By Jerameel Kevins Owuor Odhiambo
“The moving finger writes; and, having writ, moves on: nor all thy Piety nor Wit shall lure it back to cancel half a Line, nor all thy Tears wash out a Word of it.” – Omar Khayyám
This Supreme Court case shines a light on the harsh realities that employees can face when corporations restructure and transfer business operations between subsidiaries. The appellant, Mr. Gatuma, found his salary unilaterally reduced by over 50% when his employment was transferred from Kenya Breweries Ltd to its subsidiary Kenya Malting Ltd. The courts must grapple with the tension between respecting the separate legal personalities of corporate entities, and preventing corporations from using subsidiaries as mere facades to exploit workers and avoid fair employment practices.
“The law is reason, free from passion.” – Aristotle
The Employment Act of Kenya is clear that employers cannot unilaterally change fundamental terms of employment like salary without consultation and consent from the employee. The Act also prohibits discrimination in terms and conditions of employment. However, the Court of Appeal took a formalistic view, finding that because Kenya Malting Ltd was a separate legal entity, it could offer Mr. Gatuma inferior terms without violating the law. The trial court rightly looked beyond the corporate veil to the economic realities and found this amounted to unfair labor practices.
“The life of the law has not been logic: it has been experience.” – Oliver Wendell Holmes
Multinational corporations today often have complex structures with many subsidiaries. Applying the Salomon principle that each company has a separate legal personality can lead to unjust results if taken to an extreme. Subsidiaries are sometimes set up as mere facades, with no real autonomy or separate economic substance. When a business is transferred between such related entities, the law should protect the continuity of employees’ rights. The trial court’s approach of looking at the economic realities and decision-making structure is more in line with the spirit of labor laws.
“The law is a ass – a idiot.” – Charles Dickens
The Employment Act is deficient in not having provisions to safeguard employees’ rights when businesses are transferred, as exists in the EU Acquired Rights Directive. Employees should not lose hard-earned rights and benefits simply by being moved between group companies. The law must evolve to prevent corporations from exploiting legal technicalities to the detriment of workers. Judges should be willing to lift the corporate veil when it is being used as an instrument of injustice.
“The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” – Anatole France
This case highlights the imbalance of power between employers and employees, especially in a context of high unemployment. An individual worker has little bargaining power to resist unilateral changes to their contract, even if it violates the law. The courts must be attuned to this reality and not simply assume the parties negotiated as equals. Judges should scrutinize the circumstances closely when an employee accepts inferior terms, to ensure it was not due to coercion or unequal bargaining power.
“The law is a seamless web.” – Samuel Johnson
The principles developed in this case will have ramifications beyond employment law. The courts’ approach to lifting the corporate veil will impact other areas like taxation, tort liability, and contract law. A consistent jurisprudence is needed on when subsidiaries will be considered mere facades or agents of the parent company. The Supreme Court should provide clear guidance to lower courts on the relevant factors to consider, such as common ownership and control, economic unity, and improper conduct.
“The law is always too short and too tight for growing mortals.” – Charles Dickens
The Employment Act needs reform to better protect workers in the modern economy. Provisions should be added requiring automatic transfer of employees on the same terms when a business is transferred, unless the employees agree otherwise. Employers should have the burden of proving any changes to employment terms are fair and not discriminatory. Stronger remedies are needed, such as uncapped compensation for unfair labor practices. The law must evolve to meet the challenges of the 21st century workplace.
“The law is reason unaffected by desire.” – Aristotle
The Supreme Court must rise above the narrow self-interest of corporations and focus on the broader public interest. Allowing corporations to easily strip workers of rights by transferring operations to subsidiaries will have negative ripple effects on society. It will increase inequality, erode trust in institutions, and stifle economic mobility. The law must be an impartial arbiter, weighing the scales of justice evenly between capital and labor. Judges have a duty to interpret the law purposively to achieve its underlying aims of fairness and social progress.
“The law is the last result of human wisdom acting upon human experience.” – Samuel Johnson
This case is a microcosm of the challenges facing labor law in the 21st century. Globalization, financialization, and the rise of the gig economy are putting pressure on traditional employment models and legal frameworks. Courts must adapt by looking beyond formal legal structures to the economic realities. The law should focus on the substance over form, and the function over labels. Judges must be willing to depart from precedent when it leads to unjust results, while still providing a measure of certainty and predictability.
“The law is a seamless web, and the whole system would be incomplete without any part.” – Samuel Johnson
In conclusion, the Supreme Court should affirm the trial court’s decision and find that the unilateral reduction of Mr. Gatuma’s salary by over 50% when his employment was transferred to a subsidiary violated his right to fair labor practices. The Court should provide guidance that the corporate veil can be lifted when subsidiaries are used as mere facades, and that employees’ rights must be protected when businesses are transferred between related entities. This will help ensure labor laws keep pace with the changing nature of employment in the modern economy. As the great jurist Oliver Wendell Holmes said, “The life of the law has not been logic: it has been experience.” The law must evolve to meet the needs of the times.
“The moving finger writes; and, having writ, moves on.” – Omar Khayyám
The writer is a legal researcher and lawyer
John Kariuki