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ELRCPartially AllowedCause Number 339 of 2011 (consolidated with Cause Number 337 of 2011)· [2014] KEELRC 723 (KLR)

Kenneth Kimani Mburu & another v Kibe Muigai Holdings Limited [2014] KEELRC 723 (KLR)

Industrial Court of Kenya
29 January 2014
JRJames Rika
7,494 words in judgment
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The bottom line

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Kenya's Industrial Court ruled two 'consultants' were actually employees and awarded them over Kshs. 3.6 million after their employer stopped paying their salaries.

What this practically means

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Executive summary

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Two separate Claims (Causes 337 and 339 of 2011) by Saidi Emmerich and Kenneth Kimani Mburu against Kibe Muigai Holdings Limited, consolidated on 29th July 2013 with Cause 339 as the reference file, concerned alleged unlawful (constructive) termination. Both Claimants were engaged under agreements dated 10th October 2009 and 4th November 2009 respectively as Pre-opening Food and Beverage Manager and Pre-opening General Manager of the Respondent's hotel, and alleged they ceased working in late 2010 after the Respondent withheld their salaries from July 2010. They sought salary arrears, notice pay, 12 months' compensation, costs and interest. The Respondent maintained they were consultants on performance-based one-off engagements who misrepresented credentials, absconded, and failed to deliver outputs, and additionally sought return of its laptop. The Court framed three issues plus the laptop question. It held that, despite hybrid wording, the agreements were employment contracts: the Claimants were paid 'salary', provided tools of work and family health insurance, worked under the Respondent's control in roles integral to the business, on open-ended contracts. On constructive dismissal, the Court applied its Award in Maria Kagai Ligaga v Coca Cola, holding the withholding of about four months' salary was a repudiatory breach; the Claimants resigned promptly in response and were constructively dismissed, with no evidence supporting the Respondent's allegations of poor performance or gross misconduct. Both Claims succeeded. Mburu was awarded Kshs. 2,595,384 and Emmerich Kshs. 1,026,923, totalling Kshs. 3,622,307 payable within 40 days, including 5 months' salary each in damages rather than the 12 months sought. The Court also ordered an ICT professional to examine the Respondent's laptop before return, and made no order on costs and interest. Dated and delivered at Nairobi on 29th January 2014 by Rika J.

Key legal issues

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01

Whether the Claimants were employees or independent consultants

Holding

The agreements, though hybrid in wording, were employment contracts, not consultancy contracts.

Reasoning

The Court examined the substance of the relationships: the Claimants were paid 'salary', were provided tools of work (laptop, office, phone), received company benefits such as family health insurance, remained accountable to and under the control of the Respondent, and their roles as General Manager and Food and Beverage Manager were integral to the business. The contracts were open-ended rather than limited in duration. The absence of the words 'employer' and 'employee' on the face of the agreements did not prevent them from being valid employment contracts.

p. 9
02

Whether the Claimants were unfairly constructively dismissed

Holding

Both Claimants were constructively dismissed by the Respondent's failure to pay their salaries from July 2010.

Reasoning

The Respondent conceded salaries for July, August, September and part of October 2010 were unpaid. This was a fundamental, repudiatory breach. The Claimants resigned in response to the breach, within three months, without waiving it. There was no evidence of appraisals, warnings, disciplinary proceedings or termination letters to support the Respondent's allegations of poor performance or gross misconduct. Non-payment of salary also constitutes a wage offence under Section 17 of the Employment Act 2007.

p. 11
03

Whether the Claimants are entitled to arrears of salary, notice pay and damages

Holding

The Claimants were awarded arrears of salary, one month's notice pay and 5 months' salary each as damages for unfair constructive dismissal.

Reasoning

Having found employment and constructive dismissal, the Court invoked Section 15 of the repealed Part 3 of the Labour Institutions Act No. 12 of 2007 and Section 49 of the Employment Act 2007, the substantive laws in force at the time of dismissal. Each Claimant received notice pay, unpaid salary for July-September 2010, salary for 7 days worked in October 2010, and 5 months' salary as compensation, rather than the 12 months sought.

p. 11

Legal principles established

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  • In determining whether a contract is one of employment or consultancy, the Court is not bound by the parties' own characterisation of the contract but examines the substance of the relationship, including control, payment of salary, provision of tools of work, benefits, and whether the role is integral to the business.
  • Constructive dismissal occurs where an employee is forced to leave his job against his will because of the employer's conduct; the essential ingredients are employer breach of contract, a repudiatory breach, resignation in response to the breach, and no delay in resigning.
  • Non-payment of an employee's salary for about four months is a fundamental, repudiatory breach of the contract of employment entitling the employee to treat himself as constructively dismissed, and also constitutes a wage offence under Section 17 of the Employment Act.
  • The absence of a termination clause and leave clause does not invalidate an employment contract; basic minimum conditions under the Employment Act are read into every contract of employment.

Court orders

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  1. 1.A declaration that the Claimants were employees of the Respondent and were constructively dismissed
  2. 2.Kenneth Kimani Mburu to be paid one month salary in lieu of notice at Kshs. 280,000
  3. 3.Kenneth Kimani Mburu to be paid salary for July, August, September 2010 at Kshs. 840,000
  4. 4.Kenneth Kimani Mburu to be paid salary for 7 days worked in October 2010 at Kshs. 75,384
  5. 5.Kenneth Kimani Mburu to be paid 5 months' salary in damages for unfair constructive dismissal at Kshs. 1,400,000 (total Kshs. 2,595,384)
  6. 6.Saidi Emmerich to be paid one month salary in lieu of notice at Kshs. 100,000
  7. 7.Saidi Emmerich to be paid salary for July, August, September 2010 at Kshs. 300,000
  8. 8.Saidi Emmerich to be paid salary for 7 days worked in October 2010 at Kshs. 26,923
  9. 9.Saidi Emmerich to be paid 5 months' salary in damages for unfair constructive dismissal at Kshs. 600,000 (total Kshs. 1,026,923)
  10. 10.The total amount of Kshs. 3,622,307 to be paid by the Respondent to the Claimants within 40 days of delivery of the Award
  11. 11.The Advocates to agree on an ICT professional to examine the Respondent's laptop with a view to handing the laptop over to the Respondent's Advocates, within the same period of 40 days

Authorities

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Legislation

  • Employment ActSection 2
  • Employment ActSection 10
  • Employment ActSections 17
  • Employment ActSection 49
  • Employment ActPart 4
  • Employment ActPart 5 and 6
  • Labour Institutions ActSection 15 of the repealed Part 3, Number 12 of 2007
  • English Employment Rights Act1996
  • South African Labour Relations ActNumber 66 of 1995

Cases cited (1)

  • Maria Kagai Ligaga v. Coca Cola East and Central Africa Limited
    Cause Number 611 [N] of 2009 [unreported]
Jurisdiction invoked
Jurisdiction of the Industrial Court over employment and labour relations disputes (Labour Institutions Act); Award on an issue in dispute of unlawful termination

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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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, "Kenneth Kimani Mburu & another v Kibe Muigai Holdings Limited [2014] KEELRC 723 (KLR)", Case Analysis (2014). Cause Number 339 of 2011 (consolidated with Cause Number 337 of 2011). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/723/eng@2014-01-29

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