Brief Facts:
The case began when Symon Wairobi Gatuma, an employee of Kenya Breweries limited (KBL), filed a claim against his employer and its subsidiaries. Gatuma had been employed as a machine technician since 1986 and had later been transferred to the malting section.
In 2003, KBL restructured its operations, transferring the malting unit to its subsidiaries, Kenya Malting Limited and East Africa Malting Limited. Gatuma and his colleagues were forced to sign new employment contracts with the subsidiaries who offered lower salaries and allowances.
Gatuma argued that the new terms were not negotiated with the trade union, Kenya Union of Commercial Food and Allied Workers (KUCFAW) and that the transfer amounted to constructive dismissal. He therefore sought several reliefs, including compensation for unfair termination and reinstatement to his previous position.
The Industrial Court ruled in favour of
Gatuma and awarded him compensation for unfair termination in addition to reinstement to his employment
position. However, KBL and its subsidiaries appealed the decision which led to
a protracted legal battle that eventually reached the Supreme Court where the
apex court clarified the following:
The Issues for determination:
1: Whether the forced transfer and reduction in salary amounted to constructive dismissal?
2: Whether the new employment terms imposed without proper negotiation and that violated the terms of his original contract and bargaining agreement with KUCFAW amounted to a breach of the employment contract?
3: The case also raised questions on the legality of transferring employees to subsidiaries without their consent and the implications on their employment rights.
Court’s Determination:
Issue 1:
On the issue of whether the forced transfer and reduction in salary amounted to constructive dismissal, the court opined that Constructive dismissal occurs when an employee resigns because their employer’s behaviour has become so intolerable and has made life so difficult that the employee has no other choice but to resign. The Court held that the forced transfer and reduction in salary did indeed constitute constructive dismissal. Additionally, it emphasized the need for employers to ensure that any change in employment terms is negotiated and agreed upon by the affected employees or their representatives.
Issue 2:
On whether the new employment terms
amounted to a breach of the employment contract, the Court found that KBL and
its subsidiaries had in fact breached Gatuma’s employment contract by imposing
new terms without proper negotiation. It underscored the importance of adhering
to collective bargaining agreements and respecting the rights of employees
during corporate restructuring.
Issue 3:
On Employee rights in Corporate Restructuring, the judgement highlighted that employees cannot be transferred to subsidiaries without their consent and any such transfer must not result in less favourable terms of employment. The Court further emphasized that employers must prioritize the welfare of their employees during restructuring processes.
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