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ELRCPartially AllowedCause No 1992 of 2015· [2023] KEELRC 3081 (KLR)

Mwangangi v Kikima Farmers Cooperative Society Limited (Cause 1992 of 2015) [2023] KEELRC 3081 (KLR)

Employment and Labour Relations Court of Kenya
30 November 2023
2,729 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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The Claimant, employed by the Respondent Cooperative Society from November 1983 and rising from Factory Manager to Secretary Manager and Chief Executive Officer, was dismissed with effect from 1st June 2015 by a letter dated 5th June 2015 citing five grounds: lack of transparency in a handover financial report, failure to avail academic and professional certificates, absence of promotion records, AGM resolutions commissioning an inquiry, and public demand. He claimed notice pay, terminal benefits, 12 months' compensation for unfair termination, annual leave pay, a declaration, and a Certificate of Service. The Respondent denied unfairness, asserted the Claimant was subscribed to N.S.S.F. and thus not entitled to service pay, and counterclaimed Kshs. 4,389,546.43 as misappropriated funds. The court found none of the five reasons valid under Sections 43 and 45 of the Employment Act: financial reporting was the Treasurer's duty; the certificates demand was unreasonable after 32 years of service; custody of employment records lies with the employer under Section 74; the fourth ground was ambiguous; and public demand had no evidential foundation. Procedural fairness under Section 41 was breached - no show-cause letter or disciplinary record was exhibited. The November 2017 Cooperative Inquiry Report did not support the Respondent. The Counterclaim, unsupported by documents or prosecution, was declined. The court declared the termination unfair and awarded service pay for 24 years (1983-2007) at Kshs. 435,420, statutory notice pay of Kshs. 36,285, and maximum compensation of 12 months' salary at Kshs. 435,420, totalling Kshs. 907,125, with costs, interest, and a Certificate of Service. The annual leave claim and the pleaded three months' notice pay were refused.

Key legal issues

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01

Validity of the five reasons given for termination

Holding

None of the five grounds was a valid reason under Sections 43 and 45 of the Employment Act.

Reasoning

The court examined each of the five reasons in the termination letter individually. Lack of transparency failed because financial reports were the Treasurer's responsibility under by-law 43; the certificates ground failed because the Claimant complied and the demand was unreasonable after 32 years; the promotion ground failed because records custody is the employer's duty under Section 74; the AGM resolutions ground was ambiguous; and 'public demand' was unsupported by any evidence.

p. 5
02

Procedural fairness of the termination

Holding

Termination breached Sections 41 and 45; there was no letter to show cause and no record of a disciplinary hearing.

Reasoning

The Respondent's own witnesses conceded no show-cause letter was exhibited and the former Chairman could not produce a disciplinary hearing record, claiming the file was too bulky. The court held procedural fairness was discarded from the outset and the minimum statutory standards of fairness were not met.

p. 5
03

The Counterclaim for alleged misappropriation of Kshs. 4,389,546.43

Holding

The Counterclaim was not established and was declined.

Reasoning

The Respondent's witnesses offered no documentary support; the State Department of Cooperatives' Inquiry Report of November 2017 found no misappropriation and no due process in dismissals; the Claimant was never sued or criminally charged; and the Board itself resolved in June 2015 that suit would issue only if misappropriation was proved, which proof was never shown.

p. 5
04

Remedies for unfair termination

Holding

Service pay for 24 pre-2007 years, statutory one-month notice pay, and maximum 12 months' compensation were awarded; annual leave pay was refused.

Reasoning

Service pay was limited to 1983-2007 because the Claimant was subscribed to N.S.S.F. thereafter under the Employment Act 2007 regime, but his long pre-Act service merited recognition. Notice pay was capped at the statutory month absent a contractual clause. Compensation was set at the maximum 12 months given his 32 years of diligent service and no contribution to the termination. The annual leave claim was too jumbled to sustain.

p. 6

Legal principles established

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  • An employer must establish valid reasons for termination under Sections 43 and 45 of the Employment Act; vague grounds such as 'public demand' or ambiguous resolutions do not suffice.
  • Procedural fairness requires a letter to show cause and a documented disciplinary hearing, meeting the minimum statutory standards under Sections 41 and 45 of the Employment Act.
  • Section 74 of the Employment Act places the duty of custody of employment records upon the employer, which cannot demand such records from the employee.
  • Serious allegations of misappropriation unsupported by documents or prosecution cannot sustain a counterclaim.

Court orders

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  1. 1.Declaration that termination was unfair
  2. 2.Counterclaim declined
  3. 3.Respondent to pay the Claimant service pay at Kshs. 435,420; notice pay at Kshs. 36,285; and compensation for unfair termination at Kshs. 435,420 - total Kshs. 907,125
  4. 4.Costs of the Claim and the Counterclaim to the Claimant
  5. 5.Interest granted from the date of Judgment at court rate, till payment is made in full
  6. 6.Certificate of Service to issue

Authorities

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Legislation

  • Employment ActSection 43
  • Employment ActSection 45
  • Employment ActSection 41
  • Employment ActSection 74
  • Employment Act 2007General (enactment relevant to service pay and N.S.S.F. subscription)
  • Electronic Case Management Practice Directions, 2020Practice Direction 6[2]
Jurisdiction invoked
First-instance jurisdiction under the Employment Act, Sections 41, 43, 45 and 74, and Section 74 custody-of-records duty on employers

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, "Mwangangi v Kikima Farmers Cooperative Society Limited (Cause 1992 of 2015) [2023] KEELRC 3081 (KLR)", Case Analysis (2023). Cause No 1992 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/3081/eng@2023-11-30

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