Elizabeth Ngina Mutisya v Arrow Motors Group East Africa Limited & 2 Others

unlawfully purported to summarily dismiss and terminate her services actively and/or constructively and failed to pay her terminal dues. c. That her employment was at all times continuous and uninterrupted. d. That on or about 14 th April 2022, the Claimant was paid her salary in cash however, was ordered to return the same by the 3rd Respondent under the pretext that the Claimant had declined to work over the Easter Holidays. e. That the Claimant continued working for the Respondents as usual until May 2022 when she was unable to continue due to non-payment of her salary since March 2022 whereat, she was unable to sustain herself. She then reported the matter to the Labour Officer in Nairobi and delivered a letter from the Labour Office dated 9.5.22 to the Respondents. f. That upon receipt of the said letter from the Labour Office, the Respondents summoned the Claimant for a meeting whereat they insulted her severally, including making negative racial slurs at her. That the 3 rd Respondent then told her that her employment is terminated and proceeded to illegally detain her at the premises before ordering the security guards to kick her out of the premises with further orders that she should not be let in again. Judgment ELRC Cause No. E407 of 2022 2

page 2 of 24

g. That the Claimant avers that at the time of her termination, she was not given any cogent reasons for her termination nor did the Respondent communicate with her officially on the same, making the same unfair. h. That prior to the above termination, the Respondent did not serve the Claimant with a ‘Show Cause’ letter or invite her for a disciplinary hearing to defend herself against any allegations. i. That the Respondents’ non-payment of the Claimant’s salary over a period of 3 months to a point where she could no longer sustain herself amounted to constructive termination. j. That due to the above, the Claimant further avers that the Respondent’s actions amounted to unfair termination, which was unlawful, unfair and contrary to the basic tenets of labour practices as enshrined in the Employment Act and the Constitution of Kenya. 2. The Claimant in the upshot prayed for the following against the Respondents: i. A declaration that the Claimant’s termination was unprocedural and amounted to unfair termination. ii. Kshs. 1,922,923.00 as particularized in Paragraph 4 of the Statement of Claim. iii. Costs of the suit. Judgment ELRC Cause No. E407 of 2022 3

page 3 of 24

3. The Respondent in response filed its Response to the Memorandum of Claim dated 31st October 2022 and averred inter alia: a. The 1st and 3rd Respondents averred that there was never an employer-employee relationship between them and the Claimant and that the suit against them was liable to dismissal in limine. b. The Respondents averred that although the 2nd Respondent made an offer of employment to the Claimant vide a letter dated 15th February 2021, the said offer was withdrawn on 16th February 2021, whereupon the Claimant was informed that she would instead be offered employment by Tristem Estates Limited. c. The Respondents averred that the Claimant duly accepted employment with Tristem Estates Limited and remained employed by the said company until 31 st January 2022, and as such she was never employed by the 2 nd Respondent during that period. d. The Respondents averred that the Claimant was only engaged by the 2nd Respondent from February 2022 on a temporary basis as a consultant, under which arrangement she was required to raise monthly invoices against which she would be paid. e. The Respondents further averred that during the months of March and April 2022 the Claimant was inconsistent in undertaking the functions for which she had been contracted and that on 7th May 2022 she failed to report to work and never returned. f. The Respondents averred that in view of the foregoing, the Claimant's claim for the payments pleaded in the Memorandum Judgment ELRC Cause No. E407 of 2022 4

page 4 of 24

of Claim was denied as the same were not due and payable to her. 4. The Respondents in the upshot prayed as against the Claimant that the Claimant’s suit be dismissed with costs to the Respondents. EVIDENCE 5. Both the Claimant's and the Respondents' case was heard on 18th November, 2025. The Claimant (CW1) testified and adopted her witness statement dated 15 th June 2022 together with the bundle of documents filed in Court as her evidence in chief. She further testified that she was employed by the Respondents as an Accountant. That although she received a letter of appointment, she was never issued with a job description or the checklist of documents referred to therein. She stated that she reported to work as instructed and discharged her duties until the dispute arose. 6. CW1 testified that her salary was initially paid by Tristam despite having no contract with that company. She stated that the salary was paid by Tristam until November 2021, thereafter by the 2nd Respondent from December 2021 and subsequently through M-Pesa by one of the Respondents' directors. She further testified that her February 2022 salary was paid in cash while the salary paid in March 2022 was taken back by one of the Respondents' directors. 7. CW1 testified that the Respondents failed to pay her salary thereafter and informed her that they had no money and did not know when payment would be made. She stated that she reported the matter to the Labour Office, which issued her with a letter addressed to the Respondents. Judgment ELRC Cause No. E407 of 2022 5

