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ELRCDismissedCause No. 1173 of 2014· [2018] KEELRC 1039 (KLR)

Simon Njuguna Kago v Pan Africa Life Assurance Limited [2018] KEELRC 1039 (KLR)

Employment and Labour Relations Court
26 September 2018
HWHellen S. Wasilwa
1,675 words in judgment
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The bottom line

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Kenya's Employment Court ruled an insurance agent was a contractor, not an employee, so it had no jurisdiction to hear his unfair termination claim.

What this practically means

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Executive summary

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The claimant, engaged by the respondent insurer on 14th July 1999, sued for damages for wrongful and unlawful termination, a declaration that attempts to declare him redundant were wrongful, reinstatement, and payment of accrued salary and commission. He asserted he was employed on a gross consolidated salary of Kshs.115,761.00 with out-patient medical benefits and that the respondent breached the Employment Act's provisions on termination and redundancy. The respondent admitted the claimant acted as its agent but denied any contract of employment, contending the relationship was governed by contracts for service; that the claimant was an independent contractor whose commissions attracted withholding tax rather than PAYE; and that the court therefore lacked jurisdiction. The respondent relied on the Mombasa Industrial Court decision in Elijah Moranga v Irene Onderi. The court framed three issues: whether an employment relationship existed, and if so whether there were valid reasons for dismissal and whether due process was followed. Examining the appointment letter and the successive agency contracts of 2005 and 2013 - the latter expressly designating the agent an independent contractor not entitled to employee benefits - the court found the relationship was purely one of agency, not employment. Consequently, the court held it lacked jurisdiction under Section 12 of the Employment and Labour Relations Court Act, declined to determine the remaining issues, dismissed the claim, and made no order as to costs.

Key legal issues

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01

Whether an employment relationship existed between the claimant insurance agent and the respondent insurer

Holding

No employment relationship existed; the claimant was an independent agent/contractor.

Reasoning

The court examined the appointment letter of 14th July 1999 and subsequent agency contracts of 2005 and 2013. The contracts expressly described the relationship as agency and, in the 2013 contract, expressly stated the agent was an independent contractor not entitled to employee benefits. Payment was by commission on sales, and withholding tax rather than PAYE was deducted. The court relied on Black's Law Dictionary's definition of an independent contractor and concluded the claimant was a non-servant agent, not an employee.

p. 3
02

Whether the court had jurisdiction to determine the claim

Holding

The court lacked jurisdiction under Section 12 of the Employment and Labour Relations Court Act because the dispute did not arise out of an employment relationship.

Reasoning

Having found that the claimant was an independent contractor and not an employee, the court held that its jurisdiction under Section 12 of the ELRC Act is limited to matters arising out of an employment relationship. Since no such relationship existed, the court declined to consider the remaining issues on validity of termination and due process, and dismissed the claim.

p. 3

Legal principles established

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  • The ELRC's jurisdiction under Section 12 is restricted to disputes arising out of an employment relationship; where none exists, the court lacks jurisdiction.
  • A life assurance agent engaged under an agency contract with express independent-contractor clauses is not an employee of the insurer.

Court orders

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  1. 1.The claim is dismissed for lack of jurisdiction.
  2. 2.No order as to costs - each party to bear their own costs.

Authorities

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Legislation

  • Employment ActNo. 11 of 2007 (generally, on mode of termination and redundancy)
  • Employment and Labour Relations Court ActSection 12

Cases cited (1)

  • Elijah Moranga Vs Irene Onderi
    Cause No. 363 of 2013
Jurisdiction invoked
Section 12 of the Employment and Labour Relations Court Act (jurisdiction confined to disputes arising out of an employment relationship)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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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, "Simon Njuguna Kago v Pan Africa Life Assurance Limited [2018] KEELRC 1039 (KLR)", Case Analysis (2018). Cause No. 1173 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1039/eng@2018-09-26

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