Judge James Rika rejected an application by Kenya Airways’ lawyers for a stay of orders reinstating the workers as the airline studied the ruling with a view to appeal.
“All the affected 447 unionisable employees are hereby reinstated to their roles at KQ held as of August 30 without loss of seniority, continuity, benefits and privileges,” Mr Justice Rika ruled in a judgement read over three hours.
The decision is a major setback for the airline which was hoping to slash Sh1.3 billion off its payroll annually through the retrenchment. The airline reported a Sh4.8 billion net loss for the six months to September 30, this year.
Kenya Airways chief executive officer Titus Naikuni said the company was studying the ruling and its implications.
“We shall advice on the next steps in due course,” Mr Naikuni said.
Mr Justice Rika said he reinstated the workers because their contracts were terminated unitarily and unfairly. He also ordered the airline to pay the affected workers salaries and allowances for the three months from September to date.
The national carrier shed 578 jobs in September to control a wage bill that had doubled from Sh6 billion in 2007 to Sh13.4 billion last year. The rationalisation was expected to reduce staff costs by between 10 to 15 per cent or about Sh1.3 billion annually.
The number of Kenyan employees had grown from 3,729 to 4,170 during the period while that of overseas employees rose from 425 to 664.
While releasing the results last month, Mr Naikuni had said that reversing the losses in the next five to six months would depend on a lot of things in the market-place going right.
The airline issued a profit warning that its full year results would be a quarter less than the previous year’s in line with capital market regulations. For the year ended September 30, 2011, the airline made a net profit of Sh1.7 billion having been pinned back by high fuel costs.
Revenues dipped by Sh5.1 billion to Sh49.8 billion and passenger traffic, which account for 90 per cent of the business, dipped 10 per cent to Sh43.6 billion in the first six months of the year. The airline made a net profit of Sh2.0 billion in the first six months of last year.
Its share at the Nairobi Securities Exchange has lost 44 per cent in the past year to trade at Sh11.60 Monday, down from Sh11.90 last week on Friday .
The Aviation and Allied Workers Union went to the industrial court to overturn the airline’s action on the grounds that the management had breached the Labour Relations Act which requires negotiations with the union before declaring redundancies.
Mr Justice Rika declined to stay the order of reinstatement for 45 days pending the appeal as was requested by the Kenya Airways.
“The restructuring exercise was stopped by the court and KQ should not have in the first place stopped these employees from working after 4th September 2012. By asking the court to grant stay, KQ is asking the court to endorse its continued defiance,” ruled Mr Justice Rika.
He also found that the layoff had nothing to do with poor financial results but was intended to get rid of employees involved in trade union activities.
“Other roles became ‘unavailable’ to the grievants to allow for outsourcing. The decision to outsource was not driven by valid reasons and was simply a way of weakening trade union power,” the judge said.
The company also failed to consult with the government.
“Its largest shareholder is the government of Kenya, which through the Prime Minister, called for consultations, a call that was ignored by the KQ management,” said the Judge.
He said KQ cannot be a national carrier yet continue to recruit Thais, Ghanaians and other foreigners while retrenching Kenyans.
The government owns 29.8 per cent of the national carrier.
Although the company presented its financial result for the six months to September as evidence that its business was facing difficulties, Mr Justice Rika said losses cannot be used as a reason to retrench.
“Not every cyclic financial report of loss should be read as valid reason to justify retrenchment. Many companies make cyclic losses and do not rush to retrench,” he said and added that KQ was increasing its workload by adding more fleet and destinations and therefore needed more employees. He wondered why the airline was recruiting foreigners for similar roles.
“KQ has recruited Thais, Ghanaians and plans to have more expatriates, even as Kenyans are told they must leave,” he said.
