Steel Makers Limited v Obare (Appeal E001 of 2020) [2023] KEELRC 396 (KLR)
The bottom line
#An employer who fires a worker for demanding unpaid wages, without a hearing, must pay up—but maximum compensation awards need justification.
What this practically means
#Executive summary
#Key legal issues
#Whether termination of the Respondent was for a valid reason and in accordance with fair procedure
The trial magistrate was correct to find unfair termination; the Appellant had no valid reason (the employees were demanding salary arrears of four months) and gave no hearing
The Appellant's witness conceded the salary arrears that triggered the events of March 4, 2019. A demand for salary arrears could not amount to gross misconduct. There was no evidence of a disciplinary session, notification of the accusations, or an opportunity to respond before the Respondent was blocked from the premises on March 11, 2019, contrary to sections 41, 43 and 45 of the Employment Act.
Whether the award of unpaid salary was justified
Upheld; the Appellant failed to discharge the evidential burden of proving payment of the arrears
The defence witness confirmed four months of unpaid salaries but could not confirm payment to the Respondent. No bank slips, Mpesa statements or payment vouchers were produced. Under section 109 of the Evidence Act, the burden lay on the Appellant, and under section 10(7) and section 74 of the Employment Act the employer is custodian of employment records.
Whether the leave dues claim was time barred and proved
Not time barred and upheld; leave pay is a periodic entitlement, not a continuing injury, and the cause of action arises on termination per the Court of Appeal in G4S
The claim was filed about a month after termination, within three years on any view. On the merits, the Respondent testified on oath to nine years of untaken leave, and the defence witness admitted unpaid leave claims without denying the nine-year period.
Whether the maximum compensation of twelve months' salary was justified
Set aside and reduced to six months' salary (Kshs 158,964/-) because the trial magistrate gave no justification for the maximum award and the Respondent's prior conduct contributed to termination
Under section 49 of the Employment Act the maximum award requires cogent justification. The trial magistrate exercised her discretion whimsically by offering none. Further, the Respondent's episodes of unexplained absenteeism, particularly October 2018, soiled the employment relationship and contributed to the termination, justifying a reduction to six months.
Whether the Respondent was entitled to service pay from November 2007
Upheld; the Appellant failed to disprove the November 2007 commencement date and did not prove NSSF membership or that the Respondent was a casual
The employer bears the burden under section 10(7) to disprove disputed contract particulars where the contract was not reduced to writing. Even if casual, section 37 converts the engagement after one month, and section 93 transposes pre-2007 contracts. Service pay was computed at 15 days' pay per year for eleven years, upholding Kshs 143,068/-.
Whether the trial court erred in awarding costs to the Respondent
No error; costs follow the event and the Respondent was the successful party with no misconduct shown
A successful party may only be denied costs on cogent grounds. There was no evidence of misconduct by the Respondent, so the costs order was properly made in his favour.
Legal principles established
#- Absence from duty does not automatically terminate employment; the employer must make efforts to ascertain the employee's whereabouts and reasons for absence and follow the disciplinary procedure under section 41 before terminating
- The law does not countenance placing an employee on probation as a disciplinary measure, and probation under section 42(2) of the Employment Act cannot exceed six months in the first instance plus a further six months by agreement
- Even an employee on probation is entitled to the protection of section 41 of the Employment Act, including a hearing
- Periodic entitlements such as leave pay, salary and house allowance are not continuing injury claims; they create distinct causes of action on each default and are subject to the three-year limitation period under section 90 of the Employment Act
- Where an employer fails to reduce a contract into writing as required, the burden of proving or disproving disputed terms (including commencement date) lies with the employer under section 10(7) of the Employment Act
- Under section 37 of the Employment Act, casual contracts automatically convert to indefinite term contracts after one month of continuous service; transitional contracts under the repealed Act are governed by section 93 of the current Act
- Service pay under section 35(5) of the Employment Act is computed, in the absence of a statutory formula, at 15 days' pay for each completed year of service, borrowing the severance formula under section 40
- A trial court may only award the maximum twelve months' compensation under section 49 of the Employment Act on cogent, justified grounds; an unexplained maximum award is an improper exercise of discretion
Court orders
#- 1.Grounds 1, 6, 7 and 9 of the Appeal dismissed
- 2.Award of salary arrears of Kshs 113,109/- upheld
- 3.Award of unpaid leave dues upheld
- 4.Award of service pay of Kshs 143,068/- upheld
- 5.Award of salary in lieu of notice affirmed
- 6.Award of compensation for unfair termination set aside and replaced with compensation equivalent to six months' salary (Kshs 158,964/-)
- 7.Appeal dismissed save for the alteration to the compensation award; all other findings of the trial court upheld
- 8.Respondent awarded costs of the appeal
- On appeal from
- Principal Magistrate's Court at Mavoko
- CMEL Cause No 49 of 2019
- Jurisdiction invoked
- First appellate jurisdiction over the Principal Magistrate's Court (ELRC) in an employment cause; appeal determined on written submissions and the Record of Appeal
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.
- Neser v Globology Limited & 7 others (Cause E033 of 2024) [2025] KEELRC 1777 (KLR)[2025] KEELRC 1777 (KLR)19 Jun 2025
Cite this brief
#Cite this brief
Caselaw, "Steel Makers Limited v Obare (Appeal E001 of 2020) [2023] KEELRC 396 (KLR)", Case Analysis (2023). CMEL Cause No 49 of 2019 (appeal therefrom, Mavoko). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/396/eng@2023-02-16
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.