page 5 of 24

8. CW1 testified that upon presenting the Labour Officer's letter to the Respondents, she was insulted and informed that the Labour Office could not assist her. She stated that she was thereafter sent away from the workplace and was never subjected to any disciplinary process before her employment came to an end. 9. CW1 further testified that Arrow Motors and AMGEA referred to the same entity. She stated that although Tristam paid part of her salary, she had no employment contract with that company and was never informed why it was making the payments on behalf of the Respondents. 10. CW1 testified that she was never paid NSSF and NHIF contributions by the Respondents. She further stated that although she completed a leave application form obtained from the office, the same was never approved. 11. In cross-examination, CW1 confirmed that the appointment letter provided that her reporting date would be communicated. She further confirmed that she was not issued with the checklist of documents referred to in the appointment letter and that she had no written contract with Tristam, which she described as a sister company owned by the Respondents' relative. 12. CW1 maintained that the manner in which her salary was paid was at the discretion of the Respondents and reiterated that she was never informed why Tristam paid her salary. She further confirmed that although she applied for leave, the application was never approved. 13. The Respondents called one witness, Akshif Virani (RW1), the Operations Manager of the 2 nd Respondent. RW1 Judgment ELRC Cause No. E407 of 2022 6

page 6 of 24

adopted his witness statement together with the Respondents' bundle of documents as his evidence in chief. RW1 further testified that there was no employer-employee relationship between the Claimant and the Respondents and maintained that the Claimant was engaged as a consultant. He further testified that there was no relationship between Tristam and the Respondents and denied that there was any arrangement for Tristam to pay the Claimant's salary on behalf of the Respondents. 14. In cross-examination, RW1 confirmed that he was not involved in human resource matters and was unfamiliar with the Respondents' termination procedures. He nevertheless maintained that the Claimant was not an employee of the Respondents but an external consultant, although he acknowledged that there was a letter of appointment before the Court. 15. RW1 further confirmed that there was no consultancy agreement between the parties and that the Claimant worked as an Accountant. He testified that the appointment letter never took effect, that the Claimant was aware of this fact and that the appointment was subsequently withdrawn. He also confirmed that the Claimant's salary was paid by Tristam and later by one of the Respondents' directors. 16. RW1 testified that the Claimant was not entitled to annual leave as she was not an employee of the Respondents. He further confirmed that the Claimant had complained through email that she had not reported to work because she had not received her salary and that the said email was produced before the Court. Judgment ELRC Cause No. E407 of 2022 7

page 7 of 24

17. In re-examination, RW1 reiterated that the appointment letter never took effect and that the Claimant rendered services as an external contractor. He stated that the payment vouchers produced by the Respondents demonstrated that the Claimant was a consultant and not an employee. CLAIMANTS’ SUBMISSIONS 18. The Claimant’s Advocates Lemmy Regau t& Company Advocates filed written submissions dated 17th December 2025 and on the issue of whether the Claimant was an employee of the 1st Respondent, Counsel submitted that the Claimant was employed by the 1st Respondent as an Accountant and that although her salary was paid through Tristem Estates Limited, the decision to use the said company was solely that of the Respondent's director and did not alter her employment status. 19. It was argued that the Claimant earned a monthly salary of Kshs.100,000 together with statutory employment benefits and that the Respondent’s witness was aware of the company Tristem Esates Limited and that the Respondent used to make payments to her through the company Tristem Estates Limited. It was the Counsel’s argument that the issue in dispute was not on the Claimant’s employment but the specific company that employed her. She relied on Salomon v Salomon & Co. Ltd (1897) UKHL 1. 20. On the issue of whether the consultancy arrangement negated the employer-employee Judgment ELRC Cause No. E407 of 2022 relationship, Counsel 8

