You are fired! Three dreaded words that can cost your employer dearly - Daily Nation

You are fired! Three dreaded words that can cost your employer dearly


You are fired! Three dreaded words that can cost your employer dearly

A high success rate of lawsuits on employment termination ought to make employers dismiss staff only as a last resort

A court recently ordered Kirinyaga Governor Anne Waiguru to pay a former county employee Sh3.3 million for unlawful dismissal. Ms Judy Kinyua was dismissed in September last year over what her employer cited as incompetence and underperformance.
At the beginning of March, a court awarded two former employees of Plan International who had been sacked for losing a birthday card and a calculator sent to a Standard Eight pupil by an overseas sponsor Sh876,798 and Sh323,9163.

Neither these cases nor the rulings are unique. Some 4,377 (two-thirds) similar cases, out of the 6,253 that were filed at the Employment and Labour Relations Court between 2011 and 2019, saw employers pay for their actions, which in a number of cases made them part with colossal amounts of money.

Two in three cases in which an employer was sued for unfair termination were ruled in favour of the employee.

In 2016, the court ruled that Dr Ezekiel Nyangoya Okemwa be paid Sh53 million by his former employer, the Kenya Marine and Fisheries Research Institute (KMFRI). He had worked for KMFRI for 22 years, rising to the position of director, which attracted a monthly salary of Sh480,000. The premise of the case was an anonymous complaint that he engaged in corrupt dealings. Subsequently, he was charged in court but later acquitted of the corruption charges, by which time the employer had terminated his contract.

After the acquittal, he sued KMFRI for Sh247,039,200 in compensation. The court awarded him Sh53 million for injured feelings and diminished employability. The amount included Sh33 million in salary arrears, Sh20 million in damages for unfair and unlawful termination and interest at 14 percent per annum, computed from the date of the award.

KMFRI has failed to honour the court’s order by March 2019, prompting Dr Okemwa to ask the court to compel his former employer to pay him Sh70.7 million, after the initial amount accrued interest.

Such cases, whether involving prominent personalities or ordinary low-profile Kenyans and large or small sums of money, are founded on Section 45 (2)(b) of the Employment Act of 2007, which requires an employer to have a valid reason for terminating an employee’s contract.

Court data obtained from the Kenya Law website shows that dismissed employees win two out of three job dismissal cases taken to the Employment and Labour Relations Court, indicating that seldom does termination adhere to satisfactory conditions for fair termination.

Costly 'goodbye'

In the business world, exposure to such legal penalties constitutes a class of risks known as compliance risk. Inability of a company to justify termination of employment leads to financial loss.

Awarded compensation to employees generally constitutes a multiple of their salary for the period of the grievance, damages accrued from termination, the period of employment and other financial benefits attached to the employment. These factors combine to constitute the risk exposure to a company in the event of a dismissal.

Ms Elizabeth Kioko, a housekeeper employed by Beyene Haire Warde for 14 years on a monthly salary of Sh10,000, was awarded Sh2.7 million by the court for unlawful termination. Despite her low salary, she received a significant amount in compensation owing to the many years she had served.

The diagram below shows salary, compensation and years of employment for selected (stratified sample) 77 selected cases (stratified sample) on unfair termination.

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The outlier case on the chart above is Dr Okemwa, whose big sum was informed by many factors: a high salary, many years of service, court case dragging for long, injured feelings and diminished employability.

In another case, the deputy executive director of Transparency International, Ms Teresa Carlo Omondi, sued her former employer for unfair termination and asked that the court grant her compensation of Sh11.7 million. The court found the dismissal unlawful and awarded Sh3.9 million to Ms Omondi, who had been employed for two years earning Sh300,000.

Similarly, early this year, the former director of the Kenya Water Institute, Mwalimu Kithome Musau, who had worked for seven years earning Sh578,000, won a compensatory award of Sh6.7 million against his former employer on account of unfair termination. Former National Transport and Safety Authority director for road safety Mathew Munyao was also awarded Sh7.3 million on the ground of unfair termination. He had been summarily dismissed, after two years of service, on corruption allegations.

The analysis found that the average job dismissal case lasted about two years.

A random scan of cases in which the court ordered compensation revealed that senior employees in the level of director are likely to get awarded a minimum of 10 times their salary in the event of an unfair dismissal. The remuneration of directors is the highest in most organisations, and hence dismissing them carries a huge financial risk for any company.

No regrets

In contrast, dismissing junior employees seems to be a much easier call, since the possibility of a court battle does not portend a high financial loss for the employer.

The data shows that some of the instances of successful litigation by low-cadre employees were as a result of the former employer not showing up in the court. It is probable that companies opt to stay away and await the court ruling after weighing the modest amount that such cases are likely to attract in compensation against the high legal fees they stand to incur in defence.

Even with a proper cause, it does show that the burden of proof in a summary dismissal case is higher for the employer.

A hypothesis worth considering would be whether the probability of successful litigation is higher in cases involving directors compared with those relating to junior employees. Access to better lawyers, higher disposable income, and legal knowledge would probably tilt the scale in favour of directors.

Gender

More male than female employees sued for wrongful dismissal. Using a representative random sample of 362 cases from the 6,532, the analysis finds that one in five dismissal cases filed by individuals was by a female employee. Eleven percent of the suits were filed by entities other than the dismissed employees such as labour unions.

Judicial precedent

Wrongful termination is not a new phenomenon, though the circumstances for termination can set up a legal precedent.

In the practice of common law, the decisions of judges abide by similar decisions rendered by other judges in similar circumstances. In the event of a case without a similar verdict, a judge makes a decision that acts as a reference for future decision-making. This is known as setting a judicial precedent.

Such was the case in Cause 7 of 2015 that pitted Mr John Rioba Maugo against his former employer Riley Falcon Security Services Limited. He was summarily dismissed from his job as a guard for being drunk while on duty. Riley Security did not provide medical proof of the employee's drunkenness.

In a ruling on September 8, 2016, Justice Maureen Atieno Onyango, said: "Drunkenness is a very shallow ground to found liability for summary dismissal. First, drinking alone or smelling of alcohol per se is not a ground for summary dismissal".

Section 44(b) of the Employment Act provides that an employee is liable for dismissal if "During working hours, by becoming intoxicated, an employee renders himself unwilling or incapable of performing his work correctly.''

Consequently, Mr Rioba, who earned a monthly salary of Sh8,392, was awarded Sh296,777 for unfair termination. The ruling formed a judicial precedent - drinking or smelling of alcohol that does not lead to an inability or unwillingness to work is not a ground for summary dismissal.

The leading reasons for employee dismissals in the eight years were redundancy (20 percent), work absenteeism (10 percent), gross misconduct (six percent), Incompetence (six percent) and medical grounds (five percent). Corruption contributed to three percent of the cases.

The manufacturing sector accounted for the highest dismissal cases between 2011 and 2019 (19 percent), followed by government (13 percent). They were followed by retail, hospitality, finance and education sectors with seven percent each.

The high number of cases in the manufacturing sector could be as a result of litigation undertaken on behalf of an employee by labour unions. Equally, the observation may indicate that a high number of summary dismissals happen in the manufacturing sector, and are mostly of low-wage employees.

Even with a proper cause, it does show that the burden of proof in a summary dismissal case is higher for the employer. Like nuclear weapons, summary dismissal should be only a last resort, for it exposes a company to financial risks.

The author is a data scientist. @blackorwa