The Employment Act 2007 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. While redundancy is a challenging process for both the employer and the employee, the Act in section 40 provides a framework for termination, on account of redundancy.
This article aims to provide guidance to both employers and employees to ensure a fair and legally compliant process. It will also highlight key court cases that have shaped the interpretation of redundancy law in Kenya.
For Employers: Key Considerations for a Lawful Redundancy
- Establish a Genuine Justification for redundancy:
The grounds for redundancy should demonstrate a justifiable need to terminate the employment of an employee. From the definition of redundancy, the employer should justifiably prove that the services of an employee are superfluous leading to an abolition of office. Vague justifications without supporting evidence are likely to be challenged.
“In Kenya Airways Limited v Aviation & Allied Workers Union Kenya [2014] eKLR], the court found that the employer had demonstrated the operational need for the redundancy. Maraga J, as he was then stated that: “Termination of employment on account of redundancy is justified if there is substantive justification for declaring redundancy and there is procedural fairness in the consequent retrenchment. Given the fact that for a period of about five years the appellant’s profits had continually dipped, I find that the appellant was justified in declaring redundancy.”
- Notify and Consult with the Union (if applicable):
If a Collective Bargaining Agreement (CBA) is in place, the employer must notify and consult with the recognized trade union and the labour officer in charge of the area where the employee is employed. The notice should indicate the reason for and the extent of the intended redundancy not less than a month prior to the date of the termination on account of redundancy.
The consultation period must be reasonable, allowing the union sufficient time to review the proposed redundancies, provide feedback, and explore alternatives. While the Employment Act doesn’t specify a minimum period, aim for a timeline that allows for meaningful engagement.
It is critical to document all consultations, including the issues raised by the union and how the employer addressed them. Failure to properly consult can render the redundancy unfair, even if a genuine operational need exists.
The Court of Appeal inKenya Airways Limited v Aviation & Allied Workers Union Kenya [2014] eKLR], stated that; “Unless the circumstances are such that it would be an utterly futile exercise to hold any meaningful negotiations, consultation has to be real and not cosmetic”. While making reference to the New Zealand Chief Judge in the case of Cammish v. Parliamentary Service: Maraga J, as he was then; emphasized that: “Consultation has to be a reality, not a charade. The party to be consulted must be told what is proposed and must be given sufficiently precise information to allow a reasonable opportunity to respond. A reasonable time in which to do so must be permitted. The person doing the consulting must keep an open mind and listen to suggestions, consider them properly, and then (and only then) decide what is to be done.”
Fair Selection Criteria:
Develop objective and non-discriminatory criteria for selecting employees for redundancy. Section 40 (1) (c) of the Employment Act requires the employers to apply all the selection criteria specified, with due regard to seniority in time, skill, ability and reliability of each employee.
Avoid criteria that could be perceived as discriminatory based on age, gender, ethnicity, or other protected characteristics.
Apply the selection criteria consistently across all affected employees.
Notice and Termination:
Provide written notice of termination to the affected employees. The notice period must comply with the Employment Act, the employment contract, and any applicable CBA. The longest of these three periods applies.
Employers can choose to allow the employee to work during the notice period or provide payment in lieu of notice.
If opting for payment in lieu of notice, ensure the payment accurately reflects what the employee would have earned during the notice period, including salary and any other contractual benefits.
Severance Pay and Other Benefits:
The Employment Act mandates a minimum severance pay of 15 days’ pay for each completed year of service. However, the employment contract or CBA may provide for a more generous severance package. Employers must adhere to the more favorable terms.
In addition to severance pay, employees are entitled to:
- Accrued salary and benefits up to the date of termination.
- Payment for accrued but unused leave days.
- Payment for public holidays worked but not taken.
- Pension benefits, as per the applicable pension scheme rules.
- A certificate of service.
Compliance with the Law
Ensure all aspects of the redundancy process comply with the Employment Act, 2007, and any other relevant legislation. Seek legal advice to ensure compliance and minimize the risk of legal challenges.
For Employees: Understanding Your Rights During Redundancy
Redundancy can be a stressful and uncertain time. Understanding your rights is crucial to ensuring you are treated fairly.
- Right to Consultation (if a Union Member):
If you are a member of a trade union, the union has the right to be consulted about the proposed redundancies. The union should represent your interests and ensure the employer follows a fair process.
- Right to Fair Selection:
The employer must use objective and non-discriminatory criteria for selecting employees for redundancy. If you believe you were unfairly selected, you have the right to challenge the decision.
- Right to Notice
You are entitled to written notice of termination, as per your employment contract, the CBA (if applicable), and the Employment Act. If the employer chooses to provide payment in lieu of notice, ensure the payment is accurate and reflects what you would have earned during the notice period.
- Right to Severance Pay and Benefits:
You are entitled to severance pay, calculated according to the Employment Act, your employment contract, or the CBA (whichever is more favorable). Ensure you receive all other outstanding benefits, including accrued salary, leave pay, pension benefits, and a certificate of service.
- Right to Challenge Unfair Redundancy:
If you believe the redundancy was unfair or unlawful, you have the right to challenge it at the Employment and Labour Relations Court.
Seeking Legal Advice:
Both employers and employees should seek legal advice from experienced employment lawyers to navigate the complexities of redundancy. DVM Advocates LLP can provide expert guidance to ensure a fair, lawful, and smooth redundancy process.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. You should consult with a qualified legal professional for advice on your specific situation.