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ELRCDismissedMemorandum of Claim dated 5th November 2019· [2024] KEELRC 2515 (KLR)

Wambugu v Foresight Ventures Limited (Cause 742 of 2019) [2024] KEELRC 2515 (KLR)

Employment and Labour Relations Court
17 October 2024
1,812 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled that a 'consultancy' label doesn't hide an employment relationship, but rejecting a varied role isn't constructive dismissal.

What this practically means

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Executive summary

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This Employment and Labour Relations Court judgment at Nairobi, delivered virtually by Linndolo J on 17th October 2024, determined a claim of constructive dismissal. The Claimant, engaged by a consultancy agreement dated 11th May 2018 as Acting Managing Director at Kshs. 400,000 per month, alleged that he was to transition to permanent employment as Managing Director of Popote Payments Limited at Kshs. 1,250,000 per month from 1st September 2018. He claimed he was underpaid, received only verbal assurances of resolution, and resigned on 26th June 2019, claiming 12 months' salary as compensation, Kshs. 9,950,000 in underpayment and Kshs. 500,000 in unpaid allowances. The Respondent denied any employment relationship, asserting the Claimant was a consultant whose engagement was contingent on meeting performance targets, and challenged the court's jurisdiction. The court framed three issues: existence of an employment relationship, constructive dismissal, and entitlement to remedies. It found an employment relationship existed, holding that the substance of the role - central to the Respondent's core business - overrode the 'consultancy' label. On constructive dismissal, applying the Coca Cola v Ligaga principles and section 10(5) of the Employment Act, the court held that an employer may vary terms by consultation, revision and notification without agreement, and that the Claimant, having declined the varied role of brand ambassador offered on 3rd March 2019, could not claim constructive dismissal. The entire claim was dismissed, with each party bearing their own costs.

Key legal issues

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01

Whether an employment relationship existed despite the contract being styled a consultancy agreement

Holding

Yes. The Claimant occupied the central position of Acting Managing Director, integral to the Respondent's core business, so the 'consultancy' label did not alter the employer/employee relationship.

Reasoning

The court applied the statutory definitions in section 2 of the Employment Act and Black's Law Dictionary, emphasising the employer's right to control work performance. Relying on Rika J's decision in Kenneth Kimani Mburu, it held that the existence of an employment contract is discerned from the parties' conduct, not merely the terms used. Because the Claimant was at the centre of the Respondent's core business rather than on its periphery, the relationship was one of employment. This finding also answered the Respondent's jurisdictional objection.

p. 3
02

Whether the Claimant was constructively dismissed

Holding

No. The Claimant resigned after declining a varied role (brand ambassador) offered on 3rd March 2019; rejecting revised terms does not amount to constructive dismissal.

Reasoning

The court adopted the Court of Appeal's principles in Coca Cola v Ligaga, including the objective test, causation and the employee's burden of proving repudiatory breach. On the facts, the Respondent raised performance concerns and offered a varied role which the Claimant declined. Applying section 10(5) of the Employment Act as explained by Rika J in Emmanuel Wambua Muthusi, variation requires consultation, revision and notification, not agreement; an employee may accept or reject revised terms. Having declined the new position, the Claimant could not claim constructive dismissal.

p. 5
03

Whether the Claimant is entitled to the remedies sought

Holding

No. The claim having failed in its entirety, no remedies were awarded.

Reasoning

Having found that an employment relationship existed but that constructive dismissal was not established, the court held that the foundation for the remedies - 12 months' salary as compensation, Kshs. 9,950,000 in alleged underpayment and Kshs. 500,000 in unpaid allowances - fell away. The entire claim was accordingly dismissed, with each party bearing its own costs.

p. 5

Legal principles established

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  • The existence of an employment relationship is discerned from the conduct of the parties and the substance of the role, not the label used in the contract; a role central to the employer's core business is not a consultancy merely because it is termed one.
  • Under section 10(5) of the Employment Act, an employer may vary contractual terms by consulting the employee, revising the contract and notifying the employee in writing; agreement is not required, and an employee's rejection of varied terms does not amount to constructive dismissal.

Court orders

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  1. 1.The Claimant's entire claim is dismissed
  2. 2.Each party to bear their own costs

Authorities

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Legislation

  • Employment ActSection 2
  • Employment ActSection 10(5)
  • Employment ActSection 10(1)

Cases cited (4)

  • Kenneth Kimani Mburu & another v Kibe Muigai Holdings Limited
    [2014] EKLR
  • Nathan Ogada Atiagaga v David Engineering Limited
    [2015] eKLR
  • Coca Cola East & Central Africa Limited v Maria Kagai Ligaga
    [2015] eKLR
  • Emmanuel Wambua Muthusi & 6 others v Khoja Shia Ithna Ashari Education Board t/a Jafirey Academy
    [2020] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act (Respondent disputed jurisdiction; court found an employment relationship existed)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Wambugu v Foresight Ventures Limited (Cause 742 of 2019) [2024] KEELRC 2515 (KLR)", Case Analysis (2024). Memorandum of Claim dated 5th November 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2515/eng@2024-10-17

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