motor Boat Co. Ltd & others (1968) EA 123, in which this Court held that the rst appellate court has to reconsider, evaluate and assess afresh the evidence tendered before the trial court and make its own independent conclusions. An allowance is however given for the fact that this Court did not hear and see the witnesses unlike the trial court. 15. We have considered the grounds of appeal and we distil the issues for determination as follows: whether the declaration by the trial court that the appellant’s action not to pay house allowance to mill cane tractor drivers oended Section 31(1), (2) and (3) of the Employment Act; whether failure to pay mill https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 3

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cane tractor drivers the house allowance in dispute amounted to discrimination; whether the order compelling the appellant to start paying the mill cane tractor drivers house allowance from March 2021 was fair in the circumstances; and, whether the appeal should be allowed with costs to the appellant. 16. On the rst issue for determination, the respondent trade union’s case in the dispute before the trial court was that the appellant’s action not to pay house allowance to mill cane tractor drivers oended Section 31(1), (2) and (3) of the Employment Act. The memorandum of claim stated the issue in dispute as house allowance for mill cane tractor drivers. The parties negotiated a (CBA) for the period 1st January, 2018 to 31st December, 2019 which was concluded and signed on 3rd September, 2018. During the negotiations process the parties held dierent positions on whether the mill cane tractor drivers should be paid a monthly house allowance like the other appellant’s unionisable employees. The CBA in clause 24(a) on housing stated as follows: “ (a) 17. 18. An employee shall be considered for rent free housing subject to availability of housing facilities. Where sucient housing is not available, the employees shall be paid Housing allowance at the rate of 15% of their basic pay (with exception of mill cane drivers whose term are on piece rated contractual terms).” Clause 45 of the CBA made comprehensive provisions specic to the mill cane tractor drivers. Clause 45 (I) on incentive pay for mill cane tractor drivers stated as follows: “ (a) A mill cane tractor driver who attains more than six thousand (6,000) tonnes per year and above shall be paid KES 2.00 per tonne delivered. b. A mill cane driver who delivers more than two trips on achieving a minimum of twenty-four (24) tonnes per day will be entitled to a bonus pay of 150/= for that day. b. A driver who delivers more than twenty (20) tonnes per day any tonnage over and above 20 tonnes shall attract twenty-two (22) per tonne as bonus.” Further, clause 45 (II) of the CBA stated that any mill cane tractor driver who stays out past midnight for justiable reasons shall be provided by meal vouchers. Clause 45(III) on tonnage rates stated the tonnage rates that shall apply as payment for cane delivered for mill cane drivers thus: “ (a) First year – 30 KES per ton. b. Second year – 32 per ton.” 19. The parties signed the CBA but the dispute on payment of house allowance for mill cane tractor drivers went to conciliation under the Labour Relations Act. Parties failed to reach an agreement and the suit was led before the trial court. 20. The appellant’s defence was that it objected to the clause of house allowance covering mill cane tractor drivers because the drivers were paid on piece rate basis a consolidated pay which is inclusive of the house allowance. While the appellant admitted that at the meeting of 3rd September, 2018 the parties had concluded the CBA negotiations with a stando on the issue of house allowance for mill cane tractor drivers, the CBA was nevertheless duly concluded and with no agreement that the Joint Industrial Council (JIC) would be at liberty to convene and discuss the issue to its logical conclusion. The bracketing in the clause on housing in the CBA was not bracketed to indicate that the exception to pay house allowance to the mill cane tractor drivers was discriminatory. The appellant urged that it employed the drivers on piece rate arrangement in accordance with section 18 of the Employment Act https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 4

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and the provisions of the CBA signed on 3rd September, 2018 and their payment dues were inclusive of house allowance and the respondent union’s case was unfounded. 21. We turn to the relevant statutory provisions as they relate to piece work and rate arrangements and payment of house allowance, provision of housing or consolidated pay inclusive of reasonable provision for housing. 22. Section 2 of the Employment Act states that "piece work" means any work the pay for which is ascertained by the amount of work performed irrespective of the time occupied in its performance. Section 18 (1) of the Act on when wages or salary are due states thus: “ (1) 23. Where a contract of service entered into under which a task or piece work is to be performed by an employee, the employee shall be entitled — a. when the task has not been completed, at the option of his employer, to be paid by his employer at the end of the day in proportion to the amount of the task which has been performed, or to complete the task on the following day, in which case he shall be entitled to be paid on completion of the task; or, b. in the case of piece work, to be paid by his employer at the end of each month in proportion to the amount of work which he has performed during the month, or on completion of the work, whichever date is the earlier.” On the other hand, section 31 of the Act on the employee’s right to housing provides as follows: “ 31. Housing 1. An employer shall at all times, at his own expense, provide reasonable housing accommodation for each of his employees either at or near to the place of employment, or shall pay to the employee such sucient sum, as rent, in addition to the wages or salary of the employee, as will enable the employee to obtain reasonable accommodation. 2. This section shall not apply to an employee whose contract of service — 3. a. contains a provision which consolidates as part of the basic wage or salary of the employee, an element intended to be used by the employee as rent or which is otherwise intended to enable the employee to provide himself with housing accommodation; or b. is the subject matter of or is otherwise covered by a collective agreement which provides consolidation of wages as provided in paragraph (a).” The Cabinet Secretary may, on the recommendation of the Board by notice in the Gazette, exclude the application of this https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 5

