A Kenyan court has raised the legal bar for employers seeking to lay off workers, a decision that could have far-reaching implications for startups, which have used redundancies to slow cash burn amid a funding slowdown.
The Employment and Labour Relations Court on June 25 ruled that companies cannot use restructuring or reorganisation to justify job cuts. They must prove that a genuine operational change has made a role unnecessary, meaning employers will face greater scrutiny if workers challenge layoffs in court.
The judgment came in a case involving Nokia Solutions and Networks Kenya, which was ordered to pay former employee Byron Otega KES 9.8 million ($76,000) after the court found his redundancy was unfair and unlawful.
While the dispute involved a multinational telecommunications company, the ruling applies to all employers in Kenya, including venture-backed startups that have shed jobs over the past four years as funding dropped and investors shifted focus to profitability.
“It is not enough to cite restructuring or reorganisation,” the court said. “The employer must show by evidence that he has genuinely undertaken business restructuring or adopted new technology or made some other genuine commercial decision that has rendered the services of his employee superfluous.”
