The Kenya Employment Act, 2007 (Employment Act), was enacted to declare and define the fundamental rights of employees and to provide basic conditions of employment to employees among other things.

Redundancy in Kenya refers to the situation where an employer no longer requires an employee’s services due to various reasons outlined below. Redundancy is a lawful reason for terminating an employment contract, but it must be carried out in accordance with the labour laws and regulations of Kenya.

This piece by the law firm, will focus on the redundancy of employees in Kenya and some legal principles governing it.

Grounds for Redundancy

Redundancy can occur due to numerous reasons, including:

  • Change in Business Operations: When an employer restructures, relocates, or ceases a particular line of business or service.

In Cause 924 of 2010, Jane I Khalechi V Oxford University Press E.A. Ltd [2013] eKLR, the Court held that, “Companies restructure not necessarily because they are in financial distress, but for such other reasons as mechanization of the modes of production. The terms redundancy, reorganization and restructuring are related, but can be separable. There are other terms used in different jurisdictions, to denote this form of employment termination. These include downsizing, lay-off, and rightsizing. Whatever term is used, the decision results in the dissolution of an employment agreement”. 

  • Economic Conditions: When financial difficulties or economic downturns necessitate staff reductions. For the avoidance of doubt, redundancy shall not apply where an employee’s contract of service is terminated on account of insolvency.

Justice I.E.K Mukunya in the Industrial Court of Kenya Cause Number 231 of 2010 between Kenya Union of Domestic, Hotel, Education, Institutions and Allied Workers [KUDHEIHA] v. Rabai Road Primary School “found the employer to have correctly terminated the contract of an employee for economic reasons, but concluded the employer failed on fairness and awarded compensation. It was determined that whether a redundancy decision is made in good faith is a question of fact and degree, depending on the circumstances of the case. So long as the decision is reasonable, and exercised in good faith, the Court is encouraged not to intervene”.

  • Technological Changes: When technology advancements make certain job positions obsolete.

Despite the reasons given by an employer for exercising redundancy, these reasons are open to judicial interpretation. If the reason given is not based on any reasonable grounds, then the redundancy could be considered as substantively unfair. In Cause 924 of 2010, Jane I Khalechi V Oxford University Press E.A. Ltd [2013] eKLR, the Court held that, “the Court must be satisfied that in all the circumstances of the case the decision made by the employer was reasonable. Re-organizations become a superfluous exercise if done for the sole purpose of getting rid of an employee”. The Court held that redundancy is a process that should involve positions and not the employees as the subject.

Mandatory Conditions when Declaring an Employee Redundant

Redundancy is defined under Section 2 of the Employment Act 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”.

Section 40 of the Employment Act outlines the conditions that an employer must comply with if the employer wishes to declare an employee redundant. These are:

“(a) where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;

(b) where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;

(c)  the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;

(d)  where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;

(e)  the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;

(f) the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and

(g)  the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days’ pay for each completed year of service.”

Redundancy Process in Kenya

Prior to commencing the redundancy process, employers ought to consider:

  • Legal Framework: The primary legislation governing redundancy in Kenya is the Employment Act, 2007, as may be amended from time to time. This law outlines the rights and obligations of employers and employees regarding redundancy procedures.
  • Employment Contract and HR Manual: Employers should consider the terms included in the Employment Contract and HR Manual that touch on redundancy including, notice periods, compensation policies, redundancy packages and leave protocols.
  • Collective Bargaining Agreements (CBAs): If there is a collective bargaining agreement in place, it may provide additional or modified provisions related to redundancy that both the employer and employees must adhere to.
  • Selection Criteria: When selecting employees for redundancy, employers should use fair and objective criteria. Due regard shall be had to seniority in time, skill, ability, and reliability of each employee. Arbitrary or discriminatory selection methods are not allowed.

Section 40 of the Employment Act requires an employer to consider the seniority in time and the skill, ability, and reliability of each employee of the particular class affected by the redundancy. In Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR, the Court of Appeal found that the employer failed to apply a fair selection procedure and had consequently unlawfully terminated the employment of 447 employees. The airline did not give evidence to demonstrate how the procedure was followed to identify the employees declared redundant. It held that, “on the question of seniority in time, also known as the LIFO principle (Last In First Out), the Court stated that the sole application of this principle would be detrimental to the employer as continuity and succession planning within the organization could be jeopardized”.

 

  • Timelines: There are no prescribed timelines for the redundancy process in the Employment Act. However, it should be stressed that the notice of termination shall be made once all the processes have been exhausted and a determination of which the employees will be affected, has been reached. It should be noted that the initial notice is not the same as the notice of termination of employment.

