Kenya, and the world at large, is currently dealing with the pandemic of COVID-19. The pandemic has disrupted the normal course of business leading to a negative impact on the economy. This will in turn adjust our longstanding interpretations of employment law that will pave way to various strategies to ensure both the employers and employees’ interests are protected.
Most employment contracts do not anticipate any cause of action to be taken on the occurrence of unforeseeable things as is in this case, the occurrence of a pandemic. Additionally, in some sectors such as the manufacturing industries it is impossible to have the employees work from home and the option of scaling down staff will lead to underproduction.
This brief analysis sets out possible options that can be explored by employers to cushion themselves from irrecoverable losses in the event that the pandemic renders them incapable to discharge their contractual obligations.
Working in shifts / Working from home.
Under Section 10 of the Employment Act of Kenya, a contract of service ought to state inter alia the place of work and the hours of work. The act under Section 27 states that an employee is entitled to one rest day in every seven days. It further obligates the employer to regulate the working hours of each employee according to the provisions of the Act. The normal working hours under Regulation 5 of the Regulation of Wages (General) Order consist of 52 hours spread over 6 days of the week.
Notwithstanding the provisions of the Act, the parties to an employment contract can agree that employees work in shifts or work from home. This is to reduce the number of people within the place of work and also allow employees to work from the safety of their homes in keeping with the directives from the Ministry of Health and Section 36 (m) of the Public Health Act.
However, in the event that such an arrangement would lead to a reduction of the employee’s salary, it is imperative that the employer seeks the employees consent before such a reduction.
Reduction of salaries
The role of the Constitution and the laws drawn from it is to ensure the protection of individual rights and freedom. The Constitution of Kenya under Article 41 provides for fair labour practices which include fair remuneration. According to Ingrida Mačernytė-Panomariovienė “The Right to Receive Fair Remuneration for Work in the Republic Of Lithuania”, fair remuneration is an important aspect of ensuring the employee’s welfare and means guaranteeing a decent living for the employee.
According to the Court’s enunciation in Fredrick Ouma v Spectre International Ltd [2013] eKLR, fair remuneration means remuneration that is adequate and commensurate to the services rendered. It involves a measure of certainty and this is why it is imperative that the remuneration payable to an employee is discussed and agreed upon before services are rendered. This is important to allow the employer prepare and budget for his pay. Such preparation may include taking a loan in anticipation of the salary that is payable.
While the Employment Act of Kenya is silent on the issue of reduction of salaries, Courts have been met with the question on the validity of salary reduction. In the case of Ibrahim Kamasi Amoni v Kenital Solar Limited [2018] eKLR, the Court stated that for a reduction of salary to be valid, an employer ought to obtain the approval of an employee by communicating the reduction to an employee in a letter and causing the letter to be accepted by the employee. This is because salary is a fundamental term of employment whose reduction has negative impact on an employee’s livelihood and should not be done arbitrarily or unilaterally by an employer.
The terms of employment cannot be changed unilaterally, the employer has to obtain consent from the employee before doing so. (DOUGLAS v. Talk America Inc. No. 06-75424, United States Court of Appeals, Ninth Circuit). In that case then, the employer can enter into a contract with the employee on reduction of their salary during the period of the pandemic or until such a time when the company is able to sustainably pay fair remuneration to the employee.
Forced leave.
Under Section 28 of the Employment Act, an employee is entitled to, after every twelve consecutive months of service with his employer to not less than twenty-one (21) working days of leave with full pay. An employer may, with the consent of the employee divide the minimum annual leave entitlement into different parts to be taken at different intervals.
Section 3 of the Employment Act, law provides the minimum conditions and terms of employment and parties are allowed to vary the same and hold themselves to higher standards. Therefore, where the contract of employment or a collective bargaining agreement provide for better terms on leave then the same ought to apply.
Similarly, the Employment Act does not foresee a situation where an employee is forced to take leave. The court in Rajab Barasa & 4 others v Kenya Meat Commission [2016] eKLR, held that taking of annual leave is not punishment and in any case the duty is upon the employer to ensure each employee takes their annual leave when due.
In most cases forced leave is applicable where an employee is suspected of grossly misconducting themselves while on duty and the employer sends the employee on forced leave to pave way for investigations into the conduct of the employee. The general practice is that the employee during this period earns half their salary.
The current situation is different as the employee in this case is not at fault but the employer is unable to sustain their employment due to the economic conditions. The question thus is whether the employer can send the employee on forced leave and whether the employee will be entitled to their full pay while on leave. It boils down to the rule that the terms of an employment cannot be changed unilaterally. The employer and the employee can enter into a mutual agreement where they can proceed on leave and the terms of payment are discussed and agreed upon.
