Erastus Kwaka Otieno v Dhanush Infotech Limited [2021] KEELRC 125 (KLR)
The bottom line
#A Kenyan court ruled a 'consultant' was actually an employee, awarding him Kshs 2.17 million after his employer botched a redundancy.
What this practically means
#Executive summary
#Key legal issues
#Whether the claimant was an employee under a contract of service or a consultant under a contract for service
The claimant was an employee; the consultancy agreement was a disguise for an employment relationship.
Despite the agreement being titled a 'consulting agreement', the claimant worked exclusively for the respondent under non-compete and transfer clauses, was under its control, was paid a monthly salary rather than raising fee notes, was issued a laptop (tools of work), and was issued a pay slip with an employee code. These hallmarks of employment displaced the consultancy label.
Whether the claimant was subjected to unfair labour practices
Withholding part of the claimant's salary without justifiable cause constituted an unfair labour practice.
Article 41(1) guarantees fair labour practices; what amounts to a violation is circumstantial. Under Section 17(1) of the Employment Act an employer must pay the entire wages earned. Email evidence showed the respondent withheld salary without plausible reason, repeatedly apologising and promising to remit balances, exposing the claimant to financial hardship.
Whether the termination on account of redundancy was lawful and procedural
The termination was unfair and unprocedural for non-compliance with Section 40(1) of the Employment Act.
The loss of a client contract rendered the claimant's services superfluous, bringing the exit within the statutory definition of redundancy. However, there was no evidence of notice to the labour officer, no selection criteria, no evidence of severance pay or leave pay-off. The respondent, having not participated, failed to prove the operational-requirements reason as required by Section 45(2).
Entitlement to reliefs
Compensatory damages of 4 months' salary, June 2016 salary, severance pay, salary underpayment of Kshs 486,933.30, accrued leave, and half of the unutilized rent were awarded; house allowance, notice pay and household goods reimbursement were refused.
Compensatory damages were limited to 4 months given the 3 months remaining on the contract and the salary withholding. Severance pay followed from the redundancy finding under Section 40(1)(g). Bank statements proved underpayment against the contractual 2,000 USD net salary. Leave was prorated at 17.5 days under Section 28(1)(a). Rent reimbursement was halved because receipts bore the names of the claimant and CW2.
Legal principles established
#- The characterisation of a relationship in a contract does not bind the court; the real substance of the engagement determines whether an employment relationship exists.
- Failure by an employer to comply with the procedure under Section 40 of the Employment Act renders a termination on account of redundancy unprocedural and unfair.
- An employer has a cardinal duty to fully compensate an employee for services rendered, and unjustified withholding of salary constitutes an unfair labour practice.
Court orders
#- 1.Judgment entered in favour of the claimant against the respondent in the total sum of Kshs 2,172,231.60, comprising compensation equivalent to 4 months' gross salary of Kshs 901,600.00; unpaid salary for June 2016 of Kshs 203,000.00; severance pay for 10 months of Kshs 93,965.60; salary underpayment of Kshs 486,933.30; accrued leave days (17.5 days) of Kshs 131,483.00; and reimbursement of rent expense of Kshs 355,250.00
- 2.The award shall attract interest at court rates from the date of judgment until payment in full
- 3.The respondent shall bear the costs of the suit
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction under the Employment Act and Labour Relations Act (first-instance employment claim)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Bore & 2 others v Jubilee Party & 2 others (Employment and Labour Relations Cause E917 of 2021) [2025] KEELRC 1707 (KLR)[2025] KEELRC 1707 (KLR)11 Jun 2025
- Ndung’u v E.D.G & Atelier Limited (Cause E937 of 2022) [2024] KEELRC 963 (KLR)[2024] KEELRC 963 (KLR)2 May 2024
Cite this brief
#Cite this brief
Caselaw, "Erastus Kwaka Otieno v Dhanush Infotech Limited [2021] KEELRC 125 (KLR)", Case Analysis (2021). Cause No 2351 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/125/eng@2021-12-17
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.