There are some key redundancy processes that must be undertaken by an employer. These include:

  1. Notice of intended redundancy to the employees/trade union (Initial notice)

The employer shall issue a notice period of at least one (1) month and this notice cannot be paid in lieu. Before implementing redundancy, employers are required to consult with employees or their chosen representatives. They should discuss the reasons for redundancy, intended date of termination, the criteria for selecting employees for redundancy and the extent of the redundancy. In cases where there is a recognized trade union the employer must notify and consult with the union or representatives throughout the redundancy process.

In Aviation and Allied Workers Union v Kenya Airways Ltd & 3 others [2012] eKLR the initial notice stated its intention to alert the parties to the situation. This notice is not the same thing as a notice of termination of employment. The employer, at this point, has not made any decision and is opening discussions on a possible redundancy situation.

  1. Notice of intended redundancy to the labour office

The employer shall issue a notice period of at least one (1) month prior to the intended redundancy. The employer is responsible for notifying the labour office in the district in which the employee was working.

  1. Offering explanations to the employees

Where a member of staff does not understand/ appreciate the full extent of redundancy and its implications, the employer, is expected to offer the explanation to the employee. The explanation should be in clear and simple words and detailed enough to allow understanding.

  1. Consultations with the employees

In Kenya Universities Staff Union v Kisii University (Cause E009 of 2020) [2022] KEELRC 9 (KLR) it was determined that, “consultations on an intended redundancy between the employer and the relevant unions, labour officials and employees was implied by section 40(1)(a) and (b) of the Employment Act. Consultation was also specifically required by Article 47 of the Constitution and section 4(3) of the Fair Administrative Action Act”. An administrative action was defined under the Fair Administrative Action Act to include any act, omission or decision of any person, body or authority that affected the legal rights or interests of any person to whom such action related. Employers fell within the category of persons whose action, omission or decision affected the legal rights or interests of employees.

Before implementing redundancy, employers are required to consult with employees or their representatives. Key is that consultations can only be carried out during the formative stages of the redundancy process. This process should involve discussing the reasons for redundancy, potential alternatives, and the criteria for selecting employees for redundancy.

In Kenya Union of Domestic, Hotels, Educational Institutions, Hospital and allied Workers (Kudheiha) v Nairobi Hospital [2022] eKLR, the Court pointed to the fact that, “consultation is aimed at giving parties, one an opportunity to consider measures to be taken to avert or to minimize the termination and secondly measures to mitigate the adverse effects of termination on the workers concerned such as alternative employment”.

Employers are encouraged to make reasonable efforts to explore alternative employment within the organization for redundant employees. If alternative employment is available, the affected employees may be offered such positions.

The Court in Kenya Airways Limited -Vs- Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR was of the opinion that, “consultation is implicit in the Employment Act under the principle of fair play; consultation gives an opportunity for other avenues to be considered to avert or to minimize the adverse effects of terminations; consultations are meant for the parties to put their heads together and is imperative under Kenyan law; consultations have to be a reality not a charade; opportunity must be given for the stakeholders to consider; stakeholders must have and keep an open mind to listen to suggestions, consider them properly and then only then decide what is to be done; and consultation must not be cosmetic”.

Consultation is a key ingredient to ensure that there is substantive fairness. Consultations must be real and not cosmetic.

  1. Notification of Status (Second Notice)

This notice is intended to inform the employee of the decision that the employer has reached. It will communicate whether the employee has been retained in their initial position, has been transferred into a new role, or has been made redundant.

If the employee has been declared redundant, the notice should indicate, among others, the terminal dues payable and when the termination shall take effect. This notice shall comply to the notice period in the employment contract or the CBA, where applicable. If it is silent, the statutory minimum notice period of one (1) month shall apply. The employer may opt pay the employee in lieu of notice.

  1. Certification of Service

The employer must issue the employee being made redundant, with the Certificate of Service. This is a statutory entitlement that ought to be issued to the employees within twenty-one (21) days as was held in Kenya Universities Staff Union v Kisii University (Cause E009 of 2020) [2022] KEELRC 9 (KLR).

 

  1. Settlement of the Employees’ Dues

Employers are legally obligated to settle all outstanding dues with the affected employees, including salary, accrued leave, severance pay, and any other entitlements. Redundant employees are entitled to severance pay, which is calculated based on their length of service with the company. Severance pay should be equal to a sum of at least fifteen (15) days’ pay for each completed year of service. Settlement should be done without undue delay.

Final Thoughts

Redundancy is a process in Kenya that mandates careful planning, adherence to all the legal requirements, and consideration of the rights of all affected employees. Employers ought to approach redundancy with transparency, equitability and fairness, and employees should be made aware of their rights during this process. Employees have the right to challenge the fairness of the redundancy process and criteria used. Legal advice is imperative for both parties to ensure compliance with labour laws and regulations.

Disclaimer: This piece should not be regarded as legal advice, nor should it be considered as a substitute for legal consultation and/or legal advice from the best law firm in Kenya. Feel free to contact us by calling on +254703124871 or click here book an appointment with us.