IKM MEMORANDUM OF PROPOSED AMENDMENTS TO THE DRAFT EMPLOYMENT ACT (AMENDMENT) BILL, 2019  

FROM:             ISEME, KAMAU & MAEMA ADVOCATES

TO:                  KENYA LAW REFORM COMMISSION

 RE:                  EMPLOYMENT ACT (AMENDMENT) BILL, 2019

 DATE:              9TH AUGUST, 2019

 

Having reviewed the draft Employment Act (Amendment) Bill, 2019 (the ‘Draft Bill”), we write to present our comments and proposals for your consideration and inclusion in the next version of the Draft Bill:-

 

Clause

Subject matter

Overview

IKM’s remarks

6

Grounds of Discrimination

This Clause proposes to amend Section 5(3) (a) of the Employment Act, 2007 (“Principal Act”) by expanding the grounds of discrimination both in employment and recruitment. The grounds will henceforth include health status (not just HIV), ethnic or social origin, colour, conscience, belief, culture, dress and, curiously, birth. This is in addition to the existing grounds of race, sex, pregnancy, marital status, colour, disability, religion and language.

While we understand that the proposed changes are meant to align the Employment Act with Article 27 of the Constitution, some of the grounds, specifically, age, dress, birth, belief and culture are likely to be controversial in the context of employment.

 

For instance, although there is no statutory retirement age in the private sector; most employers have a retirement policy and some jobs may also require employees of a certain age bracket. If this law is passed, such policies will become illegal and, consequently, asking an employee to retire or specifying the required age bracket will constitute discrimination.

 

Regarding dress, it is a fact that some jobs e.g. nursing and blue sector industries, among others, require staff to wear uniform or not to dress in a certain way for safety, and the comfort/convenience of fellow staff and clients. Making dress a ground of discrimination will curtail the power of employers in such sectors/professions to prescribe a dress code or uniform.

 

It is not clear in what circumstances a person will experience discrimination on account of birth. We recommend that the word ‘birth’ be replaced with the words ‘place of birth.’ This is the term used in the laws of other countries which we have reviewed.

 

While one should not be discriminated against on the basis of their culture, they should also not be allowed to conduct themselves in an objectionable manner under the pretext of living their culture at the work-place.

 

We recommend that the controversial grounds namely age, dress, and culture be qualified by the phrase “subject to such reasonable policies as the employer may prescribe from time to time.

 

7

Sexual Harassment Policy

This Clause proposes to amend Section 6(2) of the Principal Act by deleting the word “twenty” and replacing it with the word “five”.

Currently, the law provides that any employer with 20 or more employees is required to have a sexual harassment policy in place. This draft Bill reduces this number to 5.

                            

In our view, employers with only 5 employees are probably too small to afford the cost of developing human resources policies including a sexual harassment policy. We recommend that the number of employees be retained at 20.

 

8

Restrictive Covenants

This Clause seeks to amend Section 9 of the Principal Act by introducing sub sections (5) and (6) which provide:-

 

“(5) A provision in a contract of service whose effect is to restrain an employee from exercising a lawful profession or occupation or use of knowledge and skills gained during employment upon termination of such contract of service is void.

 

(6) Despite of subsection (5), a contract of service may limit an employee from disclosing any confidential information or trade secrets acquiring in the course of engagement for a reasonable period.”

 

While this is a welcome development and in line with the prevailing labour jurisprudence in Kenya and across the world, we recommend that there should be no possibility for the disclosure of confidential information and trade secrets.

 

We therefore propose the deletion of the language suggesting that the non-disclosure can be limited to “a reasonable period.” Proprietary information does not cease being confidential after any specific period.

9

Employment Particulars

This Clause proposes to amend Section 10 of the Principal Act by deleting “age” and “sex” from the list of employment particulars for a contract of service.

 

The first challenge with this requirement is how the employer/prospective employer will determine age of the employee for purposes of job suitability, retirement or eligibility to pension benefits including NSSF which is normally triggered by age.  Absence of employees’ sex identity in the employer’s records will also complicate the maintenance of gender balance and provision of gender-specific facilities at the work-place.