page 8 of 24

submitted that the Respondents failed to produce any consultancy agreement to prove that the Claimant was an independent contractor. It is argued that the bundle of documents at page 65 evidences payment of statutory deductions such as NHIF, access to leave forms demonstrated the existence of an employer-employee relationship between the Claimant and the Respondents irrespective of the description given to the engagement. She relied on the case of Republic v Kenya Revenue Authority ex parte Yaya Towers Ltd (2008) KEHC 489. 21. On the issue of whether the Claimant’s employment was unfairly terminated, Counsel submitted that the Respondent unlawfully withheld the Claimant’s salary for the months of March and April 2022 and seven days worked in May 2022, prompting her to report the dispute to the Labour Office. She contended that contrary to the Respondents' allegation of abscondment, she had sought permission to attend to personal matters and was neither subjected to a disciplinary hearing nor issued with a notice to show cause or termination notice. 22. Counsel further submitted that the Respondents failed to comply with the procedure applicable in cases of abscondment and that the Respondents' conduct, including withholding her salary, amounted to constructive and unfair termination. She relied on Owudu v Digital Sanitation Services Ltd (Appeal E109 of 2023) [2024] KEELRC Judgment ELRC Cause No. E407 of 2022 9

page 9 of 24

917 (KLR) and Coca-Cola East & Central Africa Ltd v Maria Kagai Ligaga [2015] KECA 394 (KLR). 23. On the issue of the reliefs sought, Counsel submitted that having established that the Claimant’s termination was unfair, the Claimant was entitled to the reliefs sought, including maximum compensation under Section 49(1)(c) of the Employment Act, notice pay, service pay, accrued leave, house allowance and salary arrears. It was argued that the Respondents failed to comply with Sections 41, 43 and 45 of the Employment Act, did not make NSSF contributions, failed to produce leave records, did not prove that the Claimant’s salary was consolidated, and failed to prove payment of her salary for the months of March and April 2022 and seven days worked in May 2022. In support of these submissions, counsel relied on Josephat Kaibi Linguya v Highland Canners Ltd [2018] eKLR, Trebar Marambe v For You Chinese Restaurant [2021] eKLR, and Postal Corporation of Kenya v Tanui [2019] KECA 489. RESPONDENTS’ SUBMISSIONS 24. The Respondent’s Advocates Harry & Associates Advocates filed written submissions dated 18th March 2026 and on the issue of whether there was an employeremployee relationship between the Claimant and the Respondents, Counsel submitted that the Claimant was never employed by either the 1 st or the 2nd Respondent. It Judgment ELRC Cause No. E407 of 2022 10

page 10 of 24

was argued that although the 2nd Respondent issued the Claimant with an offer letter dated 15 th February 2021, the offer was conditional, was later withdrawn and the Claimant was instead employed by Tristem Estates Limited. 25. It was submitted that the Claimant accepted that offer and that all her salary, PAYE, NSSF and NHIF contributions were paid by Tristem Estates Limited. 26. Counsel further submitted that during cross- examination, the Claimant admitted that she was paid by Tristem Estates Limited and that she herself processed the statutory deductions in her capacity as the company's accountant. It was therefore their submission that the Court lacked jurisdiction since Tristem Estates Limited, the Claimant's employer, was not a party to these proceedings. 27. On the issue of the Claimant's engagement by the 2 nd Respondent, the Respondents submitted that after the Claimant left Tristem Estates Limited, she was engaged by the 2nd Respondent as a consultant between February and May 2022. It was argued that she was paid upon raising monthly invoices, and she was not subjected to PAYE, NSSF or NHIF deductions. Counsel submitted that this arrangement was a contract for services and not a contract of employment and, therefore, did not give rise to an employer-employee relationship. Counsel relied on the case of Kenya Hotel & Allied Workers Union v Alfajiri Villas [2014] eKLR, as approved in Vitalis Oliewo K'omudho v AAR Health Services Ltd [2016] eKLR. Judgment ELRC Cause No. E407 of 2022 11

