Machungo v Stanbic Bank Kenya Limited (Cause E304 of 2021) [2025] KEELRC 2145 (KLR)
The bottom line
#A Kenyan court ruled that letting a fixed-term contract expire is lawful, but treating fixed-term staff worse than permanent staff is discrimination worth Kshs. 2 million.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the termination of the employment of the claimant was fair
- 2.Whether the Respondent discriminated the Claimant and thereby violated Article 27 of the Constitution, 2010 and Section 5 of the Employment Act
- 3.Whether the claimant was entitled to relief sought
Key legal issues
#Legitimate expectation of renewal of fixed-term contracts
No legitimate expectation of renewal arose; termination by effluxion of time was lawful, the notice of non-renewal being a courtesy.
The court applied the Court of Appeal decision in Transparency International Kenya v Omondi, holding that fixed-term contracts carry no expectancy of renewal and that an automatically renewable fixed-term contract is a contradiction in terms. The exception applies only where there is a promise or conduct indicating renewal; here the employer issued a non-renewal notice 15 days before expiry. The claimant did not fall within the exception, and redundancy claims did not arise.
Discrimination in basic terms of service between fixed-term and permanent staff
The differential treatment in annual leave, medical cover and exclusion from the pension scheme was unjustified and amounted to discrimination.
Following its own decision in Rang'anga & others v KCB Bank, the court held that treating fixed-term employees differently without justification on basic conditions of service already negotiated for permanent staff under a CBA breaches Section 5 of the Employment Act. It was an indignity to exclude fixed-term staff's immediate families from medical cover, and there was no basis for excluding them from the pension scheme and granting inferior leave. General damages of Kshs. 2 million were awarded.
Fairness of termination and claims under Sections 41, 43 and 45 of the Employment Act
Termination was fair as the contract ended by effluxion of time; claims for compensation, notice pay, leave, overtime, commission and severance failed.
The court held that non-renewal of a fixed-term contract upon expiry is not termination, so Sections 41, 43 and 45 had no application and there was no redundancy under Section 40. Specific monetary claims failed: leave had been paid, the 2017 leave claim was time-barred, overtime was unproved, commission had been paid, and severance had no basis absent redundancy.
Legal principles established
#- A fixed-term contract carries no automatic expectancy of renewal; absent a promise or conduct indicating renewal, the contract ends by effluxion of time and non-renewal is lawful.
- Unjustified differential treatment of fixed-term employees in basic conditions of service (annual leave, medical scheme, pension) amounts to discrimination contrary to Section 5 of the Employment Act and Article 27 of the Constitution.
Court orders
#- 1.A declaration that the respondent discriminated against the claimant contrary to Article 27 of the Constitution and Section 5 of the Employment Act
- 2.General damages for discrimination of Kshs. 2,000,000 with interest at court rate from date of judgment
- 3.Costs of the suit to the claimant
- 4.Certificate of service to issue according to section 51 of the Employment Act
- 5.Stay of 30 days
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction over employment and labour relations disputes (Employment Act; Constitution Articles 27, 30, 41, 47 invoked in claim)
Relief refused
#Declarations on legitimate expectation of renewal; conversion to permanent employment; that contracts were unlawful/unconstitutional; violation of Articles 30, 41 and 47; redundancy
The court found the fixed-term contracts lawful, that they ended by effluxion of time with no legitimate expectation of renewal and no redundancy
Compensation for unfair termination under Sections 41, 43 and 45 of the Employment Act (12 months' salary, loss of income, notice pay)
Termination was by effluxion of time and therefore fair
Payment in lieu of 168 leave days
Outstanding leave was paid on termination
Leave allowance for 21 days taken in May 2017
Claim was statute-barred
Overtime of 8,000 hours at Kshs. 2,307,000
Not justified or proved
Variable commission-based pay of Kshs. 342,993
Commission of Kshs. 336,718 was already paid under April and May 2019 salary
Severance pay of Kshs. 180,000
No redundancy arose
Costs
Costs of the suit awarded to the claimant
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
a. A declaration is issued that the respondent discriminated against the claimant contrary to the provisions of Article 27 of the Constitution and Section 5 of the Employment Act.
b. General damages for discrimination Kshs. 2,000,000 (Two Million Kenya Shilling) awarded with interest at court rate from date of judgment.
d. Certificate of service to issue according to section 51 of the Employment Act.
The court holds that the termination was fair. The court enters judgment for the claimant against the respondent
there cannot be a guarantee of automatic renewal of fixed term contract as that would defeat the meaning of the term, ''fixed''. The court cannot rewrite contract of parties on the mere basis that it is a bad bargain.
Issues in the judgment
#The judgment inconsistently dates the claimant's commencement of employment, variously May 2010, 10th May 2010, and October 2011 per the respondent.
The respondent's fixed-term employment contract is dated '29th April 2024' in the judgment, which appears to be a typographical error given the contract commenced 1st May 2015.
The respondent's witness is referred to inconsistently as 'Simon Mwangi', 'Winfred Mwende Kyalo' and 'Wilfred Mwende Kyalo'.
The awarded damages of Kshs. 2,000,000 is labelled 'General damages for discrimination' although the head 'General damages for breach of the Constitution' is a distinct prayer; also 'Kshs. 2, 000,000/-' appears with an anomalous comma in one instance.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Masoud v Cabinet Secretary for Labour & another; Kenya Revenue Authority (Interested Party) (Judicial Review Application E006 of 2025) [2025] KEELRC 2686 (KLR)[2025] KEELRC 2686 (KLR)2 Oct 2025applied
Cite this brief
#Cite this brief
Caselaw, "Machungo v Stanbic Bank Kenya Limited (Cause E304 of 2021) [2025] KEELRC 2145 (KLR)", Case Analysis (2025). Not stated in the extract (ELRC claim dated 13th April 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/2145/eng@2025-07-18
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.