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ELRCPartially AllowedCause No E149 of 2022· [2023] KEELRC 833 (KLR)

Kuria v Badoer (Cause E149 of 2022) [2023] KEELRC 833 (KLR)

Employment and Labour Relations Court
13 April 2023
3,444 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled that a share sale agreement did not wipe out employment rights, awarding a dismissed executive notice pay, one month's compensation, and costs.

What this practically means

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Executive summary

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The Claimant sued the Respondent alleging unlawful and wrongful termination of employment, claiming 12 months' salary compensation, one month's salary in lieu of notice, salary for November 2018, accrued leave, costs and interest. The Respondent denied an employment relationship, contending the Claimant was a director and shareholder in his companies who voluntarily resigned under a Settlement Agreement dated 21st July 2020, under which the Respondent bought his shares for Kshs.2,000,000 in full and final settlement. The court framed three issues: the employment relationship, fairness of termination, and entitlement to reliefs. It found the Claimant was the Respondent's employee, relying on the Respondent's cross-examination admission, his counsel's letter of 13th March 2020 confirming a salaried relationship, and uncontroverted email evidence of salary payments. The court held the Deed of Settlement concerned only the transfer of shares in seven companies, not the employment relationship, and distinguished Coastal Bottlers Ltd v Kimathi Mithika on discharge vouchers. The Respondent having adduced no evidence of a valid reason or fair procedure, termination was unfair contrary to Sections 41, 43 and 45(2) of the Employment Act. On quantum, the court applied Section 49(4) factors - short service of about 1 year 5 months, receipt of Kshs.2,000,000 for shares, uncertainty over continuation, and the Claimant's failure to deny kickback allegations - and awarded the equivalent of one month's salary as compensation. Judgment was entered for the Claimant with one month's salary in lieu of notice, one month's compensation, costs and interest; the November 2018 salary and accrued leave claims were disallowed as unproven.

Key legal issues

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01

Whether the Claimant was an employee of the Respondent

Holding

Yes - the Claimant proved on a balance of probabilities that he was an employee of the Respondent personally, not a mere director or shareholder

Reasoning

The Respondent admitted on cross-examination that the Claimant was his employee paid a monthly salary. The Respondent's counsel's letter of 13th March 2020 confirmed the relationship and catalogued duties. The Respondent offered no evidence of directorship terms, and directors are not employees. Email evidence of salary payments was uncontroverted.

p. 6
02

Effect of the Settlement Agreement dated 21st July 2020

Holding

The Deed of Settlement governed only the transfer of shares, not the employment relationship, and did not discharge employment claims

Reasoning

The court read the Deed of Settlement and found its terms exclusively concerned surrender and purchase of shares in seven companies for Kshs.2,000,000. It was silent on the employment relationship, so Coastal Bottlers on discharge vouchers was inapplicable, and the Respondent still had to justify termination.

p. 7
03

Whether termination of employment was unfair

Holding

Yes - the Respondent established neither a valid reason nor a fair procedure

Reasoning

Under Sections 43, 41 and 45(2) of the Employment Act, the employer must prove valid reasons and procedural fairness including a hearing. The Respondent gave no notice (admitting he was in Spain), conducted no investigation response, and adduced no evidence of a valid reason, instead relying on the Deed of Settlement.

p. 7
04

Quantum of compensation under Section 49(1)(c)

Holding

Equivalent of one month's salary awarded instead of the 12 months sought

Reasoning

The court considered Section 49(4) factors: short service of about 1 year 5 months, receipt of Kshs.2,000,000 for shares not paid for, uncertainty whether the Claimant wished to continue, and the Claimant's failure to deny allegations of kickbacks in the 13th March 2020 letter.

p. 8

Legal principles established

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  • For a termination to be fair, the employer must prove both substantive justification and procedural fairness
  • It is the employer's obligation to prove the reason(s) for termination and to comply with the mandatory procedural requirements of Section 41 of the Employment Act

Court orders

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  1. 1.One month's salary in lieu of notice
  2. 2.Equivalent of one month's salary compensation
  3. 3.Costs of the suit to the Claimant
  4. 4.Interest at court rates from date of judgment till payment in full

Authorities

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Legislation

  • Employment ActSection 2
  • Employment ActSections 20 and 21
  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 43(1)
  • Employment Act, 2007Section 45(2)
  • Employment Act, 2007Sections 49(1)(c) and 49(4)
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48

Cases cited (8)

  • Kenfreight (EA) Ltd v Benson K. Nguti
    [2016] eKLR
  • Joseph Mwaniki Nganga v United Millers Ltd
    [2020] eKLR
  • Coastal Bottlers Ltd v Kimathi Mithika
  • Trinity Prime Investment Ltd v Lion of Kenya Insurance Company Ltd
    [2015] eKLR
  • Christine Adot Lepvio v Wycliffe Mwathi
    [2013] eKLR
  • Walter Ogal Anuro v Teachers Service Commission
    [2013] eKLR
  • Naima Khamis V Oxford University Press (EA) Ltd
    [2017] eKLR
  • Pius Machafu Isindu v Lavington Security Guards Ltd
    [2017] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 over a claim of unfair termination of employment

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, "Kuria v Badoer (Cause E149 of 2022) [2023] KEELRC 833 (KLR)", Case Analysis (2023). Cause No E149 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/833/eng@2023-04-13

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