Case Summary: Gatuma v Kenya Breweries Ltd & 3 others (Petition E023 of 2023) [2024]
Background:
The Appellant, was initially employed by Kenya Breweries Ltd (the 1st Respondent) in 1986 as an Artisan Grade F. In 2003, he was declared redundant following the separation of the malting operations from the beer business. Gatuma was offered a redundancy package amounting to Kshs 2,083,852, and shortly after, he was re-employed by Kenya Maltings Ltd (the 3rd Respondent) at a reduced salary of Kshs 29,665, less than half of his previous salary of Kshs 66,064.
The appellant claimed that the respondents took advantage of him by reducing his salary and altering his employment terms without the involvement of his trade union, KUCFAW. He argued that the respondents manipulated corporate structures, using subsidiaries to deprive him of his rightful benefits, particularly his salary and a 20-year long service award.
Litigation History:
Gatuma filed a suit before the Industrial Court (now Employment and Labour Relations Court) in 2010, seeking declarations that his redundancy in 2003 was unlawful and that his salary reduction and termination in 2009 were unfair. The Industrial Court ruled in his favor, finding that the respondents had manipulated their corporate structure to exploit labor rights. The Court declared that Gatuma’s employment was continuous between 1986 and 2009, and ordered the respondents to pay Kshs 1,881,846 in salary underpayments, Kshs 184,826 in unpaid house allowance differentials, and Kshs 130,000 as a long-service award.
The respondents appealed to the Court of Appeal, which overturned the Industrial Court’s judgment. The appellate court held that the respondents were separate legal entities and that the redundancy process was lawful. It found that Gatuma had voluntarily accepted the new employment terms in 2003 and worked under those terms for six years. Consequently, the Court of Appeal set aside the trial court’s award.
Supreme Court Proceedings:
The appellant appealed to the Supreme Court under Article 163(4)(b) of the Constitution, which allows appeals on matters of general public importance. The Supreme Court was tasked with determining whether reducing Gatuma’s salary and altering his employment terms while retaining the basic tenets of employment constituted unfair labor practice. Additionally, the Court addressed whether the respondents acted as a single economic unit and whether the use of subsidiaries had been a façade to evade labor responsibilities.
Key Issues for Determination:
- Whether the unilateral reduction of salary and alteration of employment terms, while retaining basic employment tenets, amounted to unfair labor practice.
- Whether the respondents acted as a single economic unit and whether their use of subsidiaries constituted a façade to evade labor responsibilities.
- Whether Gatuma’s right to fair labor practices under Article 41 of the Constitution was violated.
Court’s Findings:
The Supreme Court agreed with the appellate court in finding that the redundancy notice issued by the 1st respondent was valid and procedurally compliant with the Employment Act. It was established that Gatuma’s subsequent employment by Kenya Maltings Ltd was based on a new contract, which he voluntarily agreed to and remained employed under for six years. As a result, the Court found that the respondents had not infringed upon his right to fair labor practices.
The Court further upheld the appellate court’s finding that the respondents operated as separate legal entities, rejecting the argument that the subsidiaries were merely a façade. The redundancy process in 2003 and the new employment terms offered were deemed lawful, and the appellant’s claim that he was unfairly treated was dismissed.
Conclusion:
The Supreme Court upheld the Court of Appeal’s judgment, ruling that there was no violation of the Appellant’s labor rights. The court affirmed that the redundancy and subsequent employment were handled lawfully and that Gatuma had voluntarily accepted the new terms of employment.