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Hard lessons for employers from coronavirus COVID-19

By William Maema

Although the arrival of the coronavirus in Kenya was inevitable and had been foretold since the beginning of the year, it is fair to say that when it finally hit the country in mid-March employers and employees alike were ill-prepared for its full impact.

Suddenly and almost in a movie-like fashion, some businesses were shut down or began to operate within limited hours, thousands of workers were sent home on undefined terms while for others, the concept of working from home, hitherto viewed skeptically by employers, became the new normal. As the country-wide dusk to dawn curfew followed and talk of a total lockdown became even louder, the implications of forced leave and massive lay-offs without compensation became the most frequent questions for the company lawyer.

The COVID-19 emergency has laid bare various gaps in our labour laws which need to be addressed through legislative reform. It also challenges employers to review their employment contracts and human resources policies to mitigate some of the risks exposed by the pandemic.

One of the most contentious issues arising from the pandemic is how to treat the inevitable lay-offs affecting employees who for various reasons are unable to continue working whether from their usual place of work or at home during this period.  While it is understandable that the employee has financial obligations to discharge, it is also true that without any work being done the employer has no revenue to pay the wage bill.

Should such lay-offs be treated as redundancies? Redundancy as defined in the law arises where, through no fault of the employee, the contract of employment is terminated at the initiative of the employer because the services of the employee have become superfluous. It is persuasively arguable that such lay-offs do not constitute a redundancy and therefore the statutory requirements of redundancy do not apply. This is because   a) unlike in a redundancy, the lay-offs are not initiated by the employer and b) the services of the employee are not superfluous. The only reason for the lay-offs is that the continued performance of the contract has become impossible due to the pandemic, a factor beyond the control of either party. 

Furthermore, a redundancy normally entails a definitive termination of employment for long-term economic reasons. In the present circumstances, however, the intention of most employers is to recall the staff as soon it becomes safe enough to resume normal operations after the country has been declared free of COVID-19.

A redundancy involves a significant financial burden on the employer. Apart from the normal terminal dues, severance pay could be quite substantial depending on the number of employees and their years of service. It seems onerous under the present circumstances to require employers to pay severance when, in effect, they have also been rendered jobless by the pandemic. Unlike in a redundancy where employers are normally prepared for the financial implications, an emergency such as COVID-19 presents a different kettle of fish.

Perhaps a better approach would be to treat the termination as having been caused by frustration and thereby release the parties without any punitive liabilities save for payment of the normal terminal dues.

The common law doctrine of frustration simply holds that a contract may be terminated on account of an intervening event which is beyond the control of either party if such event makes the continued performance of the contract impossible or illegal.  During the pandemic, it is impossible for any employer to guarantee the health and safety of his employees as required by law. It would therefore be illegal for the contract to proceed.

The law should provide a mechanism for carrying out temporary lay-offs during national disasters subject to certain safeguards to protect employees. The employer should be required to pay the employee a certain reasonable amount, say full salary in the first month, half in the second, a quarter in the third and thereafter no salary until the resumption of normal operations. Where the disaster continues for longer than 6 months, the contract should be deemed to have been terminated automatically by operation of law without any further liability on the employer.  In the meantime, the employee would continue enjoying medical cover and housing allowance for the duration of the disaster until the contract is terminated.

The law should also compel the employer, upon resumption of normal operations, to give priority to the laid off staff and to disregard the period of the disaster in the computation of the years of service. Until then, employers should consider revising their contracts to incorporate the doctrines of frustration and force majeure.

The next most vexing question for employers is whether the days when employees are forced by the pandemic to stay at home without performing any work should be treated as paid or unpaid leave. The most preponderant school of thought suggests that employees should utilize their annual leave days during this period or take unpaid leave if they have already exhausted their leave entitlement for the year. The rationale for this argument is that it would be  double enrichment for the employee to receive full salary while performing no work during the pandemic and still expect to be paid again when they take their annual leave.  

Other than losing a job, the other big fear amongst employees at this time is the threat of pay-cuts which many employers are, understandably, considering. The good news for employees is that wages are jealously protected by law and cannot be unilaterally reduced by the employer without their consent in writing. That having been said, the reality on the ground is that for financial reasons, continued employment may only be sustained at a lower pay over the period when the business is battling the challenges of the pandemic. Parties are encouraged to discuss in good faith and agree on a mutually reasonable salary adjustment with the possibility of the deducted pay being reimbursed at a future date after the end of the pandemic.

The law should provide that in periods of national calamities which significantly affect the ability of employers to sustain the agreed salaries, the employer shall be entitled to reduce salaries by such a reasonable margin as may be approved by the Government in consultation with the Federation of Kenya Employers and the Central Organisation of Trade Unions.

Most Kenyan employment contracts do not provide for working from home or ‘flexi-hours’. COVID-19 has helped employers to overcome their fears and skepticism about this concept which is largely associated with the millennial generation. The post COVID-19 era is likely to be characterized by renewed preference for this lifestyle and an exponential utilisation of technology.

Finally, the Occupational Health and Safety Act (popularly known as ‘OSHA’) does not envisage the home as a workplace.  Therefore, the obligations of the employer do not extend to such premises yet during a national disaster it is the actual work-place. The law should impose reasonable obligations on the employer including the supply of basic health and safety amenities such as sanitisers, face masks and appropriate furniture.

The article was published in the Business Daily on 13 April 2020 and can be accessed here