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ELRCPartially AllowedCause Number 1709 of 2011· [2013] KEELRC 142 (KLR)

Paul Litunya Abundo v University of Nairobi [2013] KEELRC 142 (KLR)

Industrial Court of Kenya
30 September 2013
JRJames Rika
2,499 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Industrial Court ruled the University of Nairobi could fairly fire an employee for insider trading, but still owed compensation for skipping proper disciplinary procedure.

What this practically means

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Executive summary

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The claimant, employed by the University of Nairobi from 5th February 1985 as a Laboratory Attendant and later Junior Technologist, had his employment terminated on 2nd August 2011 on allegations of gross misconduct arising from insider trading. The respondent alleged he owned Litlab Suppliers and used it, together with his brother's entity Lilam Enterprises and an unregistered entity Litlam Enterprises, to irregularly supply goods to the University, contrary to a 2004 circular prohibiting staff from trading with the employer. The claimant sought reinstatement or, in the alternative, notice pay, 12 months' compensation, pension entitlements and a certificate of service. The court found the respondent had a valid substantive reason for termination: the internal audit investigation credibly established collusion between the claimant and the Procurement Officer, with the family entities sharing addresses and deliberately similar names to circumvent the circular. However, the termination was procedurally unfair: there was no show-cause letter, no formal charges, no disciplinary hearing as required by Section 41 of the Employment Act 2007 and the CBA, and the claimant's appeal was never heard or answered. Substantively justified though the dismissal was, it was improperly executed. Reinstatement, notice pay, pension orders against the respondent and the requested certificate of service were refused; 12 months' compensation was held disproportionate. The court awarded 3 months' gross salary of Kshs. 77,760 as compensation for procedural unfairness, with no order on costs.

Key legal issues

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01

Whether termination was for a valid reason

Holding

Valid reason existed - the Claimant engaged in insider trading through family-owned entities in breach of the employer's 2004 circular.

Reasoning

The Internal Audit investigation confirmed the Claimant colluded with the Procurement Officer to win tenders irregularly. His and his brother's companies shared postal and physical addresses, bore deliberately similar names, and an unregistered entity appeared as supplier. The court held the Claimant could not have been unaware of his brother's dealings, and that the family entities circumvented the 2004 circular. Insider trading was deemed a corrosive employment offence justifying dismissal.

p. 4
02

Whether the termination procedure was fair

Holding

Procedurally unfair - no show-cause letter, no formal charges, no disciplinary hearing, and the appeal was not heard.

Reasoning

The Investigation Report was dated 27th July 2011 and the dismissal followed just 5 days later, with no disciplinary process on record. The Respondent's own pleadings confirmed no show-cause letter, no formal charges and no hearing as prescribed under Section 41 of the Employment Act 2007. The CBA required an opportunity to explain and to be accompanied by a shop steward; no disciplinary committee was convened. The appeal filed on 3rd August 2011 was never decided or even responded to.

p. 4
03

Quantum of compensation for procedural unfairness

Holding

3 months' gross salary (Kshs. 77,760) awarded, 12 months being disproportionate to the purely procedural wrong.

Reasoning

Because termination rested on solid and valid grounds but was executed improperly, the court limited compensation to 3 months' gross salary, rejecting the 12 months' claim as disproportionate to the nature of the procedural wrong.

p. 5

Legal principles established

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  • Termination may rest on valid substantive grounds yet still be unfair if the procedure under Section 41 of the Employment Act is not followed.
  • An employee dismissed for gross misconduct forfeits entitlement to notice pay.
  • Pension claims must be pursued against the Scheme Trustees, a separate legal entity from the employer.

Court orders

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  1. 1.A declaration that termination was procedurally unfair
  2. 2.The Respondent shall pay to the Claimant 3 months' gross salary computed at Kshs. 77,760 in compensation
  3. 3.No order on the costs

Authorities

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Legislation

  • Employment ActSection 41
  • Public Officers Ethics Act
Jurisdiction invoked
Jurisdiction over the dispute as an issue in employment between the claimant and the respondent under the Industrial Court's mandate (Employment Act 2007 referred to; no express constitutional provision cited)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Paul Litunya Abundo v University of Nairobi [2013] KEELRC 142 (KLR)", Case Analysis (2013). Cause Number 1709 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2013/142/eng@2013-09-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.