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ELRCPartially AllowedNot stated in the judgment as extracted

Mwirigi & 2 others v Social Health Authority & 2 others (Petition E042 of 2025) [2025] KEELRC 2236 (KLR)

Employment and Labour Relations Court
29 July 2025
5,034 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 former NHIF staff who retire under the new health law are entitled to exit packages and absorbed staff keep their NHIF salaries.

What this practically means

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Executive summary

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This was an amended petition by staff of the defunct National Health Insurance Fund (NHIF) challenging their transition to the Social Health Authority (SHA) under the Social Health Insurance Act, No 16 of 2023. By consent order of July 23, 2025, most prayers were settled: redeployed staff retain their NHIF last salary personal to self until exit; a contempt application was withdrawn; and two issues were reserved for the court's judgment - the exit package for staff opting to retire, and whether competitively absorbed staff retain NHIF salaries personal to self. The 1st respondent (SHA) and the 2nd respondent (Public Service Commission) contended that the Act's transitional framework was complete and exclusive, that the statute's silence on exit packages was a deliberate legislative choice, that retirement would follow existing pension schemes, that the Transition Committee's report was purely advisory, and that the 2022 CBA was unenforceable per the Supreme Court's decision. The court held that the option to retire imposed by the statute is a classical redundancy under section 2 of the Employment Act, attracting severance/exit packages under section 40, CBAs and contracts of service; that respondents failed to justify any limitation of article 41 fair labour practices under article 24; and that the SHA's takeover was a transfer of a going concern obligating recognition of prior service, with variation of terms only by consultation and negotiation. Denial of salary retention or severance would be discriminatory under article 27. The petition was determined in favour of the petitioners with declarations and a compulsion order; each party to bear own costs per the consent order.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the option for defunct NHIF staff to retire by operation of the Social Health Insurance Act constitutes redundancy attracting an exit/severance package
  2. 2.Whether fair labour practices entitle absorbed employees to retention of accrued terms, conditions and remuneration upon transfer of a going concern
  3. 3.Whether the consent order left the issue of retention of NHIF salaries personal to self by competitively recruited staff open for determination
  4. 4.Whether denial of NHIF salaries personal to self or of severance amounts to discrimination under article 27 of the Constitution
  5. 5.What reliefs should issue

Key legal issues

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01

Nature of the statutory 'option to retire' for defunct NHIF staff

Holding

It is redundancy; the staff are entitled to severance/exit packages under the law, valid CBAs and contracts of service

Reasoning

Section 2 of the Employment Act defines redundancy as loss of employment through no fault of the employee, including abolition of office. The option to retire was imposed on staff at the instance of the employer through the SHI Act's transitional provisions, with no misconduct or performance issues alleged. It is effectively early retirement occasioned by abolition of all offices of the defunct NHIF, and the 1st respondent as liable employer bears the consequences of that redundancy.

p. 9
02

Effect of transfer of a going concern on absorbed employees' terms

Holding

Fair labour practices under article 41 obligate the new employer to recognise prior service and accrued terms; variation only via consultation and negotiation, not unilaterally

Reasoning

The 1st respondent substantially took over the business of the defunct NHIF, amounting to transfer of a going concern. Fair labour practices imply continuity of employment with recognition of previous service, terms and remuneration. Section 10(5) of the Employment Act requires consultation and written notice for changes to terms. Harmonisation of terms may occur, but only through negotiation with employees or their trade unions, never unilaterally.

p. 13
03

Status of the Transition Committee report and the CBA

Holding

The dispute did not turn on the CBA found unenforceable by the Supreme Court; the court was not deciding that issue

Reasoning

Respondents argued the CBA was void for want of SRC approval per the Supreme Court decision. The court held the cause of action did not hinge on that CBA and whether it applied was beyond the petition's cause of action. The Transition Committee's advisory grounding the VSI package on VER precedence, the CBA and section 40(1)(g) was correctly within its mandate.

p. 13
04

Discrimination

Holding

Denial of NHIF salaries personal to self or of severance would amount to discrimination contrary to article 27 and section 5 of the Employment Act

Reasoning

Given the findings on redundancy and transfer of service, denying the salaries or severance would deny affected staff equality before the applicable redundancy law and fair treatment, engaging article 27 of the Constitution and section 5 of the Employment Act.

p. 14

Legal principles established

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  • Where staff of a defunct entity opt to retire by operation of a statute repealing their employer, that is redundancy in law and attracts severance/exit packages
  • In a transfer of a going concern, an absorbed employee cannot be engaged at a lower salary without consent; variation of terms requires consultation and negotiation

Court orders

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  1. 1.Declaration that employees who opt to retire by operation of the Social Health Insurance Act are entitled to an exit package
  2. 2.Order compelling the 1st and 2nd respondents to compute and pay an exit package to staff of the defunct NHIF who opt to retire by operation of the Social Health Insurance Act
  3. 3.Declaration that staff of the defunct NHIF competitively and on priority recruited and absorbed by the 1st respondent retain their NHIF salaries personal to self, unless lawfully varied with consent, consultation and negotiation with affected employees or their trade union, or in accordance with applicable law

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

Jurisdiction invoked
Constitution of Kenya, 2010, article 41 (fair labour practices) and article 23 (enforcement of Bill of Rights); Employment and Labour Relations Court jurisdiction

Relief refused

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Damages for violation of Bill of Rights (prayer 8)

Not granted in final orders; the residual reliefs granted were the exit package and salary retention declarations/compulsion

Costs of the petition

Determined by consent order of July 23, 2025

p. 14

Costs

Each party to bear own costs of the petition (per consent order of July 23, 2025)

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The declaration that to comply with their constitutional right to fair labour practices, the employees who will opt to retire by operation of the Social Health Insurance Act are entitled to an exit package as found in this judgment.
p. 14Final orders - exit package declaration
The order compelling the 1st and 2nd respondents to compute and pay an exit package to the stafi of the defunct NHIF who opt to retire from service by operation of the Social Health Insurance Act.
p. 15Final orders - compulsion to compute and pay exit package
The declaration that the stafi of the defunct NHIF competitively and on priority recruited and absorbed in the service of the 1st respondent will retain their NHIF salaries personal to self
p. 15Final orders - salary retention
The court finds that the respondents have failed to show that the petitioners’ right to fair labour practices was limited as per the tests set out in article 24 of the Constitution.
p. 12Failure to justify limitation of rights
the court holds that an employee cannot be absorbed by a new employer in a transfer of undertaking, going concern or business at a lower salary without the consent of the employee
p. 14Transfer of undertaking

Issues in the judgment

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minor

The consent order records orders 'given on July 24, 2025 and extended on June 8, 2025' - the earlier date appears to precede the later one, an internal inconsistency

minor

The CBA date is inconsistently given as December 17, 2022 in the petition and December 16, 2022 in the replying affidavit

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, "Mwirigi & 2 others v Social Health Authority & 2 others (Petition E042 of 2025) [2025] KEELRC 2236 (KLR)", Case Analysis (2025). Not stated in the judgment as extracted. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/2236/eng@2025-07-29

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