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ELRCPartially AllowedCause Number 1357 of 2010· [2014] KEELRC 685 (KLR)

Samuel Gachomo Chege v Jesse Kangethe Karuma & another [2014] KEELRC 685 (KLR)

Industrial Court at Nairobi
21 January 2014
1,836 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~7 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled a pub manager was an employee, not a partner, and was owed unpaid salary and severance despite the business closing down.

What this practically means

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Executive summary

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The Industrial Court at Nairobi, presided over by Rika J, determined a claim of unfair and unlawful termination brought by Samuel Gachomo Chege against Jesse Kangethe Karuma and Mr. Thiongo trading as Roof Top. The Claimant alleged he was employed as Manager of the Roof Top pub in Thika at a monthly salary of Kshs. 14,000 and terminated without reason or notice; he claimed unpaid salaries of Kshs. 42,540, severance pay, monthly salary deductions totalling Kshs. 28,000, house rent allowance, and 12 months' compensation for unfair termination. The Respondents denied any contract of employment, contending the Claimant was a business partner who ran the business, paid himself and other employees, and whose mismanagement caused the business to collapse. The Court held the Claimant was an employee within Section 2 of the Employment Act 2007: despite the managerial authority donated to him, real decision-making power, control of the tools of trade and finances remained with the Respondents. The Court awarded notice pay of Kshs. 15,000, unpaid salaries of Kshs. 42,540, severance pay of Kshs. 11,250, and the Kshs. 28,000 deductions, but allowed the Respondents to deduct the Kshs. 17,732 lost under the Claimant's management, leaving a net sum of Kshs. 79,058 payable within 30 days. The house rent allowance claim was not established, and the unfair termination claim was rejected because the closure of the business provided a substantive economic reason for the termination to which the Claimant, as Manager, contributed. There was no order on costs. The Award is dated and delivered at Nairobi, 21st January 2014.

Key legal issues

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01

Employment relationship versus business partnership

Holding

The Claimant was an employee within Section 2 of the Employment Act 2007, not a business partner

Reasoning

Jesse owned the business, paid or authorised payment of the Claimant's salary, controlled the business, assigned banking duties and determined employee pay rates. The managerial authority donated to the Claimant did not convert him into a partner or co-employer; real decision-making power, tools of trade and finances remained with the Respondents, to whom the Claimant remained answerable.

p. 3
02

Entitlement to unpaid salaries

Holding

Granted as prayed - Kshs. 42,540 for April, May and June 2010

Reasoning

The Respondents did not deny in evidence that the salaries were unpaid; they merely alleged poor management. Salary is an invariable form of pay owed by the employer, not dependent on business performance. The Respondents were in all aspects the employers of the Claimant.

p. 3
03

Unfair termination and compensation

Holding

Rejected; termination was justified on account of closure of business

Reasoning

The business collapsed or was taken over and rebranded. The Claimant, as Manager with great latitude, contributed to the collapse and was said to have advised closure, which he did not challenge. There was a substantive economic reason for termination, making it difficult to characterise the termination as unfair.

p. 3
04

House rent allowance

Holding

Not established

Reasoning

The Claimant did not dislodge the Respondents' explanation that he was afforded a room within the business. Such accommodation is a common arrangement in the hotels and catering industry, and an employee enjoying such accommodation has no reason to demand house rent allowance.

p. 3

Legal principles established

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  • It is the duty of the employer to pay salary to the employee, and this duty is not dependent on the performance of the business
  • Conferral of management authority (recruiting, supervising, paying employees) on a worker does not make that worker a business partner or co-employer where real control, tools of trade and finances remain with the owners
  • Where a business collapses and the position of Manager is rendered redundant, the employee is entitled to severance pay
  • An employer may deduct a proven loss occasioned to the business under an employee's management from that employee's final dues

Court orders

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  1. 1.Declaration that termination was on account of closure of business and justified
  2. 2.Respondents to pay one month salary in lieu of notice at Kshs. 15,000; unpaid salaries at Kshs. 42,540; severance pay at Kshs. 11,250; and deductions made from the Claimant's salary of Kshs. 28,000
  3. 3.Respondents entitled to deduct the loss of Kshs. 17,732 occasioned to the business under the Claimant's management
  4. 4.Total sum of Kshs. 79,058 to be paid to the Claimant by the Respondents within 30 days of delivery of the Award
  5. 5.No order on costs

Authorities

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Legislation

  • Employment ActSection 2
Jurisdiction invoked
Jurisdiction under the Employment Act 2007; dispute of unfair and unlawful termination filed under the Industrial Court's employment jurisdiction

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Samuel Gachomo Chege v Jesse Kangethe Karuma & another [2014] KEELRC 685 (KLR)", Case Analysis (2014). Cause Number 1357 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/685/eng@2014-01-21

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