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ELRCPartially AllowedCause No 1650 of 2016· [2022] KEELRC 1107 (KLR)

Mwangi v Advent Valuers Limited (Cause 1650 of 2016) [2022] KEELRC 1107 (KLR)

Employment and Labour Relations Court
28 April 2022
SRStella Rutto
3,618 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~14 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled that the property manager, not the mall owner, was the true employer and must pay one month's notice salary.

What this practically means

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Executive summary

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This first-instance judgment of the Employment and Labour Relations Court at Nairobi, delivered by Stella Rutto, Judge, on 28th April 2022, concerned a claim by a former chief security officer at Shujaa Mall who alleged that the respondent employed him from 9th January 2015 and unfairly terminated his employment by letter dated 1st July 2016. He sought notice pay, maximum compensatory damages, and compensation for public holidays, weekly off days and accrued leave. The respondent denied the employment relationship, contending it engaged the claimant only as agent of Virgin Estates Limited, the mall's owner, under a Property Management Agreement, and sought a declaration that Virgin Estates Limited was the true employer. Its attempt to join Virgin Estates Limited as third party lapsed when an extension of time to serve the Third-Party Notice was declined. The court framed three issues: existence of an employment relationship; fairness of the termination; and entitlement to reliefs. Applying sections 2, 9, 10 and 45(2)(b) of the Employment Act, it held that the claimant was the respondent's employee: the respondent executed the appointment letter, controlled him once employed, and itself terminated his services, notwithstanding Virgin Estates Limited's role in recruitment and payment of wages through an operating account. On fairness, the court found a valid reason for termination based on operational requirements, as the loss of the Property Management Contract destroyed the substratum of the employment; section 41 did not apply as this was not a disciplinary termination. The only flaw was the short notice given, contrary to the contractual one-month notice clause. The claim succeeded only in part: the claimant was awarded Kshs 60,000/=, one month's salary in lieu of notice, with interest at court rates from filing until payment in full, and costs of the claim against the respondent. Compensatory damages, public holiday pay and the leave/week-off-days claims were denied for lack of merit and evidence. The respondent was left at liberty to seek recourse from Virgin Estates Limited.

Key legal issues

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01

Whether an employment relationship existed between the claimant and the respondent, or whether the respondent was a mere agent of Virgin Estates Limited

Holding

The claimant was the employee of the respondent. The respondent executed the letter of appointment, controlled the claimant once employed, and itself terminated his services; clause 2.3.2 of the Property Management Agreement authorised it to perform all acts required of an employer.

Reasoning

The court applied the statutory definitions of 'employee', 'employer' and 'contract of service' in sections 2 and 10 of the Employment Act. Although emails showed Virgin Estates Limited controlled the recruitment and dictated terms, once employed the claimant was under the respondent's control, reported administratively to it, and it was the respondent that issued the termination letter. The fact that the respondent terminated rather than surrendering the claimant to the principal confirmed the employment relationship.

p. 6
02

Whether the termination was unfair and unlawful

Holding

The reason for termination — loss of the Property Management Contract — was a valid and fair reason based on operational requirements, but the procedure was flawed because the respondent gave a shorter notice than the one month stipulated in the contract.

Reasoning

The claimant's employment was tied exclusively to Shujaa Mall, so termination of the Property Management Contract destroyed the substratum of the employment contract and frustrated further performance. Section 41 did not apply as this was not a disciplinary termination. However, clause 1(d) of the contract required one month's notice or pay in lieu; the two days' notice resulting from Virgin Estates' abrupt exit breached that term, entitling the claimant to pay in lieu of notice.

p. 7
03

Whether the claimant was entitled to the reliefs sought

Holding

Only one month's salary in lieu of notice (Kshs 60,000/=) was awarded; compensatory damages, public holiday pay and accrued leave/week-off-day claims were denied.

Reasoning

Because the termination arose from operational requirements and no fault of either party, compensatory damages were not viable. The leave and week-off-days claims failed for want of supporting evidence. The respondent was left at liberty to seek recourse from Virgin Estates Limited for the pay in lieu of notice.

p. 7

Legal principles established

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  • An entity that executes a contract of service with an employee, controls the employee's work and terminates the employee's services is the employer, notwithstanding that a third party (as principal) influenced the recruitment and paid the wages through an operating account
  • Where termination is based on operational requirements of the employer, the procedural safeguards of section 41 of the Employment Act (applicable to disciplinary terminations) are not triggered
  • An employer remains bound by the contractual notice period notwithstanding that a third party's abrupt termination of the underlying contract made compliance difficult; the employer's remedy lies against that third party

Court orders

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  1. 1.The claimant is awarded the sum of Kshs 60,000/= being payment of one month's salary in lieu of notice
  2. 2.The award shall attract interest at court rates from the date of filing the suit until payment in full
  3. 3.The respondent shall bear the costs of the claim

Authorities

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Legislation

  • Employment Actsection 2 (definitions of employee, employer, contract of service)
  • Employment Actsections 9 and 10
  • Employment Actsection 40
  • Employment Actsection 41
  • Employment Actsection 45(2)(b)
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure ActSection 1B
  • Civil Procedure RulesOrder 21 Rule 1

Cases cited (3)

  • Yehuda Sulami & another vs Zalareeds Limited & 3 others
    (2019) eKLR
  • Aineah Liluyani Njirah vs Aga Khan Health Services
    (2013) eKLR
  • Mary Kisao Ngowa & 36 others vs Krystalline Limited
    (2015) eKLR
Jurisdiction invoked
Original jurisdiction of the Employment and Labour Relations Court under the Employment Act (first-instance employment claim; no specific constitutional provision invoked)

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, "Mwangi v Advent Valuers Limited (Cause 1650 of 2016) [2022] KEELRC 1107 (KLR)", Case Analysis (2022). Cause No 1650 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2022/1107/eng@2022-04-28

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