[Kenya] Employment law requires further changes

If it is passed into law, the draft Employment Act (Amendment) Bill, 2019 will be a progressive piece of legislation but there is still much work to be done. Business Daily reports on the amendment and considers what must come next.

The Employment Act (Amendment) Bill 2019 was published by the Kenya Law Reform Commission in April 2019. It represents positive change but fails to address some issues of concern. Kenyan employment law does not make a provision for retirement age in the private sector. Ordinarily, the matter is regulated by company policy, problems arise when no policy exists. For example, if an employer wants to let an employee go on grounds of age but the employee wants to continue working, termination of the employee’s services could be challenged on grounds of unfairness or discrimination.

Or by contrast, when an employee reaches a certain age and applies for retirement, may the employer treat their application as a resignation?

The proposed law does require employers to issue retiring employees with a certificate of retirement but does not make a provision for retirement itself. Business Daily suggests it should go further and stipulate that at 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 set out a minimum retirement package for retiring employees based on the number of years they have worked.

Such a provision would provide certainty on the issue of retirement. It would also save employers millions of shillings which are paid out every year in unfair termination damages for employees let go when unable to carry out their work due to advancing age.

The law should set out terms for retirement on medical grounds. It is not clear at present whether employees who have used up their sick leave but remain unable to resume work should be retired or put on indefinite unpaid leave.

Without a specific provision, terminating the services of such an employee would constitute discrimination on the grounds of ‘health status’. Yet keeping them on the payroll puts a heavy financial burden on employers, who might need to hire a replacement in the interim.

The procedure for declaring a redundancy is unclear, as set out in the Employment Act at present. There have been conflicting interpretations of Section 40 of the Act by the Employment & Labour Relations Court and the Court of Appeal as a result of the way the provisions are drafted.Business Daily says this is the right time 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. 

The law on fixed-term contracts - especially in relation to their renewal - remains muddled and continues to be the source of much litigation in Kenya. Without a clearly defined law, courts maintain that fixed-term contracts expire automatically on their due date and that the employee is not entitled to reasons for termination or notice.

The Employment Act states that poor performance is a valid ground for terminating an employment contract but does not mention the mandatory requirement for a performance improvement plan (PIP). Yet courts have ruled that termination of employment on poor performance grounds without a PIP is unfair. In addition, they have laid down very specific guidelines on how a valid PIP is to be conducted.

It is common practice in some developed countries for companies with a large workforce to appoint at least one director to represent the interests of employees. As a final step, Business Daily suggests it might be time for Kenya to consider incorporating such a requirement in law for companies with over 500 employees.

If it is passed into law, the draft Employment Act (Amendment) Bill, 2019 will be a progressive piece of legislation but there is still much work to be done. Business Daily reports on the amendment and considers what must come next.

The Employment Act (Amendment) Bill 2019 was published by the Kenya Law Reform Commission in April 2019. It represents positive change but fails to address some issues of concern. Kenyan employment law does not make a provision for retirement age in the private sector. Ordinarily, the matter is regulated by company policy, problems arise when no policy exists. For example, if an employer wants to let an employee go on grounds of age but the employee wants to continue working, termination of the employee’s services could be challenged on grounds of unfairness or discrimination.

Or by contrast, when an employee reaches a certain age and applies for retirement, may the employer treat their application as a resignation?

The proposed law does require employers to issue retiring employees with a certificate of retirement but does not make a provision for retirement itself. Business Daily suggests it should go further and stipulate that at 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 set out a minimum retirement package for retiring employees based on the number of years they have worked.

Such a provision would provide certainty on the issue of retirement. It would also save employers millions of shillings which are paid out every year in unfair termination damages for employees let go when unable to carry out their work due to advancing age.

The law should set out terms for retirement on medical grounds. It is not clear at present whether employees who have used up their sick leave but remain unable to resume work should be retired or put on indefinite unpaid leave.

Without a specific provision, terminating the services of such an employee would constitute discrimination on the grounds of ‘health status’. Yet keeping them on the payroll puts a heavy financial burden on employers, who might need to hire a replacement in the interim.

The procedure for declaring a redundancy is unclear, as set out in the Employment Act at present. There have been conflicting interpretations of Section 40 of the Act by the Employment & Labour Relations Court and the Court of Appeal as a result of the way the provisions are drafted.Business Daily says this is the right time 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. 

The law on fixed-term contracts - especially in relation to their renewal - remains muddled and continues to be the source of much litigation in Kenya. Without a clearly defined law, courts maintain that fixed-term contracts expire automatically on their due date and that the employee is not entitled to reasons for termination or notice.

The Employment Act states that poor performance is a valid ground for terminating an employment contract but does not mention the mandatory requirement for a performance improvement plan (PIP). Yet courts have ruled that termination of employment on poor performance grounds without a PIP is unfair. In addition, they have laid down very specific guidelines on how a valid PIP is to be conducted.

It is common practice in some developed countries for companies with a large workforce to appoint at least one director to represent the interests of employees. As a final step, Business Daily suggests it might be time for Kenya to consider incorporating such a requirement in law for companies with over 500 employees.