page 11 of 24

28. On the issue of the reliefs sought, the Respondents submitted that since there was no employer-employee relationship between the parties, the Claimant was not entitled to the remedies sought. It was argued that the claims for unfair termination, notice pay, salary arrears, leave pay, house allowance and service pay could not succeed. It was further submitted that the claim for service pay was not available since NSSF contributions had been made on the Claimant's behalf. DETERMINATION 29. The court has reviewed and considered the pleadings, testimonies and submissions by both counsel in support and opposition to the case. The court has also considered authorities relied on by counsels. 30. The issues for determination are: (a)Whether an relationship employerexisted employee between the Claimant and the Respondents. (b) Whether the Claimant was unfairly terminated by the Respondents. (c) Whether the Claimant is entitled to the reliefs sought. Judgment ELRC Cause No. E407 of 2022 12

page 12 of 24

Whether an employer- employee relationship between the Claimant and the Respondents. 31. existed The Court considers the question whether there existed an employer-employee relationship to be a key issue, as the determination it reaches on this question will determine the outcome of the remaining issues in dispute. 32. The Claimant's case is that she was employed by the 1 st Respondent as an Accountant. According to her, the fact that her salary was paid through Tristem Estates Limited did not alter the true nature of the relationship, as that arrangement was made solely at the Respondents' instance. 33. On the other hand, Respondents claim that the Claimant was never their employee. They maintained that the initial offer made by the 2 nd Respondent on 15th February 2021 was withdrawn on 16th February, 2021, following which the Claimant was then employed by the company Tristem Estates Limited on 17th February, 2021. 34. The Respondents further contended that when the Claimant later rendered services to the 2 nd Respondent in Judgment ELRC Cause No. E407 of 2022 13

page 13 of 24

2022, she did so purely as an independent consultant and not as an employee. Therefore, that no employer-employee relationship existed between them. 35. The collective definition of an employee/employer relationship is found in Section 2 of the Employment Act, 2007 as follows; “employee” means a person employed for wages or a salary and includes an apprentice and indentured learner. “employer” means a person, public body, firm, corporation or company who or which has entered into a contract of service to employ an individual and includes the agent, foreman, manager or factor of such a person, public body, firm corporation or company. [Emphasis mine] “contract of service” means an agreement, whether oral or in writing, and whether expressed or implied to employ or to serve as an employee for a period of time …… 36. There is a distinction between a contract of service and a contract for services. In the case of Christine Adot Lopeyio v Wycliffe Mwathi Pere NRB ELRC Cause No. 1688 of 2012 [2013] eKLR, Mbaru J., contrasted the nature of a contract of service contemplated under section 2 of the Employment Act, 2007 and a contract for services which is outside the ambit of the statute by setting out various tests to determine the character of the relationship as follows; Judgment ELRC Cause No. E407 of 2022 14

page 14 of 24

In most cited authorities in this regard from various jurisdictions, several tests have been applied to distinguish between what comprise ‘employment’ as against what constitutes ‘service’ in case of contracts of service as contrasted with contracts for service. They include the following: a. The control test whereby a servant is a person who is subject to the command of the master as to the manner in which he or she shall do the work. b. The integration test in which the worker is subjected to the rules and procedures of the employer rather than personal command. The employee is part of the business and his or her work is primarily part of the business. c. The test of economic or business reality which takes into account whether the worker is in business on his or her own account, as an entrepreneur, or works for another person, the employer, who takes the ultimate risk of loss or chance of profit. d. Mutuality of obligation in which the parties make commitments to maintain the employment relationship over a period of time. That a contract of service entails service in return for wages, and, secondly, mutual promises for future performance. The arrangement creates a sense of stability between the parties. The challenge is that where there is absence of mutual promises for stable future performance, the worker thereby ceases to be classified as an employee as may be the case for casual workers. These tests are however not to be seen exclusively by themselves as they only serve as a guide based on the facts of each case. They are however a good guide to the issues as in this case. 37. When viewed through the lens of these tests at first glance, the Claimant does not appear to have been employed by the Respondents for the year 2021. The documents produced and the testimony of the parties at trial, shows that the 2nd Respondent did issue the Claimant with a letter of offer dated 15th February 2021, however, Judgment ELRC Cause No. E407 of 2022 15

