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ELRCDismissedCause No. 2090 of 2012· [2016] KEELRC 1548 (KLR)

Michael Otieno Auma v Egis Becom Kenya Limited [2016] KEELRC 1548 (KLR)

Employment and Labour Relations Court of Kenya
8 March 2016
HWHellen S. Wasilwa
2,074 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled that when a fixed-term contract expires and the employer simply declines to renew it, that is neither termination nor redundancy — so no compensation is owed.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent as a driver from 30 January 2008 at a monthly salary of Kshs. 21,000/=, sued for damages for alleged unlawful termination. He claimed salary arrears of Kshs. 9,000/= per month for the period January 2008 to February 2009 when he said his appointment letter was withheld; house, medical, leave and overtime allowances; service pay for 2008-2009; and compensation for redundancy, contending that his termination on 23 May 2012 was motivated by the malice of a team leader against whom he had earlier complained. The Respondent maintained that the Claimant's fixed term contract lapsed by effluxion of time on 30 June 2012 after due notice of non-renewal, and that all allowances were consolidated into his gross salary. The court, disposing of the matter on written submissions, framed two issues: whether the Claimant was terminated or his contract expired, and whether he was entitled to the prayers sought. The court found the Claimant was on successive fixed term contracts, the last expiring 30 June 2012, and that non-renewal was neither termination nor redundancy, the reason for non-renewal being immaterial. It found no salary underpayment on the payslips, held that house, medical, leave and overtime allowances were consolidated in the contract consistent with Section 31 of the Employment Act, and that NSSF membership barred service pay under Section 35(6). The claim was dismissed with no orders as to costs.

Key legal issues

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01

Whether non-renewal of a fixed term contract amounts to unlawful termination or redundancy

Holding

It does not; the contract simply expired by effluxion of time and the Respondent declined to renew it, so there was neither termination nor redundancy.

Reasoning

The court found on the record successive fixed term contracts commencing 30.1.2008, renewed on 1.1.2010 and again on 13.12.2011 for six months to 30.6.2012. By a letter dated 23.5.2012 the Claimant was notified the contract would not be renewed. The court held that whatever motive prompted non-renewal was immaterial because the contract simply came to an end; the Claimant's assertion of termination or redundancy was untrue. The Court did not need to examine the alleged malice of the team leader.

p. 4
02

Whether the Claimant was entitled to salary arrears, house, medical, leave and overtime allowances

Holding

No; the payslip showed no underpayment and the contracts consolidated all allowances into gross salary.

Reasoning

The appointment letter dated 30.1.2008 fixed salary at 21,000/= consolidated with no overtime claims, and the renewed contracts expressly consolidated rent/housing allowance. The Claimant's January 2008 payslip showed gross pay of 27,000/=, above the contractual figure, negating the alleged 9,000/= monthly underpayment. The court applied Section 31(2)(a) of the Employment Act, which excludes the housing obligation where the contract consolidates a rent element into basic salary, and found medical, leave and overtime claims equally covered.

p. 4
03

Whether the Claimant was entitled to service pay

Holding

No; he was paid service pay at exit and was an NSSF member for the disputed period, disentitling him under Section 35(6).

Reasoning

The court noted that at exit the Claimant was paid service pay of 15 days for each year worked. For the years 2008-2009 for which he claimed service pay, the Claimant was registered with NSSF. Under Section 35(6) of the Employment Act, service pay is not payable where an employee is a member of a registered pension or provident fund scheme such as NSSF, so the claim failed on that statutory ground.

p. 4

Legal principles established

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  • Where a fixed term contract expires and the employer declines to renew it, the employee is not terminated or declared redundant, and the reason for non-renewal is immaterial.
  • A contractual provision consolidating wages to include a housing element excludes the employer's statutory obligation to provide or pay for housing under Section 31(2) of the Employment Act.
  • An employee who is a member of NSSF is not entitled to service pay under Section 35(6) of the Employment Act.

Court orders

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  1. 1.The claim is dismissed accordingly
  2. 2.There are no orders as to costs

Authorities

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Legislation

  • Employment Act, 2007Section 37
  • Employment Act, 2007Section 31(1) and (2)
  • Employment Act, 2007Section 35(6)
  • Employment Act, 2007Section 40(1)(g)
  • Employment Act, 2007Section 41

Cases cited (3)

  • David Getare Nyangau Vs Houseman General Contractors Limited
    (2013) eKLR
  • Isaiah Makokha Vs Basco Products (K) Limited
    Case No. 206 of 2013
  • Godfrey Kisemei Mutisya Vs USIU Africa
    Case No. 1667 of 2014
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007

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, "Michael Otieno Auma v Egis Becom Kenya Limited [2016] KEELRC 1548 (KLR)", Case Analysis (2016). Cause No. 2090 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/1548/eng@2016-03-08

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