Board of Directors, Migori County Water & Sanitation Company Ltd v Okeyo

iv. The Learned Trial Magistrate erred in law and fact by making a contradictory award of severance pay despite noting that the Respondent was contributing member of the National Social Security Fund. v. The Learned Trial Magistrate erred in law and fact by making an award for compensation for leave allowance without any basis in law and evidence. vi. The Learned Trial Magistrate erred in law and fact in awarding the maximum 12 months' compensation for unlawful termination without giving any reasons and or justication. vii. That the Learned Trial Magistrate erred in fact and law by failing to take into account the principles set out under sections 49 and 50 of the Employment Act in awarding compensation which was, in any event, excessive in the circumstances. viii. That the Learned Trial Magistrate erred in law and fact by failing to nd that the Appellant had justiable reasons for summarily dismissing the Respondent. 2. On the basis of the foregoing grounds, the Appellant urges this Court to allow the appeal, set aside the judgment of the Trial Court, and substitute it with a nding that the Respondent’s termination from employment was lawful. The Appellant also seeks the costs of the appeal. 3. The appeal was canvassed by way of written submissions. Appellant’s Submissions 4. 5. The Appellant identies the following issues as dispositive of the appeal: a. Whether the Trial Court erred by holding that termination of the Respondent's employment was procedurally unfair and unlawful; b. Whether the Trial Court properly exercised its discretion in awarding the Respondent twelve months' salary as compensation for unfair termination; c. Whether the awards for severance pay and leave allowances were justiable and supported by evidence. On the rst issue the Appellant submits that it complied with section 41 of the Employment Act and that the dismissal was justied under sections 44(3) and 44(4)(c), (e) and (g) of the Act. It maintains that the Respondent received a notice to show cause dated 12th April 2022 containing ve allegations namely; receiving or soliciting a bribe, misuse of company property, insubordination, negligence of duty, and disrespect and intimidation of fellow sta and a contractor, and that he responded to the allegations before appearing before an Ad Hoc Committee. The Appellant contends that the committee’s report, which was produced in evidence, demonstrates that the Respondent was heard on all the allegations before the committee’s recommendations were adopted by the Appellant’s Board, culminating in the dismissal letter dated 3rd June 2022. It therefore submits that the Trial Court misapprehended the evidence by nding that the Respondent had been denied a fair hearing. Reliance is placed on Pius Machafu Isindu v Lavington Security Guards Limited [2017] eKLR, where the Court of Appeal held that an employer must prove the reasons for termination under section 43, demonstrate that those reasons are valid and fair under section 45, and comply with the mandatory procedural requirements of section 41 of the Employment Act before terminating employment. It further relies on Postal Corporation of Kenya v Tanui [2019] KECA 489 (KLR), in which the Court of Appeal held that procedural fairness requires an employer to notify an employee of the specic allegations, provide the material relied upon, and aord the employee a fair opportunity to respond before a decision is https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2268/eng@2026-07-31 2

