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ELRCPartially AllowedELRC Bungoma (Cause) – not stated in judgment; related to ELRC Bungoma No. 4 of 2019· [2022] KEELRC 407 (KLR)

Peter Adams Ludaava v Bonito Hotels Limited [2022] KEELRC 407 (KLR)

Employment and Labour Relations Court
24 March 2022
4,381 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~18 min to read original · ~4 min brief

The bottom line

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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

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Executive summary

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The Claimant, engaged by an undated agreement styled 'Consultancy Agreement' to run Tourist Hotel Bungoma as General Manager for Bonito Hotels Limited from 1st December 2014, sued for a declaration of his employment status, reinstatement, salary arrears, leave pay, fuel allowance, a cash advance of Kshs. 41,000 and general damages. The Respondent denied an employment relationship, insisting the Claimant was a consultant and that the dispute was commercial and belonged in the commercial courts. The court framed four issues and found that, notwithstanding its title, the agreement created a contract of service: it provided housing, laundry, fuel allowance, weekly day off, 30 days' annual leave and 3 months' notice - statutory benefits under the Employment Act - and the Claimant was integrated into the enterprise, serving as sole bank signatory and handing over duties to existing employees when sent on 3 months' paid leave by the Board in December 2018. Applying the integration and multi-factor tests adopted in Michael Otieno Ouma (a prior case against the same Respondent), the court distinguished N'DRI Therese Assie Lumumba and held an employer-employee relationship existed on a balance of probabilities, giving the ELRC jurisdiction under Article 162(2) of the Constitution. The failure to declare the Claimant's status at the end of his leave was declared unlawful constructive dismissal without procedural fairness. Reinstatement was refused for lapse of time and breakdown of relations. The court awarded salary arrears of Kshs. 1,523,950, November 2018 wages of Kshs. 200,000, December 2018 pay of Kshs. 93,333, leave pay of Kshs. 600,000, fuel allowance of Kshs. 108,000, the Kshs. 41,000 advance and Kshs. 400,000 damages, plus a certificate of service, costs and interest. Claims for continued salaries from February 2019 and an extra month's leave pay (time-barred under Section 90) were dismissed. Judgment delivered at Bungoma on 24th March 2022 by J.W. Keli, J.

Key legal issues

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01

Whether an agreement styled 'Consultancy Agreement' creates a consultancy or a contract of service

Holding

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

Reasoning

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.

p. 5
02

Whether the dispute fell within the Employment Court's jurisdiction

Holding

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

Reasoning

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.

p. 5
03

Whether the Claimant was constructively and unfairly dismissed

Holding

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

Reasoning

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.

p. 6

Legal principles established

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  • 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

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  1. 1.A declaration that the conduct of the Respondent in constructively dismissing the Claimant from employment was unlawful
  2. 2.The Respondent to pay the Claimant Kshs. 1,523,950/- as salary arrears as at 15th October, 2018
  3. 3.The Respondent to pay the Claimant salary arrears for the month of November 2018 amounting to Kshs. 200,000/-
  4. 4.The Respondent to pay the Claimant Kshs. 93,333/- being salary arrears for days worked 1st to 14th December 2018
  5. 5.The Respondent to pay the Claimant Kshs. 600,000/- being unpaid salary while on leave for 3 months
  6. 6.The Respondent to pay the Claimant Kshs. 108,000/- being unpaid fuel allowance for October 2018 to 1st week December 2018
  7. 7.The Respondent to pay the Claimant Kshs. 41,000/- advanced to Respondent's business
  8. 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. 9.The Respondent to issue the Claimant with a certificate of service
  10. 10.The Respondent to bear costs of the suit
  11. 11.Interest on the award amount and costs at court rates from date of judgment

Authorities

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Legislation

  • Employment ActSection 35
  • Employment ActSection 28
  • Employment Act, 2007Section 74
  • Employment ActSection 90
  • Constitution of KenyaArticle 162(2)
  • Employment and Labour Relations Court Act No. 20 of 2011Sections 4 and 12

Cases cited (9)

  • Martin Juma Kundu -vs- KEMU Salt Packers production Limited
    (2016) eKLR
  • N’DRI Therese Assie - Lumumba -vs Forum for Africa Women Educationists
    (2020) eKLR
  • Michael Otieno Ouma -vs Bonito Hotels Ltd TA Tourist Hotel Bungoma
    ELRC Bungoma No. 4 of 2019 (Reported 2022 eKLR)
  • Eldoret Aviation Ltd -vs- Kenya Revenue Authority (through the Commissioner of Taxes)
    2013 eKLR
  • Lolengode Venkatachala Lalsi Mintayan -vs Intex Construction Ltd
    (2020) eKLR
  • Beloff -vs- Preddram Ltd
    (1973) Allier 2011
  • Simmons -vs- Health Laundry Company
    (1990) IKB 543
  • Okelly -Vs Trust House Forte
    (1983) eKLR 456
  • Festo Ndolo Muguru -vs- Board of governors St Georges primary School
    (2018) eKLR
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

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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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, "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.