page 15 of 24

the same was later withdrawn by another letter dated 16 th February 2021. 38. The Respondents produced another appointment letter issued to the Claimant by a company, Tristem Estates Limited, which on itself raises questions in the Court's mind, as to how they were able to come into possession of the same particularly in light of their avid denial that they have no relationship with the company Tristem Estates Limited. 39. Be that as it may, the court has noted that the Claimant, during her cross-examination, admitted that her salary was paid through Tristem Estates Limited and that statutory deductions were made by the said company and there being no other evidence before me to show the link between the company Tristem Estates Limited and the Respondents, the court is inclined to conclude that there existed no employer- employee relationship between the parties for the year 2021. 40. The position however, changes from January 2022 and although it is the Respondents claim that they only Judgment ELRC Cause No. E407 of 2022 16

page 16 of 24

engaged the Claimant as a consultant as of February 2022, the same does not persuade this court. Since it is noted that the definition of an independent contractor as defined by Radido J in Kenya Hotels & Allied Workers Union v Alfajiri Villas (Magufa Ltd) [2014] eKLR to be: “An independent contractor’s contract, in my view is a contract of work (contract for service) and not a contract of service, or to use the ordinary language a contract of employment. The hallmarks of a true independent contractor are that the contractor will be a registered tax payer, will work his own hours, runs his own business, will be free to carry out work for more than one employer at the same time will invoice the employer each month for his/her services and be paid accordingly and will not be subject to usual “employment” matters such as the deduction of payee (tax on income) will not get annual leave, sick leave, 13th cheque and so on”. 41. Upon a critical analysis of facts before me, the dominant elements in the relationship between the Claimant and the Respondents in 2022 were as follows: (a) There is no consultancy agreement. (b) The Claimant was required to fill in a leave form by the Respondents dated 5th May 2022 and the same was received and stamped by the 2nd Respondent. (c) When the Claimant failed to report to work, the Respondents’ Operations Manager, one Mr. Aakif Judgment ELRC Cause No. E407 of 2022 17

page 17 of 24

Nizarali Viarani, RW1 wrote an email to the Claimant on 13th May 2022 asking why she had absconded duty and requiring her to show cause in writing. (d) The Respondents produced mpesa payment vouchers for the months of January and February 2022. 42. It is the court’s view that these elements clearly demonstrate that the Claimant was an employee of the Respondents and not an Independent Consultant. If indeed the Claimant was merely a consultant, it is difficult for the court to understand why she was required to apply for sick leave or why she had to show cause in writing why she had not shown up to work and absconded. 43. It is the court’s view that the Respondents' actions were therefore more consistent with an employer exercising authority over an employee than with a client engaging an independent consultant. In this respect, I am guided by the case of Christine Adot, (Supra) and Republic V Kenya Revenue Authority Exparte Yaya Towers Limited [2008] eKLR where the court held as follows; Judgment ELRC Cause No. E407 of 2022 18

page 18 of 24

“Going by the definition of an employee earlier alluded to vis a vis the relationship between David Peter Saunders and the Applicant, one does not fail to see a close correlation. In other words, the Respondent is correct to allege that he was an employee of the Applicant. Although the Applicant would want to pretend that he was a partner in Modave Technologies Firm which later translated to a limited liability company, the attributes of an employee such as monthly payments, medical scheme, company car, leave application among others are so conspicuous that such an allegation by the Applicant is indefensible. Indeed, the terms we give to relations are not important than the subsequent evidence arising therefrom which one may safely draw other conclusions. In essence, whether the Applicant continues to deny that David Peter Saunders was an employee or to allege existence of another relationship, does not really matter, in reality, the evidence surrounding the relationship will give it the correct name.” 44. Consequently, I conclude by finding that there was an employer-employee relationship between the Claimant and the Respondents. Whether the Claimant was unfairly terminated by the Respondents. 45. It is also now a well-established principle that for termination to pass fairness test there should be both substantive and procedural fairness with a number of cases Judgment ELRC Cause No. E407 of 2022 19

