The Supreme Court of Kenya has declared that any unilateral change to an employee’s contract terms without their agreement constitutes a breach of contract, paving the way for potential claims of unfair dismissal.
The ruling, delivered last Friday, emphasized that employers must obtain explicit consent from employees before making any alterations to their remuneration or terms of employment.
The judgment arose from the appeal case Symon Wairobi vs. Kenya Breweries Limited & Others (SC-Petition No. E023 of 2023), in which Symon Wairobi, a former employee of Kenya Breweries Limited, challenged the legality of salary reductions made without his consent during a corporate restructuring exercise. The court ruled in favor of Wairobi, affirming the lower court’s position that his employment rights were violated when his salary was reduced from KES 66,064 to KES 29,665 per month, following a reorganization of the company’s malting unit in 2003.
“The unilateral reduction of the appellant’s salary by the respondent between 2003 and 2009 was unlawful,” the court stated in its judgment. “Where a business is transferred or merged, the rights of an employee under the old business are not affected unless there is insolvency in the previous employer.”
At the heart of the case was the question of whether an employer could alter the fundamental terms of an employment contract—particularly concerning remuneration—without the explicit agreement of the employee. The Supreme Court found that such changes without employee consent are inherently unfair and violate both statutory protections under the Employment Act of 2007 and constitutional rights under Article 41, which guarantees fair labor practices.
Case Background and Lower Court Rulings
Wairobi was employed by Kenya Breweries Limited in 1986 and worked within its specialized malting unit. In 2003, the company restructured its operations by delinking its malting activities, creating a separate entity known as Kenya Maltings Limited. Wairobi was declared redundant and offered a new role with the subsidiary, resulting in a significant pay cut. He continued in this capacity until his position was again declared redundant in 2009.
The initial decision by the Industrial Court in 2017 ruled in favor of Wairobi, awarding him Kshs. 2,196,672 in compensation, including back pay for underpayment of salary over six years, house allowance differentials, and a long-service award. The court also found that the restructuring process used by Kenya Breweries Limited and its subsidiaries effectively concealed the continuation of Wairobi’s original employment relationship. The court stated, “Subsidiaries do not insulate their parents against wrongful or abusive control.”
The ruling was, however, overturned by the Court of Appeal in 2017, which held that the companies were separate legal entities and that due process had been followed in declaring redundancies. The appellate court found that Wairobi had “acquiesced to the new terms of employment” when he accepted the lower salary offer from Kenya Maltings Limited in 2003.
Supreme Court’s Decision and Broader Implications
The Supreme Court’s ruling has now set aside the Court of Appeal’s decision, reinstating the findings of the Industrial Court. The judgment emphasizes that corporate restructuring cannot serve as a means to bypass fair labor practices or alter employment terms to the detriment of employees without their agreement.
“The transfer of an undertaking does not affect the rights of the employee unless insolvency is involved,” the Supreme Court noted. “A transferee must continue to observe the terms and conditions of employment agreed in the collective bargaining agreement between the transferor and the employee’s trade union.”
Legal experts and labor advocates see the ruling as a significant precedent that strengthens protections for employees against unilateral contract changes. “This judgment is a major victory for workers,” said James Okeyo, a labor rights lawyer. “It sends a clear message to employers that they cannot undermine employee rights through corporate maneuvers.”
Impact on Corporate Practices and Employment Law
The ruling may have far-reaching consequences for businesses operating in Kenya, particularly those undergoing mergers, acquisitions, or restructuring. Employers must now exercise greater caution when altering employment terms and ensure all changes are negotiated and consented to by employees.
Companies could face legal challenges if they attempt to implement changes without employee agreement.
