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ELRCPartially AllowedCause No 844 of 2018· [2019] KEELRC 1337 (KLR)

Edward Ngarega Gacheru v Nation Media Group Limited [2019] KEELRC 1337 (KLR)

Employment and Labour Relations Court of Kenya
21 June 2019
BOByram Ongaya
5,423 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~22 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled that a 'freelance contractor' was really an employee and awarded him millions because his employer disguised the relationship.

What this practically means

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Executive summary

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The claimant, engaged as a freelance Business Executive to sell advertising space for Nation Media Group Limited under a letter dated 15.03.2013 expressly labelled an independent contractor arrangement, sued seeking declarations that he was permanent staff, that his termination was unlawful, reinstatement or re-engagement, and in the alternative some Kshs. 23,281,842.00 including withheld salaries, notice pay, travel allowance, compensation for unfair termination, leave pay, service pay, tax refund, damages for discrimination and various commissions. The respondent maintained the relationship was an independent contract, that freelance and permanent sales executives were distinct cadres, and that termination complied with the contract. The court applied the multiple test and the doctrine of primacy of facts and held the parties were in a contract of service: the claimant had a staff number, payroll entry, official email, work station, appraisals, regulated hours, and PAYE rather than 5% withholding tax was deducted, consistent with a KRA letter confirming freelance sales executives fell under a contract of service. Labels in the contract could not oust the statutory reality, and disguised contracts of service would be rectified to apply the Employment Act's minimum terms. However, the discrimination claim failed for want of a comparator since the two cadres were distinct, and the termination was within the contractual notice provision and not unfair. The court awarded compensation of Kshs. 2,500,000.00 for unfair labour practices under Article 41 and section 5 of the Employment Act, half month's pay in lieu of notice, 5 months' service pay, and payment for 120 leave days, but declined withheld salaries, travel allowances, unfair termination compensation, tax refund, discrimination damages and commission claims for want of basis or evidence. Reinstatement was refused for lack of evidence of practicability. The claimant was to compute and file quantum within 7 days; payment was due by 01.08.2019 failing interest at court rates, with costs to the claimant.

Key legal issues

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01

Whether the claimant was an employee or an independent contractor

Holding

The parties were in a contract of service despite the contract labelling the claimant an independent contractor

Reasoning

Applying the multiple test (control, integration, economic reality, mutuality of obligation) and primacy of facts, the court found the claimant worked under the respondent's control, was integrated into its service (staff number, payroll, official email, work station, appraisals, regulated hours), and was deducted PAYE rather than 5% withholding tax as would apply to a contractor. The KRA letter of 20.11.2008 confirmed freelance sales executives fell under a contract of service. The contractual label could not override these facts.

p. 5
02

Whether the claimant was discriminated against

Holding

No discrimination established; the claimant contracted into a distinct freelance cadre with no comparator

Reasoning

The respondent lawfully operated two cadres — freelance and permanent sales executives — with different roles (new clients versus portfolio clients) and terms. Since the claimant contracted to serve as a freelance sales executive and the cadres were distinct, there was no proper comparator and the discrimination claim collapsed.

p. 5
03

Whether the disguised contract violated the claimant's statutory and constitutional rights

Holding

Yes — disguising a contract of service as an independent contract amounted to unfair labour practices under Article 41 and section 5 of the Employment Act, attracting compensation under Article 23(3)(e)

Reasoning

By denying the claimant access to statutory minimum terms (medical cover, housing, due process) through a deliberately disguised contract, the respondent violated section 3(1) of the Employment Act and Article 41 rights. Statutory rights under the Act are incorporated into the Bill of Rights via Article 19(3)(b). The court awarded Kshs. 2,500,000.00, considering that some violations were remedied by filling gaps in the contract through the other awards.

p. 6

Legal principles established

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  • The existence of a contract of service is a matter of fact and law; parties cannot contract out of the statutory meaning of an employment relationship, and disguised contracts of service will be rectified to apply the Employment Act's minimum terms.
  • Determination of an employment relationship is guided by facts, not the label the parties give the contract (doctrine of primacy of facts).
  • Payment by commission is merely a mode of remuneration and does not defeat a contract of service.
  • Employers may maintain different cadres with distinct terms but must not disguise contracts of service as independent contracting and must observe statutory minimum terms.

Court orders

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  1. 1.Declaration that the parties were in a contract of service governed by the terms in the letter of appointment dated 15.03.2013, with deficiencies supplemented by minimum terms under the Employment Act, 2007
  2. 2.Respondent to pay the claimant Kshs. 2,500,000.00 in compensation for violation of statutory rights
  3. 3.Respondent to pay half month's pay in lieu of the outstanding month's termination notice at the rate of half the last full monthly commission paid
  4. 4.Respondent to pay 5 months' pay as service pay or gratuity at the rate of the last full monthly commission paid
  5. 5.Payment for 120 leave days at the rate of 120 divided by 30 days of a month multiplied by the last gross full monthly commission paid
  6. 6.Claimant to compute, file and serve the amounts within 7 days for recording of quantum on an appropriate mention date
  7. 7.Respondent to pay the awarded amounts by 01.08.2019, failing which interest at court rates from the date of filing the suit
  8. 8.Respondent to pay the claimant's costs of the suit

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 41; Article 19(3)(b); Article 23(3)(e)
  • Employment Act, 2007Section 2; section 3(1); section 5; section 35
  • Industrial Court Act, 2011Section 2
  • Income Tax ActSection 35(3) as read with the 3rd Schedule
  • ILO Employment Relationship Recommendation, 2006 (No. 198)Recommendation No. 9

Cases cited (4)

  • Stanley Mungai Muchai – versus – National Oil Corporation of Kenya
    Industrial Court of Kenya at Nairobi Cause No. 447N of 2009
  • Ivor Niselow – Versus – Liberty Life Association of Africa Limited
    [1998] ZASCA 42
  • Mundia Njeru Gateria – Versus – Embu County Government & 5 Others
    [2015] eKLR
  • Mohamed Khamis Hemed – Versus – Almasi Beverages Limited
    [2019] eKLR
Jurisdiction invoked
Jurisdiction of the Employment and Labour Relations Court over employment and labour relations claims (Article 162(2) of the Constitution and Employment Act, 2007 invoked; Article 41 and Article 23(3)(e) applied)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (9)

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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, "Edward Ngarega Gacheru v Nation Media Group Limited [2019] KEELRC 1337 (KLR)", Case Analysis (2019). Cause No 844 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1337/eng@2019-06-21

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