NSSF Board of Trustees prohibited from requiring mandatory registration of any employer or employee to register and contribute their earnings in terms of the National Social Security Fund Act, 2013
The petitioners challenged the constitutionality of sections 17, 18(4), 20(2), 27, 35(4), 37(1), 18(2), 72 and the Second Schedule to the National Social Security Fund Act No. 45 of 2013 (the impugned Act). The petitioners’ case was that the proposed mandatory pension scheme under the impugned Act was unconstitutional. They were apprehensive that they would lose the contributions already made to their subscribed pension schemes and that they were not consulted to give their input. The petitioners further claimed that whereas the repealed National Social Security Fund Act, Cap 258 (the repealed Act) exempted the petitioners members from registering under the national social security fund (the fund), the impugned Act made it compulsory for all employees to register under the fund, thus making it mandatory for the employer to deduct the dues from an employee’s salary; that consequently interfered with the petitioner and its members’ free will to choose a pension scheme of their choice.
The petitioners claimed that the requirement for the petitioners’ members to register with the fund as a prerequisite for accessing public services was a violation of article 27 of the Constitution of Kenya, 2010 (Constitution) on discrimination. It was further claimed that the impugned Act was unconstitutional for failure to involve the Senate in its enactment. The petitioners stated that sections 47 and 68 of the impugned Act were oppressive, irrational, and unreasonable to the extent that they purported to give regulatory powers to the National Social Security Fund Board of Trustees (the Board) instead of the Retirement Bene its Authority (RBA) – the independent sector regulator.
The petitioners contended that the provisions of the impugned Act were unconstitutional in terms of the mandatory registration and contribution by employees and employers since the fund did not qualify as a retirement benefit body. The petitioners stated that section 13 of the impugned Act provided for the remuneration of the board members to be set by the Board and approved by the Cabinet Secretary for Labour, Social Security and Service (CS Labour) and that remuneration of public officers such as the board’s members ought to be determined by the Salaries and Remuneration Commission (SRC).
- Whether failure to involve the Senate in the enactment of an Act which dealt with matters to which the Senate and the National Assembly had concurrent jurisdiction was fatal.
- Whether section 13 of the National Social Security Fund Act which required the payment of allowances and fees to be approved by the Cabinet Secretary for Labour, Social Security, and Services conflicted with article 230(4) of the Constitution which set out the mandate of the Salaries and Remuneration Commission and thus unconstitutional.
- Whether section 20 of the National Social Security Fund Act violated the rights of employees and employers’ free choice to the extent that it made it mandatory to register and contribute to the fund by employees who had adequate alternative pension or social security schemes and thus unconstitutional.
- Whether the National Social Security Fund Act was inconsistent with the Constitution as read together with the Competition Act for giving the National Social Security Fund a monopoly in the provision of pension and social security services and hence unconstitutional.
- Whether the precondition of registration under the National Social Security Act, 2013 to allow access to public services was unconstitutional to the extent that it was undefined under the Act and did not portend any legitimate purpose.
- Whether section 49(2) of the National Social Security Fund Act which required that funds not for the time being required to be applied for the fund to be invested under the provisions of the Retirement Benefits Act conflicted with section 38 of the Retirement Benefits Act which created restrictions on the use of scheme funds.
- Who bore the burden of proof in a claim that the constitutional standard of public participation in a law-making process had not been met and when did the burden shift?
- What were the factors to be considered in interpreting legislation whose constitutionality was in question?
- The national values set out under article 10(2) of the Constitution included democracy and participation of the people; equity; social justice; non-discrimination, good governance; transparency and accountability inter-alia. Once a petitioner attacked the legislative process on grounds that the law-making process did not meet the constitutional standard of public participation, the onus was on a respondent to demonstrate there was public participation that met the constitutional standards.
- The petitioners who participated in the meetings adduced by the respondents did not dispute that they attended the meetings and that the subject of discussion was the impugned National Social Security Fund Bill. The petitioners did not expressly state that they did not participate in the process of enactment of the impugned Act. The petitioners bore the initial burden of proof that they were not involved in any and or in any reasonable public participation process during the enactment of the Bill. It was only then that the evidential burden of rebuttal shifted to the respondents to demonstrate that indeed there was reasonable public participation in the enactment process of the Bill.
