On 19 September 2022, the Employment and Labour Relations Court declared several sections of the National Social Security Fund Act Cap 45 of 2013 as unconstitutional, null and void in Petitions 38 of 2014 (consolidated with Petitions 34, 35, 49 and 50 of 2014) Kenya Tea Growers Association & Others versus The Honourable Attorney General, the National Social Security Fund Trustees & Others.
In the decision, the Court proceeded to issue orders restraining the Government and the National Social Security Fund Board of Trustees from applying the provisions of the Act to employers and employees who have an adequate alternative pension or social security scheme, unless the employees voluntarily choice to opt in. The Court further issued an order restraining the Government and the National Social Security Fund Trustees from demanding mandatory registration or enlisting as members as well as contributions, as had been provided under the Act.
The Court, comprising of Justices Mathews Nduma, Hellen Wasilwa and Monica Mbaru, was of the view that the Act was unconstitutional as it violated Articles 110 and 205 of the Constitution. According to the Court, the Act was legislated without involving the Senate, yet it clearly affected the functions and powers of the county governments. In the Court’s view, the county governments finances, budgeting, and planning would be impacted upon as it imposes a mandatory and optional pension scheme for the county government and the county government would have contribution obligations on behalf of the public officers who worked in those county governments.
Further, the Court took the view that the duty to avail and allocate resources towards the enjoyment of the right to social security as well as to remove barriers towards the enjoyment of the right to social security as set out under Article 43(1)(e) of the Constitution rests with the state. Those resources ought to emanate from the state. To the extend the Act removed the duty from the state and vested it on the members, the Fund was an overreach on its statutory mandate.
Section 19(2) of the Act which made it a requirement for any person seeking to enjoy public service who is registrable as an employer, to produce proof of registration with the scheme before enjoying those services, was not spared as the same was declared as unconstitutional, null and void. The Court was of the view that the condition did not serve a legitimate purpose and was a violation of Article 27(1), 47(1), and 232(1) of the Constitution. The said condition was an unlawful and unreasonable fetter to the enjoyment of public services.
The Court further directed its salvos at Section 13 of the Act which mandated the Cabinet Secretary to approve the remuneration payable to the Fund’s Board and its Committees, terming the provision as unconstitutional null and void. The Court faulted the provision for interfering with the mandate of the Salaries and Remuneration Commission on which the power to approve the said remuneration is vested.
Section 20 of the Act was not spared either. To the extent the said provision made it mandatory for employers and employees to register and contribute to the Fund, and to the extent the provision obligated the employees who are already in other schemes to join the Fund, the said provision violated the employer and employees’ free choice contrary to the provisions of Article 49 of the Constitution. For those reasons, the said provision was declared null and void.
The Court took the further view that by establishing a pension scheme, the Act was creating a monopoly and favouring NSSF, and over other pension providers as social security providers and that implementation of the Act would kill or stifle other pension schemes or social security schemes across the country. The Act was therefore in violation of Articles 10(1)(b) and (c) of the Constitution and in conflict with Section 3 of the Competition Authority Act.
The effect of this decision is that the government will need to go back to the drawing board and come up with a new law which provides for social security for all as envisaged under Article 43(1)(e) of the Constitution. The NSSF Act 2013 clearly fell short of the constitutional intent.