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ELRCPartially AllowedCause No 1236 of 2013· [2019] KEELRC 691 (KLR)

Nasieku Tarayia v Agricultural Finance Corporation [2019] KEELRC 691 (KLR)

Employment and Labour Relations Court
8 October 2019
2,949 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 awarded a former executive over Kshs 12 million because her employer ignored its own stricter disciplinary rules when dismissing her.

What this practically means

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Executive summary

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The Claimant, employed by the Agricultural Finance Corporation from January 1989 and rising to Deputy Managing Director, sued for unfair termination, discrimination and breach of contract following her dismissal on 24 November 2010 after disciplinary proceedings founded on an Efficiency Monitoring Unit investigation. The court condensed the dispute into discrimination, procedural fairness, substantive fairness and remedies. On discrimination, it could not find in her favour because her appointment as Deputy Managing Director was made by the Minister for Agriculture outside the Board and the formal establishment. On procedural fairness, the court held that sections 35(1), 41 and 47(5) of the Employment Act, 2007 set minimum standards, and that the Respondent's own Staff Policy and Regulations Manual with better protections had to be strictly followed. The Claimant was given less than two days to respond to a show cause letter and was never given the investigation report, so the process fell short of statutory and contractual requirements. On substantive fairness, the two allegations - failure to advise on the Elgon View plots tender and concealment of a loan settlement offer - were not proved: the Board had exonerated her on the tender, and the loan negotiations were conducted directly with the Managing Director without her involvement. The court declared the termination unfair, found she had been hounded out by a cartel, declined reinstatement as over three years had elapsed, refused severance, golden handshake, relocation allowance and additional voluntary contribution, and awarded pay in lieu of notice, unpaid salaries, pension contributions, surrender value, accrued leave and 12 months' gross salary compensation, totalling Kshs 12,203,429/75 subject to statutory deductions, with costs denied for late filing of submissions.

Key legal issues

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01

Whether the Claimant was discriminated against

Holding

The Court could not find discrimination given the circumstances of her appointment as Deputy Managing Director by the Minister

Reasoning

The Claimant was appointed Deputy Managing Director by the Minister for Agriculture, not by the Respondent's Board, and the position did not exist in the Respondent's formal establishment. Without proof that the Minister could bypass the Board and the establishing law, the Court could not conclude she was discriminated against through the restructuring.

p. 1
02

Procedural fairness of the termination

Holding

The process fell short of contractual and statutory requirements

Reasoning

The Claimant was given less than two days to respond to a show cause letter when the Respondent's Disciplinary Code allowed seven days, and she was never furnished with the Efficiency Monitoring Unit investigation report on which the process was founded. As a senior manager entitled to the Manual's protections, the process was procedurally unfair.

p. 2
03

Substantive fairness - failure to advise on Elgon View plots tender

Holding

Not a valid or fair reason for termination

Reasoning

The responsibility for the tender lay with the Tender Committee and the Claimant had been stripped of legal and procurement oversight. The Respondent's witnesses never showed how, when or how the advice was sought, the investigating report did not implicate her, and the Board had exonerated her in June 2007. The allegation was not proved.

p. 3
04

Substantive fairness - concealment of information on loan settlement offer

Holding

Not a valid or fair reason; the Claimant was not privy to the negotiations

Reasoning

Documentary evidence showed the debtor and his advocates dealt directly with the Managing Director, who received and minuted the correspondence. The Claimant had denied knowledge of negotiations and was not party to the engagements, so she could not be accused of concealing information from the Board.

p. 4
05

Appropriate remedies and compensation

Holding

Reinstatement refused; 12 months' gross salary compensation plus terminal dues awarded

Reasoning

Given over three years had elapsed, reinstatement was inappropriate. Considering 21 years of service and the circumstances of the separation, compensation equivalent to 12 months' gross salary was fair, alongside pay in lieu of notice, unpaid salaries, pension contributions, surrender value and accrued leave as offered or proved.

p. 5

Legal principles established

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  • Sections 35(1) and 41 of the Employment Act are the statutory anchors of the show cause notice requirement
  • Where an employer's own disciplinary procedures provide higher or better protections than the statutory minimum, they must be strictly complied with
  • Section 47(5) of the Employment Act places the initial burden of proof on the employee before it shifts to the employer
  • Pay in lieu of notice is ordinarily computed on basic salary, and severance pay is a redundancy entitlement computed on years actually served

Court orders

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  1. 1.Declaration that the termination of the Claimant's employment was unfair
  2. 2.Award of pay in lieu of notice of Kshs 936,000/-
  3. 3.Award of unpaid salaries of Kshs 2,268,000/-
  4. 4.Award of pension funds contribution of Kshs 1,063,485/-
  5. 5.Award of surrender value of Kshs 3,116,011/20
  6. 6.Award of accrued leave of Kshs 595,933/55
  7. 7.Award of compensation equivalent to 12 months gross salary of Kshs 4,224,000/-
  8. 8.Total award of Kshs 12,203,429/75 subject to statutory deductions
  9. 9.Denial of costs to the Claimant for late filing of submissions

Authorities

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Legislation

  • Employment Act, 2007Section 35(1)(c)
  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 47(5)
  • Employment Act, 2007Sections 43 and 45
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (employment dispute)

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, "Nasieku Tarayia v Agricultural Finance Corporation [2019] KEELRC 691 (KLR)", Case Analysis (2019). Cause No 1236 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/691/eng@2019-10-08

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