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ELRCPartially AllowedCause No 2281 of 2014· [2016] KEELRC 1681 (KLR)

George Ndutire Karugo v Kenya Orient Insurance Limited [2016] KEELRC 1681 (KLR)

Employment and Labour Relations Court
19 February 2016
888 words in judgment
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The bottom line

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Kenyan employers cannot lawfully fire staff without a valid reason, even if the employment contract says they can.

What this practically means

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Executive summary

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The claimant, George Ndutire Karugo, was employed by Kenya Orient Insurance Limited as an Internal Assessor from 10th April 2012 until his employment was terminated by letter dated 16th May 2014. He filed a memorandum of claim on 24th December 2014 seeking a declaration that his termination was unlawful and unfair, damages equivalent to twelve months' salary (Kshs.1,800,000), a certificate of service, costs and interest. The respondent admitted the employment but defended the termination on the strength of Clause 7 of the appointment letter, which permitted termination on one month's notice or pay in lieu without assigning reasons. The respondent filed a memorandum of response but did not attend the hearing, and the claim was heard ex parte on 3rd December 2015. The court, Linnet Ndolo J, framed two issues: whether the termination was lawful and fair, and whether the claimant was entitled to the remedies sought. The court found no reason was stated in the termination letter and held that Section 43 of the Employment Act, 2007 requires a valid reason for termination irrespective of contractual provisions, rendering any derogating contract clause null and void. The termination was therefore substantively unfair. Further, no evidence showed the claimant was given an opportunity to defend himself as required by Section 41, making the termination procedurally unfair as well. The court awarded six months' salary, Kshs.900,000, in compensation, considering the claimant's length of service and the respondent's conduct. The certificate of service claim was abandoned during trial. Costs were awarded to the claimant, with interest on the award at court rates from the date of the award until payment in full.

Key legal issues

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01

Whether termination without any stated reason, relying on a contractual clause permitting termination without cause, is lawful

Holding

Unlawful and unfair for want of substantive justification; contractual clauses permitting termination without reason cannot override the statutory requirement of a valid reason under Section 43

Reasoning

The termination letter gave no reason for terminating the employment. The Respondent relied on Clause 7 of the letter of appointment permitting termination on one month's notice or pay in lieu without reasons. The Court held this reflected the old law; Section 43 of the Employment Act, 2007 now mandates a valid reason regardless of contract, and any contract derogating from the statute is null and void to that extent.

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02

Whether the termination was procedurally fair

Holding

Procedurally unfair as no evidence showed the Claimant was given an opportunity to defend himself as required by Section 41

Reasoning

Section 41 of the Employment Act, 2007 mandates that an employee facing disciplinary action be given an adequate opportunity to be heard and defend themselves. No evidence was presented that the Claimant was afforded such an opportunity before termination, so the termination was procedurally unfair in addition to lacking substantive justification.

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What remedies are due

Holding

Six months' salary as compensation, Kshs.900,000, plus interest and costs

Reasoning

The Court adopted the uncontroverted salary figures presented by the Claimant and, considering his length of service and the Respondent's conduct in the termination, awarded six months' salary in compensation rather than the twelve months claimed. The claim for certificate of service was abandoned at trial.

p. 3

Legal principles established

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  • Section 43 of the Employment Act, 2007 requires an employer to have a valid reason for termination irrespective of the contractual terms, and a contract derogating from the statute is void to the extent of the derogation
  • Section 41 of the Employment Act, 2007 requires an employee facing disciplinary action be given an adequate opportunity to defend themselves; failure renders the termination procedurally unfair

Court orders

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  1. 1.Respondent to pay the Claimant Kshs.900,000.00 being the equivalent of six (6) months' salary as compensation for unlawful and unfair termination
  2. 2.The award amount to attract interest at court rates from the date of the award until payment in full
  3. 3.Respondent to pay the costs of the case

Authorities

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Legislation

  • Employment Act, 2007Section 43
  • Employment Act, 2007Section 41
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under Article 162(2) of the Constitution (as the specialised court hearing employment claims); claim brought 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, "George Ndutire Karugo v Kenya Orient Insurance Limited [2016] KEELRC 1681 (KLR)", Case Analysis (2016). Cause No 2281 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/1681/eng@2016-02-19

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