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Supreme CourtDismissedPetition E024 of 2024

National Hospital Insurance Fund Management Board v Kenya Union of Commercial Food and Allied Workers & another; Attorney General (Interested Party)

Supreme Court of Kenya
30 May 2025
Philomena Mbete MwiluPM MwiluMohammed Khadhar IbrahimMK IbrahimSmokin Charles WanjalaSC WanjalaNjoki Susanna NdunguNjoki NdunguIsaac LenaolaI Lenaola
12,978 words in judgment
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AI-assisted case brief
·~52 min to read original · ~4 min brief

The bottom line

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NHIF employees are public officers, and SRC salary advice is binding on all state corporations.

What this practically means

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The Supreme Court ruled that the National Hospital Insurance Fund (NHIF) is a public service body, so its employees are public officers. This means the Salaries and Remuneration Commission (SRC) has authority over their pay and benefits. The court also said that SRC's advice on salaries is not optional—it must be followed. Any collective bargaining agreement made without SRC's input is invalid. This decision affects all state corporations in Kenya.

Executive summary

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The Supreme Court dismissed an appeal by the National Hospital Insurance Fund (NHIF) challenging the Court of Appeal's decision that NHIF employees are public officers subject to the jurisdiction of the Salaries and Remuneration Commission (SRC), and that the SRC's advice on remuneration is binding. The Court held that NHIF, as a State corporation established under an Act of Parliament, is in the public service and its employees are public officers under article 260 of the Constitution, read together with article 232. The Court rejected NHIF's argument that its employees were not public officers because their salaries were not paid directly from the Consolidated Fund, finding that NHIF handled public funds as defined under the Public Audit Act, PFMA, and Exchequer and Audit Act, and that its accounts were audited by the Auditor General. The Court further held that the SRC's advice under article 230(4) is binding on public service organizations, relying on article 259(11) and its decision in Muthuuri v Attorney General. The Court found that the SRC cannot discharge its constitutional obligation to ensure fiscal sustainability if its advice were merely a suggestion. The Court also addressed the appellant's failure to properly invoke its jurisdiction, but proceeded to hear the matter due to its public importance. The Court affirmed the Court of Appeal judgment, dismissed the appeal, and ordered each party to bear its own costs, with the security for costs of Kshs 6,000 to be refunded to the appellant.

Questions the Court framed

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

  1. 1.Whether the court has jurisdiction to determine the instant appeal.
  2. 2.Whether the appellant fell under the jurisdiction of the 2nd respondent.
  3. 3.Whether the 2nd respondent's advice was binding on the appellant.
  4. 4.What orders should issue?

Key legal issues

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01

Whether the appellant fell under the jurisdiction of the Salaries and Remuneration Commission.

Holding

The appellant, NHIF, being a State corporation established under an Act of Parliament, is in the public service and its employees are public officers. Therefore, the Commission has jurisdiction over their remuneration and benefits.

Reasoning

The court applied a holistic interpretation of the Constitution, reading article 260 together with article 232. It held that State organs and State corporations are in public service, and their employees are public officers. The court also considered that NHIF handled public funds as defined under the Public Audit Act, PFMA, and Exchequer and Audit Act, and that its accounts were audited by the Auditor General. The court further noted the interplay between NHIF and other government actors, such as the President appointing the chairperson and the Cabinet Secretary's oversight, as indicators of its public character.

p. 27
02

Whether the advice of the Salaries and Remuneration Commission under article 230(4) of the Constitution is binding on the appellant.

Holding

The Commission's advice is binding on the appellant. The appellant was required to seek the Commission's advice before commencing any collective bargaining process, and any CBA entered without such advice is of no legal consequence.

Reasoning

The court relied on article 259(11) of the Constitution, which provides that where a function is exercisable on the advice of another person, it may be exercised only on that advice. The court also cited its decision in Muthuuri v Attorney General, which upheld the Court of Appeal's decision in the TSC v KNUT case, holding that the Commission's advice is binding. The court reasoned that the Commission cannot discharge its constitutional obligation to ensure fiscal sustainability if its advice were merely a suggestion. The court distinguished the Council of Governors case, where the Constitution expressly allowed Parliament to deviate from the Commission on Revenue Allocation's recommendation.

p. 29

Legal principles established

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  • State corporations are part of public service, and their employees are public officers under Article 260 of the Constitution.
  • SRC's advice under Article 230(4) is binding on all public service organizations, not just advisory.
  • Public service organizations must seek SRC advice before starting any collective bargaining process.
  • A collective bargaining agreement made without SRC input has no legal effect.
  • Handling public funds and being audited by the Auditor General indicates a body is in public service.