- There was no evidence adduced by the petitioners either the nature or the method used by the 1st respondent for public participation were wanting. The petitioners did not discharge their onus of proof for the burden of rebuttal to shift to the respondents. Therefore, the presumption of legality of the impugned Act applied in the instant case and indeed there was reasonable public participation in the enactment of the Bill.
- The impugned Act dealt with matters to which the Senate and the National Assembly had concurrent jurisdiction and specifically matters of finance, budget and planning and public service in that it imposed mandatory and optional pension schemes for public officers in the National and County Governments even though the Act avoided to mention county governments expressly. Consequently, failure by the National Assembly to involve the Senate in the process of enacting the impugned Bill was fatal to the impugned Act.
- Article 10, 20, 191(5) and 259 of the Constitution provided a guide to statutory interpretation under the constitutional order. The provisions thereof created an obligation to interpret all legislation in a manner that promoted the spirit, purport and objects of the Bill of Rights. That meant that all statutes, including the impugned Act had to be interpreted through the prism of the Bill of Rights.
- When the constitutionality of legislation was in question, a court had to examine the objects and purport of that legislation and read the provisions of the legislation, as far as was possible, in conformity with the Constitution. A judicial officer had to prefer an interpretation of legislation that fell within constitutional bounds over one that did not, provided that such interpretation could be reasonably ascribed to the legislation within reasonable limits in the application of that principle.
- The right to social security was of central importance in guaranteeing human dignity for all persons when they were faced with circumstances that deprived them of their capacity to fully realize their constitutional and covenant rights under the International Covenant on Economic, Social and Cultural Rights. The duty was on the State to avail resources, allocate resources and remove barriers which could interfere with such allocation of resources since that was not permissible on the basis that the State would have reached a different conclusion outlined under article 43(5)(c ) of the Constitution. The resources to be availed and allocated should emanate from the State pursuant to article 45 of the Constitution. For the fund to remove such duty from the State to the registered members was an overreach on its statutory mandate.
- Article 35 of the Constitution secured the right to access to information held by another person and required for the exercise or protection of any right or fundamental freedom. The rights under article 35 were further actualized under the Access to Information Act, 2016 and the guidelines thereof. Every registered member was required to open and have an individual account and allowed access to information therefrom. Such an individual account was to be credited all contributions made to the pension fund by and in respect of each member of the pension fund.
- The information available under the individual account was pursuant to section 24(2) of the impugned Act. Further, section 24(7) granted access rights through electronic and manually from the offices of the fund. There was nothing under section 20(2) of the Act, which demonstrated how the constitutional right about access to information would be negatively affected under the impugned Act.
- Section 19(2) of the impugned Act had created a link between registration with the fund and access to other Government services. The impugned Act was predicated on the right to social security and to provide for contributions to and the payment of benefits out of the fund. For that purpose, employer and employees were required to register with the fund as well as voluntary members. The preconditions of the public services to be restricted where there was no registration were not defined.
- Provision and access to public services was a State function which should only be limited within the parameters of the Constitution and the law. For the precondition of registration under the fund so as to allow access to public services to be lawful, the reason given had to not only be lawful, but it had to meet the article 24 of the Constitution test.
- The import of section 19 of the impugned Act was to ensure registration with the fund and to effect contributions by among other persons, voluntary members. Such objective, though novel, was inherently addressed by the requirement that all persons described under the Act as employers and employees should register with the fund and voluntary contributors encouraged registering as members. There was therefore no legitimate purpose to be achieved by creating a precondition for registration linked to undefined dealing with or access to public services. The fund had to market its objectives in an open and democratic society and adopt measures carefully designed to achieve such objectives. Such had to be rationally connected to the objective to obtain as many members as possible from the registerable public.
- From a reading of the entire section 19 of the impugned Act and indeed the entire Act, there was no justification given for the precondition requirement which predicated access to public services upon membership of the fund. Such provision was overreaching without good cause and created an unnecessary limitation that could not be justified in an open and democratic society secured under article 20(4)(a) of the Constitution and which then in essence violated article 21(1) which created a fundamental duty of the State and every State organ to observe, respect, protect, promote and fulfill the rights and fundamental freedoms in the Bill of Rights.
