On August 9, 2024, the Employment and Labour Relations Court in Nairobi issued a pivotal judgment in Banking, Insurance and Finance Union [Kenya] v Access Bank PLC [Kenya] Limited (Cause E679 of 2021), dismissing a claim by the Claimant Union on behalf of four former employees (Grievants) who challenged the terminal benefits paid under a Voluntary Early Retirement Scheme (VERS). This judgment underscores the binding nature of VERS agreements and clarifies the contractual status of Human Resource (HR) policies.
Below, we summarize the case and its implications for employers and employees.
Case Background
The Claimant Union, representing four Grievants, Florence Mbithi, Florence Ogwora, Kennedy Bosire, and Jeremiah Ongubo, filed a claim against Access Bank PLC, alleging underpayment of terminal benefits under a VERS implemented in February 2019. The Grievants, who had served 28–30 years, argued that the bank’s 2014 HR Policy entitled them to three months’ notice pay and severance at two months’ basic salary per year of service. Instead, they received one month’s salary in lieu of notice and severance at one month’s gross salary per year, totaling Kshs. 15,670,554 less than claimed. The bank countered that the VERS offer letters, accepted by the Grievants, constituted binding contracts with terms distinct from the HR Policy and Collective Bargaining Agreement (CBA).
Key Issues and Court Findings
The Court examined whether the Grievants were paid the correct terminal benefits under VERS, analyzing the interplay between their employment contracts, the CBA, the HR Policy, and the VERS agreements. Key findings include:
- Non-Contractual Nature of HR Policy: The Court ruled that the HR Policy was not a contractual document, as it was not incorporated into the Grievants’ employment contracts or the CBA, nor signed by the Grievants as required by Section 9(3) of the Employment Act. The Policy served as a guide, not a binding agreement, and could be unilaterally amended by the employer, further undermining its contractual enforceability.
- Binding Nature of VERS Agreements: The VERS offer letters, signed by the Grievants and the bank, constituted standalone contracts with clear terms: one month’s gross salary per year of service for severance and one month’s salary in lieu of notice. These terms superseded other employment instruments, including the HR Policy and CBA, as VERS is a consensual termination not governed by the Employment Act’s redundancy provisions.
- Voluntary Consent and Absence of Coercion: The Court found no evidence of coercion, fraud, or undue influence in the Grievants’ acceptance of VERS, despite their claim of pressure due to the bank’s financial difficulties. The Grievants voluntarily applied for and accepted the VERS terms, receiving payments exceeding the statutory minimum under Section 40 of the Employment Act (15 days’ salary per year for redundancy).
- Irrelevance of CBA and Redundancy Provisions: The CBA’s severance and notice provisions applied to involuntary redundancy, not VERS, which is a voluntary arrangement. The Court clarified that “voluntary redundancy” is a misnomer, as redundancy under Section 40 is inherently involuntary.
Implications for Employers and Employees
This judgment has significant implications:
- VERS as Binding Contracts: Employers can structure VERS agreements as standalone contracts, overriding HR policies or CBAs, provided they are clearly drafted and voluntarily accepted. Employees must carefully review VERS terms before signing, as acceptance is binding.
- HR Policy Limitations: HR policies are not automatically contractual unless explicitly incorporated into employment contracts and acknowledged by employees. Employers should clarify the non-binding nature of such policies to avoid disputes.
- Voluntary Termination: VERS agreements fall outside the Employment Act’s redundancy framework, giving employers flexibility in structuring exit packages, provided they meet statutory minimums and are free of coercion.
Recommendations
- Employers: Ensure VERS offer letters are clear, signed, and specify all terms to avoid ambiguity. Review HR policies to clarify their non-contractual status.
- Employees: Seek legal advice before accepting VERS offers to understand their implications, as acceptance waives rights to claim higher benefits under other instruments.
