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ELRCPartially AllowedNot stated in judgment· [2024] KEELRC 2296 (KLR)

Nzioka & another v Gateway Marine Services Limited (Cause E139 of 2023) [2024] KEELRC 2296 (KLR)

Employment and Labour Relations Court
26 September 2024
3,024 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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Kenyan employers cannot hide behind contract termination clauses or notice pay—they must prove valid reasons and follow fair procedure before ending employment.

What this practically means

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Executive summary

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Two former employees of the respondent - the head of operations (gross salary Ksh.174,000) and the head of the department of clearing and imports (Ksh.120,000) - sued for unfair termination, seeking reinstatement or, in the alternative, 12 months' compensation, unpaid salaries, notice pay, general damages for discrimination and for psychological trauma, and costs. Both received 30-day termination notices dated 21st October 2022 with no reasons; final dues included severance pay, suggesting redundancy, but no Section 40 notice was issued to employees or the labour officer, and no Section 41 hearing was conducted. The respondent maintained that both were on fixed-term contracts, that the 2nd claimant's contract ran to near full term, and that Covid-19 financial constraints justified terminating the 1st claimant's contract two months early, with severance and leave paid. The court held that invoking a contractual termination clause at will is impermissible; under Sections 43 and 45 the employer must prove valid and fair reasons and fair procedure. The Covid-19 rationale failed because both claimants were employed after the pandemic. Section 40 and 41 procedures were ignored, rendering both terminations unfair. Salary deductions without written consent contrary to Section 10(5) were refunded, and terminal dues recalculated on full salary. Discrimination and trauma claims failed as the claimants were replaced by junior staff on lower wages. Compensation of 3 months' and 2 months' gross salary was awarded respectively, with reinstatement refused and each party bearing its own costs. Judgment delivered at Mombasa on 26th September 2024.

Key legal issues

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01

Validity of reasons for termination

Holding

Termination for alleged Covid-19 financial difficulties was not valid; claimants were employed post-Covid

Reasoning

The employer attributed terminations to Covid-19 financial constraints, but the court noted both claimants were engaged after the pandemic and the respondent had navigated it successfully. Under Sections 43 and 45 the employer bears the burden of proving valid and genuine reasons, which it failed to discharge.

p. 4
02

Procedural fairness under Sections 40 and 41

Holding

No notice under Section 40, no report to the labour officer, and no hearing under Section 41; termination unfair

Reasoning

Where loss of employment stems from operational/financial difficulties amounting to redundancy, Section 40 procedures (notice and labour officer report) apply, and Section 41 hearing requirements must be met. The respondent invoked only the contractual termination clause and paid notice, which is insufficient.

p. 4
03

Premature termination of fixed-term contracts

Holding

Early termination of fixed-term contracts without reasons was unfair for both claimants

Reasoning

Even where contracts had expiry dates, the respondent terminated them prematurely (2 months and 40 days respectively) citing only the termination clause. Section 45(2) requires proof of a valid and fair reason and fair procedure; notice pay alone does not satisfy the Act.

p. 6
04

Unauthorised salary deductions

Holding

Deductions made without written consent must be refunded

Reasoning

The employer imposed Covid-related pay cuts without the employees' written consent as required by Section 10(5) of the Employment Act. The unpaid/deducted salaries were accordingly awarded: Ksh.295,800 for the 1st claimant and Ksh.156,000 for the 2nd claimant, with terminal dues recalculated on full salary.

p. 5
05

Discrimination and trauma claims

Holding

Discrimination not established

Reasoning

Discrimination must be compared between similarly situated employees. The claimants were replaced by junior staff on lower wages who accepted half salary; this did not amount to discriminatory treatment, and the trauma claim was subsumed in the unfair termination finding.

p. 5

Legal principles established

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  • An employer must prove valid and fair reasons for termination and follow fair procedure; invoking a contractual termination clause at will is impermissible
  • Salary deductions require the employee's prior written consent under Section 10(5) of the Employment Act
  • Reliance on operational reasons/redress must be read with Sections 40, 43 and 45 of the Employment Act; failure to follow Section 40 renders termination unfair

Court orders

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  1. 1.Declaration that employment of both claimants was terminated unfairly
  2. 2.1st claimant awarded compensation of Ksh.522,000
  3. 3.1st claimant awarded unpaid salaries of Ksh.295,800
  4. 4.1st claimant awarded unpaid terminal dues of Ksh.346,249
  5. 5.2nd claimant awarded compensation of Ksh.240,000
  6. 6.2nd claimant awarded unpaid salary of Ksh.156,000
  7. 7.2nd claimant awarded unpaid terminal dues of Ksh.226,554.20
  8. 8.Each party bears its own costs

Authorities

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Legislation

  • Employment Act, 2007Section 40
  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 43
  • Employment Act, 2007Section 45 (including 45(2) and 45(5))
  • Employment Act, 2007Section 49
  • Employment Act, 2007Section 10(3)
  • Employment Act, 2007Section 10(5)

Cases cited (5)

  • Musa Mwale Ashibira v African Blooms Ltd
    [2018] eKLR
  • Zablon Bisonga Mose v Real Careers Limited
    [2018] eKLR
  • Kenya Petroleum Oil Workers Union v Kenya Petroleum Refineries Ltd
    (2013) eKLR
  • Kenya Union of Domestic, Hotels, Educational Institutions, Hospital and Allied Workers (Kudheiha) v Nairobi Hospital
    [2022] eKLR
  • Rose Njambi Mwangi v Point East Africa Limited
    [2021] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (Sections 40, 41, 43, 45, 49 applied)

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, "Nzioka & another v Gateway Marine Services Limited (Cause E139 of 2023) [2024] KEELRC 2296 (KLR)", Case Analysis (2024). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2296/eng@2024-09-26

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