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made. The Appellant highlights the fact that the Respondent never requested to call witnesses during the disciplinary hearing and that the minutes of the hearing do not support the allegation that he was denied an opportunity to present evidence. The Appellant relies on Easy Coach v Njogu [2026] KECA 559 (KLR) for the principle that an employer need only establish, on a balance of probabilities, that it had a reasonable and genuine belief based on the material available at the time that the employee had committed the alleged misconduct hence proof beyond reasonable doubt is not required. 6. On whether the Trial Court properly exercised its discretion in awarding twelve months’ salary as compensation for unfair termination, the Appellant submits that the award of Kshs. 588,000/- was baseless and hence constituted improper exercise of judicial discretion. It asserts that the trial court failed to consider the mandatory factors under section 49(4) of the Employment Act, particularly the Respondent’s relatively short period of service of about two years and his contribution to the termination through acts of gross misconduct. The Appellant relies on Easy Coach v Njogu [2026] KECA 559 (KLR), where the Court of Appeal held that the maximum award of twelve months’ salary under section 49(1)(c) should not be granted as a matter of course and must be supported by sound judicial reasoning anchored in the statutory considerations set out in section 49(4) of the Employment Act. The Appellant also relies on Simba Corporation t/a Acacia Premier Hotel v Kirui [2024] KEELRC 413 (KLR) which in applying the principles in Moi Teaching and Referral Hospital v James Kipkonga Kendagor [2019] eKLR and Kenya Broadcasting Corporation v Georey Wakio [2019] eKLR, underscored that the maximum award must be justied and that an award of twelve months’ salary without adequate reasons amounts to an erroneous exercise of discretion. 7. Lastly on whether the awards for severance pay and leave allowance were justied and supported by evidence, the Appellant submits that the Respondent was a contributor to the National Social Security Fund (NSSF), as shown by his payslip, and was therefore not entitled to service pay under section 35(5) and (6)(d) of the Employment Act. It argues that any award of severance or service-related pay was legally unsustainable. The Appellant further submits that the award of Kshs. 45,000/- for unpaid leave allowance lacked both a pleading and evidentiary foundation. It contends that the Respondent neither particularised the claim nor produced evidence showing that leave allowance was unpaid. It also notes that the Respondent admitted having taken leave in January 2022. Reliance is placed on Mascor Kenya Limited v Odhiambo [2025] KEELRC 1199 (KLR), where the Court distinguished annual leave pay from leave allowance, by stating that annual leave pay is a statutory entitlement under section 28 of the Employment Act, whereas leave allowance is a contractual benet that exists only where expressly provided for in a contract or collective bargaining agreement. In view of the foregoing the Court is urged to allow the appeal. Respondent’s Submissions 8. 9. On his part the Respondent identies the following issues for determination: i. Whether the Trial Court erred in holding that his termination of employment was procedurally unfair and unlawful; ii. Whether the he is entitled to compensation for unfair dismissal; iii. Whether the award for gratuity was justiable and supported by the evidence; and iv. Whether the award for leave allowance was justiable. On the rst issue the Respondent urges the Court to uphold the Trial Court’s nding that the termination was unfair. He asserts that although he received a notice to show cause dated 12th April 2022 and responded to it on the same day, the Appellant failed to provide the documentary evidence, https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2268/eng@2026-07-31 3

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witnesses and complainants whose evidence formed the basis of the allegations against him. He further contends that no witness testied before the disciplinary committee and that he was denied the opportunity to confront the allegations or call witnesses in his defence. He draws attention to the Appellant’s Human Resource Manager’s testimony that he was not a member of the committee neither was he privy to the investigations and recommendations arrived at. He relies on Peterson Muriuki v Flame Tree Africa Limited [2021]eKLR, where the Court held that a witness who was not present during disciplinary proceedings cannot competently testify about what transpired during the meeting and that failure to prove the disciplinary process renders termination procedurally unfair. 10. Additionally, The Respondent contends that the disciplinary process was predetermined because the Ad Hoc Committee had already been constituted before his response was considered and his requests for evidence and witnesses were ignored. He asserts that the process was therefore a mere formality intended to justify an already-made decision to dismiss him. He cites Co-operative Bank of Kenya Limited v Yator [2021] KECA 95 (KLR), where the Court of Appeal armed that even where gross misconduct is alleged, an employer must strictly comply with the requirements of procedural fairness before dismissing an employee. 11. On his entitlement to compensation the Respondent submits that he is entitled to the same having established unfair dismissal. He therefore contends that the Trial Court properly exercised its discretion in awarding the same. He relies on Peterson Muriuki v Flame Tree Africa Limited [2021]eKLR, where the Court held that compensation under section 49(1)(c) is awarded at the discretion of the court and is calculated on the employee’s gross salary. The Respondent also relies on H Young & Co. (E.A.) Ltd v Kobong [2025] KEELRC 514 (KLR), where the Court held that the maximum award of compensation is not determined solely by the length of service but by the circumstances and gravity of the unlawful termination and whether the employee contributed to the dismissal. He submits that he did not contribute to his dismissal and that the manner in which the Appellant conducted the disciplinary process justied the compensation awarded by the Trial Court. 12. As concerns gratuity, The Respondent submits that the Appellant wrongly characterises the claim as one for severance pay. He asserts that he claimed gratuity, not severance pay, and that gratuity is a contractual benet governed by the employment contract rather than by the statutory provisions on redundancy. The Respondent therefore maintains that the Trial Court correctly awarded gratuity because 2 of the employment contract entitled him to gratuity at the rate of 31% of his basic salary for the contract period. 13. On whether leave allowance was justiable, the Respondent submits that the employment contract expressly provided for annual leave and leave allowance according to the employee’s grade. He asserts that the Appellant, as the employer, bore the statutory duty under section 74 of the Employment Act to keep and produce employment records relating to leave taken, leave due and leave-related payments. He submits that the Appellant failed to produce leave records or any evidence disproving his claim for leave allowance. He therefore contends that the trial court was entitled to draw an inference in his favour from the Appellant’s failure to produce records that were within its possession and control. He therefore urges the Court to uphold the Trial Court’s awards for unfair dismissal, gratuity and leave allowance. Disposition 14. On appeal a Court has to analyse the evidence noting it did not hear the parties and make allowance for that. In the case of Selle v Associated Motor Boat Co. Ltd [1968] EA 123 and restated in the case https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2268/eng@2026-07-31 4

