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ELRCPartially AllowedCause stated in statement of claim filed 14.03.2018 (number not stated in judgment)· [2018] KEELRC 1443 (KLR)

Jadiah M. Mwarania v Kenya Reinsurance Corporation Limited [2018] KEELRC 1443 (KLR)

Employment and Labour Relations Court of Kenya
20 July 2018
BOByram Ongaya
6,815 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~27 min to read original · ~4 min brief

The bottom line

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A Kenyan court reinstated a sacked CEO, ruling that an employer cannot abandon a disciplinary process midway and terminate through a contract clause instead.

What this practically means

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Executive summary

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The claimant, Managing Director of Kenya Reinsurance Corporation since 2012 with over 27.5 years of service and a five-year contract running to 11.04.2021, was summarily terminated on 12.03.2018 following allegations of management lapses drawn from a PricewaterhouseCoopers audit report. He sued for a declaration that the termination was unfair, reinstatement, an injunction, back salary, damages and costs. The Court found the termination procedurally unfair: the claimant replied to the show-cause letters but, after requesting an adjournment on grounds of illness, was never accorded the hearing envisaged by section 41 of the Employment Act. The full Board dispensed with notice and terminated him the same morning it received the HR Committee's report. The Court also found no valid reasons under sections 43 and 45: the PWC report was only a draft, the A.M. Best downgrading was organisational, the allegation of involving external parties was raised for the first time in the termination letter, and the assertion of loss of trust and confidence was empty. The Court rejected the respondent's argument that termination under contractual clause 28 with pay in lieu of notice was lawful, holding that an employer who initiates a disciplinary process cannot whimsically abort it, as that amounts to an unfair labour practice under Article 41 of the Constitution. Applying section 49(4), the Court ordered reinstatement rather than compensation, citing the preserved vacancy, the claimant's unblemished record, the scar of unanswered allegations, and public interest given the respondent's 60% state shareholding. Judgment was entered for the claimant with reinstatement, injunction, back salary with interest if unpaid by 01.09.2018, and costs.

Key legal issues

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01

Procedural fairness of the termination under section 41 of the Employment Act

Holding

Termination was procedurally unfair because the claimant was never accorded the hearing envisaged by section 41; his request for adjournment due to illness was granted by the HR Committee but the Board nonetheless terminated him without a hearing

Reasoning

The claimant replied to the show-cause letters and requested more time, and could not attend the hearing on 09.03.2018 due to illness. The Chairperson of the HR Committee sympathised and the Committee resolved to report to the full Board for direction. The full Board on 12.03.2018 instead terminated him immediately. The Court found the requests had been granted and that no hearing on the allegations took place before termination, violating section 41.

p. 4
02

Valid reasons for termination under sections 43 and 45 of the Employment Act

Holding

The respondent failed to establish valid or genuine reasons; extraneous allegations were introduced in the termination letter and loss of trust and confidence was an empty assertion

Reasoning

The termination letter introduced allegations never put in the show-cause notice, such as involving external parties, which the claimant had no chance to answer. The PWC audit report was only a draft; the A.M. Best downgrading was organisational and not shown attributable to the claimant; the claimant had explained the acting-capacity confirmations and the salary increment letter; profits had been reported. Loss of trust and confidence therefore was unsubstantiated.

p. 5
03

Whether termination under contractual clause 28 with pay in lieu of notice cures the unfairness

Holding

No: once disciplinary allegations were made, the employer was bound to conclude the disciplinary process under sections 41, 43 and 45 and could not invoke the termination clause unilaterally

Reasoning

The respondent argued the contract was terminated under clause 28 with three months' pay in lieu of notice. The Court accepted the general contract principles cited but found no agreement to separate independently of the original contract. Having raised misconduct allegations, the respondent was bound to complete the disciplinary procedure; a unilateral abort leaves a scar of unanswered allegations and violates Article 41 of the Constitution.

p. 5
04

Whether reinstatement should be granted instead of compensation

Holding

Reinstatement was granted: the claimant did not contribute to the termination, the vacancy was preserved by court order, and public interest in a 60% state-owned body favoured reinstatement over payment of about Kshs.22 million

Reasoning

Weighing section 49(4) factors, the Court noted the claimant's 27.5 years of service, willingness to complete his 37-month unexpired term, the preserved vacancy, and the scar of unanswered allegations on his professional reputation. The respondent is a public body with 60% state shareholding, and Article 232(1)(b) on economical use of resources, plus Article 236 protection of public officers, favoured reinstatement rather than a compensation payment of about Kshs.22,362,000.

p. 7

Legal principles established

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  • Once an employer initiates a disciplinary process it must conclude it; it cannot whimsically abort it by invoking a contractual termination clause with pay in lieu of notice
  • Unilaterally aborting a disciplinary process leaves unanswered allegations that scar the employee's record and amounts to an unfair labour practice under Article 41 of the Constitution
  • An employer who cannot establish gross misconduct or poor performance cannot fairly terminate by asserting loss of trust and confidence
  • A soft landing or agreed separation must be shown to have been mutually agreed; it cannot be imposed unilaterally by the employer
  • Reinstatement is an exceptional remedy requiring serious consideration of section 49(4) factors before it is ordered

Court orders

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  1. 1.Declaration that the claimant's termination of his contract of employment was unfair, unjustified, illegal, null and void
  2. 2.Reinstatement of the claimant effective 12.03.2018 to his employment as Managing Director of the respondent without loss of benefits, the respondent, its Board or agents to forthwith permit him to resume duty
  3. 3.Consequential injunction restraining the Board of Directors of the respondent from interfering with or sabotaging the claimant's terms of employment in force
  4. 4.Salary for the entire period the claimant has been out of employment, to be paid by 01.09.2018 failing which interest at Court rates from the date of judgment till full payment
  5. 5.The respondent to pay the claimant's costs of the suit

Authorities

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Legislation

  • Employment Act, 2007sections 41, 43, 45, 49, 49(3), 49(4)(a)-(m), 50
  • Constitution of Kenya, 2010Articles 41, 155(3)(a), 158(3), 232(1)(b), 234(2)(a), 234(3), 236, 252(1)
  • Public Service Commission Act, 2017sections 2 and 3
  • Kenya Defence Forces Actsection 28

Cases cited (6)

  • National Cereals and Produce Board –Versus- John Kirui Tongorei
    [2017]eKLR
  • William Barasa Obutiti –Versus- Mumias Sugar Company Ltd
    [2004]eKLR
  • National Bank of Kenya Ltd –Versus- Hamida Bana & 103 Others
    [2017]eKLR
  • Malachi Ochieng Pire – Versus- Rift Valley Agencies, Industrial Cause No. 22 of 2013 at Nakuru
    [2013]eKLR
  • Kenya Power & Lighting Company Limited –Versus- Aggrey Lukorito Wasike
    [2017]eKLR
  • New Zealand Educational Institute –versus- Board of Trustees of Auckland Normal Intermediate School
    [1994]2 ERNZ 414 CA
Jurisdiction invoked
Employment and labour relations jurisdiction under Article 162(2) of the Constitution and the Employment Act, 2007 (as invoked in the statement of claim); judgment does not expressly cite a jurisdictional article

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (7)

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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, "Jadiah M. Mwarania v Kenya Reinsurance Corporation Limited [2018] KEELRC 1443 (KLR)", Case Analysis (2018). Cause stated in statement of claim filed 14.03.2018 (number not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1443/eng@2018-07-20

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