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ELRCDismissedCause No E059 of 2021· [2025] KEELRC 3696 (KLR)

Naliaka v Diamond Trust Bank Limited (Cause E059 of 2021) [2025] KEELRC 3696 (KLR)

Employment and Labour Relations Court
19 December 2025
JRJames Rika
1,749 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~7 min to read original · ~4 min brief

The bottom line

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A Kenyan court upheld a bank teller's dismissal for paying an unsigned cheque, but barred the bank from charging interest on her staff loan after she lost her job.

What this practically means

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Executive summary

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The Claimant, employed by the Respondent Bank from 2015 and dismissed on 15th November 2018, sued for unfair termination after she approved payment of a Kshs. 1,033,753 cheque - unsigned and crossed - to the customer's unverified agent, contrary to the Bank's cash handling policies. An earlier default judgment in her favour for Kshs. 1,538,786 was set aside on 28th February 2025, and the matter proceeded to full hearing. The Respondent filed a Statement of Response and Counterclaim for the outstanding staff loan. The court framed three issues: whether termination was unfair, whether the Claimant was entitled to remedies, and whether the Counterclaim was merited. On procedure, the court found full compliance with Sections 41 and 45 of the Employment Act: the Claimant received a show-cause letter, responded, was heard, the decision with reasons was communicated, and she exercised her right of appeal; her failure to receive the appeal outcome was of no weight. On substantive fairness, the court held there was valid reason: the Claimant admitted paying an unsigned crossed cheque to a third party not formally introduced to the Bank, breaching banking policy and her fiduciary duty; the customer's later ratification did not absolve her, and under Section 44para 4[c] careless performance is gross misconduct. The Respondent discharged its evidential burden under Sections 43 and 47para 5. The Claim was accordingly declined. The Counterclaim was allowed at a frozen Kshs. 1,427,464, but the court refused commercial-rate interest, holding that an employer loan pegged on payroll check-off cannot accrue interest indefinitely after job loss, as that would offend the in duplum rule and consumer protection. There was no order on costs.

Key legal issues

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01

Procedural fairness of termination

Holding

Procedure conformed with the minimum statutory standards under Sections 41 and 45 of the Employment Act

Reasoning

The Claimant conceded she received a show-cause letter, responded, attended and was heard at a disciplinary hearing, the decision was communicated with reasons, and she exercised her right of appeal. Her complaint about not receiving the appeal outcome failed as she did not show the Respondent used a wrong address or that she made any effort to obtain the decision before filing suit.

p. 2
02

Validity of reasons for termination

Holding

There was valid reason: the Claimant paid out an unsigned crossed cheque to an unverified third party, exposing the bank

Reasoning

The Claimant admitted processing an unsigned crossed cheque to an agent not formally introduced to the bank. Her conduct breached banking policy and law and her fiduciary duty. Subsequent ratification by the customer did not cure the misconduct. Under Section 44para 4[c], carelessly performing duties is gross misconduct; under Sections 43 and 47para 5 the Respondent discharged the burden of proving reasons it genuinely believed existed.

p. 3
03

The Counterclaim for outstanding staff loan

Holding

Counterclaim allowed at a frozen sum of Kshs. 1,427,464, without commercial-rate interest

Reasoning

The Claimant conceded the loan and did not dispute the amount claimed. However, interest at commercial rates from December 2021 was refused because the loan was pegged on monthly payroll check-off; the employee lost her job and salary, which was her security. Accruing interest would violate the in duplum rule, consumer protection and social protection floors.

p. 4

Legal principles established

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  • An employee loan repayable through monthly payroll check-off should not accrue commercial interest indefinitely after the employee loses the employment that was the security for repayment
  • Payment of an unsigned crossed cheque to a third party without written authority constitutes gross misconduct justifying summary dismissal

Court orders

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  1. 1.The Claim is declined
  2. 2.The Counterclaim is allowed at a frozen sum of Kshs. 1,427,464
  3. 3.No further interest shall accrue on the Counterclaim amount
  4. 4.No order on the costs

Authorities

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Legislation

  • Employment ActSections 41, 43, 44[4][c], 45, 47[5]
  • E&LRC [Procedure] Rules, 2024Rule 68[5]
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act and E&LRC [Procedure] Rules, 2024 (Rule 68[5])

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, "Naliaka v Diamond Trust Bank Limited (Cause E059 of 2021) [2025] KEELRC 3696 (KLR)", Case Analysis (2025). Cause No E059 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/3696/eng@2025-12-19

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