- Article 47(1) of the Constitution on the right to fair administrative action and 232(1) on the right to equal protection and benefit of the law, fair administrative action and on the values and principles of the public service respectively would be an impediment were the provisions of section 19(2) of the impugned Act to be operationalized. Section 19(2) was unconstitutional to the extent of its preconditions and restrictions as a precondition of dealing with or accessing public services undefined under the Act. The precondition portended no legitimate purpose.
- In the finance, administration and management of the fund section 49(2) of the impugned Act required that the fund should invest any of its funds which were not for the time being required to be applied for the purposes of the fund in accordance with the provisions of the Retirement Benefits Act (RBA Act). The requirements were in addition to requirements imposed by the Retirement Benefits Act pursuant to section 71 of the impugned Act. Section 38 of the RBA Act created restrictions on use of scheme funds. Those provisions were complimentary and not in conflict. Funds which were not for the time being required to be applied for the purposes of the fund should be invested in movement securities or infrastructure bonds issued by public institution as those were public funds for the benefits of the members.
- The reading of the provisions under section 18 of the impugned Act revealed a solution to the matter under subsection (3) and which resolved the issue of assets and liabilities arising out of the repealed Act. The individual member account known as the pension fund credit to which should be credited all contributions made to the pension fund by and in respect of each member of the pension fund. The account should have a breakdown of the employer and member contributions outlined separately. Section 51 of the impugned Act directed that keeping of proper books of accounts in relation to the old provident fund and pension fund and all undertakings, investment activities and properties and to render annual accounts. Those provisions well insulated any member under the old provident fund, the provident fund and pension fund.
- A reading of section 17 of the impugned Act was that the appointed compliance officer was bound by the rules of natural justice in the execution of such mandate and was required to only sanction conduct that was found to be refusal and or neglect to furnish information by willful delays or obstruction in the exercise of any power under that section.
- Under section 13 of the impugned Act the remuneration, fees and allowances of the board and committee members thereof was subject to the approval of the CS Labour. The SRC mandate was codified under article 230(4)(a) of the Constitution read together with section 11 of the Salaries and Remuneration Commission Act (SRC Act). Under section 11 of the SRC Act, the SRC was conferred with additional functions to those set out under article 230(4). The SRC was the independent constitutional commission mandated to set and regularly review the remuneration and benefits of all State officers and to advise the National and County Governments on the remuneration and benefits of all other public officers. It was to set and regularly review the remuneration and benefits of all State officers.
- State corporations were creatures of the National Government and its officers were so regulated. Any funds drawn out of such entities were subject to Public Finance Management Act as such were public funds. The fund under the impugned Act could not therefore arrogate such function/mandate to approve the remuneration payable to board and committee members to the CS Labour under section 13 of the Act. Though the sittings of the board and its committees were regulated under section 11 and 12 of the impugned Act funds drawn for payment of any remuneration, fees and allowances were drawn from members’ contributions to the fund were regulated under Part VI of the Act and which comprised public funds. For checks and balances, the mandate of the SRC was imperative.
- The notion that section 27 of the impugned Act was unconstitutional for charging of interest on late payment without a provision that such interest should be credited to a member’s account was incorrect in the context of section 24(2)(d) and (4) of the Act stated in mandatory terms that all interests charged should be credited into the individual member account. A statement therefrom should also reflect the interest credited into the account.
- The principles governing public finances mandated all State actors to abide the values of openness and accountability, including public participation. Those were the principles addressed under article 201 of the Constitution and article 227(1) on procurement of public services. The challenged provisions under section 35(4) of the impugned Act in their nature were self-enforcing and did not in any manner relate and or linked to articles 201 or 227(1).
- A validly nominated beneficiary could be rejected by the board subjection to being furnished with written reasons thereof. Section 47(3)(a) of the impugned Act allowed an appeal to the trustee and further under subsection (3) a member or an aggrieved party was allowed a reference to the court on any question of law arising in connection with the determination of any question by the managing trustee any officer or agent of the fund or the tribunal, and for appeals to court from the decision of the managing trustee, any officer or agent of the fund or the tribunal on any such question of law.
