Understanding Redundancy: A Snapshot of Redundancy Law in Kenya
In recent times, many organizations have found themselves in difficult situations, often leading to the tough decision of declaring some or all of their employees redundant. While these decisions may be necessary for the survival of businesses, they can wreak havoc on the lives of the affected employees. The importance of carefully managing redundancy cannot be overstated. Employers must consider not only the financial health of their organizations but also the impact these changes will have on their workforce. This delicate balance of interests raises the question: how can we navigate the complexities of redundancy while adhering to legal standards?
In Kenya, it is crucial to approach redundancy through the lens of the prevailing law. This ensures that both employers and employees understand their rights and responsibilities during such critical transitions. In this article, we explore the legal framework surrounding redundancy in Kenya, the implications for both employers and employees, and best practices for managing these challenges effectively.
Applicable Law
Redundancy is governed by the Employment Act No. 11 of 2007 (hereafter the “Act”). The Act defines redundancy as “the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous, and the practices commonly known as abolition of office, job or occupation and loss of employment.”
The key factors necessitating an Employer declaring employees redundant include:
- The employer has ceased, or intends to cease, conducting business.
- The requirement for employees to perform a specific type of work or to carry it out at the location where they are employed has ceased or diminished.
- The reorganisation of the workforce has led to reduced tasks and altered conditions, making the new position significantly different from the previous one.
Fundamentals of Redundancy
To avoid rendering a redundancy exercise flawed and exposing an employer to claims of unfair termination, the Act requires that two fundamental principles be satisfied, namely:
- The justification for the redundancy: and
- The procedural fairness employed by the employer during the redundancy.
Factors to Consider during Redundancy
To satisfy the fundamentals of redundancy, it is important to note the following:
- Notice of Redundancy
The employer must give notice of the intended retrenchment. The notice should be for at least 30 days or longer if required by the employment contract or a Collective Bargaining Agreement (CBA).
A notice of at least 30 days must be served to the labour officer and the trade union if the employee is a member.
The notice in all instances must include the reasons for and the extent of the intended redundancy.
- Employee Consultations
Kenya is a state party to the International Labour Organization (ILO). The ILO Termination of Employment Convention, 1982, requires consultation between employers on one hand and employees or their representatives on the other before termination of employment due to redundancy.
The court of appeal in Civil Appeal No.46 of 2013, Kenya Airways vs. Aviation Allied Workers Union Kenya & 3 others, ruled that the above ILO Convention applies in Kenya and that in addition to the notices under Section 40 (1) (a) and (b) of the Act, there must be consultations between the parties.
- Reasons for the Declaration of Redundancy
Termination due to redundancy must be substantially justified and procedurally fair. Consequently, the reasons provided must be valid and provide reasons thereof.
The Act stipulates that in a claim related to the termination of a contract, the employer must demonstrate the reason(s) for termination. If the employer fails to do so, the termination will be deemed unfair under section 45 of the Act.
The Act further provides that the reasons for terminating a contract are the matters that the employer, at the time of termination, genuinely believed to exist and which caused the employer to terminate the employee’s services.
- Criteria for Selection of Affected Employees
The Act stipulates that in selecting employees to be declared redundant, the employer must consider both seniority in time and the skill, ability, and reliability of each employee within the affected class of employees.
To prove compliance with this requirement, the employer must demonstrate that the selection criteria adopted (in whatever combination of considerations) were applied systematically and uniformly across the board; and when the numbers involved are large, it was structured and comparatively based.
- Collective Bargaining Agreements
A collective bargaining agreement (“CBA”) refers to a registered agreement regarding any terms and conditions of employment that is made in writing between a trade union and an employer, a group of employers, or an employers’ organization.
If there is an existing agreement between an employer and a trade union outlining terminal benefits for redundancy, the employer must ensure that no employee is disadvantaged based on their membership status in the trade union.
- Unutilized Leave Days
If the employment contract states any terms and conditions regarding entitlement to annual leave, including public holidays and holiday pay, these entitlements must be accurately calculated.
The Act stipulates a minimum of one and three-quarters days of leave for every full month of service.
If an employee is declared redundant and is entitled to leave, the employer must ensure that the leave entitlement is paid in cash.
- Severance Pay
The employer must pay severance to an employee who is declared redundant at a rate of no less than fifteen days’ pay for each completed year of service.
What are the Expected Dues to an affected Employee?
- An employee facing redundancy is entitled to the following payments:
- Salary up to the redundancy termination date.
- Cash payment for any accrued leave days.
- One month’s wage if the notice period is not served.
- Severance pay equal to at least fifteen days’ pay for each year of completed service.
In situations where a Collective Bargaining Agreement (CBA) exists between the employer and the trade union that offers more advantageous terms than those stipulated in the Act, the employee shall be entitled to receive the higher rates as specified in the CBA or in the employment contract.
NB: The above provisions (a) to (g) shall not apply in the case of a redundancy occasioned by the insolvency of the employer. So, what happens in an insolvency scenario?
Redundancy in insolvency
The Act provides that when an employee or their representative submits a written application, and the Cabinet Secretary is satisfied that (a) the employee’s employer has become insolvent; (b) the employee’s employment has been terminated; and (c) on the relevant date the employee was entitled to receive the whole or part of any debt to which this Part applies, the Cabinet Secretary shall, subject to section 69 of the Act, pay the employee the amount that, in the Cabinet Secretary’s opinion, the employee is entitled to regarding the debt from the National Social Security Fund.
Under section 69 of the Act, the payment limit is capped at either ten thousand shillings or half of the monthly salary, whichever amount is higher, for any given month’s payment.
The Cabinet Secretary may, on the advice of the National Labour Board, by order in the Gazette, vary the limit specified above.
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Disclaimer: This article has been prepared for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Nothing in this article is intended to guarantee, warranty, or predict the outcome of a particular case and should not be construed as such a guarantee, warranty, or prediction. The authors are not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. Readers should take specific advice from a qualified professional when dealing with specific situations.
