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ELRCPartially AllowedCause No 543 of 2011· [2014] KEELRC 852 (KLR)

Teresia N. Peter v Kitui Teachers Savings & Credit Co-Operative Society Ltd [2014] KEELRC 852 (KLR)

Industrial Court of Kenya
20 February 2014
LNLinnet Ndolo
2,131 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled an employer can have a valid reason to fire you, but must still hold a fair hearing or pay compensation.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent Sacco since 1986 and risen to Loans Clerk earning Kshs. 47,056 monthly, was suspended on 17th November 2010 over alleged indebtedness to two third parties totalling about Kshs. 2 million, contrary to the Respondent's Code of Conduct and Ethics. Her suspension was renewed and, on 22nd December 2010, she was summarily dismissed without a formal disciplinary hearing. She claimed a declaration of unlawful termination, reinstatement or alternatively compensation, notice pay, service pay, leave pay, unpaid salary, salary up to retirement, and a certificate of service. The Court found the dismissal substantively justified: the correspondence between the parties showed a common understanding of the indebtedness problem, and the Court rejected her claim of coercion in writing an apologetic admission letter, holding she was in breach of the Code of Conduct. However, the process fell below the procedural fairness threshold in Section 41 of the Employment Act, as no proper disciplinary hearing was conducted; the Respondent wrongly treated suspension as a disciplinary action. The Court followed Nazareno Kariuki v Feed the Children Kenya on the need for clarity as to when disciplinary proceedings commence. Reinstatement and future salary were refused as exceptional specific-performance remedies. The Court awarded 8 months' salary as compensation (Kshs. 336,224) based on an assessed monthly salary of Kshs. 42,028 after discounting overtime, plus one month's notice pay, salary for November and 22 days of December 2010, and 20 days' leave pay, totalling Kshs. 479,120, with a certificate of service, costs to the Claimant, and statutory deductions under Section 49(2).

Key legal issues

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01

Substantive justification for the summary dismissal

Holding

The Claimant's breach of the Code of Conduct and Ethics through indebtedness gave the Respondent a valid reason to terminate her employment

Reasoning

The correspondence between the parties showed a common understanding that the Claimant's indebtedness was affecting the employment relationship. The Court rejected her claim that she was coerced into writing the admission letter. Her financial difficulties breached Article 7.1.8(ii) of the Code of Conduct and Ethics, so the dismissal was substantively justified.

p. 4
02

Procedural fairness of the dismissal

Holding

The process fell below the threshold of procedural fairness set under Section 41 of the Employment Act; termination was unfair for want of due procedure

Reasoning

Although some discussions and correspondence took place, the Respondent did not hold a disciplinary hearing explaining the reasons and allowing the employee a representative as required by Section 41. The Respondent treated suspension as a disciplinary action and then imposed summary dismissal when it failed, misconstruing the nature of suspension.

p. 4
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Nature of suspension in employment law

Holding

Suspension is a neutral act, not a disciplinary action; an employee on suspension remains innocent until proved otherwise and has a legitimate expectation to respond to adverse findings

Reasoning

The Court distinguished suspension from interdiction, holding that suspension allows the employer to conduct investigations and should not be unduly prolonged. The Respondent erred in using suspension as a disciplinary remedy, then dismissing when it did not work.

p. 4
04

Quantum of compensation and assessment of salary

Holding

The Court awarded 8 months' salary as compensation, using a monthly salary of Kshs. 42,028 after discounting overtime of Kshs. 5,028

Reasoning

The Court found the actual salary in contention, adopted the February 2010 payslip less overtime, and awarded 8 months' compensation for the unfair procedure, plus notice pay, earned salary, and uncontroverted leave pay, subject to statutory deductions under Section 49(2).

p. 5

Legal principles established

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  • An employer must prove the reason or reasons for termination, failing which the termination is deemed unfair
  • Suspension is neither a disciplinary action nor a stage within the disciplinary procedure; it is a neutral act to enable investigations
  • An employer must clearly define when a disciplinary process commences so that the employee is not left guessing

Court orders

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  1. 1.Award of 8 months' salary in compensation for unfair termination (Kshs. 336,224)
  2. 2.One month's salary in lieu of notice (Kshs. 42,028)
  3. 3.Salary for November 2010 and 22 days in December 2010 (Kshs. 72,849)
  4. 4.Leave pay for 20 days (Kshs. 28,019)
  5. 5.Total award of Kshs. 479,120
  6. 6.Respondent directed to issue a certificate of service to the Claimant
  7. 7.Respondent to pay the costs of the case
  8. 8.Award subject to statutory deductions in accordance with Section 49(2) of the Employment Act, 2007

Authorities

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Legislation

  • Employment Act, 2007Section 43(1) and (2)
  • Employment Act, 2007Section 41(a)-(c)
  • Employment Act, 2007Section 45
  • Employment Act, 2007Section 12
  • Employment Act, 2007Section 49(2)

Cases cited (1)

  • Nazareno Kariuki Vs Feed the Children Kenya
    [2013] eKLR
Jurisdiction invoked
Employment and labour relations jurisdiction of the Industrial Court (Cause No 543 of 2011, claim for unlawful dismissal)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (5)

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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, "Teresia N. Peter v Kitui Teachers Savings & Credit Co-Operative Society Ltd [2014] KEELRC 852 (KLR)", Case Analysis (2014). Cause No 543 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/852/eng@2014-02-20

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