Pearl Bank fired employee for losses it had already linked to bad weather. They have to pay him Shs 78m

Pearl Bank (formerly PostBank) has been ordered by the Industrial Court to pay Shs 78.9 million to a senior manager it unfairly and unlawfully dismissed nine years ago.

Paul Ndhego joined PostBank in May 2009 as a branch manager before rising through several positions. By December 2012, he had become credit manager in charge of Projects and Agriculture.

In this position, Ndhego was supposed to oversee credit facilities extended to customers engaged in big agriculture projects.

One of the projects was in Kapchorwa and Koboko involving Kato Eco Farming Limited (KEFL).

First, the bank alleged that Ndhego had failed to enforce a policy limiting agricultural financing to 75% of project costs.

Second, it accused him of failing to monitor farming projects in Kapchorwa and Koboko properly. Third, it claimed he allowed KEFL direct access to money that had been disbursed to farmers.

Following investigations, Ndhego was suspended in November 2016. The suspension was later extended before he was eventually dismissed on February 3, 2017.

Ndhego challenged the dismissal before the Kampala Capital City Authority (KCCA) Labour Officer, Emmanuel Mukiza. Mukiza ruled in his favour in February 2020 and awarded him Shs 78.9 million.

PostBank then appealed to the Industrial Court.

The bank’s lawyer, Juma Omollo of Arcadia Advocates, argued that Ndhego held overall responsibility for credit risk management and should have ensured compliance with lending policies.

Omollo claimed the bank financed farming projects at 100% instead of the required 75%.

The bank argued that Ndhego failed to monitor the projects properly and allowed KEFL improper access to loan funds.

Ndhego, through his lawyer, Ivan Wanume Atuhaire of Naafi & Wanume Advocates, however, argued that the accusations had no factual basis.

He told court that the actual financing was about 73% and therefore complied with policy.

He further argued that loan monitoring was largely the responsibility of loan officers and branch committees.

Ndhego’s lawyer said the transfers to KEFL were made after farmers signed standing orders authorising the transactions.

He argued that crop failures were mainly caused by floods, drought, pests and diseases rather than employee misconduct.

After reviewing the evidence, Justice Anthony Wabwire Musana of the Industrial Court agreed with Ndhego.

On the allegation of over-financing, he found that PostBank had failed to prove its claim that the projects were financed at 100%.

He also found that approval of agricultural loans was not Ndhego’s sole responsibility.

Regarding loan monitoring, Justice Musana examined numerous field reports showing that Ndhego regularly travelled to Kapchorwa and Koboko to assess projects, monitor progress and report problems to management.

He said the reports show that he repeatedly warned the bank about challenges facing the projects.

“We think that, having made these observations and there being no clear evidence of [PostBank’s management] support to address the difficulties, it would be an unfair labour practice for the [bank] to heap the blame on the [Ndhego],” Justice Musana stated.

He noted that reports prepared by Ndhego highlighted serious weather-related problems including floods, drought, pests and crop diseases.

The court concluded that natural disasters, rather than employee misconduct, were responsible for poor harvests and loan recovery challenges.

On the issue of KEFL accessing farmers’ funds, Justice Musana again sided with Ndhego and discovered that farmers had signed standing orders authorising transfers and that bank policy permitted direct payments to service providers where borrowers had agreed.

“The signed transfer orders constituted borrower concurrence,” he said.

Apart from rejecting the allegations of misconduct, he also faulted PostBank for how it handled the disciplinary process, noting that Ndhego’s suspension exceeded the legal limit.

Justice Musana further noted that PostBank did not provide him with the investigation report used against Ndhego.

“A disciplinary process cannot be deemed procedurally fair when an employee is left to guess the specific nature of the case against them,” he said.

In the end, the court concluded that PostBank had failed to prove a valid reason for Ndhego’s dismissal and dismissed the appeal, confirmed the earlier award of Shs78.9 million and ordered PostBank to pay the costs of the appeal.

The Shs 78.9 million award to Ndhego includes severance pay, compensation for violation of employment rights, compensation for unfair dismissal, and salary instead of notice.

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