Court orders

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  1. 1.The appeal dated June 7, 2024 and filed on June 24, 2024 is hereby dismissed.
  2. 2.The Judgment of the Court of Appeal delivered on April 26, 2024 is hereby affirmed.
  3. 3.Parties shall bear their respective costs.
  4. 4.We hereby direct that the sum of Kshs 6,000 deposited as security for costs upon lodging of this appeal be refunded to the appellant.

The bench

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

Philomena Mbete Mwilu
PM MwiluDCJ
Currently serving
majority
Mohammed Khadhar Ibrahim
majority
Smokin Charles Wanjala
SC WanjalaSCJ
Currently serving
majority
Njoki Susanna Ndungu
Njoki NdunguSCJ
Currently serving
majority
Isaac Lenaola
I LenaolaSCJ
Currently serving
majority
On appeal from
Court of Appeal of Kenya
Civil Appeal No 156 of 2016
Jurisdiction invoked
Article 163(3) of the Constitution of Kenya

Relief refused

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Setting aside the Court of Appeal judgment and upholding the ELRC judgment

The Supreme Court agreed with the Court of Appeal that NHIF employees were public officers and the Commission's advice was binding.

p. 30

Costs

Parties shall bear their respective costs.

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.

It follows, therefore, that State organs and State corporations are in public service, and that their employees are public officers.
p. 23 Definition of public officer and public service
It would be absurd to have the 2nd respondent, vested with ensuring the fiscal health of our country, demoted to a mere advice-minting body.
p. 29 Binding nature of SRC advice
It follows therefore, and we agree with the Court of Appeal, that the advice of the 2nd respondent was binding upon the appellant.
p. 30 Binding nature of SRC advice
The appeal dated June 7, 2024 and filed on June 24, 2024 is hereby dismissed.
p. 30 Final orders - dismissal of appeal
The Judgment of the Court of Appeal delivered on April 26, 2024 is hereby affirmed.
p. 30 Final orders - affirmation of Court of Appeal judgment
Parties shall bear their respective costs.
p. 6 Costs order

Key timeline

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2024-04-26
Court of Appeal ruled NHIF employees are public officers subject to SRC jurisdiction.
2024-06-07
NHIF filed an appeal to the Supreme Court challenging the Court of Appeal decision.
2024-06-24
NHIF formally lodged the appeal with the Supreme Court.
2025-01-01
Supreme Court dismissed NHIF's appeal and affirmed the Court of Appeal judgment.

Practical implications

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For lawyers

Binding SRC advice changes CBA strategy

When advising state corporations or unions on collective bargaining agreements, you must ensure SRC advice is obtained before negotiations begin. Any CBA finalized without this step is void. This ruling also strengthens arguments that SRC advice is mandatory, not discretionary, for all public service entities. Update your due diligence checklists accordingly.

For businesses

State corporation contracts now under SRC

If your business contracts with state corporations like NHIF, note that their employee remuneration is now subject to SRC oversight. This may affect service costs or pricing in contracts tied to labor expenses. Review existing agreements to assess potential impacts from mandatory SRC compliance, especially if collective bargaining terms are involved.

For individuals

NHIF employees' pay set by SRC rules

If you work for NHIF or a similar state corporation, your salary and benefits are now directly regulated by the Salaries and Remuneration Commission. Your employer cannot negotiate pay through a union without SRC approval. This may limit salary increases but ensures consistency with public service standards. Check with your HR department on how this affects your next CBA.

Frequently asked questions

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Are NHIF employees public officers in Kenya?+

Yes, the Supreme Court confirmed that NHIF employees are public officers under Article 260 of the Constitution because NHIF is a state corporation in public service. This applies even though their salaries are not paid directly from the Consolidated Fund.

Is SRC advice binding on state corporations in Kenya?+

Yes, the Supreme Court ruled that SRC advice under Article 230(4) is binding on all public service organizations, including state corporations like NHIF. Organizations must seek SRC advice before collective bargaining, and any agreement made without it is invalid.

What does the NHIF Supreme Court ruling mean for collective bargaining in Kenya?+

The ruling means state corporations cannot enter collective bargaining agreements without first getting SRC advice. Any CBA made without SRC input has no legal effect. This ensures fiscal sustainability and uniform public service remuneration standards.

Can NHIF employees unionize and negotiate salaries in Kenya?+

Yes, NHIF employees can unionize, but any salary negotiations must follow SRC advice. The Supreme Court held that SRC's role is binding, so unions must involve SRC in the process. Without SRC approval, negotiated terms are unenforceable.

Later judgments citing this (4)

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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, "National Hospital Insurance Fund Management Board v Kenya Union of Commercial Food and Allied Workers & another; Attorney General (Interested Party)", Case Analysis (2025). Petition E024 of 2024. Source: https://new.kenyalaw.orghttps://new.kenyalaw.org/akn/ke/judgment/kesc/2025/37/eng@2025-05-30

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