The Employment and Labour Relations Court has tightened the legal threshold for laying off workers, ruling that employers must prove a redundancy is genuine and fairly select and consult affected employees before implementing job cuts.
The court made the ruling after finding that Nokia Solutions and Networks Kenya unlawfully declared senior employee Byron Otega redundant, ordering the telecommunications firm to pay him Sh9.8 million in compensation.
The judgment held that employers cannot simply cite restructuring or reorganisation to justify redundancies. Instead, they must demonstrate that a valid operational requirement has genuinely rendered an employee’s role unnecessary and comply with the mandatory safeguards under the Employment Act.
“It is not enough to cite restructuring or reorganisation. The employer must show by evidence that he has genuinely undertaken business restructuring or adopted new technology or made some other genuine commercial decision that has rendered the services of his employee superfluous,” the judge said.
The ruling provides fresh guidance on redundancy disputes at a time when many companies continue restructuring operations amid changing business conditions.
Redundancy test
“It must be shown that the employer’s commercial decision culminated in abolition of roles, merger of roles, adoption of new technology or closure of the business or departments,” the court said.
Mr Otega joined Nokia in April 2013 as a Customer Solution Manager before moving to Ethiopia in November 2021 as Account Manager for Network Infrastructure after Nokia secured a contract to support Safaricom Ethiopia’s network rollout.
He earned an annual basic salary of Sh8 million, a Sh1.8 million annual car allowance and performance-based sales incentives.
The dispute arose after Nokia reorganised the teams managing its network contracts for Safaricom Kenya and Safaricom Ethiopia in 2023.
Mr Otega was informed on May 8, 2023, that his position would become redundant and received a formal notice the following day.
The newly created position was later advertised internally and externally. Mr Otega applied unsuccessfully before his employment ended on July 31, 2023.
Consultation failure
Mr Otega challenged the redundancy, arguing it was retaliation after he repeatedly complained about alleged bullying and harassment by his line manager through Nokia’s ethics and compliance system. He also argued that the company failed to consult him adequately and did not fairly consider whether he could remain in employment.
Nokia denied the allegations, saying the redundancy resulted from a legitimate business reorganisation aimed at improving efficiency and long-term competitiveness.
The company told the court it had notified the labour officer, consulted affected employees, prioritised them for alternative vacancies and paid all statutory redundancy benefits.
The court accepted that employers retain the commercial freedom to reorganise their businesses but found Nokia failed to prove the restructuring eliminated Mr Otega’s role.
Instead, it found evidence that the company had recruited Ethiopian account managers shortly before declaring the redundancy, indicating that the work continued to exist.
“The respondent has failed to prove that the reorganisation of its business led to abolition of the claimant’s role and rendered his services superfluous,” the court said.
The judge also found that Nokia failed to conduct meaningful consultations before deciding to terminate Mr Otega’s employment.
“There is also no evidence to show that the claimant was given any other alternative job to avoid the termination or to mitigate the effects of the redundancy,” the judge said.
The court further ruled that the company failed to carry out a fair selection process among employees performing similar roles before identifying Mr Otega for redundancy.
“The respondent has not proved that there was a fair selection conducted before identifying the claimant as the person to exit on account of redundancy,” the court said.
The court rejected Mr Otega’s separate claim for Sh1.7 million in unpaid sales incentives, finding that he failed to produce sufficient evidence to support the claim.
However, it declared the redundancy unfair and unlawful, awarding him Sh9.8 million in compensation, equivalent to 12 months’ gross salary and car allowance.