Termination of the contract under the doctrine of frustration.
Employment relations are contractual in nature and therefore governed by the laws and rules of contract. The locus classicus case of Taylor v Caldwell [1863] EWHC QB J1 where a music hall that was contracted to hosts various concerts burned to the ground before the performance if the contract, established the doctrine of frustration of contracts.
The Court in Davis Contractors Ltd v Fareham U.D.C, (1956) A.C 696 held that “…frustration occurs whenever the law recognizes that, without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. “
The question that arises is, “Does the spread of the COVID-19 virus constitute an intervening event leading to the frustration of the contract?” Rika J. in Christopher Okwako & 21 others v Sai Eden Roc Hotel [2014] eKLR found a termination of employment by force majeure as a regular termination. The Court in its reasoning found that it was not possible to continue employing the Claimants, at least not in the foreseeable future.
Where a business cannot sustain employees due to the interruption caused by a pandemic, then, they can agree with the employees to find alternative means of self-sustenance, until such time as the business is restored.
Termination on account of redundancy.
Where the services of an employee are no longer needed, you can terminate the employment on the grounds of redundancy.
Section 40 (1) of the Employment Act provides the legal requirements that the employer should meet in order to effect the termination of employment on account of redundancy. For the process to be fair and lawful, the following conditions have to be complied with;
- Notice ought to be given to the trade union which the employee is member to (if any) and the labour offices on the reasons for such termination not less than one month to the intended termination on account of redundancy.
- Where the employee is not a member of a trade union, such notice will be served on the labour offices within the area and to the employee personally in writing. where such notice is not given to the employee, such employee is entitled to payment in lieu of notice.
- In the selection of employees to be declared redundant, you must have 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.
- Where leave is due to an employee who is declared redundant, the same ought to be paid off in cash.
- Payment of severance pay at the rate of not less than fifteen days pay for each completed year of service.
The reason for the requirement of a notice is to provide the employee or his representative the relevant information regarding the said termination and provide them time to mitigate the damages by finding alternative employment. It is also imperative to provide an employee with the reason for termination to prevent the company from being sued for unfair termination.
Restructuring the employment terms
The Employment Act of Kenya recognizes different types of employment under Section 2 and 9. Under the Act, the employer who is a party to a written contract of service is responsible for causing the contract to be drawn up stating particulars of employment and that the contract is consented to by the employee.
In Oshwal Academy (Nairobi) & another v Indu Vishwanath [2015] eKLR, the Court found that just like any other contracts parties are at liberty to amend the contract by execution of another contract or an addendum as was the case herein. This recognition is also provided for under Section 13 of the Act where the employer is obligated to give the employee a statement indicating material changes in terms of the employment contract.
Based on the foregoing, both parties can agree to change the type of employment from say a permanent contract to a part-time contract for the purpose of ensuring the sustainability of the business.
However, it is important to point out where an employer unilaterally varies the terms of employment below the prescribed minimum, the employee can claim for constructive dismissal as in the case of Coca Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR.
Way forward
In the absence of a clause in the employment contracts on the action to be taken by the employer in case of a pandemic, many employers have been left at a dilemma on how to ensure sustainability of their business and at the same time avoid the economic risk of claims arising from unfair labour practices. It is imperative therefore, that contract drafters come up with a clause on the steps to be taken in the event of a pandemic.
We trust that the current situation will not warrant the implementation of any of the above options as we hope that the spread of the virus will be duly contained. As we hope for the best we prepare for the worst, and pray for good health.
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary as set out in the article should be held without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact the following: Virginiah Nduta or Wamuyu Mathenge at virginiah@wamaeallen.com or wamuyu@wamaeallen.com.
About the author
Andrew undertook his articles of pupilage at the firm after undertaking his Bachelor of Laws at the Catholic University and thereafter undertaking the Advocates Training Program at the Kenya School of Law. He has joined the Litigation and Dispute Resolution Department.
Virginiah is a promising transactional advocate specializing in Real Estate and Securitization, Banking and Finance.
Hi
Congratulations on the well written article. i enjoyed reading it.
My question is, my husband’s company was closed down due to the pandemic and they were all on paid leave in march.
But for the month of April, they have been issued with a letter stating that from May they will be on unpaid leave and they will forfeit their accrued leave days. April salary will only be paid when the employee signs the letter. Is this legal?
The management has claimed that there is a clause in the labor law that states it.
I have asked him not to sign the letter yet as i have not come across such clause in my years of audit. The accrued days are payable and can not be forfeited.
Your assistance is highly appreciated.
Thanks.
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