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ELRCPartially AllowedCause No. 2584 of 2016· [2020] KEELRC 453 (KLR)

Samuel Chege Kamau v Uwezo Microfinance Bank Limited [2020] KEELRC 453 (KLR)

Employment and Labour Relations Court of Kenya
16 September 2020
3,135 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled that a bank unfairly fired its finance manager because it never gave him a hearing or proved its fraud claims.

What this practically means

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Executive summary

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The Claimant, formerly Finance Manager of Uwezo Microfinance Bank Limited, sued for damages for wrongful and unlawful summary dismissal on 12th July 2016 on allegations of fraud and poor performance, together with terminal dues. He sought declarations, unfreezing of his bank account, a certificate of service, unpaid July 2016 salary, leave pay, severance pay, cash bail refund, notice pay, punitive damages and twelve months' salary compensation. The Respondent defended the dismissal as a lawful summary dismissal for fraudulent dealings under Section 44(4)(g) of the Employment Act, contending it was not bound to issue a show cause letter given the fraud suspicions. The Claimant testified as CW1; the Respondent called its Legal & Compliance Officer, Leonard Mwakalu Kilambo, as RW1, who conceded that no show cause letter, written accusations or warning were issued. The Court framed three issues: valid reasons, due process, and remedies. It found the Respondent failed to prove fraud or poor performance: the internal audit report was unexplained and undated, and the witness could not substantiate any specific allegation. Under Section 43 the termination was therefore without valid reasons. On process, the arrest of the Claimant by police did not excuse the Respondent from complying with the mandatory hearing requirements of Section 41. The dismissal was declared unfair and unjustified. The Court awarded Kshs. 730,000 (notice, 12 days' July salary, 40 days' leave pay, and seven months' salary compensation), less statutory deductions, and ordered the bank account unfrozen, a certificate of service issued, with costs and interest. Other heads sought, including the Kshs. 100,000 fine, severance pay, bail refund and salary differential, were not granted.

Key legal issues

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01

Whether the Respondent had valid reasons for summary dismissal

Holding

The Respondent failed to prove the alleged fraud and poor performance; dismissal was without valid reasons

Reasoning

The Respondent relied on an internal audit report that was neither explained nor dated. Its witness could not identify the files or documents allegedly stolen, the customers allegedly colluded with, or the amounts of cash allegedly collected and not remitted. No evidence of poor performance against expected output was adduced. Under Section 43 of the Employment Act, the employer must prove the reasons for termination, failing which the termination is deemed unfair under Section 45.

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02

Whether the Respondent followed due process before dismissal

Holding

The Respondent failed to comply with Section 41 of the Employment Act; the dismissal was procedurally unfair

Reasoning

The Claimant was not issued a show cause letter or written notice of the accusations, and was only invited orally to a meeting. Section 41 requires an employer, before terminating on grounds of misconduct or poor performance, to explain the reasons to the employee and to hear and consider any representations. The police investigation is independent of the employer's internal disciplinary process and does not substitute for it. Condemning the Claimant unheard violated this mandatory requirement.

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03

Remedies for unfair termination

Holding

Claimant awarded notice pay, unpaid July salary, untaken leave pay and 7 months' salary compensation

Reasoning

Having found the dismissal unfair and unjustified, the Court applied Section 49 principles, awarding one month's salary in lieu of notice, 12 days' unpaid July salary, pay for 40 untaken leave days, and seven months' salary as compensation for the denial of an opportunity to be heard, subject to statutory deductions, plus unfreezing of the bank account, a certificate of service, costs and interest.

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Legal principles established

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  • An employer bears the burden of proving the reason or reasons for termination; failure to do so renders the termination unfair
  • An employee's arrest by police on an employer's report does not excuse the employer from according the employee a disciplinary hearing under Section 41 of the Employment Act

Court orders

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  1. 1.1 month salary in lieu of notice of Kshs. 75,000
  2. 2.Salary not paid in July 2016 for 12 days of Kshs. 30,000
  3. 3.Pay in respect of 40 days leave not taken of Kshs. 100,000
  4. 4.Compensation of 7 months' salary (Kshs. 525,000) for unlawful and unfair termination
  5. 5.Total award of Kshs. 730,000 less statutory deductions
  6. 6.Unfreezing of the Claimant's bank account No. 001205000001
  7. 7.Issuance of a certificate of service
  8. 8.Costs and interest at Court rates with effect from the date of the judgment

Authorities

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Legislation

  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 43
  • Employment Act, 2007Section 44(4)
  • Employment Act, 2007Section 45(2)
  • Employment Act, 2007Section 47
  • Employment Act, 2007Section 49
  • Employment Act, 2007Section 51
  • Constitution of Kenya, 2010Article 41

Cases cited (3)

  • Mary Chemweno Kiptui Vs Kenya Pipeline Company Limited
    (2014) eKLR
  • Moses Kaunda Moro Vs CMC Motors Group Limited
    (2013) eKLR
  • David Ndungu Vs Thika High School
    ELRC No. 397 of 2013
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under Article 162(2) of the Constitution (employment and labour relations dispute; no specific provision quoted in judgment)

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, "Samuel Chege Kamau v Uwezo Microfinance Bank Limited [2020] KEELRC 453 (KLR)", Case Analysis (2020). Cause No. 2584 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2020/453/eng@2020-09-16

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