Bank of Baroda employees lose bid to raise retirement age to 60 years

The Court of Appeal has reversed an order requiring Bank of Baroda Kenya to raise the retirement age of its employees from 55 to 60 years as part of the Collective Bargaining Agreement (CBA) signed with the Banking Insurance & Finance Union.

Justices Kathurima M’Inoti, Wilson Korir and Fredrick Ochieng, in their March 7 judgement, declared that the trial court erred in holding that retirement age is a negotiable item under the CBA, adding that it exceeded its jurisdiction by rewriting the employment contract between bank and its employees.

Bank of Baroda had moved to the appellate court to challenge the decision by the Employment and Labour Relations Court directing it raise the retirement age of its employees to 60 years but on condition that they may be allowed to opt for early retirement on attaining the age of 50 years with full retirement benefits as sought by their union.

The union had sued the lender, accusing it of engaging unfair, unlawful, premature retirement of employees before they had attained the age of 60 years.

It was also ordered to adopt the retirement age as a negotiable item and include it in the CBA for future negotiations.

The union had claimed the bank’s policy of setting the retirement age at 55 was discriminatory since employees at its branches in India retired upon reaching the age of 60 or more.

However, the bank contented that the retirement age had been set out in the human resource manual as 55 years with its human resource manager stating that this is brought to the attention of the employees at the time they are being employed, and there is no room for early retirement, or a longer term of service.

He stated that retirement age was not one of the negotiable items set out in the CBA for the last 18 years since the appellant was recognized by the 2nd respondent, and that the 2nd respondent had not given any policy directives to its members on retirement age. This was left to the discretion of each individual bank to decide within the law, and also as dictated by its financial means.

He refuted the claim that there was discrimination of the employees in Kenya, compared to the employees in India, and stated that all the employees retired at the age of 55 years.

The Kenya Bankers Association’s head of human resources and industry relations had also opposed the application, saying each individual member bank had varying retirement ages ranging from 55-60 years. She stated that it had a recognition agreement with the union since 2005, which sets out negotiable, and non-negotiable items, and retirement age was not a negotiable item.

However, Employment and Labour Relations Judge Hellen Wasilwa ruled in favour of the union saying the bank’s policy was a violation of Article 27 of the Constitution and Article 1 of the ILO 1958 Convention No. 111 since the two- tier retirement age within the appellant bank was discriminatory, as the union’s members worked for the same bank.

At the Court of Appeal, the bank held that Justice Wasilwa erred in failing to appreciate that the form and duration of employment is one of the terms set out under Section 10(2) (e) of the Employment Act to be agreed between the employer and the employee.

It also stated that she failed to appreciate that Section 10(5) of the Employment Act envisages that where any terms to be agreed between the employer and the employee change, the employer shall, in consultation with the employee, revise the contract to reflect the change and notify the employee of the change in writing.

The bank contented that in ruling in favour of the union, she rewrote the terms of the contract of employment between it and its employees, adding she also ignored the provisions of the appellant’s employment handbook, and the CBA between the bank and the union.

During the hearing, its lawyer,  Ondati Mogaka submitted that the core contention was whether retirement age should be a negotiable item under the CBA. This was so because the prayer for increasing the retirement age of the appellant’s employees from 55 years to 60 years had already been implemented.

He also submitted that employment contracts were being negotiated individually between the banks and the employees, and they should not have been subject to CBA negotiations, especially since KBA was not willing to negotiate retirement age on behalf of its member banks.

Mogaka also argued that employment contracts, including retirement age, should be negotiated between the individual employee and the bank.

However, the union, through Mr Museve, submitted that when it proposed the inclusion of a clause on retirement age in the CBA, the discussions led to a deadlock, which was then reported to the Cabinet Secretary.

The lawyer argued that its demand was well founded in law, and its recognition agreement and was of the view that retirement age was a negotiable item as per the CBA.

He further pointed out that the trial court had found that the retirement age in the circumstances was discriminatory and should be reviewed accordingly, so that all employees should have equal terms of employment.

In their judgement, Justices M’Inoti, Korir and Ochieng held that it is not in dispute that the CBA did not explicitly address retirement age as a negotiable item.

“Furthermore, the recognition agreement between the parties specifically listed certain items as negotiable, while others, including retirement benefits and pension schemes, were deemed non-negotiable.

They cited the decision in Alghussein Establishment v Eton College [1991] 1 All ER pp 267, where the court held that: “The principle that in the absence of clear express provisions in a contract to the contrary it was not to be presumed that the parties intended that a party should be entitled to take advantage of his own breach as against the other party was not limited to cases where a party was relying on his own wrong to avoid his obligations under the contract but applied also where a party sought to obtain a benefit under a continuing contract on account of his breach…”

“That being the case, we are inclined to agree with the appellant’s submission that retirement age, being part of the individual employment contracts, should remain a matter for agreement between the employer and the employee, rather than being dictated by the CBA. We are persuaded that the trial court erred in its finding that retirement age should be made a negotiable item under the CBA. Employment contracts, including those relating to retirement age, should be negotiated individually between the employer and the employee. The trial court’s decision to introduce this term into the CBA was, therefore, a misapplication of the law,” they ruled.

They agreed with the bank that the role of the court is not to alter the terms of an agreement that had been freely entered into between parties.

“The trial court’s duty was to interpret the law and assess whether the terms of the contract violated any statutory or constitutional provisions.  In this case, the trial court’s decision to introduce the concept of a negotiable retirement age was an overreach, as it effectively rewrote the terms of the employment contracts between the appellant and its employees.

This was an error in law, as the court does not have the authority to impose terms on the parties that were not mutually agreed upon or negotiated. This was an issue which required resolution between the respondents, given that the court cannot rewrite a contract freely entered into between the parties.”