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ELRCPartially AllowedNot stated in the judgment· [2023] KEELRC 3356 (KLR)

Tolo v Rafiki Microfinance Bank Ltd & another (Cause 630 of 2017) [2023] KEELRC 3356 (KLR)

Employment and Labour Relations Court
18 December 2023
4,709 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~19 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled firing for poor performance can still be unfair if the employer skips warnings and a proper hearing before termination.

What this practically means

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Executive summary

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The Claimant sued the 1st and 2nd Respondents alleging wrongful dismissal from employment in business development effective 17th February 2014, claiming a declaration of unfair termination, 12 months' salary as damages, house allowance, overtime, unpaid leave, unpaid April 2015 salary, pay in lieu of notice, NSSF and NHIF contributions, a certificate of service and costs. The 1st Respondent admitted the employment but justified termination on poor performance and negligence; the 2nd Respondent denied employing the Claimant. The court first found that the employment stood terminated on 21st April 2015 when the Claimant read the termination letter, his refusal to acknowledge receipt being of no consequence. On substance, although the Respondent had no signed Balance Score Card and produced no evidence of appraisals on agreed targets, monitoring or a performance improvement plan, the Claimant admitted meeting only 2 of 8 targets, being supported to improve, and that performance was required to remain in employment; the Respondent therefore proved substantive justification under Section 43(2) of the Employment Act. On procedure, however, no warning, notice to show cause or disciplinary hearing was afforded, and the 21st April 2015 meeting was not shown to be a hearing; the termination was thus procedurally flawed and unfair under Section 45(2). The court awarded a declaration of unfair termination, house allowance at 15% of basic salary (Kshs.331,800), equivalent of two months' salary (Kshs.220,000), costs, interest and a certificate of service within 30 days. Claims for overtime, unpaid leave, April 2015 salary, NSSF, NHIF and pay in lieu of notice failed, having been conceded or already paid. The suit against the 2nd Respondent was dismissed with costs.

Key legal issues

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01

Whether termination for poor performance was substantively justified

Holding

Yes - although no signed Balance Score Card existed, the Claimant knew the targets, met only 2 of 8, and the Respondent proved a valid reason under Section 43(2).

Reasoning

The court acknowledged the Respondent failed to prove appraisals on mutually agreed targets, but the Claimant himself admitted meeting only 2 of 8 targets, being supported to improve, and that performance was required to remain in employment. On a balance of probabilities, the Respondent had a reasonable and genuine belief that performance was poor, satisfying Section 43(2).

p. 9
02

Whether the termination procedure was fair under Section 41

Holding

No - no warning, notice to show cause, hearing or disciplinary process was afforded; the termination was procedurally flawed and unfair under Section 45(2).

Reasoning

RWII confirmed no warning or notice was issued and no disciplinary hearing took place. The meeting of 21st April 2015 was not alleged to be a disciplinary hearing, and no minutes or attendee list were produced. The Claimant was therefore denied the opportunity to be heard and to be accompanied by a representative of his choice, rendering the termination procedurally unfair.

p. 9
03

Whether the Claimant was entitled to house allowance

Holding

Yes - the contract did not state salary was consolidated and the payslip had no housing allowance component, so 15% of basic salary was awarded under Section 31.

Reasoning

RWI admitted the contract did not state the salary was consolidated and the payslip lacked a housing allowance entry. Sections 31 and 20 of the Employment Act require provision of housing or an allowance and an itemised pay statement. Having failed to demonstrate payment of housing allowance, the Respondent was liable for 15% of basic salary for the duration served.

p. 10
04

Liability of the 2nd Respondent

Holding

None - the suit against the 2nd Respondent was dismissed with costs as no act or omission was alleged against it.

Reasoning

The Claimant neither accused the 2nd Respondent of any act or omission nor adduced evidence implicating it in the termination. The court found no basis for the suit against it and dismissed it with costs.

p. 11

Legal principles established

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  • For termination to be fair under Section 45(2) of the Employment Act, the employer must prove both a valid and fair reason and adherence to fair procedure.
  • Compliance with Section 41 of the Employment Act is mandatory; termination without such compliance is irregular.
  • A refusal by an employee to acknowledge receipt of a termination letter whose contents they have read does not negate the termination.

Court orders

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  1. 1.Declaration that termination of the Claimant's employment by the Respondent was unfair
  2. 2.Housing allowance at 15% of basic salary, Kshs.331,800.00
  3. 3.Equivalent of two months' salary Kshs.220,000
  4. 4.Costs of this suit
  5. 5.Interest at court rates from the date of judgement till payment in full
  6. 6.Certificate of service to issue within 30 days
  7. 7.Suit against the 2nd Respondent dismissed with costs

Authorities

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Legislation

  • Employment Act, 2007Sections 8, 20, 31, 41(1), 42(1), 43, 43(2), 44, 45, 45(2)(b), 47(5), 49(1)(c), 51
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of Kenya, 2010Articles 159(2)(d), 48

Cases cited (12)

  • Loise Otieno V Kenya Commercial Bank Ltd
  • Kenfreight (EA) Ltd V Benson K. Nguti
    (2016) eKLR
  • Jane Samba Mukala V Ol Tukai Lodge Ltd
    (2013) eKLR
  • Samuel Nguru Mutonya V National Bank of Kenya
  • Maina Mwangi V Thika Cofiee Mills Ltd
    (2014) eKLR
  • Hewitt & Co. V Joseph
    AIR (1918) Cal 717
  • Myres V Dafris
    (1880) 5 Ex D 180
  • Joseph Mwaniki Ng’ang’a V United Millers Ltd
    (2022) eKLR
  • Heritage Insurance Co. Ltd V Christopher Onyango & 23 others
    (2018) eKLR
  • Isdor Rachuonyo V Brava Food Industries Ltd
    (2021) eKLR
  • Pius Machafu Isindu V Lavington Security Guards Ltd
    (2017) eKLR
  • Postal Corporation of Kenya V Andrew K. Tanui
    (2019) eKLR
Jurisdiction invoked
Employment and labour relations jurisdiction (Employment Act, 2007; Employment and Labour Relations Court 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, "Tolo v Rafiki Microfinance Bank Ltd & another (Cause 630 of 2017) [2023] KEELRC 3356 (KLR)", Case Analysis (2023). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/3356/eng@2023-12-18

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