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ELRCPartially AllowedCause No 111 of 2019· [2023] KEELRC 1279 (KLR)

Kiptanui v Wevarsity Sacco Society Ltd (Cause 111 of 2019) [2023] KEELRC 1279 (KLR)

Employment and Labour Relations Court
31 May 2023
1,235 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan Sacco's CEO was lawfully demoted and had valid reasons for dismissal, but won compensation because the Sacco skipped the required oral hearing.

What this practically means

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Executive summary

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The Claimant, appointed Manager/Chief Executive Officer of the Respondent Sacco in 2014 and confirmed in 2015, challenged (i) his demotion to Internal Auditor on 15 November 2019 following a disciplinary process over an irregularly authorised loan, and (ii) his summary dismissal on 28 April 2022 for habitual absence, dishonesty and insubordination. On demotion, the Court found the Claimant was serving as CEO at the material time, but held that Chapter 7 of the Terms and Conditions of Service permitted demotion as a sanction for culpable misconduct found after a disciplinary hearing; the demotion was therefore contractually grounded and lawful. On dismissal, the Court accepted the Respondent had valid and fair reasons - the Board Chairman's evidence on the Claimant's habitual absence went unrebutted - satisfying sections 43 and 45 of the Employment Act, 2007. However, the dismissal was procedurally tainted: after the Claimant failed to respond to a show-cause letter within 14 days, the Respondent dismissed him without the oral hearing in the presence of an employee's representative of choice required by section 41(2). Balancing procedural unfairness against valid reasons and about 5 years of service, the Court awarded compensation equivalent to 4 months' gross salary (Kshs 467,264/-, based on a gross monthly salary of Kshs 116,816/-), declared the summary dismissal procedurally unfair, and awarded the Claimant costs. Judgment delivered virtually in Kisumu on 31 May 2023 by Radido Stephen, J.

Key legal issues

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01

Whether the demotion to Internal Auditor was unlawful

Holding

The demotion was lawful as it had a contractual foundation and followed a disciplinary process in which the Claimant was found culpable

Reasoning

The Respondent's Terms and Conditions of Service, Chapter 7, permitted demotion as a sanction for misconduct. The Claimant was taken through a disciplinary process culminating in a finding of culpability. Though he argued entitlement to be heard under sections 41 and 45 of the Employment Act and Article 47, the Court held that qua demotion the sanction was contractually grounded and within the Respondent's powers.

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02

Procedural fairness of the summary dismissal

Holding

The dismissal was procedurally tainted because no oral hearing was conducted as required by section 41(2)

Reasoning

The Respondent issued a show-cause letter on 13 April 2022 requiring a response within 14 days; the Claimant did not respond and the Board resolved on 27 April 2022 to summarily dismiss him. Section 41(2) demands an oral hearing in the presence of an employee's representative of choice before summary dismissal, and the Respondent did not demonstrate it offered this protection.

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Substantive fairness of the dismissal

Holding

The Respondent had valid and fair reasons for dismissal

Reasoning

The reasons given were habitual absence from duty, dishonesty and insubordination. The Board Chair testified that the Claimant absented himself habitually and did not respond to the show cause in time. The Claimant, aware of the allegations before trial, neither alluded to them in his testimony nor challenged the Respondent's evidence on the absence, so the burden under sections 43 and 45 was discharged.

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04

Quantum of compensation

Holding

Equivalent of 4 months' gross salary awarded despite valid reasons, due to procedural unfairness

Reasoning

The Court balanced the finding of procedural unfairness against the existence of valid reasons, and considered that the Claimant had served about 5 years. Using the gross monthly salary of Kshs 116,816/- from the March 2022 pay slip, it concluded 4 months' salary, Kshs 467,264/-, was appropriate compensation under section 49 of the Employment Act framework.

p. 4

Legal principles established

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  • Demotion imposed as a disciplinary sanction has a contractual foundation where the terms and conditions of service authorise it
  • In cases of summary dismissal, section 41(2) of the Employment Act requires an oral hearing in the presence of the employee's representative of choice; a show-cause process alone does not satisfy this
  • The employer bears the burden of proving and justifying the reasons for termination under sections 43 and 45 of the Employment Act

Court orders

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  1. 1.Declaration that the summary dismissal of the Claimant was procedurally unfair
  2. 2.Award of compensation of Kshs 467,264/- (equivalent of 4 months' gross salary)
  3. 3.The Claimant to have costs

Authorities

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Legislation

  • Employment Act, 2007sections 41, 45, 43, 35(1), 41(2)
  • Constitution of Kenya, 2010Article 47
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act, 2007; Labour Relations Act)

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, "Kiptanui v Wevarsity Sacco Society Ltd (Cause 111 of 2019) [2023] KEELRC 1279 (KLR)", Case Analysis (2023). Cause No 111 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1279/eng@2023-05-31

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