Skip to content
AI-generated case briefs sourced from Kenya Law · Not legal advice
AI-generated case brief
Case Brief · caselaw.co.ke
ELRCPartially AllowedCause No 2351 of 2016· [2021] KEELRC 125 (KLR)

Erastus Kwaka Otieno v Dhanush Infotech Limited [2021] KEELRC 125 (KLR)

Employment and Labour Relations Court
17 December 2021
4,943 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~20 min to read original · ~4 min brief

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

#
In this undefended claim, the claimant sued Dhanush Infotech Limited for unlawful termination, unilateral variation of employment terms and harassment in Gabon arising from his deployment on a business visa rather than a work permit. The respondent did not enter appearance or file a response, and the matter proceeded to formal proof before Stella Rutto J on 7 October 2021, with the claimant testifying alongside one witness. The court framed four issues: the nature of the engagement, unfair labour practices, the lawfulness of the termination, and entitlement to reliefs. Although the contract was styled a 'consulting agreement' describing the claimant as a 'consultant', the court found the relationship was in substance employment: the claimant worked exclusively for the respondent, was subject to its control and transfer decisions, received a monthly salary, was issued a laptop, and bore a pay slip and employee code. Withholding part of his salary without justification amounted to an unfair labour practice under Article 41(1) of the Constitution and Section 17(1) of the Employment Act. The termination on grounds of loss of a client contract amounted to redundancy, but the respondent failed to comply with Section 40(1) - no notice to the labour officer, no selection criteria, and no severance or leave pay-off - rendering it unfair and unprocedural. Judgment was entered for the claimant in the total sum of Kshs 2,172,231.60, with interest at court rates from the date of judgment, and the respondent was ordered to bear the costs. Claims for house allowance, notice pay and household goods reimbursement were refused, and rent reimbursement was halved.

Key legal issues

#
01

Whether the claimant was an employee under a contract of service or a consultant under a contract for service

Holding

The claimant was an employee; the consultancy agreement was a disguise for an employment relationship.

Reasoning

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.

p. 3
02

Whether the claimant was subjected to unfair labour practices

Holding

Withholding part of the claimant's salary without justifiable cause constituted an unfair labour practice.

Reasoning

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.

p. 4
03

Whether the termination on account of redundancy was lawful and procedural

Holding

The termination was unfair and unprocedural for non-compliance with Section 40(1) of the Employment Act.

Reasoning

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).

p. 5
04

Entitlement to reliefs

Holding

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.

Reasoning

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.

p. 5

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. 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. 2.The award shall attract interest at court rates from the date of judgment until payment in full
  3. 3.The respondent shall bear the costs of the suit

Authorities

#

Legislation

  • Employment ActSection 2 (definitions of 'contract of service', 'employee', 'redundancy')
  • Employment ActSection 17(1)
  • Employment ActSection 28(1)(a)
  • Employment ActSection 40(1)
  • Employment ActSection 43(2)(c)(ii)
  • Employment ActSection 45(2)
  • Constitution of KenyaArticle 41(1)
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B

Cases cited (6)

  • Aviation & Allied Workers Union vs Kenya Airways Limited and 3 others
    (2012) eKLR
  • Ibrahim Kamasi Amoni vs Kenital Solar Limited
    (2018) eKLR
  • Mary Nyawira Karimi vs Pure Circle (K) Limited
    (2018) eKLR
  • Kenya Hotels & Allied Workers Union vs Alfajiri Villas (Magufa) Ltd
    [2014] eKLR
  • Kenneth Kimani Mburu & another vs Kibe Muigai Holdings Limited
    [2014] eKLR
  • Hesbon Ngaruiya Waigi Versus Equitorial Commercial Bank Limited
    (2013) eKLR
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.

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.