Careful compliance with local labour laws is a matter of critical importance for any company looking to do business in Kenya, writes Bowmans Kenya partner Sean Omondi.
Nairobi, Kenya. industryandtravel
Investors seeking to do business in Kenya must ensure they comprehend the legal and regulatory regime governing employment law in Kenya, so that they comply with the country’s labour law requirements.
Kenya has in the recent past witnessed an increase in mergers and acquisitions. A typical acquisition involves either a transfer of business or assets to a third party and as a result, the fate of employee’s remains a key concern in negotiating the terms of the transaction.
In most instances, the employee contracts are not transferrable along with the assets of the business being acquired, thus creating employee risks. In such occurrences, an employer must take into consideration how they handle the employees to minimise risks or litigation-related delays. The risks associated with such transactions include transfer of employees, redundancy and termination of employment contracts. In Kenya, an employee cannot be terminated at will. An investor must take a fair and substantive procedure when dealing with employees to avoid risks.
Employee rights in Kenya
Employers at times focus on economic gains and profit margins while forgetting about the needs and rights of employees. Employee rights are an integral part of the Kenyan employment law regime and the Government has taken a key role in ensuring that those rights are maintained.
In August 2010, Kenya adopted a new constitution, the Constitution of Kenya, 2010, which is highly progressive and recognises that people, and more so employees, are entitled to basic human rights protections, including freedom from discrimination and the right to equality and fair labour practices. Further it prohibits child labour, forced labour and slavery.
Kenya is a member of the International Labour Organisations (ILO) and it has signed and ratified various international conventions and treaties advocating for employee rights. The Kenyan Employment Act 2007, just like the Constitution of Kenya, 2010 provides for rights of employees and it addresses the following main areas: sexual harassment, forced labour, discrimination, right to inform employees of their rights and fair wages. The other entitlements an employee must have include reasonable working hours, leave, reasonable housing and medical attention.
Human rights and compliance
Kenya, just like most of its African counterparts, is slowly addressing affirmative action and the one-third gender rule in public offices has been given a constitutional basis. An employee whose human rights have been violated or whose human rights are at risk of being violated is entitled to file a petition in the Employment and Labour Relations Court.
An investor seeking to set up a business in Kenya must also be committed to respect human rights. Human rights are no longer a vague concept, since every right or entitlement comes with a responsibility. There are major operational and reputational risks for investors who fail to ensure that human rights violations do not occur at the workplace.
Various statutes regulate trade unions and their activities in Kenya. These include the Constitution of Kenya, 2010, the Labour Relations Act and the Labour Institution’s Act. Employees have a constitutional right to join and participate in the activities of trade unions. There are numerous registered trade unions in Kenya and a majority of them have large memberships. Trade unions are essential in negotiating favourable terms and conditions of employment for their members and, on the national front, agitating for adoption of employee-friendly government policies, laws and regulations.
Generally, employers view trade unions as great obstacles to management and the root cause for industrial unrest and delays to commercial transactions. Lack of civility on the part of trade union officials and the fact that most trade unions in Kenya become visible only when there are industrial disputes does not help much.
The basic role of trade unions in Kenya is to agitate for better working conditions for their members. Employees who are satisfied with their working conditions will rarely consider forming or joining trade unions. Accordingly, an entity that invests in Kenya will probably not encounter a trade union if it abides by Kenyan labour laws and provides competitive terms and conditions of employment for its staff.
Opportuities for employers and investors
An employment consideration when investing in Kenya should be the significant upheavals, which have occurred over the past several years, in the landscape in which trade unions operate. More specifically, regard must be given to the proliferation of trade unions, union factionalism and the legislative push for multiunionism. These factors may present investors with an opportunity to invest in circumstances were employers have a greater advantage in industrial relations that was previously the position.
The proliferation of trade unions may also increase competition for recognition of unions by employers, resulting in a stronger bargaining position for employers. Union fragmentation constrains wage demands and weakens the bargaining position of individual unions, while multiunionism reduces industrial action by smaller unions that naturally seek organisational rights in the workplace. Multiunionism also encourages democratic union leadership.
The proliferation of trade unions would ordinarily increase the amount of union factionalism as unions compete for membership. Union factionalism would in turn drive the proliferation of trade unions. In circumstances where multiunionism allows for the recognition of smaller unions, this proliferation and factionalism is less likely to result in industrial action while simultaneously intensifying the gains for employers described above.
As such, it is worthwhile understanding the bargaining landscape of the business and/or industry in which one seeks to invest at both industry and plant level.
It is important to note that the enforcement regime of labour laws in Kenya is perceived to be employee friendly. This is witnessed by the recommendations and reports given by conciliators in statutory conciliations and in the decisions passed by the Employment and Labour Relations Court.
In Kenya, employment law due diligence is critical, and risk must be mitigated by careful compliance with labour laws.
Sean Omondi is a partner specialising in employment law at Bowmans in Kenya.