Martineau & 3 others v Light House Property Company Limited (Cause 506 of 2017) [2022] KEELRC 13196 (KLR) (22 September 2022) (Judgment)

Key Facts

Issues

• Whether the claimants are entitled to the requested reliefs including one month's salary in lieu of notice, compensation for constructive dismissal, and costs
• Whether the claimants were constructively dismissed by the respondent due to unpaid salaries over several months, leading to their resignation

Holdings

• The court dismissed the respondent's submissions attributing liability to KDIC, stating that submissions cannot substitute evidence and the burden of proof remained with the claimants.
• The court denied the claim for gratuity, ruling that entitlement must stem from an express contractual term, which the claimants did not demonstrate.
• The court ordered interest on the awarded sums at court rates, starting from the judgment date until full payment.
• The court declared that the claimants were constructively dismissed due to the respondent's failure to pay their salaries as per the employment contracts and the Employment Act, 2007.
• The court granted compensation for wrongful termination at 8 months' gross salary, totaling Kshs 11,800,000, based on Section 49(1)(c) of the Employment Act, 2007.
• The court awarded one month's salary in lieu of notice, amounting to Kshs 1,475,000, as the respondent did not provide notice of termination under the employment contracts and Section 36 of the Employment Act.
• The court directed that the awarded sums be apportioned among the claimants in the ratio of their monthly salaries.

Remedies

• The claimants were awarded the costs of the court proceedings.
• Award of one month's salary in lieu of notice amounting to Kshs 1,475,000.
• Compensation of eight months' gross salary (Kshs 11,800,000) awarded under Section 49(1)(c) of the Employment Act for wrongful termination.
• The court declared that the claimants were constructively dismissed from their employment with the respondent due to the failure to pay salaries.
• The awarded sums are to be apportioned among the claimants in the ratio of their monthly salaries.
• Interest on the awarded sums at court rates from the judgment date until full payment.

Monetary Damages

Legal Principles

• The burden of proof for constructive dismissal lies with the employee, as established in the court's analysis. The claimants were required to demonstrate that the employer's conduct (non-payment of salaries) was a significant breach of contract leading to their resignation.
• The court recognized the employees' legitimate expectation to receive their salaries as per the contract terms. The employer's failure to meet this expectation was deemed a breach justifying constructive dismissal.
• The court considered the tort of inducing a breach of contract, where KDIC's interference in the employer's management led to the non-payment of salaries. This principle was cited as a defense, though the court ultimately found the employer's conduct responsible.
• The court applied the principle of good faith, holding that the employer's failure to pay salaries as stipulated in the employment contracts constituted a fundamental breach. Employees are entitled to expect timely remuneration, and unilateral non-payment without reasonable cause breaches the implied term of good faith in the employment relationship.
• The court employed a purposive approach to interpret Article 41 of the Constitution, which protects the right to fair labor practices. This justified applying the doctrine of constructive dismissal in the absence of specific statutory provisions.

Precedent Name

• Leena Apparels [EPZ] v Nyevu Juma Ndokolani
• Toroitich Moi v Stephen Muriithi & another
• Western Excavating [ECC] Ltd v Sharp
• Coca Cola East & Central Africa Limited v Maria Kagai Ligaga
• Anthony Mkala Chitavi v Malindi Water & Sewerage Company Ltd
• Joseph Ochieng & 2 others t/a Acquiline Agencies v First National Bank of Chicago
• Geoffrey Muriithi Mthee v Xplico Insurance Co Limited

Cited Statute

Judge Name

Passage Text

• Applying the contractual test, enunciated in the case of Coca Cola East and Central Africa Ltd v Maria Kagai Ligaga [supra], I come to a conclusion that by failing to pay the Claimants their monthly salaries as and when they fell due under the terms of their contracts of employment and the law, amounted to a unilateral act, and a breach of the terms of the contract in a substantial manner. There was a repudiatory breach of the contracts therefore. The claimants were constructively dismissed.
• The claimants sought for gratuity alleging that is usually an implied term of employment contracts that an employee who separates with his employer is entitled to be paid gratuity at the time of separation. This position does not have any legal foundation, in fact it is in ignorance of the true legal position that an employee's entitlement to gratuity must flow from an express term in the contract of employment between the employer and the employee. I decline the claim under this head.
• From the onset it is imperative to state that constructive dismissal does not have any statutory anchorage within the Employment Act, 2007 or any of our statutes. It is a creature of Common law. It is trite law that where an employer's conduct evinces an intention no longer to be bound by the contract of employment, a path gets available to the employee to either accept the conduct or changes made by the employer or treat the conduct or changes as a repudiation of the contract and sue wrongful dismissal. In the instant case, it is clear that the Claimant settled for the latter choice.