page 19 of 24

supporting this position including but not limited to the case of Walter Ogal Anuro v Teachers Service Commission [2013] eKLR. Section 43 of the Act requires the employer to prove the reasons for the termination which reasons must be valid and fair and the employer must have believed to exist and to cause the termination of the employee. Failure to prove the reasons of termination of employee amounts to unfair termination under Section 45 of the Act. 46. The courts have emphasized in among other cases the case of Mary Chemweno Kiptui v Kenya Pipeline Company Limited [2014] eKLR that“Invariably therefore, before an employer can exercise their right to terminate the contract of an employee, there must be valid reason or reasons that touch on grounds of misconduct, poor performance or physical incapacity.” 47. On whether the Claimant was unfairly terminated, the Respondents did not at all alleged to have taken any steps to fairly separate with the Claimant. The Respondents’ only defence was that they never employed the Claimant Judgment ELRC Cause No. E407 of 2022 20

page 20 of 24

despite evidence urging the Claimant to show cause as to why she absconded from work. 48. Having found that the Claimant was an employee of the Respondents, and the Respondents not having taken her through any form of disciplinary process, nor given reasons for the termination, renders the termination both substantively and procedurally unfair. Whether the Claimant is entitled to the reliefs sought. 49. The court having found that the Claimant was unfairly terminated proceeds to assess suitable compensation for unfair termination of service as provided for under section 49 of the Act. The Claimant prayed for 12 months compensation but this court will be guided by considerations under Section 49(4) of the Act. 50. In this case the Claimant had worked for the Respondent from January 2022 to May 2022 which was around 5 months. The court also considers the attitude of the respondent in claiming the claimant was a consultant yet for all practical purposes the relationship was one of employer-employee, the nature of termination which it has found to have been Judgment ELRC Cause No. E407 of 2022 21

page 21 of 24

unfair and awards the Claimant two month’s salary as reasonable compensation for unfair termination. 51. On the prayer for one-month salary in lieu of notice, since the Claimant was never issued with a notice of termination of her service, she is entitled to the same. On the claim for 3 months' salary arrears, under Sections 17 and 19 of the Employment Act, all pay for work done is due. Under Section 18 of the Act, for whatever reason that applies leading to termination of employment, the employee is entitled to his pay for the time worked. Therefore, the claim for salary arrears is due at Ksh. 226,923 as prayed 52. On the claim for house allowance, the respondent did not adduce any evidence that the claimant was either housed or was paid a consolidated salary which would be inclusive of house allowance. Industry practice is that housing allowance is pegged at 15% of the basic pay hence the claimant was entitled to Kshs. 75,000/- using Kshs. 15,000 as monthly house allowance. 53. On the prayer for accrued leave days the Claimant never pleaded the number of leave days which had accrued. This Judgment ELRC Cause No. E407 of 2022 22

page 22 of 24

prayer ought to be specifically pleaded and proved. Failure to plead and prove the same, the court has no basis for making the award. The claim is therefore rejected. 54. In conclusion the Claimant’s claim is hereby allowed with costs as follows:i. One Month salary in lieu of Notice………Kshs 100,000/= ii. Salary Arrears (March, April 2022 and 7 days May 2022………………………………………Kshs. 226,932 iii. Unpaid leave……………………..NIL iv. House Allowance……………..… 75,000/v. Service Pay……………………….NIL vi. Unfair termination……Kshs. 200,000 vii. The Respondent to issue certificate of service to the Claimant. viii. TOTAL= Kshs. 601,932/55. It is so ordered. Dated at Nairobi this 22nd day of September, 2026 Delivered virtually this 22nd day of September, 2026 Abuodha Nelson Jorum Presiding Judge-Appeals Division Judgment ELRC Cause No. E407 of 2022 23

page 23 of 24

Judgment ELRC Cause No. E407 of 2022 24

page 24 of 24