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of Kenya Ports Authority v Kuston (Kenya) Limited [2009] 2 EA 212 where the Court of Appeal rendered itself as follows: “ On a rst appeal from the High Court, the Court of Appeal should reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in that respect. Secondly that the responsibility of the court is to rule on the evidence on record and not to introduce extraneous matters not dealt with by the parties in the evidence." [Underline for emphasis] 15. It is trite that the responsibility of this Court is to rule on the evidence on record and not to introduce extraneous matters that were not dealt with by the parties in the evidence they presented before the Learned Magistrate at Rongo. Having properly warned myself that I neither saw nor heard the Appellant nor the Respondent testify in trial, I have carefully evaluated the evidence the parties presented in the Trial Court, and which evidence and documents in support thereof, are before this Court and I have come to the following determination. 16. The Appellant was the employer of the Respondent. The contract herein was terminated on account of alleged misconduct. The record before the Court shows there was a disciplinary hearing held. However, the disciplinary committee was constituted even before the before the Respondent’s response was considered. That showed a predetermined approach to the disciplinary process that is not in keeping with section 41 of the Employment Act. In the Appellant’s case, an ad hoc committee has to be set up. The same cannot be set up unless there is cause. The Respondent had been asked to give an explanation and before the explanation was even considered the Appellant had set in place a panel to hear him on the disciplinary aspect. 17. The Court returns the nding of unfair and unlawful termination was established and the Learned Magistrate cannot be faulted for making such a nding. The Learned Magistrate in determining the dispute awarded the Respondent a sum of Kshs. 45,000/- as severance pay. This was erroneous as no claim for severance pay was made. The Court agrees with the Appellant there was no basis for this award and on appeal the award of severance pay is vacated. 18. The Respondent sought gratuity. The Learned Magistrate held that the Respondent was not entitled to gratuity as he had not resigned nor died. This was erroneous as gratuity payment was a contractual term. In clause 2 of the letter of employment, the Respondent was to enjoy gratuity at the rate of 31% of the basic pay. It is worth noting this payment is not conditional on the manner of exit from employment. It is not a gratuitous payment but a contractual term of the employment. It is the amount one gets for foregoing retirement benets in contracts such as the one in place between the Appellant and Respondent. The sum of Kshs. 410,750/- is payable to the Respondent on this score. 19. On leave, it is the employer who keeps records and under section 74 of the Employment Act the Appellant had a responsibility of availing proof the Respondent went on leave. In the absence of any proof as the records for leave taken are held by the employer, the worker will be entitled to his award as made by the Learned Magistrate. 20. In the nal analysis I only allow the appeal to the extent that the sum awarded as severance pay is not upheld as it was not for grant and instead substitute the same with the award of Kshs. 410,750/- being the gratuity for the period of service. The Appellant having mounted an unsuccessful appeal in the main, will bear the costs of this appeal. It is so ordered. https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2268/eng@2026-07-31 5

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DATED 30TH JULY 2026 AND DELIVERED AT KISUMU THIS 31ST DAY OF JULY 2026 NZIOKI WA MAKAU, MCIARB. JUDGE https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2268/eng@2026-07-31 6

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