Implications of the Supreme Court Judgment on New NSSF Contribution Rates

On 21^st February 2024, the Supreme Court delivered its decision in the long-running dispute on the constitutionality of the National Social Security Fund Act, 2013 (“the impugned Act”). We have taken the liberty of sharing this advisory to bring to your attention the salient aspects of the dispute and the Supreme Court’s decision.

Background

The President assented to the National Social Security Fund Act, 2013 on 24^th December 2013. Shortly after the presidential assent, various organisations representing employers, trade unions, pensioners unions and other players in the labour movement filed cases that challenged the constitutionality of the impugned Act at the High Court and the Employment and Labour Relations Court (“the ELRC“). Five of the cases were consolidated and referred to the ELRC for hearing and determination.

On 19^th September 2022, a three-judge bench of the ELRC declared the impugned Act unconstitutional, null and void. In summary, the reasons for the ELRC decision were that (i) the National Assembly failed to seek the concurrence of the Senate despite the fact that the impugned Act impacted county governments, (ii) the impugned Act effectively gave the NSSF a monopoly in the provision of pension and social security services, (iii) the impugned Act allowed the Cabinet Secretary for labour to usurp a constitutional function of the Salaries and Remuneration Commission, (iv) the impugned Act preconditioned access to public services on NSSF membership and (v) the impugned Act compels persons with alternative superior pension arrangements to join the NSSF.

The NSSF appealed the ELRC judgment at the Court of Appeal. On 3^rd February 2023, a three-judge bench of the Court of Appeal set aside the ELRC Judgment. In summary, the Court of Appeal held that (i) the ELRC had no jurisdiction to hear a dispute as to the constitutionality of an Act of Parliament (including the impugned Act) and (ii) the impugned Act did not impact county governments and therefore the concurrence of the Senate to its enactment was not necessary. The Kenya Tea Growers Association, the Agricultural Employers Association and the County Pensioners Association challenged the Court of Appeal’s decision at the Supreme Court on various grounds, including procedural irregularity in the handling of the case.

On 21^st February 2024, a full bench (7 judges) of the Supreme Court set aside the Court of Appeal decision and remitted the case to the Court of Appeal for rehearing on an urgent basis. In summary, the Supreme Court held that (i) the impugned Act impacted employment and labour relations, (ii) the ELRC has jurisdiction to hear a dispute relating to the constitutionality of an Act of Parliament that impacts employment and labour relations and (iii) the Court of Appeal was wrong to assume jurisdiction on the issue of the concurrence of the Senate to the enactment of the impugned Act.

Implications of the Supreme Court Decision

Given the above background, our legal opinion on the implications of the Supreme Court decision is as follows:

• • since the Supreme Court has set aside the Court of Appeal’s decision, the impugned Act remains unconstitutional, null and void as declared by the ELRC on 19^th September 2022;
  • the ELRC’s declaration of the impugned Act as unconstitutional reverts the country to the law that applied before 10^th January 2014 (i.e., the National Social Security Fund Act [Act No. 28 of 1965]. See, among others, the decision in Samuel M. N. Mweru & Others v National Land Commission & 2 Others [2020] eKLR on the effect of declaring unconstitutional a law which had repealed a prior law);
  • the impugned Act remains unconstitutional, null and void [for the reason outlined in paragraph (a) above] until the Court of Appeal rehears the case (as directed by the Supreme Court) and makes a new decision;
  • the NSSF cannot require employers or employees to deduct, make or remit any contributions under the impugned Act until the Court of Appeal rehears the case (as directed by the Supreme Court) and makes a new decision; and
  • the NSSF may require employers and employees to deduct, make or remit contributions under the old law, that is, the National Social Security Fund Act 1965 [Act No. 28 of 1965], pending the rehearing of the case by the Court of Appeal (as directed by the Supreme Court) and the making of a new decision.

We hope that this advisory will assist all stakeholders in deciding the next course of action.

© Muthomi & Karanja Advocates (22 February 2024).