IN
THE HIGH COURT OF MALAWI

LILONGWE
DISTRICT REGISTRY

CIVIL
CAUSE NO 788 OF 2001

BETWEEN
:

N.C.
KAFAKAONA …………………………… PLAINTIFF

AND

LILONGWE
WATER BOARD …………… DEFENDANT

CORAM : HON.
JUSTICE A.K.C. NYIRENDA

Kadzakumanja;
Counsel for the Plaintiff

Wapena
Kita; Counsel for the Defendant

Mrs
Matola; Court Interpreter

Mrs
Mbewe; Court Reporter

J
U D G M E N T

NYIRENDA,
J.

The
plaintiff by writ of summons, brings this action against the
defendant for loss of salary as a result of the defendant regarding

his position to a grade lower thereby paying him a lower salary than
he otherwise should have been getting.

The
case is very short. The plaintiff was and still is the defendant’s
employee. He works as a water plant operator. The
events leading
to this case according to the plaintiff are that he started working
for the defendant on the 25^th
November 1991. His specific job is in water treatment. Sometime
towards the end of 1999 the defendant company undertook an
evaluation
of the institution regarding some positions and adjusting salaries.
The plaintiff was placed at S3 grade with a starting
gross salary of
K6540.00. Towards the middle of the year 2000 salaries were adjusted
again so that as of July 2000 the plaintiff’s
gross salary was
K8631.00.

In
December of that year the plaintiff’s salary dropped to K5460.00
because of yet another regrading. According to the plaintiff
this
regrading lowered his position from S3 to SS 2. He was not briefed
prior to regrading and adjustment of his salary. It
was later that
he, together with others who had been affected were called to a
briefing by the defendant. The explanation was
that the initial
adjustments had been carried out by the defendant without Government
approval. When the matter was taken to
Government it was opposed
basically because Government had no money to assist the defendant
company continue to meet the increased
wage bill. As a result the
defendant company was forced to drift back and reorganize both the
positions and salary scales.

On
the 22^nd
December 2000 the defendant company formally wrote the plaintiff and
other employees who had been affected offering the new salaries.

The plaintiff rejected the offer according to Exhibit P3.

Although
the plaintiff rejected the new salary he however received the new
salary in the months that followed. The plaintiff
has since been
promoted from SS2 to SS1 and his salary had accordingly been
increased to his new grade.

Mr
Imfa of the defendant who is the Human Resources Officer admits to
the events as narrated by the plaintiff. His testimony was
that the
defendant company indeed went through a restructuring process done by
Messrs Delloite & Tonche. Salaries as well
as positions were
restructured. Initially salaries were increased by 32% and later by
38%. Unfortunately for the defendant company
its own Board of
Directors and the Malawi Government who has substantial shares in the
company could not approve of the adjustments.
As a result a
committee was formed and directed to reconsider the entire process
which resulted in reduction of grades as well
as salaries.

Mr
Imfa emphasized that the reductions were necessary to avoid
retrenchment of employees which would have been inevitable had the

defendant maintained the higher salaries.

Against
these facts the plaintiff seeks that a declaration be made that the
regrading of his position from S3 to SS2 was unlawful;
that he be
reinstated at grade S3; that salary arrears be paid and finally that
the court grants any other relief as maybe appropriate
in the
circumstances.

The
general principle is that a unilateral reduction in wages is per se a
breach of contract. In situations where an employer
is to face hard
choices between reduction of wages and closing business the situation
may be resolved otherwise. In ‘Contracts
of Employment’ by Dix, Crump and Pugsley,
Seventh
Edition
at 4:04 it is stated as follows:

The
employer has no right to reduce wages or salaries unilaterally. The
payment of wages is a term of such fundamental importance
in the
contract that it is difficult to imagine circumstances in which a
unilateral reduction of wages could be construed as other
than a
repudiatory breach of contract which would allow the employee to
treat the employer as guilty of constructive dismissal.
This does
not mean that the employee will as of right succeed in an action for
unfair dismissal. A company may be in grave financial
difficulties
and its bankers may refuse to continue its finance of the operation
unless a business plan is produced which shows
substantial cuts in
costs. The management consults with the workforce and decides to
reduce wage rates by 10%. The majority
of the workforce accept
this as being preferable to the inevitable collapse of the business
which would otherwise occur.
The minority who do not accept this
cut in wages leave and sue for unfair dismissal. There would be no
issue that there was
a dismissal but no industrial tribunal may not
determine that this dismissal is unfair if they accept that there was
a genuine
need for such reductions and that the management had made
real attempts to consult with the employees about the imposition of
the
changes. A tribunal which has listened to endless criticisms of
the failure of management to explore alternatives to redundancies
in
cases alleging unfair selection for redundancy might well be of the
opinion that such a measure was an appropriate response.

The
defendant company’s explanation in the instant case for what
happened is fairly clear. The defendant had all the good
intentions
to upgrade positions and increase salaries for its employees and for
that purpose engaged another company to assist
with the restructuring
exercise, no doubt at a measurable cost. The process was completed
and the defendant infact started to
implement the improved
remuneration. Unfortunately for the defendant company and obviously
against its wish there was to be no
money to continue with the new
salaries because of factors beyond its control. The choice for the
defendant company was to reduce
its workforce, but that was
considered to be inappropriate. The defendant company then decided
to engage its employees in negotiations
to reduce the salaries. In
a difficult process, looking at the correspondence and minutes of
meetings between the defendant and
its employees, the employees
yielded to a reduction in pay. According to Mr Imfa virtually all
the employees except the plaintiff,
accepted the rather unfortunate
development.

As
stated earlier even in the case of the plaintiff, despite indicating
in the letter that was written to him that he would not
accept the
reduced salary, he continued in employment and received the reduced
pay.

In
my judgment the defendant company’s actions were out of necessity
with the aim of saving the jobs of large numbers of employees
who
might have lost out completely with extremely unfortunate
consequences. In my final judgment this action is without merit
and
I dismiss it in its entirety. I make an order for costs in favour of
the defendant.

Pronounced
in
Open Court at Lilongwe this 15^th
day of September, 2006.

A.K.C.
Nyirenda

J
U D G E