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ELRCPartially AllowedNot stated in the judgment (the appeal record references an application filed as Appeal E141 of 2024; the appeal is from Kajiado CMEL No. E009 of 2021)· [2025] KEELRC 510 (KLR)

Masai Rolling Mills Limited v Ongaki & another (Appeal E155 of 2022) [2025] KEELRC 510 (KLR)

Employment and Labour Relations Court of Kenya (Appeals Division)
24 February 2025
3,306 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~13 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled a factory worker was employed by the labour outsourcing agency, not the company where he worked, so claims must be restarted against the agency.

What this practically means

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Executive summary

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This is a first appeal to the Employment and Labour Relations Court, Appeals Division, against the judgment of Hon. L.L. Cicheha, CM delivered on 18th August 2022 in Kajiado CMEL No. E009 of 2021, in which the trial court found that the 1st Respondent was an employee of the Appellant, that his termination was unfair, and awarded him six months' salary as compensation (Kshs 114,660) and one month's notice pay (Kshs 19,110). The Appellant contended that the 1st Respondent was employed by the 2nd Respondent pursuant to a labour outsourcing agreement under which the 2nd Respondent paid salaries and NSSF dues and handled employee records, claims and terminal dues. The 1st Respondent maintained he was the Appellant's employee, unaware of the outsourcing agreement, which he said was designed to defeat fair labour practices. The court, guided by the first appellate duty to re-evaluate the evidence, framed two issues: the identity of the employer and the fairness of the termination. Applying the definition of an employee under section 2 of the Employment Act and common-law indicators, and the authorities on outsourcing including Kenya Airways Limited v Aviation & Allied Workers Union and Superforam Limited v Olwanda, the court held that outsourcing is lawful if consistent with fair labour practices. On the evidence - bank statements showing salary from the 2nd Respondent, NSSF records naming the 2nd Respondent as employer, and the outsourcing agreement predating the claimant's hiring - the trial court erred in finding an employment relationship with the Appellant. That finding and the consequential awards were set aside and the suit dismissed against the Appellant. Since the fairness of the termination could only be litigated between the 1st Respondent and the 2nd Respondent (who did not defend the suit), the claim was ordered to commence de novo between them. The appeal was allowed with no order as to costs, and the outcome applies to the consolidated claims E009, E055 and E076 of 2021.

Key legal issues

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01

Whether an employer-employee relationship existed between the Appellant and the 1st Respondent notwithstanding a labour outsourcing agreement with the 2nd Respondent

Holding

The trial court erred; the evidence (bank statements showing salary from the 2nd Respondent, NSSF records naming the 2nd Respondent as employer, and the labour outsourcing agreement in place before the claimant was hired) showed the employment relationship was with the 2nd Respondent, not the Appellant.

Reasoning

The court defined an employee under section 2 of the Employment Act and listed common-law indicators of employment. It noted outsourcing is a lawful business strategy if consistent with fair labour practices. On the evidence, the claimant's salary and NSSF dues were paid by the 2nd Respondent under the outsourcing agreement, which was already in place when he was hired, and he produced no document linking him to the Appellant. The finding of employment by the Appellant was therefore erroneous.

p. 7
02

Whether the 1st Respondent's services were unfairly terminated by the Appellant

Holding

Having found no employment relationship with the Appellant, the fairness of the termination could only be decided between the 1st Respondent and the 2nd Respondent as the actual employer; that question was remitted to the lower court.

Reasoning

The court held the termination issue could only be determined between the 1st Respondent and the 2nd Respondent, his employer. Only the Appellant had defended the suit, and the record did not show whether the 2nd Respondent was served. Since enforcement against the 2nd Respondent was not possible in those circumstances, the claim was to commence de novo between the 1st and 2nd Respondents on the termination and any compensation.

p. 7

Legal principles established

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  • A first appellate court must re-evaluate, re-assess and re-analyse the evidence on the record and determine whether the conclusions of the trial court should stand, giving reasons either way.
  • The onus of proving employment under a contract of service lies with the person who alleges that he was so employed.
  • Outsourcing of employees is not illegal provided it is carried out in accordance with fair labour practices and is not aimed at rendering an employee redundant.
  • Where the trial court's finding of an employer-employee relationship is overturned, the question of fairness of termination falls to be determined between the claimant and the actual employer, and that issue may be remitted for trial.

Court orders

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  1. 1.The appeal is allowed
  2. 2.The finding that there was an employer-employee relationship between the Appellant and the 1st Respondent, and any award against the Appellant on that premise including consequential orders, are set aside and substituted with an order dismissing the suit as against the Appellant
  3. 3.The claim filed in the lower court commences de novo to determine between the 1st Respondent and the 2nd Respondent the issue of the fairness or otherwise of the termination of the 1st Respondent's service and compensation, if any, for such termination
  4. 4.No order as to costs
  5. 5.The outcome of this appeal applies to the other consolidated claims (CMEL E009 of 2021, E055 of 2021 and E076 of 2021)
On appeal from
Principal Magistrate's Court at Kajiado (Employment and Labour Relations claim)
Kajiado CMEL No. E009 of 2021
Jurisdiction invoked
First appellate jurisdiction over an appeal from the trial magistrate's court in an employment and labour relations claim (ELRC Appeals Division); memorandum of appeal dated 12th September 2022

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, "Masai Rolling Mills Limited v Ongaki & another (Appeal E155 of 2022) [2025] KEELRC 510 (KLR)", Case Analysis (2025). Not stated in the judgment (the appeal record references an application filed as Appeal E141 of 2024; the appeal is from Kajiado CMEL No. E009 of 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/510/eng@2025-02-24

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