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ELRCPartially AllowedNot stated in judgment· [2023] KEELRC 1725 (KLR)

Kagwisage v Nyali Children Hospital Limited (Cause 40 of 2020) [2023] KEELRC 1725 (KLR)

Employment and Labour Relations Court
29 June 2023
1,737 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~7 min to read original · ~4 min brief

The bottom line

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A Mombasa court ruled that failing to pay salaries releases employees from contract terms like notice clauses, even during COVID-19.

What this practically means

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Executive summary

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The claimant, a Tanzanian obstetrician and gynaecologist, was employed by the respondent under a five-year contract dated January 13, 2020 at a monthly salary of Ksh 400,000, with a six-month probation. Salaries were paid late and staggered from January to March 2020, and nothing was paid for April to June 2020, prompting the claimant to resign on one month's notice effective June 30, 2020. He claimed unpaid salaries totalling Ksh 970,000 with costs and interest. The respondent admitted the dues but withheld Ksh 400,000, contending the claimant breached clause 5 of the contract by giving 30 rather than 90 days notice, and counterclaimed for the same sum as notice pay. It attributed the non-payment to COVID-19 financial difficulties and noted it had paid Ksh 570,000. The court held that salaries in contracts exceeding one month fall due monthly under Section 18(2)(c) of the Employment Act, and parties can only enhance, not negate, such statutory minimums. The non-payment of due salaries for work done fundamentally repudiated the contract under Section 44(3), releasing the claimant from its terms including the notice clause. The COVID-19 financial crisis did not excuse the respondent, which should have invoked Section 40 (operational requirements) or Section 13 (variation of terms with written approval). Judgment was entered for the claimant for the balance of Ksh 400,000 payable unconditionally, with 50% of his costs; the counterclaim failed and interest was not awarded.

Key legal issues

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01

Whether the respondent breached the employment contract by failing to pay monthly salaries

Holding

Yes. From inception the respondent failed to pay the agreed Ksh 400,000 monthly salary, paying staggered instalments and nothing for April to June 2020, negating the very foundation of the employment relationship.

Reasoning

Salaries in contracts exceeding one month are due at the end of each month under Section 18(2)(c) of the Employment Act. Parties may enhance but not negate these minimums. The non-payment without the claimant's written approval, despite the COVID financial crisis, fundamentally repudiated the contract under Section 44(3), entitling the claimant to all owed salaries up to June 2020.

p. 3
02

Whether the counterclaim for 90 days notice pay of Ksh 400,000 is merited

Holding

No. Because the respondent's non-payment fundamentally repudiated the contract, the claimant was no longer bound by its terms, including the 90 days notice clause, and his resignation on one month's notice was honourable and generous.

Reasoning

The court reasoned that the claimant ought not to have had to choose to resign due to non-payment of salaries. Once the employer fundamentally repudiated the contract under Section 44(3) of the Act, the claimant was released from the conditions of the contract including clause 5's 90-day notice requirement, so withholding the balance as notice pay was unjustified.

p. 4
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Whether the COVID-19 pandemic and financial crisis excused the non-payment

Holding

No. The law provides mechanisms for such situations - termination due to operational requirements under Section 40 or variation of terms with written employee approval under Section 13 - which the respondent did not use.

Reasoning

The court held that financial hardship does not permit an employer to simply withhold or stagger salaries without consent. The respondent should have invoked Sections 40 and 13 of the Employment Act. Failing to do so, its conduct negated the entirety of the contract agreement and it remained liable for the owed salaries.

p. 4

Legal principles established

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  • In employment contracts, parties can only enhance statutory minimums such as monthly payment of salaries, not negate them; delayed, staggered or unpaid salaries for work done fundamentally repudiate the entire contract and relieve the employee of its terms
  • An employer facing financial crisis or operational requirements must follow the lawful routes of termination on operational grounds or varying terms with written employee approval; unilateral non-payment or staggering of salaries breaches the contract
  • Conduct of an employer that contravenes an employee's inherent human dignity is an unfair labour practice

Court orders

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  1. 1.Judgment entered for the claimant against the respondent
  2. 2.The balance of Ksh 400,000 declared due and owing and payable unconditionally to the claimant
  3. 3.The claimant awarded 50% of his costs

Authorities

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Legislation

  • Employment ActSection 18(2)(c)
  • Employment ActSection 44(3)
  • Employment ActSection 40
  • Employment ActSection 13
  • Companies ActNot specified

Cases cited (2)

  • Jonathan Spangler v Centre for African Family Studies (CAFS)
    [2017] eKLR
  • CNR; FITM & another (Respondent)
    (Cause E204 of 2021) [2022] KEELRC 82 (KLR) (26 April 2022)
Jurisdiction invoked
Employment and labour relations dispute under the Employment Act, 2007 (ELRC first-instance jurisdiction)

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, "Kagwisage v Nyali Children Hospital Limited (Cause 40 of 2020) [2023] KEELRC 1725 (KLR)", Case Analysis (2023). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1725/eng@2023-06-29

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