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ELRCPartially AllowedNot stated in the judgment as provided· [2024] KEELRC 2518 (KLR)

Gatundu v First Assurance Company Limited (Cause E6573 of 2020) [2024] KEELRC 2518 (KLR)

Employment and Labour Relations Court
3 October 2024
MMM. Mbarũ
4,558 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~18 min to read original · ~4 min brief

The bottom line

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A Kenyan court upheld a CFO's lawful dismissal for integrity failures but ordered the employer to pay Ksh.4.6 million in unpaid contractual notice pay.

What this practically means

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Executive summary

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The claimant, employed by the respondent insurance company from 1995 and promoted to Chief Finance Officer in 2017, was terminated on 18 December 2018 after he issued a payment demand to Masterstroke Insurance Agency on behalf of Misort Africa overstating the outstanding premium and misstating policy inception dates, exposing the respondent to fraud and reputational risk. He claimed 12 months' compensation for unfair termination, pay to age 60, the unpaid balance of six months' notice, vesting of a share value tranche, a certificate of service and costs. The respondent maintained the dismissal was for valid reasons and after due process, and that terminal dues including leave, one month's notice pay and other benefits were paid. The court found that the claimant admitted issuing the erroneous demand letter and failing to confirm balances with the underwriting department - admissions going to the core of his duties as CFO, a position demanding high integrity and financial probity in a finance-sensitive sector. Applying Section 43 of the Employment Act and authorities on integrity in financial custodianship, the court held there were valid, justified and genuine reasons for termination. Applying Section 41 as explained in Oyombe v Eco Bank Limited, it further held the procedure was fair: notice to show cause, response, disciplinary hearing with option of representation, and appeal. Consequently, compensation and the claim for pay to age 60 were refused, and the final share value tranche could not vest under the plan conditions. However, the contractual entitlement to six months' notice under clause 13.2 was upheld, with five months' unpaid notice of Ksh.4,601,520 awarded payable within 30 days and bearing court-rate interest thereafter. A certificate of service under Section 51 was found due, and each party was ordered to bear its own costs.

Key legal issues

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01

Validity of the reasons for termination

Holding

There were valid, justified and genuine reasons for termination - the claimant dishonestly, negligently and recklessly issued a demand letter overstating premiums and misstating policy inception dates, acting outside his mandate

Reasoning

The claimant admitted issuing the demand letter for Ksh.18.5m when the actual balance was Ksh.13.8m, and stating the policy was incepted in May 2018 when it was incepted in February 2018. As CFO, entrusted with financial soundness and compliance, his failure to consult the underwriting department was a gross violation of his employment contract and the trust and confidence expected, exposing the respondent to fraud and risk.

p. 8
02

Fairness of procedure under Section 41 of the Employment Act

Holding

The claimant was taken through a fair procedure: notice to show cause, opportunity to respond, disciplinary hearing with the option of a representative, and a right of appeal

Reasoning

The court applied the Oyombe v Eco Bank elements of Section 41. The claimant received a notice to show cause dated 30 November 2018, replied, was invited to a disciplinary hearing on 13 December 2018, was advised he could bring another employee of his choice (he opted to attend alone), and was allowed an appeal which was heard and dismissed. The elements of fair procedure were thus satisfied.

p. 8
03

Notice pay under the contract

Holding

Clause 13.2 of the employment letter provided for 6 months' notice for a senior employee such as CFO; only one month was paid, so 5 months' unpaid notice pay of Ksh.4,601,520 is due

Reasoning

The parties contractually agreed to 6 months' notice for a senior employee such as a CFO or VP. Although termination was for valid reasons, the respondent elected to pay only one month's notice. The agreed contractual entitlement governs, so the balance of five months is payable irrespective of the lawful termination.

p. 9
04

Certificate of service

Holding

A certificate of service is due at the end of employment under Section 51 of the Employment Act

Reasoning

Section 51 of the Employment Act obliges an employer to issue a certificate of service upon termination. The claimant's entitlement survives regardless of the manner of termination, and the court ordered its issuance.

p. 9

Legal principles established

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  • An employer is entitled under Section 43 of the Employment Act to lawfully terminate an employee who fails to give a proper account of his financial probity and integrity
  • Employees handling other people's money in finance-sensitive sectors must demonstrate a high degree of integrity and financial probity, failing which termination is justified
  • Four elements under Section 41 of the Employment Act must be satisfied for a fair summary dismissal procedure

Court orders

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  1. 1.The respondent to pay the claimant unpaid notice pay of Ksh.4,601,520 within 30 days, failing which the sum shall accrue interest at court rates from the date of judgment until paid in full
  2. 2.Each party to bear its own costs
  3. 3.A certificate of service to be issued to the claimant in accordance with Section 51 of the Employment Act

Authorities

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Legislation

  • Employment ActSection 43
  • Employment ActSection 41
  • Employment ActSection 51

Cases cited (6)

  • Celina Nadite & 19 others v National Police Service Commission
    [2019] eKLR
  • Violet Kadala Shitsukane v Kenya Post Savings Bank
    [2020] eKLR
  • Agnes Murugi Mwangi vs. Barclays Bank of Kenya Limited
    (2013) eKLR
  • Evans Kamadi Misango v Barclays Bank of Kenya Limited
    (2015) eKLR
  • Postal Corporation of Kenya vs. Andrew K. Tanui
    [2019] eKLR
  • Oyombe v Eco Bank Limited
    (Civil Appeal 185 of 2017) [2022] KECA
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment claims (Employment Act; Constitution establishing the ELRC) - invoked through the Employment Act provisions applied

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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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, "Gatundu v First Assurance Company Limited (Cause E6573 of 2020) [2024] KEELRC 2518 (KLR)", Case Analysis (2024). Not stated in the judgment as provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2518/eng@2024-10-03

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