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section to a category of employees and such category of employee shall be dealt with as shall be specied in the notice.” 24. We have considered the statutory provisions and we observe that piece work, piece-rate or task-rate workers are not explicitly excluded from the employer’s housing obligation. Accordingly, they are technically entitled to housing benets under the general denition of an employee unless it is shown that their pay is legally consolidated or the Cabinet Secretary has formally excluded them through a Gazette notice as envisaged in section 31 of the Act. 25. We have considered the payment arrangements between the parties with respect to payment of the mill cane tractor drivers as codied in the CBA for the period 1st January, 2018 to 31st December, 2019 and it is our view that the arrangements amounted to making the contract of service of the drivers being the subject matter of and covered by the CBA which provided for consolidation of wages as provided and envisaged in section 31 ( 2) (a) and (b) of the Act. In that respect, the parties negotiated the CBA and deliberately agreed on the terms of payment of the drivers per clause 45 of the CBA encompassing incentive pay, pay when on duty beyond mid-night and most important tonnage rates of payment. Under clause 45(I) (b) the agreed daily trigger of a bonus pay of 150/= for the day is attainment of 24 tonnes. The agreed tonnage rate pay for rst year was Kshs. 30.00 making an optimal daily payment of at least Kshs.720 plus Kshs. 150. 00 bonus making at minimum optimal performance Kshs.870.00 daily agreed consolidated wage. To that gure add the incentive pay as may be attained and paid per clause 45 of the CBA. That was the agreed consolidated pay for the drivers and which expressly excluded them from house allowance in view of their unique piece-work employment. 26. We are therefore satised that while section 31 of the Employment Act did not absolve the appellant from housing obligations to the drivers on account of the piece-work, piece-rate or task-rate arrangement of payment based on the tonnes of the sugarcane each driver delivered, the CBA that parties signed amounted to a pay structure for the drivers that was consolidated with a reasonable provision for housing manifested in express exception of payment of house allowance or provision of free housing to the drivers. Piece-work, piece-rate, or task-rate arrangements mean that the employee receives pay strictly based on his output or the work actually performed and not time spent. Such workers receive agreed contractual or minimum statutory pay but lack regular daily reporting obligations. Such workers control their own work schedules, rest days or hours so that regular standard continuous employment rules like rest days, annual leaves do not march their unique task-based work style. Thus in the instant case the parties agreed on a complex pay structure for tonnage rate payment, incentive payment, bonus payment, and beyond mid-night work pay entitlements. The goal should be obvious that the employer is seeking to ensure that while the worker is at liberty to control work schedules, there is sucient assurance that the drivers will provide steady supply of the needed labour through the carefully designed piece-rate pay arrangement. The exception of the drivers from house allowance in favour of the consolidated complex pay arrangements cover the mischief of providing free housing or automatic house allowance even where the driver opts not to report on duty, as is entitled to do, under the piece work arrangement. 27. We have noted with curiosity that the respondent did not anchor its case wholesomely on the limbs of free housing and in alternative pay for house allowance but dened the dispute as relating to payment of house allowance and silence on the free housing. From that pleading, we infer that the respondent knew the parties had indeed entered into a unique piece-rate pay arrangement in view of the piece-work design for the drivers as was outlined in the CBA and which freed the appellant from the obligation to provide free housing to the drivers, the appellant’s housing obligation being inimical to the piece work agreement. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 6

