Hydery (P) Limited v Enock Bosire Ondieki

Elrc Appeal No. E182 Of 2025 obtained manpower from an “external supervisor”, who in turn engaged a gang leader, who in turn engaged the Respondent. 2. The learned trial magistrate held that the Respondent was the Appellant’s employee, that his casual engagement had converted by operation of section 37 of the Employment Act, 2007, and that his employment had been unfairly terminated. She awarded him Kshs. 289,400 with costs and interest. The Appellant appeals against the whole of that judgment. B. BACKGROUND (a) The pleadings 3. By a Memorandum of Claim dated 18th December 2023, the Respondent pleaded that he was engaged by the Appellant as a loader in or about August 2020 at a daily wage that rose from Kshs. 700 to Kshs. 1,800; that his wages were paid in cash against his signature on a voucher; that he signed an attendance register every day on reporting; that he was never issued with a written contract; that it was the Appellant’s policy that every worker, being a food handler, 2

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Elrc Appeal No. E182 Of 2025 undergo a medical examination every six months and obtain a certificate in the Appellant’s name; that in April 2023, when he asked for the letter he needed to renew his certificate, the supervisor, one Mr. Jabe, told him that the Director had directed that workers should no longer obtain certificates in the company’s name but should use another company’s name while continuing to work for the Appellant; and that on 20th April 2023, the supervisor told him that, not having renewed his certificate, he should not report to work the following day. 4. He sought a declaration that the termination was unfair, one month’s salary in lieu of notice, pay for leave not taken, house allowance, service pay, twelve months’ compensation, a certificate of service, costs and interest, in all Kshs. 938,340. 5. By its Response dated 16th February 2024, the Appellant denied that it ever employed the Respondent. It pleaded that it “had an independent contractual relationship with a Supervisor (Gang Leader) who sourced for labour”, that the gang leader supplied it with the work force, that it was a 3

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Elrc Appeal No. E182 Of 2025 stranger to whatever terms the gang leader agreed with the Respondent, and that it had not terminated him. (b) The evidence 6. The Respondent testified on 28th August 2024. He adopted his witness statement and produced his documents: his identity card; attendance forms headed “HYDERY (P) LTD”, on which he confirmed that his “services were engaged as a coolie” and that he “left the employers premises” without injury, witnessed by one Amos; certificates of medical examination and laboratory request forms under the Food, Drugs and Chemical Substances Act, each of which gives his work place as the Appellant; and a demand letter. 7. Cross-examined, he said that he had no written agreement with the Appellant and that his duties were loading and offloading. He said that the workers would gather at the Appellant’s gate every morning; that he was not connected to the work by anyone but went there himself to look for work; that he was not supervised by Jabastone or Kibanda; that his supervisor was Hamis and his documents were signed by Amos, a supervisor at the company; that on 4

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Elrc Appeal No. E182 Of 2025 reporting he signed an attendance sheet; and that he did not have a gang leader. Shown the Appellant’s attendance sheet, he agreed that it bore the name of Kibanda as gang leader and no signature of the Appellant. He conceded that he had filed nothing to show that the Appellant paid him. The Appellant, he said, would give the workers a letter to take to hospital for the medical examination, which the hospital retained. He said that he was terminated by Mr. Jabastone, who was senior to Amos, and that “it’s the respondent who terminated me”. Re-examined, he said that the company gave him his working tools, that he received no payslip, and that the medical certificate bears the Appellant’s name. 8. The Appellant called Abdalla Talib Abdalla (RW1) and Jaberston Kazungu Karisa (RW2). Their statements are to the same effect: that the Appellant “outsources man power” from RW2 as an “External Supervisor”; that RW2 engaged a gang leader, one Omondi, who engaged the Respondent; that the Appellant paid RW2 against a “Warehouse Labour Wages Voucher” recording the bags carried and the lorries loaded; that RW2 remitted the money to the gang leader, 5

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Elrc Appeal No. E182 Of 2025 who paid the Respondent; and that the Appellant took no part in negotiating terms with, or deploying, the workers. The Appellant produced attendance registers and wages vouchers for six days in 2021: 12th April, 3rd, 11th, 22nd and 30th June, and 9th December. 9. The notes of the oral testimony of the Appellant’s witnesses were recorded in the companion file, MCELRC No. E278 of 2023, and have not been included in the record before this Court. The Appellant, whose duty it was to place a complete record before this Court, cannot draw any advantage from that omission. I therefore take the evidence of RW1 and RW2 from their statements and from the trial court’s account of their cross-examination, the accuracy of which neither party has questioned. According to that account, RW1 admitted knowing the Respondent. RW2 admitted that he knew the Respondent and engaged him as a casual labourer at the Appellant’s premises, but could not say when the engagement began and produced nothing to show it. He produced no agreement with the Appellant and conceded that he had no registration as an outsourcing business. 6

