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Post Reply: Court Rules Inchcape Kenya Limited’s Redundancy Process Unlawful, Awards Ex-Employees Sh1.06 Million

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on May 26, 2025, 2:31 pm</div><div id="pl-6051"  class="panel-layout" ><div id="pg-6051-0"  class="panel-grid panel-no-style" ><div id="pgc-6051-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-6051-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="auto">In a landmark ruling delivered on May 22, 2025, the Employment and Labour Relations Court in Nairobi declared the termination of two employees by Inchcape Kenya Limited unlawful and unfair, awarding them a combined Kshs. 1,055,800 in compensation. Justice Linet Ndolo’s judgment in the consolidated cases (Cause No. E6579 and E6582 of 2020) emphasized the stringent legal requirements under Section 40 of the Employment Act for employers declaring redundancies, highlighting procedural failures by Inchcape, a distributor of high-end motor vehicles such as Jaguar and BMW.</p>
<h3 dir="auto"><span style="text-decoration: underline;"><em><strong>Background of the Case</strong></em></span></h3>
<p dir="auto">The claimants, Mr. John Mwakoma Kisombe and Mr. Thomas Mboya Abanda, were terminated by Inchcape Kenya Limited on July 9, 2020, with redundancy cited as the reason. Mr. Mwakoma, employed as a Service Advisor from December 1, 2017, to February 28, 2019, and previously as a Technician from May 2, 2013, to November 30, 2017, was awarded Kshs. 380,000, equivalent to four months’ salary. Mr. Mboya, who served as a Logistics Officer from April 1, 2015, and continued in a similar role after Inchcape took over the Jaguar Land Rover franchise in 2018, received Kshs. 675,800, also four months’ salary.</p>
<p dir="auto">The claimants argued that their termination was abrupt, with no prior notice or consultation. They were summoned to Inchcape’s headquarters in Westlands, Nairobi, on July 9, 2020, where they were handed termination letters without any prior indication of redundancy. They further claimed that no redundancy notice was issued to the Labour Office and accused Inchcape of unfairly targeting them. The claimants sought reinstatement or, alternatively, compensation for unlawful termination, including Kshs. 950,000 and Kshs. 1,689,500 for loss of future service of 20 years for Mwakoma and Mboya, respectively, plus 12 months’ salary and general damages.</p>
<h3 dir="auto"><em><span style="text-decoration: underline;"><strong>Inchcape’s Defense</strong></span></em></h3>
<p dir="auto">Inchcape Kenya Limited admitted to employing the claimants but denied that their termination was unlawful. The company attributed the redundancies to the economic fallout from the Covid-19 pandemic, which led to a nationwide lockdown in March 2020. The lockdown, coupled with increased taxes and reduced demand in the transport sector, forced Inchcape to scale down operations. The company claimed it explored all options before merging roles and declaring redundancies, using the “last in, first out” (LIFO) criterion to select the claimants. Inchcape stated it issued an internal memo on June 1, 2020, posted on notice boards, to inform employees of the intended redundancy, followed by a consultative meeting in early July 2020. The company also claimed it notified the Labour Office on June 17, 2020, and offered the claimants severance pay, one month’s salary in lieu of notice, accrued leave, and an ex gratia payment.</p>
<h3 dir="auto"><span style="text-decoration: underline;"><em><strong>Court’s Findings</strong></em></span></h3>
<p dir="auto">Justice Ndolo ruled that Inchcape failed to comply with Section 40 of the Employment Act, which mandates a one-month redundancy notice to affected employees, their union (if applicable), and the local Labour Officer, specifying the reasons and extent of the redundancy. The court found no evidence that the claimants received or saw the June 1, 2020, memo, and the alleged July 2020 consultative meeting, held amidst Covid-19 restrictions, was undocumented. Furthermore, the notice to the Labour Office on June 17, 2020, did not outline the extent of the redundancy, as required.</p>
<p dir="auto">The court also rejected Inchcape’s claim of using the LIFO criterion, noting the absence of evidence to support it. Additionally, the company failed to demonstrate consideration of the claimants’ skills, abilities, and reliability, as required under Section 40(1)(c). “Although the Respondent claims to have followed the last in first out selection criterion, no evidence was led to support this assertion. In addition, the skill, ability, and reliability considerations seem not to have been taken into account,” Justice Ndolo stated.</p>
<p dir="auto">Citing precedents such as <em>Thomas De La Rue (K) Ltd v David Opondo Omutelema</em> (2013) and <em>Kenya Airways Limited v Aviation &amp; Allied Workers Union Kenya</em> (2014), the court emphasized that the redundancy notice is distinct from the termination notice and that consultation is an essential part of the process to ensure substantive fairness. The lack of proper notification and consultation rendered the terminations unlawful and unfair.</p>
<h3 dir="auto"><em><span style="text-decoration: underline;"><strong>Remedies and Implications</strong></span></em></h3>
<p dir="auto">While the claimants sought reinstatement, Justice Ndolo deemed it inappropriate due to the time elapsed since the termination and the redundancy context. Instead, she awarded each claimant four months’ salary in compensation, considering their length of service and Inchcape’s failure to comply with legal requirements. The claims for loss of future service and general damages were dismissed for lack of basis. The awarded amounts—Kshs. 380,000 for Mwakoma and Kshs. 675,800 for Mboya—will attract interest at court rates from the judgment date until fully paid. The claimants were also granted the costs of the case.</p>
<p dir="auto">This ruling underscores the importance of adhering to the Employment Act’s procedural and substantive requirements for redundancies. Employers must issue clear, documented notices, engage in meaningful consultations, and apply objective selection criteria to avoid legal and financial repercussions. The case serves as a cautionary tale for businesses navigating economic challenges, particularly in the wake of crises like the Covid-19 pandemic, highlighting the need for transparency and fairness in redundancy processes.</p>
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