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ELRCPartially AllowedCause No E708 of 2022· [2024] KEELRC 2360 (KLR)

Mutira v Metropolitan National Sacco Ltd & another (Cause E708 of 2022) [2024] KEELRC 2360 (KLR)

Employment and Labour Relations Court
30 September 2024
JGJacob Gakeri
4,018 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~16 min to read original · ~4 min brief

The bottom line

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A Kenyan employer who promises in writing to renew a fixed-term contract must honour it, or face an unfair termination finding.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent Sacco from 1st September 2014 and serving as Head of Human Resource Management until 31st August 2022, sued for unfair termination and twelve heads of relief totalling over Kshs.36 million. His fixed term contract was due to expire on 31st August 2022. On 22nd June 2022 the Respondent, on its own motion, wrote to the Claimant asking him to confirm whether he wished to continue serving, promising that upon receipt of the signed confirmation he would be given a new contract. The Claimant signed and returned the letter on 30th June 2022, but on 31st August 2022 the Chief Executive Officer verbally informed him his contract would not be renewed and he should not report to work. The Court framed three issues: legitimate expectation, unfairness of termination, and reliefs. Applying the doctrine of legitimate expectation and the Court of Appeal's decision in Transparency International Kenya v Teresa Carlo Omondi, the Court held the Respondent's letter was a clear, unambiguous and lawful promise that created a legitimate expectation of renewal on terms no less favourable than the subsisting contract. Acting contrary to that representation constituted unfair termination within Section 45 of the Employment Act. Judgment was entered for the Claimant against the Respondent with a declaration of unfair termination, one month's salary in lieu of notice (Kshs.371,000), three months' salary compensation (Kshs.1,113,000) and a certificate of service. Claims for anticipatory earnings, severance, gratuity, superannuation, leave days and constitutional damages were declined for want of proof, particulars or prior payment. Each party was ordered to bear its own costs.

Key legal issues

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01

Whether the Claimant had a legitimate expectation of renewal of his fixed term contract

Holding

Yes - the Respondent's letter of 22nd June 2022 was a clear, unambiguous and lawful promise that a new contract would be issued once the Claimant confirmed his willingness to continue, which he did on 30th June 2022.

Reasoning

Applying the four requirements of the doctrine of legitimate expectation, the Court found the Respondent suo motu made an express, clear and unambiguous promise to issue a new contract. The expectation was reasonable as the contract was due to lapse in two months, the Respondent was competent to make the promise, and no law was contravened. Relying on the Court of Appeal's decision in Transparency International Kenya v Teresa Carlo Omondi, the Court held that a promise by act or omission wets the appetite for reliance on legitimate expectation. The new contract could not have been on different terms than the subsisting contract since none had been offered.

p. 7
02

Whether termination of the Claimant's employment was unfair

Holding

Yes - the refusal to renew contrary to the representation made amounted to unfair termination within the meaning of Section 45 of the Employment Act.

Reasoning

Although fixed term contracts terminate by effluxion of time without notice, the Respondent's CEO found it necessary to verbally inform the Claimant not to report to work, revealing the Respondent's awareness of its un-retracted representation. The Court held that any act or omission contrary to the previous representation constituted unfair termination. The verbal notification on 31st August 2022, evidenced by the Claimant's email of that date, confirmed the breach of the legitimate expectation.

p. 8
03

What reliefs flow from the finding of unfair termination

Holding

Declaration, one month's notice pay, three months' compensation under Section 49(1)(c), and a certificate of service under Section 51; the remaining heads were declined for want of proof.

Reasoning

The Court awarded compensation considering the Claimant's nearly 8 years of service, his non-contribution to the termination, and the fact that dues were paid. Notice pay was reduced to one month absent proof of a three-month notice clause. Claims for anticipatory earnings, severance, gratuity, superannuation, leave days and constitutional damages failed for lack of legal basis, prior payment, or particulars. The 2nd Respondent should not have been sued as no allegation or relief was made against him.

p. 9

Legal principles established

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  • A fixed term contract lapses on expiry of the term and renewal or extension is at the discretion of the employer.
  • An employer's clear and unambiguous promise to issue a new contract creates a legitimate expectation of renewal; acting contrary to it amounts to unfair termination under Section 45 of the Employment Act.
  • Fixed term contracts terminate by effluxion of time and no notice from the employer is necessary.

Court orders

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  1. 1.Declaration that termination of the Claimant's employment by the Respondent was unfair.
  2. 2.One month's salary in lieu of notice of Kshs.371,000.00.
  3. 3.Equivalent of three (3) months' salary as compensation for unfair termination, Kshs.1,113,000.00 (total award Kshs.1,484,000.00).
  4. 4.Certificate of service to be issued to the Claimant.
  5. 5.Each party to bear their own costs.

Authorities

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Legislation

  • Employment ActSection 45
  • Employment ActSection 49(1)(c)
  • Employment Act, 2007Section 40(1)(g)
  • Employment Act, 2007Section 51
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B

Cases cited (16)

  • Dierks v University of South Africa
    [1999] 4 BLLR 304
  • Margaret A. Ochieng v National Water Conservation & Pipeline Corporation
    [2014] eKLR
  • Teresa Carlo Omondi v Transparency International Kenya
    [2017] eKLR
  • John Nduba v Africa Medical & Research Foundation
    [2020] eKLR
  • Interdependent Municipal & Allied Trade Union v Merafong City Local Municipality & others
    [2017] 26 LC 64
  • In re City Council
    [1986] AC 668
  • CCK & 5 others v Royal Media & 5 others
    [2014] eKLR
  • South African Veterinary Council v Szymanski
    [2003] 4 S.A 42 (SCA)
  • Transparency International Kenya v Teresa Carlo Omondi
    [2023] KECA 174 (KLR)
  • Registered Trustees of the Presbyterian Church of East Africa & another v Ruth Gathoni Ngotho
    [2017] eKLR
  • Francis Chire Chachi v Amatsi Water Service Company Ltd
    [2012] eKLR
  • Registered Trustees De La Salle t/a St. Mary's Boys Secondary School v Julius D.M. Baini
    [2017] eKLR
  • D.K. Marete v Teachers Service Commission
    [2020] eKLR
  • Abraham Gumba v Kenya Medical Supplies Authority
    [2014]
  • Muthuuri v National Industrial Credit Bank Ltd
    [2003]
  • Wilber Opiyo Ogol v Wells Fargo Ltd
    [2022] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 and the Labour Relations Act over unfair termination of employment

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, "Mutira v Metropolitan National Sacco Ltd & another (Cause E708 of 2022) [2024] KEELRC 2360 (KLR)", Case Analysis (2024). Cause No E708 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2360/eng@2024-09-30

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