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Elrc Appeal No. E182 Of 2025 (c) The judgment of the trial court 10. The learned magistrate held that the Appellant had produced no outsourcing agreement with RW2 or any gang leader; that its own attendance register carried its name as the employer of the workers listed on it; that it set and provided the money for the workers’ pay, supplied their tools, and monitored their attendance and pay through the registers returned to it; that RW2 was, at the least, its agent in recruiting labour, so that it was the principal employer within the definition of “employer” in section 2 of the Employment Act; and that the arrangement was an unfair labour practice designed to deny the workers the protection of the law. She held that the Appellant, having produced records for only scattered days, had not displaced the Respondent’s evidence of continuous service; that his engagement had converted under section 37; and that, no reason or process having been shown, the termination was unfair. She awarded one month’s salary in lieu of notice (Kshs. 46,000), three months’ salary as compensation (Kshs. 138,000), leave pay (Kshs. 59,400) and service pay for two years (Kshs. 46,000), 7

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Elrc Appeal No. E182 Of 2025 declined house allowance on the ground that the daily wage was consolidated, and ordered a certificate of service. C. THE APPEAL 11. By its Memorandum of Appeal dated 1st September 2025, the Appellant faults the learned magistrate on seven grounds. In substance, they are that she erred in holding that the Respondent was its employee and that his casual employment converted to permanent employment, when the evidence showed that he was engaged “once in a while when work was available by an external supervisor and not the Appellant”; and that, there being no employment relationship, every one of the awards (notice pay, compensation, leave pay and service pay, totalling Kshs. 289,400) and the costs were made without foundation. 12. In its submissions dated 26th February 2026, the Appellant argued that the conditions for conversion under section 37 were not met because there was no evidence of continuous service; that there was no proof of wages paid by it or of its control or supervision; that the burden of proving the employment relationship lay on the Respondent under 8

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Elrc Appeal No. E182 Of 2025 section 107 of the Evidence Act and that the learned magistrate wrongly shifted it; and that awards could not be made on speculation. It relied on Rapid Kate Services Limited v John Mutisya & 2 others [2018] KECA 12 (KLR), Everret Aviation Limited v Kenya Revenue Authority [2013] eKLR, Thome v Katuma & another [2024] KEELRC 1110 (KLR) and Kenya Power & Lighting Co. Ltd v Nathan Karanja Gachoka & another [2016] eKLR. 13. For the Respondent, it was submitted that all the documents on record, his and the Appellant’s alike, bear the Appellant’s name; that no outsourcing agreement was produced, the gang leader was not called, and RW2 kept no records of his own; that an employer does not cease to be one by routing wages through a third party (Cable & Wireless Plc v Muscat [2006] EWCA Civ 220; Edison Nyale v Mass Investment Company Limited [2021] KEELRC 1558 (KLR); Vincent Owino Oduor v Mitchell Cotts Freight (K) Limited [2020] eKLR; Superforam Limited v Olwanda & 7 others [2022] KEELRC 4028 (KLR)); that the Appellant, as custodian of the records, produced only selected days and an adverse inference 9

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Elrc Appeal No. E182 Of 2025 should be drawn; and that the termination was substantively and procedurally unfair. D. ANALYSIS AND DETERMINATION 14. This is a first appeal. The Court must reconsider and reevaluate the evidence and reach its own conclusions, bearing in mind that it did not see or hear the witnesses and making due allowance for that (Selle & another v Associated Motor Boat Company Ltd & others [1968] EA 123). It will not lightly depart from findings of fact that rest on the evidence. 15. The appeal stands or falls on one question, and it is the question that must be answered first: was there an employment relationship between the Appellant and the Respondent? Every other ground depends on the answer. If that question is answered in the Respondent’s favour, three further issues arise: whether his engagement converted under section 37 of the Employment Act; whether his employment was terminated fairly; and whether the reliefs were justified. 10

