Peter Adams Ludaava v Bonito Hotels Limited [2022] KEELRC 407 (KLR)
The bottom line
#Kenya's Employment Court ruled that a 'consultant' who received employee benefits like leave and housing was actually an employee, awarding him millions in arrears.
What this practically means
#Executive summary
#Key legal issues
#Whether an agreement styled 'Consultancy Agreement' creates a consultancy or a contract of service
The court found it was a contract of employment; the Claimant was integrated into the enterprise as General Manager, granted statutory benefits (leave, notice, housing, allowances) and appointed sole bank signatory
Although titled a Consultancy Agreement, the contract provided housing, laundry, fuel allowance, weekly day off, 30 days' annual leave and 3 months' notice or pay in lieu - statutory employee benefits under Sections 28 and 35 of the Employment Act. The Claimant ran the hotel as General Manager, was sole bank signatory, and handed over duties to existing employees when sent on leave, showing integration into the enterprise.
Whether the dispute fell within the Employment Court's jurisdiction
Having found an employment relationship, the court held the dispute fell under Article 162(2) of the Constitution and Sections 4 and 12 of the ELRC Act
The court rejected the Respondent's submission that the matter was purely commercial, since its own finding was that an employer-employee relationship existed, bringing the dispute squarely within the ELRC's jurisdiction under Article 162(2) of the Constitution and the Employment and Labour Relations Court Act.
Whether the Claimant was constructively and unfairly dismissed
The Respondent's failure to declare the Claimant's employment status at the end of the 3 months' leave was unlawful and amounted to constructive dismissal without procedural fairness
The Claimant reported back after leave to find his office closed and was ordered off the premises by Alfred Agengo. The court held the contract intended an employment relationship, supported by the Respondent's conduct, and that the failure to declare his status after leave amounted to constructive dismissal, which lacked procedural fairness, meriting 2 months' salary as damages.
Legal principles established
#- The title of an agreement as a 'Consultancy Agreement' does not of itself make the engagement an independent contract, nor does payment of a fee as opposed to salary; the court examines the substance of the terms and the parties' conduct
- Whether a person is an employee is determined by balancing all the facts, including control, integration into the enterprise, method of payment, statutory benefits and mode of termination
- In the absence of the employer producing records of remuneration as required under Section 74 of the Employment Act, the claimant's computation of arrears stands
Court orders
#- 1.A declaration that the conduct of the Respondent in constructively dismissing the Claimant from employment was unlawful
- 2.The Respondent to pay the Claimant Kshs. 1,523,950/- as salary arrears as at 15th October, 2018
- 3.The Respondent to pay the Claimant salary arrears for the month of November 2018 amounting to Kshs. 200,000/-
- 4.The Respondent to pay the Claimant Kshs. 93,333/- being salary arrears for days worked 1st to 14th December 2018
- 5.The Respondent to pay the Claimant Kshs. 600,000/- being unpaid salary while on leave for 3 months
- 6.The Respondent to pay the Claimant Kshs. 108,000/- being unpaid fuel allowance for October 2018 to 1st week December 2018
- 7.The Respondent to pay the Claimant Kshs. 41,000/- advanced to Respondent's business
- 8.The Respondent to pay the Claimant Kshs. 400,000 for unprocedural termination of employment (all amounts subject to statutory declaration of PAYE only)
- 9.The Respondent to issue the Claimant with a certificate of service
- 10.The Respondent to bear costs of the suit
- 11.Interest on the award amount and costs at court rates from date of judgment
- Jurisdiction invoked
- Article 162(2) of the Constitution and Sections 4 and 12 of the Employment and Labour Relations Court Act No. 20 of 2011
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Preissler & another v Daluga Investment Limited t/a Easygym Kenya & 2 others (Cause 309 of 2020) [2024] KEELRC 473 (KLR)[2024] KEELRC 473 (KLR)4 Mar 2024
Cite this brief
#Cite this brief
Caselaw, "Peter Adams Ludaava v Bonito Hotels Limited [2022] KEELRC 407 (KLR)", Case Analysis (2022). ELRC Bungoma (Cause) – not stated in judgment; related to ELRC Bungoma No. 4 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2022/407/eng@2022-03-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.