 

 

13

Effect of Mergers and Acquisitions on Employees

This Clause proposes to amend the Principal Act by introducing a new section 15A which provides that it is mandatory for all employees affected by an impending merger or acquisition of their employer to be consulted and, in particular, informed of the manner in which the transaction will affect them.

 

It also provides that the transfer of a business shall not operate to terminate any contract of employment prior or subsequent to the transaction.

 

All the employees of the business being merged or acquired will be automatically transferred to the acquirer of the business without any loss of benefits or contractual dues.

 

Further, the new owner shall be liable for all the employees’ dues stretching back to the commencement of the employment contract. This means that the acquirer will take over all the labour-related obligations of the acquired enterprise including pensions and other liabilities like pending court cases initiated by or against the acquired business.

 

Finally, the Clause proposes that where an employee of the transferor is dismissed, it will amount to unfair termination if the principal reason for such dismissal is in connection with the transfer.

 

This is a welcome development. Many countries including the UK, Uganda and others have similar provisions.

 

We however find the proposals in the Draft Bill too populist and couched in manner that will subject parties to a merger/takeover transaction to unnecessary costs and restrictions.

 

The law should allow the transacting parties to enter into alternative arrangements for the settlement of employee dues up to the date of the transaction. This may involve the transferor bearing the cost of redundancy in the event that the transferee does not require some of the employees. There is no business rationale for the acquirer to take over a bloated workforce which it does not need. This is especially so where the business is distressed and it would be uneconomical to retain all the employees in the short run when the focus should be on cost cutting and turning around the business.

 

Most M&A transactions are structured in such a way that even where the purchaser is taking over all the employees, the original employer bears the liabilities accrued up to the date of the transaction. This enables the new owner to start on a clean slate by issuing new contracts to all transferring employees on substantially similar terms as the previous contracts but without taking over past liabilities for which it was not responsible unless the parties agree to factor that in the purchase price.

 

The law should specify the period within which the employee is protected against termination both prior and subsequent to the acquisition of the business. As currently drafted, it will operate as a blanket protection for all employees including those who deserve to be dismissed for valid reasons during the transaction period. 

 

We recommend that the prohibition on termination should be limited to redundancy, thereby leaving it open to the employer to exercise its contractual rights of termination at any time and for any other valid reason.

 

21

Night Work

This Clause proposes to introduce a new Clause 27B to the Principal Act, and provides that no employee will be required to undertake night work unless this has been agreed in the contract. In addition, night work will attract an extra allowance over and above the normal salary. Night workers will also be entitled to transportation to and from their homes, and right to medical examination.

 

The draft law does not specify the amount or rate of computing the allowance for night work. It should indicate a percentage of the gross salary to protect employees against exploitation by being paid ridiculously low allowances.

 

22

Surrogate Motherhood

The Clause proposes to introduce a new section 29B(5) which provides that where a child is born pursuant to a surrogate motherhood agreement, the commissioning parent will be entitled to 2 months leave upon the birth of the child.

 

It is not clear why parental leave is shorter than maternity leave yet the needs of an infant born through a surrogacy arrangement are similar to those of biological motherhood.

 

We, therefore, propose that the parental leave period should also be three months.

 

22

Compassionate leave

The Clause proposes to introduce a new sub-section 29C(1) which provides that an employee who has exhausted their annual leave may be granted up to 5 days compassionate leave upon the death of a parent, spouse, child or sibling.

 

The implication inherent in this wording is that employees will only be eligible for compassionate leave if they have already used up their annual leave. This position is worse than the current situation where employees are normally granted compassionate leave irrespective of the status of their annual leave account. We recommend deletion of “who has exhausted their annual leave”.

 

The definition of ‘sibling’ should also be limited to immediate blood brothers and sisters to prevent abuse.

 

23

Sick leave

This Clause proposes to enhance sick leave from 15 to 30 days with full pay and a further 15 days with half pay.

 

The law should go further to clarify what should happen after the exhaustion of sick leave. Should the employer terminate the contract or allow the employee to proceed on unpaid leave and if so, for how long?

 

26

Reasons for termination of employment

This Clause seeks to amend Section 35 of the Principal Act by introducing a new subsection (4) (c) which provides that an employee is entitled to be provided with a written statement of the reasons for dismissal.

