East African Portland Cement Company Limited v Ndauti & 4 others
The bottom line
#Kenya's Court of Appeal upheld a cement company's right to fire finance staff over fraud, but struck down their reinstatement because proper dismissal procedure wasn't followed.
What this practically means
#Executive summary
#Key legal issues
#Whether the appellant had valid and justifiable reasons to summarily dismiss the respondents
Yes. The respondents were suspected on reasonable grounds of committing criminal offences to the substantial detriment of the employer under section 41(4)(g) of the Employment Act; the massive financial loss occurred under their watch in the finance department, and arraignment in court lent credence to the employer's belief.
The court re-evaluated the evidence as a first appeal. It found the appellant suffered losses of Kshs 100-200 million through fraud in the finance department where the respondents worked, with the fraud intimately connected to their duties. The employer was only required to show valid, justifiable reasons on a balance of probability, not the criminal standard, and the trial court erred by substituting its own view for that of the employer.
Whether the respondents were afforded a fair procedure
Partly. The two days' notice of hearing was not fatal since the respondents had show cause letters a year in advance and made written and oral representations; however, the appellant failed to comply with the mandatory requirement of section 41(2) to explain the termination to the employees in the presence of another employee before dispatching termination letters, rendering the terminations procedurally unfair.
The court found the respondents knew the allegations, responded comprehensively, and were heard by the disciplinary committee, so the hearing was not an ambush. But nothing in the evidence showed the appellant explained the termination to the respondents in the presence of another employee as section 41(2) mandates before issuing termination letters, which rendered the dismissals procedurally unfair.
Whether the trial court rightly converted the dismissals into suspensions and reinstated the respondents
No. The trial judge failed to consider the section 49(4) prerequisites for reinstatement and gave no justification for converting dismissal into suspension; the appellate court interfered and set aside the suspension order.
Reinstatement is discretionary and must be guided by section 49(4) factors: circumstances of termination, employee's contribution, practicability of reinstatement, and sensitivity of the position. Given the fraud allegations and the finance roles held, reinstatement was inappropriate, and an indefinite suspension pending the criminal case would cause indeterminate disruption at the appellant's expense.
Whether the compensation awarded to the 5th respondent should be disturbed
No. The appellant did not specify or substantiate how the trial judge wrongly exercised her discretion on the compensation award, so the court had no reason to interfere.
An appellate court will not interfere with an exercise of discretion unless the judge misdirected himself or arrived at a clearly wrong decision occasioning injustice. Since the appellant failed to substantiate any misdirection regarding the 5th respondent's award of one month's notice, leave, gratuity and three months' salary as damages, the award stands.
Legal principles established
#- An employer need only prove valid and justifiable reasons for dismissal on a balance of probability; the criminal standard of proof does not apply to internal disciplinary proceedings, and an acquittal or pending criminal case does not immunise an employee from discipline.
- Compliance with section 41(2) of the Employment Act is mandatory: before termination the employer must explain the reasons to the employee in the presence of another employee or representative; failure renders the termination procedurally unfair.
- Before reinstating an employee, a court must consider the section 49(4) factors including practicability of reinstatement, the employee's conduct, and the circumstances of termination; failure to do so is a misdirection justifying appellate interference.
Court orders
#- 1.The appeal is partially allowed
- 2.The order of suspension granted in the judgment dated April 18, 2016 be and is hereby set aside
- 3.Each party to bear their own costs
- On appeal from
- Employment and Labour Relations Court
- Causes No. 1267, 1274, 1275, 1340 and 1884 of 2013 (Consolidated under Cause No. 1267 of 2013)
- Jurisdiction invoked
- First appeal under rule 29(1)(a) of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "East African Portland Cement Company Limited v Ndauti & 4 others", Case Analysis (2022). Civil Appeal 202 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/1202/eng@2022-11-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.