- The payment addressed under section 37(1) of the impugned Act arose in the unfortunate demise of the contributing member before the pensionable age and at the time was contributing to the pension fund at the time of his death and not less than thirty-six monthly contributions had been made by the member immediately preceding the date of death. The contention that the provisions pegged the payment of benefits to 36 months and hence a denial of the total contributions by the deceased member was not correct. That was more so putting into context the provisions of section 37(2).
- The benefits payable under section 37(1) of the impugned Act resulted from the total aggregate equal in value to the member’s credit. For members under Tier I, there was an increase by a multiplier of half the number of months of potential employment from the date of death to the envisaged pensionable age and 90 months. Such benefit accrued to the beneficiary without any disadvantage save for the demise of the contributing member. In any event, section 37(6) made sufficient and adequate provisions towards benefits of a survivor’s family members. Those provisions were reasonable and justifiable in an open and democratic society based on human dignity and not prejudicial to the beneficiaries in any manner.
- In as far as section 20 of the impugned Act made it mandatory to contribute to the fund, it violated rights of employees and employers’ free choice. It especially violated the rights of employees who were members of other pension funds and who were members of trade unions with collective bargaining agreements providing categorically that gratuity was payable and those who were on casual employment, on fixed term contracts and piece rate workers. For members who were already under exiting contributory schemes, there was no constitutional justification to deny contributors their choice of pension scheme to subscribe to as the impugned Act had done which was contrary to article 49 of the Constitution.
- In employment and labour relations, any matter relating to discrimination had to be addressed within the confines of article 27 of the Constitution read together with section 5 of the Employment Act, 2007. Both prohibited discrimination against any person under the listed grounds of race, sex, pregnancy, marital status, health status, ethnic or social origin, colour, age, disability, religion, conscience, belief, culture, dress, language or birth, national extraction or social origin which had the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation.
- Differential treatment did not necessarily lead to discrimination. Discrimination meant affording different treatment to different persons attributable wholly or mainly to their descriptions whereby persons of one such description were subjected to restrictions to which persons of another description were not made subject or had accorded privileges or advantages which were not accorded to persons of another such description. Discrimination also meant unfair treatment or denial of normal privileges to persons because of their race, age, sex, a failure to treat all persons equally where no reasonable distinction could be found between those favoured and those not favoured.
- Article 27 of the Constitution advocated for non-discrimination as a fundamental right which guaranteed that people in equal circumstances be treated or dealt with equally both in law and practice without unreasonable distinction or differentiation. Under section 26 of the impugned Act the CS Labour was given the mandate to make regulations with regard to voluntary registration of person outside the defined relationships under section 23 of the Act. Save for the singled-out issues, the provisions covered all aspects of contracts of service and contracts for service and inclusive of any party seeking to be registered as a member of the fund under the Act hence removing any aspect of the alleged discrimination.
- Under article 10(1)(b) and (c) of the Constitution, Parliament was obliged to observe national values and principles whenever it made policy decisions and enacted legislation. Section 3 of the Competition Act provided for objectives of the Competition Act, among the objectives was to protect consumers of services and products. Section 4(a) defined competition as meaning competition in a market in Kenya and referred to the process whereby two or more persons supplied or attempted to supply to or acquired or attempted to acquire from, the people in that market the same or substitutable goods or services.
- In the case of getting into a pension scheme, the impugned Act favored the fund over other pension providers as social security providers in the entire country. The implementation of the impugned Act would therefore kill or stifle other pension and social security schemes across Kenya. Therefore, the impugned Act was in conflict with the Competition Act.