 

Since there is no corresponding duty upon the employee to give any reasons to the employer for resignation, most employees simply quit whenever they find a new job without giving notice, irrespective of the cost and inconvenience to be suffered by the employer as a result of an abrupt resignation.

 

To instil discipline among employees and balance the scales somewhat, the law should provide for a certain amount of liquidated damages over and above the contractual amount payable in lieu of notice to be paid by the employee who deserts employment without giving the contractual notice.

 

26

Service Pay

The Clause proposes to amend Section 35 of the Principal Act by inserting a new subsection (5)(a) which provides that upon termination, an employee will be entitled to a gratuity equivalent to 15 days’ pay for each completed year of service.

 

Unless Section 35(6) of the Employment Act is deleted, service pay , including the gratuity proposed in the Draft Bill, will never be an absolute right.

 

40

Fair Termination/Dismissal Process

The Clause seeks to lay down the mandatory steps required to be taken by the employer in order for the process to meet the threshold of fairness required by the statute.  The essentials of the process are that the employee must be made fully aware of the charge against him, be given an opportunity to be heard and informed of the right of appeal.

 

In light of the hefty damages normally awarded to employees on account of unfair termination arising from breach of the due process, the proposed law should set out all the procedural requirements to foster compliance by enhancing certainty. Currently, this procedure as prescribed by the courts acts like a death trap for employers who are not aware of it.

 

41

Constructive Dismissal

The Clause recognises and validates the common law doctrine of constructive dismissal. It allows an employee who has been subjected to oppressive and intolerable conduct by the employer to the extent of making him unable to effectively perform his duties, to resign and claim damages for unfair termination.

 

The draft law should clarify that the burden of proof lies upon the employee.

44

Legal Representation

The Clause seeks to repeal Section 48 of the Principal Act and insert a new section thereby allowing any party to be represented by an Advocate.

 

The disciplinary process is an internal affair that should not include external participants such Advocates. The proposal to allow advocates to participate in such proceedings is unfortunate. Not only will it intimidate employers but will make the proceedings unnecessarily confrontational.  Employers may be forced to hire their own lawyers to attend the proceedings which are a significant cost especially for employers with hundreds of employees where disciplinary proceedings are a regular occurrence. We STRONGLY recommend deletion of this proposal. Parties should be allowed to hire lawyers after the exhaustion of the internal disciplinary processes.

 

45

Suspension

The Clause provides that an employer may suspend an employee for a maximum of 14 days to allow for investigations to be completed.

This period may not be sufficient for completion of complex investigations involving fraud. The best practice is 30-90 days.

 

 

OTHER PROPOSED  CHANGES

 

 

We propose the following additional changes for inclusion in the Draft Bill :

No.

Subject Matter

IKM Proposal

1.      

Retirement

Kenyan employment law makes no provision for retirement age in the private sector. The matter is normally regulated by company policy but where no policy exists, the matter can get fairly complicated. For instance, where the employer wishes to separate with an employee on grounds of age but the employee wishes to hang on, terminating the services of such an employee might be challenged on grounds of unfairness or discrimination. On the other hand, when an employee who has reached a certain age applies for retirement, is the employer entitled to treat such an application as a resignation?

 

While the proposed law now requires employers to issue retiring employees with a certificate of retirement, it makes no provision for retirement itself. It should specifically provide that upon the attainment of a certain age an employee will be entitled to retire unless the contract of employment or the employer’s policies provide otherwise.

 

It should also prescribe a minimum retirement package payable to a retiring employee based on the number of years worked.  Such a provision will not only provide certainty on the issue of retirement but will save employers millions of shillings paid annually in damages for unfair termination when they send home employees who are no longer productive due to advanced age.

 

While at it, the law should provide for the terms applicable to retirement on medical grounds. Currently it is unclear whether employees who have exhausted their sick leave but are still unable to resume work should be retired or allowed to go on an indefinite unpaid leave. Without a provision to this effect, terminating the services of such an employee would constitute discrimination on grounds of ‘health status’ yet retaining them on the payroll imposes a huge financial obligation on the employer who may have to hire a replacement in the meantime.

 

2.      

