David Mbugua v Keroche Breweries Ltd [2015] KEELRC 1443 (KLR)
The bottom line
#What this practically means
#Executive summary
#Key legal issues
#Whether the salary reduction from Kshs 150,000/- to Kshs 120,000/- was an unlawful variation of the contract
There was no unlawful variation; the increase to Kshs 150,000/- was an error. The contract stipulated Kshs 120,000/- consolidated and the Claimant produced no document communicating an increase, nor disclosed who effected it; he was himself in charge of the payroll department.
Remuneration is an essential term of the employment contract and variation requires party consent. The Claimant's contract stated a consolidated salary of Kshs 120,000/-. He was paid Kshs 150,000/- for only a few months, produced no written communication of any increase, and could not say who effected it. The Respondent's witness explained it was an error paid once and never recovered, and the Claimant headed the payroll department. The Court found the increase unusual and erroneous.
Whether the termination was procedurally fair
The termination was procedurally unfair. The Claimant was terminated orally by a phone call without prior notification, a hearing, reasons or a termination letter, and the Respondent failed to discharge its burden of demonstrating procedural fairness.
Section 41 of the Employment Act, 2007 introduced a fundamental shift making it mandatory for an employer to hear an employee before terminating on grounds of misconduct, performance or incapacity. An employee must be informed of allegations and afforded an opportunity to be heard. The Respondent did not disclose who informed the Claimant of the allegations, that dismissal was under consideration, or who sat or chaired a hearing. The employer's burden under sections 43 and 45 was not discharged.
Validity of contractual termination clauses without reasons in light of the Employment Act, 2007
A contract clause permitting termination on notice or pay in lieu without lawful cause is inconsistent with the minimum statutory protections of the Act; pre-2007 authorities must be applied cautiously.
Sections 43 and 45 oblige an employer to prove the reasons for dismissal and that they are valid and fair. The Act lays down minimum statutory rights. Responding to the Respondent's submission that the Pandya Memorial Hospital interpretation was unfair to employers, the Court held that assessing the wisdom of the legislature is not a judicial function absent inconsistency with the supreme law.
Appropriate relief for procedurally unfair termination
The Court awarded the equivalent of 9 months gross wages (Kshs 1,080,000/-) under section 49(4), based on the 9 months remaining of the 2-year fixed term contract.
Compensation under section 49(4) is discretionary and may not exceed 12 months gross wages. The Claimant was on a 2-year fixed term contract with a reasonable expectation of serving the full term, with 9 months remaining when terminated. Considering the expected remaining duration of the contract, the Court assessed compensation at 9 months gross wages, Kshs 1,080,000/-.
Legal principles established
#- Variation of an essential term of an employment contract requires the consent of the parties to be lawful
- Section 41 of the Employment Act, 2007 makes a hearing before termination mandatory and an integral part of the employment relationship
- A contractual provision for termination on notice or pay in lieu of notice without lawful cause is inconsistent with the minimum statutory protections given to employees under the Employment Act, 2007
- It is not the role of courts to assess the wisdom of legislation absent inconsistency with the supreme law
- Authorities on employment contracts predating the Employment Act, 2007 must be applied with caution and circumspection
Court orders
#- 1.Respondent to pay the Claimant 9 months wages as compensation assessed at Kshs 1,080,000/-
- 2.The claim for salary variation is dismissed
- 3.Claimant to have costs of the Cause
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act, 2007 and the employment relationship between the parties); no specific constitutional provision cited
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "David Mbugua v Keroche Breweries Ltd [2015] KEELRC 1443 (KLR)", Case Analysis (2015). Cause No 59 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2015/1443/eng@2015-02-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.