In our previous articles, particularly Series 004 & 005, MMW Advocates LLP answered FAQs on pay cuts and unpaid leave due to the reduced generation of income into businesses during this pandemic period. However, as the pandemic continues, businesses will be forced to look into their reserves and see whether it is sustainable to maintain employees in the face of reduced revenue. In this series, Series 006, MMW Advocates LLP has answered FAQs on ending employment contracts due to the economic effects of Corona Virus.
What termination options are available in law to employers?
The Employment Act provides for lawful termination and redundancy (summary dismissal may not be an option at this stage unless there is gross misconduct by the employee). What will determine whether an employee is to be declared redundant or lawfully terminated will be based on why there is need for the termination.
Will there be need to follow the laid down procedure in the termination of employees?
Yes. As stated in our Series 005, the law does not allow for unlawful activities under the guise of the pandemic. Employers may have to apply various technological utilities to document that they followed the laid down legal procedure in the termination of their employees.
Is Force Majeure (Act of God) applicable to employment contracts?
While the Employment Act does not mention it, our Kenyan Courts have taken cognizance of the effects of force majeure. A force majeure clause, based on the wording in the contract, can either;
suspend the performance of the employment contract, thus relieving the employer and employee from their various obligations or;
it may trigger the right to terminate the Contract following the continued occurrence of the force majeure event.
However, Force Majeure must be an express term provided for in the contract. It does not automatically apply. Further, even If the force majeure clause is provided for in the contract, it must categorically provide for a pandemic as an event that triggers the application of force majeure.
Can an employment contract be frustrated?
Commercially where there is a supervening event that makes it impossible to perform a contract, parties tend to invoke the doctrine of frustration whose effect is to discharge parties from performing their contractual duties. This is particularly where the force majeure clause is not contractually provided for or does not include a pandemic as a trigger for the clause.
There is a mixed school of thought on whether an employment contracts can be frustrated or not. Most employees do not fall under the strict rule of redundancy, which is that their role in the business has been permanently diminished. (Think of all the waiters who have been sent home for this short period due to the government’s directive on restaurants only serving take-away orders). These employees will still be required to serve the business after the pandemic passes.
Our courts will therefore have to take into consideration that most businesses cannot afford to declare their employees redundant as the process is a logistical and financial nightmare and that termination based on frustration may be a pursued option of ending employment contracts.
Can the terms of an employment contract be suspended?
Yes. As stated in Series 005, the terms of an employment contract can be varied but it has to be borne out of a consultative process and any such consensus must be documented.
N/B:-THIS ARTICLE DOES NOT FORM PART OF A LEGAL OPINION AND IS PURELY INFORMATIVE. PLEASE FEEL FREE TO REACH OUT TO MMW ADVOCATES LLP FOR A MORE DETAILED OPINION ON THE ISSUE OF TERMINATION OF EMPLOYMENT CONTRACTS.