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- Kiambu County Government & 3 others v Robert N. Gakuru & others (Civil Application 97 of 2014;  KECA 157 (KLR)) — Explained
- Law Society of Kenya v Minister for Finance, Kenya Revenua Authority & Commissioner for Domestic Taxes (Civil Appeal 91 of 2006;  KECA 494 (KLR)) — Explained
- Law Society of Kenya v the Attorney General & Another (Constitutional Petition 185 of 2008;  KEHC 2093 (KLR)) — Explained
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- Momanyi, Samuel G v Attorney General and another (Petition 341 of 2011;  eKLR) — Explained
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- Munyedo, Moses & 908 Others v The Attorney General and Minister for Agriculture (Petition No. 16 of 2013;  eKLR) — Explained
- Muriri, Daniel Chacha v Attorney General (Constitutional Petition 41 of 2011;  KEHC 2279 (KLR)) — Explained
- Njeru, Anarita Karimi v Republic (Criminal Appeal 4 of 1979;  KECA 12 (KLR)) — Explained
- Nubian Rights Forum & 2 others v Attorney General & 6 others; Child Welfare Society & 9 others (Interested Parties) (Petition 56, 58 & 59 of 2019;  KEHC 8772 (KLR)) — Explained
- Republic v Minister for Home Affairs & others ex-parte Sitamze (? 1652 of 2004;  KEHC 2766 (KLR)) — Explained
- Republic v Public Procurement Administrative Review Board & another ex parte Selex Sistemi (? 1260 of 2007;  KEHC 138 (KLR)) — Explained
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- Teachers Service Commission (TSC) v Kenya Union of Teachers (KNUT) & 3 others (Civil Appeal 196, 195 & 203 of 2015;  KECA 239 (KLR)) — Explained
- Ssemogerere & 2 others v AG (Constitutional Appeal No. 1 of 2002) — Explained
- Doctors for Life International v Speaker of the National Assembly and Others — Explained
- Harris v Minister of Interior and another ( (2) SA 428) — Explained
- Matatiele Municipality and others v President of the Republic of South Africa and others ((2) (CCT73/05A)  ZACC12) — Explained
- Pearlberg v varty ( 1WLR 534) — Explained
- State v White (97 Wn. 2d 92) — Explained
- Norton v Shelby County (7 (1886) 118 U. S. 425, 6 S. Ct. 1121, 30 L. Ed. 178.) — Explained
- Tropp v Dullas (356, US 86 1958) — Explained
- Ndyanabo v Attorney General ( EA 495) — Explained
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- Access to Information Act, 2016 (Act No. 31 of 2016) — In general — Cited
- Competition Act, 2010 (Act No. 12 of 2010) — Section 3; Section 5(1); Section 24 — Interpreted
- Constitution of Kenya, 2010 — Article 2(4); Article 10(1)(c); Article 20; Article 21(1); Article 24; Article 26; Article 27; Article 28; Article 30; Article 36; Article 35(1)(2)(3); Article 40(2); Article 41(2); Article 43(3); Article 46; Article 47(1); Article 50(1)(a); Article 94(5); Article 110; Article 113; Article 118(1)(b); Article 176; Article 191(5); Article 201(a); Article 205; Article 226; Article 227(c); Article 230(4); Article 232(1); Article 236(b); Article 259; Article 260 — Interpreted
- Employment Act, 2007 (Act No. 11 of 2007) — Section 5 — Interpreted
- Exchequer And Audit Act (CAP. 412) — In general — Cited
- Interpretation And General Provisions Act (CAP. 2) — Section 42; Section 43 — Interpreted
- National Social Security Act, 2013 (Act No. 45 of 2013) — Section 6; Section 4; Section 2; Section 9; Section 10; Section 13; Section 14; Section 16; Section 17(6)(b); Section 18; Section 19(2); Section 20; Section 21; Section 22; Section 24(2); Section 26; Section 27; Section 29; Section 35(4); Section 37(1); Section 45; Section 47; Section 49(2); Section 68; Section 71; Section 72 — Interpreted
- National social security Fund (Members Contribution) Regulations, 2013 (Act No. 45 of 2013 Sub Leg) — Rule 20 — Interpreted
- Public Finance Management Act, 2012 (Act No. 18 of 2012) — In general — Cited
- Retirement Benefits Act, 1997 (Act No. 3 of 1997) — Section 38 — Interpreted
- Salaries And Remuneration Commission Act, 2011 (Act No. 10 of 2011) — Section 11 — Interpreted
- Work Injury Benefits Act
- Discrimination (Employment and Occupation) Convention, 1958 — Article 1(a)
- International Covenant on Economic, Social and Cultural Rights (ICESCR), 1966 — Article 9