NSSF Act 2013 is unconstitutional, High Court rules
National Social Security Fund (NSSF) Act of 2013 which increased workers monthly deductions has been declared unconstitutional by Employment and Labour Relations Court. In a judgement delivered by a three judge bench Mathews Nduma, Hellen Wasilwa and Monica Mbaru declared the section of the law which deals with financial matter of County governments illegal and unconstitutional over Parliament failure to refer the bill to Senate prior to the enactment.
“The Act is inconsistent with provisions of Article 10 of the Constitution as read with section 3 of the Competition Act by giving the Fund a monopoly in the provision of pension and social security services in the country and to this extent, it is unconstitutional, null and void,” ruled the Judges. In the stalled Act, total pension contribution for both the worker and employee was supposed to be Sh2,160, being 12 per cent of proposed maximum pensionable earnings of Sh18,000.
The decision by the court followed a suit by Kenya County Government Workers Union which sued the NSSF Board, former Labour Cabinet Secretary Kazungu Kambi, Retirement Benefits Authority and Competition Authority claiming that the increased rate as stipulated in the NSSF Act 2013 negatively affects pensioners.
The court, however, barred NSSF Board of trustees and CS Labour from applying the NSSF Act of 2013 on Kenya County Government Workers Union members or any other employees who have adequate alternative pension or social security schemes unless they opt in.
“An order is issued prohibiting the government from compelling or requiring mandatory registration, enrolment or listing of any employer or employee whether registered as a member or any retirement benefit scheme or not to register, enrol or list and contribute their earnings or any party thereto,” the three Judges directed.
The court further held that that Section 19(2) of the Act which requires access to the public services upon membership of NSSF, the said sub-section is in conflict with Articles 21(1), 47(2), 232(1) of the constitution and to that extent unconstitutional.
“Section 29 of the NSSF Act No45 of 2013 which makes it mandatory to register and contribute to the fund and oblige the petitioners members and other employees who have adequate alternative pension or social security schemes) to join the pension or social security schemes operated by the 1st respondent violates rights or employees free choice contrary to Article 49 of the constitution and is hereby declared null and void,” the Judges held.
Mandatory nature
With regards to section 13 of the NSSF Act of 2013 that requires the payment of allowances and fees approved by the CS Labour, a mandate of the SRC, the judges found that the said section is in conflict with Article 230(4) of the constitution hence null and void. Workers unions had challenged the mandatory nature of registration and contributions to the fund despite having schemes and further that NSSF Act of 2013 does not provide for an automatic opt-out of the fund.
They had also alleged that the Act merely entrenched discriminative practices by ignoring the underprivileged such as the unemployed and giving exclusive benefit of the fund to state through investment criteria. New deductions introduced by the government, they said would automatically grant the NSSF a monopoly in the provision of pension and social security services in the country.
The County workers union had argued that the pensioners face the risk of being forced to join two parallel social security schemes or leave their current schemes to other inferior ones, if the rates take effect.
Through lawyer George Kithi, they say taking effect of the Act would allow NSSF’s monopoly to kill other schemes as well as increase contribution to more than the required 6 per cent. Considering the existing devolved governments, this would also be against the County Governments Act.
“Putting the entire country’s pension and Social Security Services Schemes in to the care of a single player would encourage employers to close down current schemes which oblige them to contribute more than 6 per cent of an employee’s earnings, contrary to the County governments Act 2012,” said Kithi.
