The strain in the economy has affected many businesses in Kenya which has forced many employers to reevaluate their revenues and expenses. The goal for most businesses is to reduce expenses especially when the business is not generating enough revenue to meet its expenses. One of the highest expenses for most businesses is employee costs. In a bid to reduce these costs, employers have had to tread the dreary path of redundancy and there are many questions that employers have regarding redundancy including the instances when redundancy would be justified in Kenya.

This article discusses the various instances when redundancy would be justified which have been developed by courts in Kenya over the years.

A. WHAT IS REDUNDANCY?

Redundancy, also known as retrenchment, layoffs or downsizing, is the loss of employment, occupation, job or career by involuntary means through no fault of the employee. It involves the termination of employment as an initiative by the employer where the services of an employee are no longer needed because of various reasons.

Redundancy does not always mean that a position has to be abolished. Downgrading or upgrading a position even without changing the title may also make the current holder of the office redundant and redundancy can be declared on this basis.

B. JUSTIFIABLE REASONS FOR REDUNDANCY

The following reasons have been found to be valid reasons for redundancy by various courts in Kenya:

 1. Corporate Restructuring

Generally, courts have held that an employer has a right to restructure its business to improve its profitability, incorporate modern technology, improve its efficiency, among other reasons. In this case, employers are allowed to declare positions redundant to facilitate the restructure.
The Court in Kungu George Kairu & 35 Others v KK Security Limited [2016] eKLR held that it was trite law that every employer has the right to determine the structures of its business and to redesign its organizational structures to suit the requirements of profit making.  In the International Labour Organization’s Recommendations No. 166 – Termination of Employment of 1982, it was highlighted that redundancy must only be a commercial decision taken to ensure the ongoing viability of an employer and that redundancy can be declared if the employer decides to reorganize his business and run it more efficiently and profitably.

In another case, Kenya Airways Limited v. Aviation & Allied Workers Union Kenya & others [2014] eKLR (KQ Case), the court held that besides economic distress, an employee could restructure the business to be in tandem with the modern technologies in order to enhance efficiency.

A further decision by the court in Kenya Airways Corporation Ltd v. Tobias Oganya Auma & 5 others found that the court had no jurisdiction to prevent an employer from restructuring or adopting modern technology so long as it observed all relevant regulations.

2. Operational Reasons

Employers are allowed to declare redundancy for operational reasons including declining revenue, high operating costs and salary adjustments.

For example, the court in the case of Kenya Airways Limited v. Aviation & Allied Workers Union Kenya & others [2014] eKLR noted that in proving redundancy, it was upon the employer to prove that the services of the employee had been rendered superfluous or that redundancy has resulted as a consequence of abolition of offices, jobs or loss of employment.  The employer in this case noted that some of the operational reasons that had called for redundancy included: declining revenue which had been occasioned by economic difficulties in the markets, extremely high operating costs, salary increment and adjustments and unsustainable employee costs owing to large increase in head count. The court held that these were justifiable reasons for redundancy.

3. Change of Job Description/Requirements of a Role

Where the job description of a certain role or the skill set of a certain role changes by law or other reasons, it is possible to declare the holder of that position redundant if they do not meet the new skill set or cannot perform the new job description.

However, the employer must demonstrate that there is a legitimate change in the job description or skills requirement. A change in the job title only will not qualify as a legitimate reason for declaring redundancy.

4. Mergers & Acquisitions

A merger/acquisition is a valid reason for an employer to declare a redundancy if previous roles of its employees are affected by it. The fate of employees in this case is usually determined by the contractual agreements between the entities in the merger/acquisition. Sometimes, employees are absorbed in the new entity (if they consent) in which case redundancy will not be necessary and they would ordinarily waive claim for redundancy.

However, if the employer chooses to declare any employees redundant, they must follow the all the redundancy processes.

C. CONCLUSION

In summary, there are several justifiable reasons for declaring redundancy which have been upheld by courts in Kenya. However, employers should not undertake any redundancy unless their reasons are legitimate and capable of being proven in court. Further, employers should apprise themselves with the procedures that must be followed when undertaking a redundancy. It is not enough for the reason for redundancy to be legitimate and justifiable, the processes taken to effect the redundancy must also be fair and in line with the Employment Act 2007.


Article by Ivyn Makena, Brian Omuganda and Emily Ogonyo.

Published on 24th January 2024

This article is intended for general knowledge only. For substantive legal advice on this, please contact us through This email address is being protected from spambots. You need JavaScript enabled to view it. and This email address is being protected from spambots. You need JavaScript enabled to view it.    

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