The government has taken several regulatory and legislative measures in a bid to curb the adverse economic impact the Covid-19 pandemic to the economy. The government has legislated the Tax Laws (Amendment) Act which, among other tax measures, has reduced the resident corporate tax from 30 percent to 25 percent; lowered the rate of turnover tax from 3percent to 1percent; and increased personal relief available to resident individuals from Sh16,896 per year to Sh28,800 per year.
The government has sought to further cushion Kenyans from the effects of a pandemic. The Senate Ad-hoc Committee on Covid-19 drafted the Pandemic Response and Management Bill, 2020 which was gazetted on April 17, 2020. The Bill seeks to introduce a raft of measures to cushion Kenyans in the event of a pandemic. The Bill underwent its second reading on May 12, 2020.
The objective of the Bill is to provide a legal framework for a co-ordinated response and management of activities during a pandemic. Further, the Bill proposes socio-economic protective measures during a pandemic period, such as tax incentives to be introduced by the Cabinet Secretary in charge of finance.
Covid-19 has led to loss of job security. Redundancies, salary reductions, reduction of working hours and unpaid leave are some of the measures that employers have taken to buffer themselves from the economic impact of the pandemic. As a result, the Bill seeks to prohibit employers from terminating a contract of service, dismissing an employee, or compelling an employee to take a salary cut. The Bill states that where an employer is unable to meet their obligations to pay salaries or wages, the employer shall allow an employee to take a leave of absence without pay for the duration of the pandemic.
The Bill should be commended for its proposed measures to cushion citizens from the adverse impact of a pandemic. This notwithstanding, it would be a grievous error to limit an employer’s flexibility in putting in place measures aimed at ensuring its survival during and after a pandemic. The Employment Act, 2007 provides sufficient protection for employees and secures their rights at termination and therefore, the Bill’s additional protection from termination at the expense of employers, is not sustainable. It interferes with the ability of parties to freely contract and imposes an added burden on a struggling company.
Employers should reserve redundancy as the last cost-cutting measure they contemplate especially during a pandemic. However, where forced to implement redundancy, employers must adhere to the statutory redundancy process in the Employment Act. Transparency is essential and the employer must have consultations with the employees before and during the process.
The Bill also proposes to bar employers from unilaterally reducing salaries and wages. This is unnecessary. Employment relationships, as they are, are contractual and therefore employees must consent to a change in their terms of reference. This protection has also been guaranteed by Employment & Labour Relations courts which have held that unilateral reduction of salaries and wages can amount to constructive dismissal, which makes the employer liable for unfair termination.
Currently, there are no statutory provisions on unpaid leave. The Bill seeks to cure this by allowing employees to take unpaid leave should employers find that they unable to meet obligations to pay salaries or wages. The unpaid leave period will run concurrently with the pandemic period. This proposal assumes that immediately the pandemic is over, employers will have financially recovered from the loss resulting from the pandemic, and yet that may not be the case. The Bill fails to mention what happens after a pandemic period regarding unpaid leave which leaves a gap for manipulation, by both employers and employees.
The spirit of the Bill is laudable. However, the provisions on employment would need a rethink to ensure that they are practicable for both employers and employees. The redundancy provisions of the Employment Act meet the purpose of the proposals in the Bill since redundancies are triggered by events outside both the employees’ and employers’ control such as a pandemic. Employees are guarded against arbitrary redundancies by the provisions under the Employment Act ensuring transparency throughout the whole process. Failure to adhere to the strict provisions on redundancies under the Employment Act is reproached by the Employment & Labour Courts.
Due to the economic conditions present during a pandemic, employers are forced to restructure and downscale their operations to ensure the sustainability of their business. At the same time, employers need to protect their employees by ensuring that the strict provisions of the Employment Act are followed.
The Bill counterbalances the scales by placing disproportionate weights on employees needs at the expense of employers. In the United Kingdom for example, the government unveiled a Coronavirus Job Retention Scheme in March, where the government would cover 80% of the salary of workers who would otherwise be laid off, thus ensuring employees retain their jobs. This move understands the precarious position employers are due to financial loss as a result of the pandemic. Employers are not pandemic proof, and they equally deserve legislative support during challenging periods such as those presented by a pandemic.
The writers are advocates at KN Law LLP.