Sang & 2 others v Kenya Orient Insurance Limited (Cause 332 & 330 of 2019 (Consolidated)) [2024] KEELRC 2169 (KLR)
The bottom line
#A Kenyan court ruled Kenya Orient Insurance unfairly sacked three employees for the company's own financial failures, awarding them Kshs. 5.325 million.
What this practically means
#Executive summary
#Key legal issues
#Validity of reasons for termination of the 1st and 2nd Claimants (Sections 43 and 45 Employment Act)
Termination was not based on valid reasons; the default judgment and attachment resulted from the Respondent's failure to pay its Advocates and service providers, not employee negligence
The Claimants instructed Okello Kinyanjui Advocates, a panel firm, which assured them appearance and defence had been filed. The firm was unpaid, like other service providers, and the Respondent was in severe financial distress. The Company Secretary conceded it would not be right to blame employees for the Respondent's financial problems. Any professional negligence claim lay against the Advocates, who held indemnity insurance, not against the Claimants.
Procedural fairness for the 1st and 2nd Claimants (Section 41 and clause 11.1 of the HR Manual)
Procedure violated Sections 41 and 45 and clause 11 of the Manual: no investigation, no letters to show cause, no suspension on full pay as normally required for gross misconduct, and no advice on the right of appeal
Clause 11.1 required investigation, advice on the nature of the complaint and opportunity to state one's case before a decision; clause 11.1.3(c) normally required suspension on full pay during investigation. Audit was still underway when the Claimants were disciplined. Letters to show cause would have crystallised the allegations, particularly given the Respondent's ongoing restructuring and PIPs, which raised suspicion that financial difficulties influenced the decision.
Validity of reasons and procedure for the 3rd Claimant's termination for poor performance
Neither reason nor procedure was valid; the Respondent ignored its Manual and terminated him at will without a hearing, and performance was assessed in a depressed business environment caused by the Respondent's own failures
Targets were set and assessed against the backdrop of the Respondent's reputational damage, restructuring and unpaid claims and service providers; all managers had been placed on PIP. Structural reconfigurations made individual performance assessment premature. He was not given a hearing and was not advised of his right of appeal under clause 11.1.2.
Whether the circular to business partners was defamatory
The circular was not defamatory; it was a precautionary, normal communication elaborating the Claimants' contractual post-employment restrictive covenants, without malice
The Claimants held senior positions able to bind the Respondent; the circular merely informed the industry they were no longer authorised to transact for the company. No malice was shown and no third party interpreted it as malicious. Claims for defamation, apology, recall and injunction were therefore declined.
Remedies for unfair termination
Compensation for unfair termination awarded: 3½ months' salary to the 1st Claimant, 7 months' to the 2nd Claimant, 5 months' to the 3rd Claimant, considering length of service, permanent and pensionable contracts, and lack of contribution to the termination; other heads refused
The Court considered service length (11 months; 2 years 11 months; 1½ years), that all were on permanent and pensionable contracts expecting to retire at 60, and that none caused or contributed to termination. The single statutory compensation remedy was held to suffice and redress the whole breadth of economic injuries; the defamation and other damages claims were rejected for want of evidential support.
Legal principles established
#- Termination requires both valid reasons under Sections 43 and 45 and fair procedure under Section 41 of the Employment Act; blame for an employer's financial and legal failures cannot be placed on employees
- An employer must follow its own Human Resource Manual disciplinary procedure, including investigation, letters to show cause, suspension on full pay where alleged gross misconduct, and advice on the right of appeal
- A normal industry circular notifying partners that senior employees have ceased employment and are not authorised to transact for the company, issued consistently with contractual restrictive covenants, is not defamatory
Court orders
#- 1.Cause No. 331 of 2019 (Joe Ngigi Gatune v Kenya Orient Insurance Co. Limited) consolidated with the other two Causes for purposes of preparation and delivery of the Judgment
- 2.A copy of the Judgment to be placed in all the separate files
- 3.Declaration that termination of the respective Claimants' contracts of employment was unfair
- 4.Respondent to pay the 1st, 2nd and 3rd Claimants compensation for unfair termination of Kshs. 700,000; Kshs. 2,625,000; and Kshs. 2,000,000 respectively, totalling Kshs. 5,325,000
- 5.Costs to the Claimants
- 6.Interest allowed at court rate from the date of Judgment till payment in full
- Jurisdiction invoked
- Original employment and labour relations jurisdiction under Article 162(2) of the Constitution (Employment and Labour Relations Court Act)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Sang & 2 others v Kenya Orient Insurance Limited (Cause 332 & 330 of 2019 (Consolidated)) [2024] KEELRC 2169 (KLR)", Case Analysis (2024). Cause No. 332 of 2019 (consolidated with Causes No. 330 of 2019 and 331 of 2019). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2169/eng@2024-08-27
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.