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ELRCStruck OutCause No. 267 of 2015· [2019] KEELRC 1008 (KLR)

Joseph Nyaga v United Millers Limited [2019] KEELRC 1008 (KLR)

Employment and Labour Relations Court of Kenya
7 March 2019
MMM. Mbaru
3,125 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 struck out a salesman's dismissal claim because commission-based work with withholding tax made him an independent contractor, not an employee.

What this practically means

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Executive summary

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The claimant, employed as a Sales Executive in May 2003, sued the respondent claiming a declaration of constructive dismissal, salary arrears of Ksh.5,100,000, tax refund expenses, unpaid and withheld earnings, gratuity and 12 months' damages for unfair termination. He alleged that following a April 2010 board meeting he was moved to Nakuru, removed from the payroll and placed on commission, subjected to excessive 30% taxation, forced to bear operational costs, deprived of commissions through the respondent's dealings with his clients, and eventually deprived of his allocated motor vehicle, creating intolerable working conditions. The defence was that the change to commission basis was mutually agreed in May 2010, the claimant earned more on commission, and he deserted duty in 2015 after being asked to return a sold motor vehicle, filing suit to pre-empt investigations over the Kanini Haraka cheques. The court framed four issues: constructive dismissal, the nature of the relationship, unfair termination and remedies. Applying the tests distinguishing a contract of service from a contract for services, the court held that upon removal from the payroll and payment of withholding tax the claimant ceased to be an employee under the Employment Act, 2007, becoming an independent contractor whose commercial claims belong elsewhere. Claims tied to the employment ending in May 2010 were also time-barred under section 90. As there was no resignation, constructive dismissal could not lie. The claim was struck out with no orders as to costs.

Key legal issues

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01

Nature of the relationship between the parties after May 2010

Holding

The claimant ceased to be an employee and became an independent contractor once removed from the payroll, paid on commission and subjected to withholding tax at 5%, so the court lacked the appropriate forum for the claims

Reasoning

The court applied the tests distinguishing a contract of service from a contract for services: control, integration, economic and business reality, and mutuality of obligation. The claimant was removed from the payroll from May 2010, paid commission on sales, and withholding tax was remitted to KRA instead of PAYE and statutory dues. These are defining features of an independent service provider. The relationship was therefore commercial, not one of employment.

p. 4
02

Whether there was constructive dismissal

Holding

No constructive dismissal; the claimant never resigned and no employment relationship subsisted at the time of filing suit in 2015

Reasoning

Constructive dismissal requires that the employee resign from employment forced by the employer's intolerable conduct. The claimant did not resign; no resignation letter was produced. Since the employment relationship had ended in May 2010, there was nothing from which to resign by September 2015. Claims arising from the employment ending in May 2010 were also caught by the limitation period under section 90 of the Employment Act, 2007.

p. 5

Legal principles established

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  • Upon removal from the payroll, payment of withholding tax and commission-based remuneration, an employee ceases to be covered under the Employment Act and becomes an independent contractor, whose contractual disputes do not fall to the Employment and Labour Relations Court
  • Constructive dismissal requires proof of intolerable work conditions forcing the employee to resign from employment; without a resignation there is no constructive dismissal

Court orders

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  1. 1.The claim is hereby struck out
  2. 2.No orders to costs

Authorities

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Legislation

  • Employment Actsection 90
  • Evidence Actsection 97

Cases cited (8)

  • Joseph Aleper & another versus Lodwar Water and Sanitation Company Limited
    [2015] eKLR
  • Cola Cola East Africa Limited versus Maria Kagai Ligaga
    [2015] eKLR
  • Christine Adot Lopeyio versus Wycliffe Pere, Cause No.1688 of 2012
  • Fredrick Byakika versus Mutiso Menezes International Unlimited
    [2016] eKLR
  • Ready Mixed Concrete (South East) Ltd versus Ministry of Pensions and National Insurance
    [1968] 2 QB 497
  • Paul Ochieng' Agola versus Gateway Marine Services Limited
    [2018] eKLR
  • George Kamau Ndiritu versus Intercontinental Hotel, Cause No.2347 of 2012
  • Lear Shighadi Sinoya versus Avtech Systems Limited
    [2017] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007; jurisdiction found not to attach as claimant was held to be an independent contractor

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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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, "Joseph Nyaga v United Millers Limited [2019] KEELRC 1008 (KLR)", Case Analysis (2019). Cause No. 267 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1008/eng@2019-03-07

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