Redundancy Procedure

The procedure for declaring a redundancy as set out in the Employment Act is far from clear. Indeed there has been conflicting interpretations of Section 40 of the Act by the Employment & Labour Relations Court and the Court of Appeal, owing to the inelegant way in which the provisions are drafted. This is a good opportunity to streamline this section and align it with the settled position articulated by the Court of Appeal in the case of Africa Nazarene University v David Mutevu & 103 others [2017] eKLR to avoid any further ambiguity.

 

3.      

Fixed Term Contracts

The law applicable to fixed term contracts and especially in relation to their renewal remains murky and is the source of much litigation in Kenya. Since the law is silent, courts have held that these contracts expire automatically on their due date and the employee is not entitled to notice or reasons for termination. This has, however, not barred employees from suing employers on the basis of the doctrine of legitimate expectation where the contract has in the past been renewed a number of times consecutively. In such cases, the courts have held that unless the employee has been notified otherwise by the employer prior to the expiry date, he is entitled to assume that the contract will be renewed. In such case, the employer will be liable for unfair termination if he failed to notify the employee within a reasonable time that the contract will not be renewed. Since this doctrine is now part of Kenyan labour law yet its essential elements are unknown to most employers, it should be incorporated into the statute to foster certainty and avoid subjectivity and inconsistency in the determination of cases.

 

4.      

Computation of Daily Rate

Courts have used different and confusing formulae in the computation of the daily rate for purposes of calculating terminal dues and leave entitlement.

 

Whereas some judgments state that the applicable rate is obtained by dividing the gross monthly salary by 30 days, others have held that the dividing number is 26 (on grounds that by law, every employee is entitled to 1 day of rest per week). The latter formula is more generous to employees but more expensive for employers. The law should clarify the correct formula.

 

5.      

Reinstatement

Reinstatement as a remedy for unfair termination should be deleted from our statute books for the simple reason that in contracts of personal service such a remedy does not serve the interests of either party. Kenyan courts have been consistent in holding that reinstatement is not an appropriate remedy for breach of an employment contract. The continued existence of this remedy in the law only serves the purpose of giving employees false hope and intimidating employers.

 

6.      

Damages for unfair termination

Currently the law provides that the maximum damages for unfair termination is 12 months’ salary. Yet, some sympathetic judges routinely award the maximum amount for very minor deviations by the employer from the recommended termination procedure even where there were compelling reasons for termination. As the court of appeal has recently clarified in the case of Kenya Airways Limited v Alex Wainaina Mbugua [2019] eKLR, the maximum award should only be given in the most aggravated cases of violation of employees’ rights. In addition, whenever a judge chooses to exercise the discretion of awarding the maximum amount, he is required justify such a decision by giving reasons.

 

The law should be amended to either confirm this position or set a fixed amount of damages payable for unfair termination. This will bring much needed certainty on the matter and facilitate out of court settlements without too much blackmail which at present is the common currency in such negotiations.

 

7.      

Performance Improvement Plan (PIP)

The Employment Act provides that poor performance is a valid ground for terminating an employment contract. It does not, however, mention the requirement for a performance improvement plan (PIP) or the fact that it is mandatory.  On the other hand, courts have stated quite robustly that termination of employment on grounds of poor performance without a PIP is unfair. They have also developed very elaborate guidelines on how a valid PIP is to be conducted. If following an appraisal the employer is of the opinion that the employee’s performance has been poor, the parties are required to agree on the specific areas of weakness that the employee needs to improve on, the assistance required from the employer in order for the employee to overcome the noted challenges and a reasonable duration of the PIP. Most employers overlook this mandatory step since it is not mentioned anywhere in the law and yet failure to observe it invariably leads to hefty damages for unfair termination.

 

The Draft Bill should incorporate the principles and guidelines developed by the employment court on PIP.

8.      

Employees’ Representation

It is common in some developed countries for companies having a large workforce to have at least one director representing the interests of employees.

 

Perhaps it is time to consider incorporating such a requirement in the law for companies with over 500 employees.

 

           

 

Please consider the above proposals and do not hesitate to contact us should you require any clarification or further information.

The memorandum can be accessed in pdf format here

 

WILLIAM I. MAEMA

ISEME, KAMAU & MAEMA ADVOCATES

wmaema@ikm.co.ke

Cc:

Law Society of Kenya

Lavington, Opposite Valley Arcade,

Gitanga Road,

Nairobi, Kenya