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ELRCPartially AllowedCause No E126 of 2023· [2024] KEELRC 1200 (KLR)

Ngala v Pidilite East Africa Limited (Cause E126 of 2023) [2024] KEELRC 1200 (KLR)

Employment and Labour Relations Court
9 May 2024
2,785 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenyan employers cannot fire staff for poor performance without a hearing, performance measures, and genuine help to improve first.

What this practically means

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Executive summary

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The claimant, employed as a business development executive – retail from February 2022 on a one-year term contract that rolled into month-to-month employment, was summarily dismissed on 25 July 2023 on grounds of poor performance. He challenged the dismissal for lack of a hearing, absence of a performance improvement plan, and unaddressed stockouts, and contested the respondent's recall of a motor vehicle purchased with a Ksh.760,000 staff car loan. The respondent defended the dismissal as procedurally sound and counterclaimed for the outstanding loan balance of Kshs.580,781 plus depreciation costs. The court applied Section 41(1) of the Employment Act and established case law holding that an employer alleging poor performance must demonstrate measures to measure performance and efforts to assist the employee to improve. Finding no such mechanisms, and no hearing, the court held the summary dismissal unlawful and unfair under Sections 41(1) and 45. It awarded a declaration of unfair termination, four months' salary as compensation (Ksh.400,000), notice pay (Ksh.100,000), July 2023 salary for 25 days worked (Ksh.84,000), prorated fuel allowance (Ksh.22,000), and leave pay for 24 days computed on basic pay (Ksh.56,000). The counterclaim was allowed only to the extent that the claimant continues repaying the car loan at Ksh.22,337 monthly at preferential rates, with liberty to recall the balance at commercial rates upon default. Each party was ordered to bear its own costs. Judgment delivered at Mombasa on 9 May 2024.

Key legal issues

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01

Fairness of summary dismissal on grounds of poor performance

Holding

Termination was unfair; the employer had no performance improvement measures, did not address stockouts raised by the claimant, and no hearing was conducted.

Reasoning

Section 41(1) requires an employer to explain reasons and allow representation before termination. Case law requires demonstrable performance measures and an improvement plan. The respondent sent emails about targets but made no efforts to assist the claimant or address stockouts, so the reason could not be attributed to the employee. The dismissal was unlawful and unfair under Sections 41(1) and 45.

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02

Entitlement to terminal dues - notice pay, July salary, fuel allowance, leave pay

Holding

Notice pay of Ksh.100,000, July 2023 salary of Ksh.84,000 for 25 days worked, prorated fuel allowance of Ksh.22,000 and leave pay of Ksh.56,000 for 24 days awarded.

Reasoning

Unfair termination entitles the claimant to notice and compensation. Section 18(4) and (5) prohibits denying pay for labour done despite the loan facility. Fuel allowance accrues with employment for the 25 days worked. The employer, as custodian of records, failed to show leave taken, so the claimed 24 accrued days stand, computed on basic pay.

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03

The car loan facility and counterclaim

Holding

Counterclaim allowed only to the extent that the claimant continues repaying the loan at Ksh.22,337 monthly; the respondent may recall the balance at commercial rates on default.

Reasoning

The claimant did not deny owing the car loan and, following the ruling of 25 January 2024, was up to date with repayments. Because the unfair termination deprived him of earnings to service the loan, equity required that he continue repayment at staff preferential rates with an option to offset the balance, rather than an immediate recall and depreciation claim.

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Legal principles established

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  • Where poor performance is the reason for termination, the employer bears a high level of proof and must show it had measures or a policy in place to measure performance
  • An employer must assist and give an employee an opportunity to improve before invoking poor performance as a disciplinary ground
  • Without employer mechanisms to assist the employee, reliance on poor performance is unfair under Sections 41(1) and 45 of the Employment Act

Court orders

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  1. 1.Declaration that employment was terminated unfairly
  2. 2.Compensation awarded at Ksh.400,000 (four months' gross salary)
  3. 3.Notice pay Ksh.100,000
  4. 4.Pay for July 2023 Ksh.84,000
  5. 5.Leave pay for 24 days Ksh.56,000
  6. 6.Fuel allowance Ksh.22,000
  7. 7.Counterclaim allowed to the extent that the claimant shall continue to repay the loan facility on monthly instalments of Ksh.22,337 until paid in full, with the option to pay the total amount at once
  8. 8.In default of instalments, the respondent shall be at liberty to recall the balance of the car loan facility at commercial rates
  9. 9.Each party bears its own costs

Authorities

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Legislation

  • Employment Act, 2007Section 41(1)
  • Employment Act, 2007Section 45
  • Employment Act, 2007Section 18(4) and (5)
  • Employment Act, 2007Section 28
  • Employment Act, 2007Section 51

Cases cited (4)

  • George Okoth Okello v Africa Blooms Limited & another
    [2022] eKLR
  • National Bank of Kenya v Samuel Nguru Mutonya
    [2019] eKLR
  • Jane Samba Mukala v Ol Tukai Lodge Limited
    [2013] eKLR
  • Eddah Anyango Akumu v AAR Insurance Kenya Limited
    [2018] eKLR
Jurisdiction invoked
Employment Act, 2007 (Sections 41, 45, 28, 51); court's employment and labour relations 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, "Ngala v Pidilite East Africa Limited (Cause E126 of 2023) [2024] KEELRC 1200 (KLR)", Case Analysis (2024). Cause No E126 of 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1200/eng@2024-05-09

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