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28. We have considered the holding by the trial court that the mill cane tractor drivers herein did not have contracts providing for consolidated salaries. Section 59 of the Labour Relations Act on the eect of a CBA states as follows: “ 59. 1) a. the parties to the agreement; b. all unionisable employees employed by the employer, group of employers or members of the employers’ organisation party to the agreement; or c. the employers who are or become members of an employers’ organisation party to the agreement, to the extent that the agreement relates to their employees. 2) A collective agreement shall continue to be binding on an employer or employees who were parties to the agreement at the time of its commencement and includes members who have resigned from that trade union or employer association. 3) The terms of the collective agreement shall be incorporated into the contract of employment of every employee covered by the collective agreement. 4) A collective agreement shall be in writing and shall be signed by ― 5) 29. A collective agreement binds for the period of the agreement – (a) the chief executive ocer of any employer, the chief executive or national secretary of an employers' organisation that is a party to the agreement or a representative designated by that person; and (b) the general secretary of any trade union that is a party to the agreement or a representative designated by the general secretary. A collective agreement becomes enforceable and shall be implemented upon registration by the Industrial Court and shall be eective from the date agreed upon by the parties.” By that provision, under section 59(3) of Act the terms of the CBA were automatically incorporated into the employment contract of every mill cane tractor driver. We have found that the agreed piece work pay arrangements amounted to a consolidated pay extinguishing the appellant’s housing obligation to the mill cane tractor drivers per section 31(2) of the Employment Act and the trial court erred in holding thus: “ 24. Since the mill cane tractor drivers do not have contracts providing for consolidated wages as envisaged by section 31(2) of the Employment Act, 2007 and the collective bargaining agreement has also not provided otherwise, it was https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 7

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incumbent upon the Respondent to secure through the Board an order from the Cabinet Secretary, Labour in terms of section 31(3) of the Employment Act, 2007, excluding the application of section 31 to the mill cane tractor drivers.” 30. We add that the CBA was binding and once the parties concluded it by signing and registering it, it thereby took full binding eect as provided for in section 59 of the Labour Relations Act. While the respondent appears to have had an issue about house allowance for the mill cane tractor drivers with an option of pursuing the issue through statutory conciliation, the pursuit was in the nature of seeking or attempting to amend the CBA but not that the CBA had not become binding and with full eect in terms of section 59 of the Act. 31. We are therefore persuaded that the trial court erred by declaring that the appellant’s action not to pay house allowance to mill cane tractor drivers oended section 31(1), (2) and (3) of the Employment Act. 32. The next issue for our determination is whether the failure to pay mill cane tractor drivers the house allowance in dispute amounted to discrimination. The material on record shows that the work of the mill cane tractor drivers was unique resulting into the specic piece-work agreement per the CBA. The arrangement was lawful as envisaged in the Employment Act. The drivers belonged to a specic and special category of workers whose working style justied the piece work and piece-rate pay arrangements for optimal performance and better economy of the appellant’s sector of transporting sugarcane. 33. In Gwer & 5 others v Kenya Medical Research Institute & 3 others [2020] KESC 66 (KLR), the Supreme Court held that dierential treatment or pay is not automatically discriminatory if based on distinct, justiable contractual categories and objective dierences rather than prohibited grounds in Article 27 of the Constitution. It was found for the employer that it is not the case that any dierential treatment is, ipso facto, discriminatory and for a dierentiation of treatment to be unconstitutional and impermissible, it has to be based on any of the prohibited grounds under Article 27 of the Constitution. In the instant appeal the record shows that by their unique work and style the appellant was entitled to negotiate with the respondent a unique piece work style and piece-rate pay structure for the mill cane tractor drivers and which pay structure amounted to a consolidated pay freeing the appellant from payment of house allowance or provision of free housing to the drivers. The failure to pay mill cane tractor drivers the house allowance in dispute did not therefore amount to discrimination. 34. The next issue for determination is whether the order compelling the appellant to start paying the mill cane tractor drivers house allowance from March 2021 was fair in the circumstances. Section 59 (1) of the Labour Relations Act provides that a CBA binds the parties for the period of the agreement. The CBA between the parties was for the period 1st January, 2018 to 31st December, 2019 and on the face of it, we are satised that the order by the trial court compelling the appellant to start paying the mill cane tractor drivers house allowance from March 2021(outside the period of the CBA) was in error. 35. We also observe that in the memorandum of claim the respondent prayed for an order to be issued for compensation of house allowance to the mill cane tractor drivers as from the 1st January, 2018 to 31st December, 2019 and they be accorded house allowance like the other unionisable workers. The respondent did not pray for compensation or payment of the drivers outside the period of the CBA as was declared by the trial court that the appellant is compelled to pay them house allowance from March 2021. The appellant’s ground of appeal that the declaration was in error will therefore succeed. 36. We have considered that the parties are in continuing recognition and collective bargaining agreements. To foster harmonious industrial relationship, each party will bear own costs of the appeal and the proceedings in the superior court. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1871/eng@2026-09-25 8

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37. The upshot is that we allow the appeal; set aside the judgment and decree of the ELRC together with all processes owing therefrom and substitute therefor an order dismissing the memorandum of claim; and each party to bear own costs of the suit in the ELRC and the appeal. DATED AND DELIVERED AT KISUMU THIS 25TH DAY OF SEPTEMBER, 2026. ASIKE-MAKHANDIA ……….………….……… JUDGE OF APPEAL E. C. MWITA ………………..….……… JUDGE OF APPEAL B. ONGAYA ………………..…….…… 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/2026/1871/eng@2026-09-25 9

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