VARIATION OF EMPLOYMENT CONTRACT TERMS
James WaNjeri - Employment and Labour Lawyer
When the parties to an employment contract agree to the essential terms of the contract, the terms are generally fixed, and no party can unilaterally amend the contractual terms. Kenya’s labour laws envision a situation where the employer and employee are engaged in consultations regarding any change of essential terms.
Amending employment contracts is a procedural matter that must be carried out in accordance with the law. The procedure to be adopted can be found in two sources, the first being in our common law consisting of precedents from our courts.
The statutes that deal with employment relationships also provide a framework for how to amend employment contracts. Article 41 of the Constitution of Kenya provides that every person has the right to fair labour practices. While what amounts to a fair practice is not expressly provided, courts will often easily spot unfair labour practices and sanction the guilty party.
Employees who feel that employment terms have been amended unilaterally to their detriment have a refuge in the law.
Case in point, on 13th June 2012 several people were offered employment as Legal Researchers. The contracts of employment indicated that there would be a probation period but were silent on the duration of the contract (open ended). For purposes of this article, we shall call this the June group. On 24th March, 2014, more people were employed on the same terms, except that their contracts were for a duration of 2 years and a probation period of 6 months. We shall refer to this as the March group.
The June Group
On 5 December 2013, the Employer decided to alter their contracts by providing that each of their contracts would be for a fixed term of 3 years effective 9 July 2012 (to end in July 2015). The Employer informed them of the alteration of the tenure of the contracts through letters dated 30 January 2014 and referenced Addendum – Offer of Appointment.Save for the variation in the duration of the contracts, the employees were advised that the other terms and conditions of service remained the same. However, some allowances that they had been enjoying were reduced while others were withdrawn.
Several extensions of the contracts were carried out in May 2015, March 2016 and June 2016.
The March group
In April 2016 before their contracts lapsed, the March group was informed by the employer that it had revised their terms and conditions of service. The revised terms included the re-designation of the Legal Researchers as Law Clerk equivalent to the position of Resident Magistrate, non-renewable 2 year contracts, and a reduction in remuneration.
Upon receipt of the letter advising on the revision of terms and conditions of service, they wrote a letter challenging, among others, the unilateral decisions taken in respect of the revision of the terms and conditions in the contracts reduction of remuneration. Notwithstanding this complaint, the Employer went ahead to offer each of them new contracts, which contained the revision of terms as communicated.
These new and revised contracts indicated that they were for a non-renewable duration of 2 years and made reference to a probationary period. Begrudgingly, the employees accepted the contracts but eventually moved to Court, alleging violation of their constitutional and contractual rights.
When the employees presented their claim before the Employment and Labour Court in Ang’awa & 10 others v Judicial Service Commission [2017] eKLR, they challenged their employer for what they termed as the unilateral change of contractual terms. The June group stated that the variation of their contracts from open-ended contracts to fixed-term contracts, which was made unilaterally violated their rights to fair labour practices, fair administrative action, equal treatment of the law and legitimate expectation.
For the March group, they stated that the variation(s) violated their rights to fair labour practices, fair administrative action, equal treatment of the law and legitimate expectation because the variations were unilateral.
When it comes to the employment contract, the Employment Act (Sec.10) sets out what are the essentials terms that an employment contract must contain. Section 10(2) provides that, among other things, a written contract of service shall state; the name, age, permanent address and sex of the employee; the name of the employer; the job description of the employment; the date of commencement of the employment and the form and duration of the contract. The Act at Section 10(5) provides that Where any particulars of employment change, the employer shall, in consultation with the employee, revise the contract to reflect the change and notify the employee of the change in writing. The law contemplates that consultations shall be carried out between an employer and employee where the essentials of an employment contract are being altered. Such essentials will include duration of contract, job description, identity of the employer, place and hours of work and remuneration among others.
In this case, the court was clear that the common law principles developed by Courts provide a clear framework of how the variation of contracts is handled. Under common law a unilateral variation of an employment contract is unlawful and amounts to repudiation (occurs when one party fails to honor the terms of the contract) and or breach of contract(violating the agreed terms and conditions of a binding contract).
It is a requirement under law to consult with an employee where there is a variation to the employment contract, and more specifically to an essential term of the contract such as duration and remuneration(pay), where the employee would be adversely affected. These are core ingredients of what amounts to the principle of fair labour practice. The court, therefore, found that by unilaterally changing the duration of the contract for the June group from an indefinite term to a fixed-term contract, the employer violated the rights of the employees to fair labor practices. Further, the variation of the contract affected the allowances that they were paid by lowering the amounts.
In the Court’s finding, these actions were not only unlawful for being unilateral but also for lack of consultation and therefore amounted to a violation of the right to fair labour practices as it took away vested rights and entitlements. The employer should have consulted the employees before introducing the changes as they would significantly affect the employees. The employer’s actions were to issue the employees with new employment contracts effectively and even though the employees agreed to them, the unilateral actions amounted to unfair labor practices.
With respect to the March group who were initially on fixed-term contracts, the Court held that the parties entered into new contracts after the expiry of the initial contracts. The said variations were properly not variations but offers for new contracts with new terms and conditions of service.
What about the probation terms? The Court was of the view that it was not proper and/or fair to put the employees on fresh probation when they had satisfactorily served out the initial contracts, which contracts had been renewed, extended (or been entered into afresh). Employers cannot, therefore, issue new contracts after the expiry of the previous ones and demand that employees undertake probation again.
The June group was successful in their petition and were awarded Kshs. 750,000 each as damages for unfair labour practices and breach of contract. For the march group, the Court held that what the employer issued was not an alteration, but a renewal of contract and therefore their case did not merit an award of damages.
(This matter is currently before the Court of Appeal in Judicial Service Commission v James Ang’awa & 10 others [2018] eKLR)
Therefore, for a change in contract terms to be considered to have been carried out properly, the Employer must do the following:
All proposed changes to the employment contract must be brought to the attention of the employee in writing.
Any change to the written contract of employment must be done in consultation with the employee so as to reflect the change and
the effected change must be brought to the attention of the employee in writing.
the employee’s acceptance of the terms must be documented
Remember that even in situations where the employee signs the amended agreement, they can challenge the same on the basis that it was a unilateral amendment on the part of the Employer.
Conclusion
After significant capital investments in businesses, it is a risk for a business owner to fail to invest in hiring skilled personnel or regularly upskilling key employees on workplace legal matters. Businesses can suffer significant loss or even ultimately fail for failing to adhere to the various laws that regulate different work environments and issues that arise.
On Friday, 28th April 2023, we will be undertaking a Webinar Training for Business Owners and HR practitioners on how to carry out terminations that meet the threshold required in law. The webinar is titled “Getting it Right-A guide to Employee Termination” and will be charged at Kshs. 2,500 per attendee.
Register for this webinar by sending an email to legal@jnadvocates.com
The contents of this newsletter do not constitute legal advice and are provided for general information purposes only
When employer changes the contractual terms for permanent and pensionable terms to fixed contractual terms. Can the employee demand for severance pay?