Kanyenda v National Bank of Malawi (IRC 101 of 2007 ) ( of ) [2007] MWIRC 33 (04 June 2007);

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IN THE INDUSTRIAL RELATIONS COURT OF MALAWI


PRINCIPAL REGISTRY


MATTER NO. IRC 101 OF 2007


BETWEEN


KANYENDA……………………….……………………… ……………...APPLICANT


-and-


NATIONAL BANK OF MALAWI…...………………... ……………..RESPONDENT


CORAM: R. Zibelu Banda (Ms); Chairperson
Kanyenda of Counsel for the Applicant
Bandawe of Counsel for the Respondent
Chinkudzu; Official Interpreter

RULING

Severance allowance-Qualifications-Disqualifications-Whether retired employees are disqualified from receiving severance allowance


Background

The applicant was employed by the respondent bank for number years not in dispute. The applicant then reached retirement age and his retirement package was calculated and made available to him. The applicant was not paid severance allowance because the respondent was of the view that severance allowance was not payable to employees whose services were terminated through reaching retirement age. The applicant took up this action to enforce his right to severance allowance.


The Law

Severance allowance is provided for under section 35 of the Employment Act 2000. It provides that on termination of contract, by mutual agreement with the employer or unilaterally by the employer, an employee shall be entitled to be paid by the employer, at the time of termination, a severance allowance to be calculated in accordance with the First Schedule.


In section 35 (6) the Act provides exceptions to payment of severance allowance. The exceptions include persons whose contracts are terminated fairly for a misconduct, those serving probationary period, those who unreasonably refuses an offer of re-employment, those employed by a partnership and the termination results from the dissolution of the partnership, those employed by a personal employer whose termination is terminated by death of that employer and is re-employment by the deceased’s representative or refuses such employment.


The above are situations under which severance allowance is not payable. It was held in Japan International Co-operation Agency v Jere [Civil Appeal Number 25/2002 (unreported)] HC that; if age of the employee was going to be a material factor, it could have been covered under section 35(6) of the Act. In this instant matter, this court is of the same view that if retired age was a material factor in excluding employees from receiving severance allowance it would have been covered. In fact, the issue in Jere hinged on retirement age and the court further held that:


It should have been expressly provided that section 35(1) shall not apply where the employee reaches retirement age or retires. The exclusion of this aspect was intentionally done by Parliament to enable a long serving obedient employee to pocket severance allowance whether with pension or not.


This legal position was followed in subsequent cases including in the matter of Bakasi v Sugar Corporation of Malawi [Civil Cause Number 559/2004 (unreported)] where the court held that:

Contracts with provisions on retirement age have never been classified before as fixed contracts. If the law wanted them henceforth to be known it would have classified them thus in very clear manner. By virtue of a mutually agreed term on retirement, severance allowance was due.


Bakasi is promulgating the fact that termination of contract on basis of reaching retirement age is a mutual termination. Parties mutually agree on a manner of termination just like they would agree on notice provisions. In this sense they agree that the employment would be terminated on reaching a certain age or working for a specified period of time but not in the sense of contract fixed by time.


Finding

Therefore because parties mutually agreed on the term of termination especially in this regard that termination would occur upon reaching a specified retirement age, severance allowance is payable under section 35(1) of the Employment Act. The court so finds.


Appeal

Any party aggrieved by this decision is at liberty to appeal to the High Court within 30 days of this ruling.


Pronounced this 4th day of June 2007 at Blantyre.



Rachel Zibelu Banda

CHAIRPERSON