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Elrc Appeal No. E182 Of 2025 (a) Was the Respondent the Appellant’s employee? 16. The Appellant is right that the burden of proving the employment relationship lay on the Respondent (section 107 of the Evidence Act). But when a respondent does not merely deny, and instead puts forward a positive case (here, that a third party was the employer), the burden of proving that case is its own (sections 109 and 112 of the Evidence Act). The terms of any arrangement between the Appellant and RW2 were particularly within the Appellant’s knowledge. The question for the trial court was therefore whether, on the whole of the evidence, the Respondent had shown that he was the Appellant’s employee, and whether the Appellant’s alternative account displaced that showing. 17. Section 2 of the Employment Act defines an “employee” as a person employed for wages or a salary, and an “employer” as any person or company that has entered into a contract of service to employ any individual, including “the agent, foreman, manager or factor” of that person or company. A contract of service may be oral or written, and express or implied. The statute thus anticipates that an employer may 11

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Elrc Appeal No. E182 Of 2025 act through intermediaries. It does not allow an employer to escape its obligations by placing one. 18. No single test settles whether a person is an employee. The courts consider several indicators together: the control test (who directs what work is done and how); the integration test (whether the work is part and parcel of the business or merely accessory to it); and the economic-reality and mutuality-of-obligation considerations (who provides the work, the tools and the pay, who bears the risk of loss and the chance of profit, and whether there is an ongoing obligation to provide work and to perform it). This is the very analysis the Appellant invites through Everret Aviation. 19. Applying those tests to the record, the result is clear: (i) Integration. Loading and offloading goods at a go-down is not accessory to the Appellant’s warehousing business. It is the core of it. The work was done at the Appellant’s premises, on the Appellant’s goods, in the Appellant’s lorries, and for its customers. (ii) Control. The workers reported every morning at the Appellant’s gate. They signed an attendance register 12

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Elrc Appeal No. E182 Of 2025 printed with the Appellant’s name. Their work was recorded on the Appellant’s “Warehouse Labour Wages Voucher”, which had to be approved by the Appellant’s Warehouse Manager. The Appellant decided who would do food-handling work and required each worker to hold a medical certificate issued in its name. Its Director could, and instruction did, change passed down that to requirement the by workers. an The Respondent’s unchallenged evidence was that the instruction came through Mr. Jabe, the same person the Appellant now calls an independent “external supervisor”. A person who conveys the Director’s instructions to the workforce is part of the Appellant’s line of command, not an independent contractor. (iii) Pay, tools and risk. The Appellant set the rates on its own vouchers and paid the money for the wages. The Respondent’s evidence that the company provided his working tools was not contradicted. Nothing suggests that RW2 or the gang leader bore any risk of loss or stood to make any profit. As the learned magistrate 13

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Elrc Appeal No. E182 Of 2025 rightly observed, RW2 could not pay the workers from his own resources. He was a conduit. (iv) The Appellant’s own documents. The attendance register begins: “you are employed to do piece work on casual basis … as company will not take any responsibility for an accident of your negligence”, beneath the name “HYDERY (P) LIMITED”. The form the Respondent signed was headed “HYDERY (P) LTD” and recorded that he had left “the employers premises”. The certificates of medical examination name the Appellant as his work place. Every document on the record points to the Appellant, and not one of them points to RW2 or to Omondi. 20. Against that evidence, the Appellant offered a triangular relationship that was, with respect, implausible. It was supported by no document of any kind. No agreement between the Appellant and RW2, or between RW2 and the gang leader, was produced. RW2 was not shown to be registered to supply labour, kept no records of the workers he supposedly engaged, and could not say when the 14

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Elrc Appeal No. E182 Of 2025 Respondent began. The gang leader, Omondi, who is said to have been the actual employer, was not called. RW2 said that the Respondent worked for other companies but named none. The Appellant’s witnesses were not even consistent about who was who. The Response described the “Supervisor” and the “Gang Leader” as one person, while the witness statements made them two. Meanwhile the Respondent himself denied having a gang leader and named Hamis and Amos as company supervisors. An employer that genuinely outsourced its labour would have had no difficulty producing the contract under which it did so, the payment statements that section 20 of the Employment Act requires, and evidence of statutory remittances made by the contractor. The Appellant produced none of these. A bare assertion, unsupported by any document and contradicted by the Appellant’s own records, could not displace the Respondent’s detailed and consistent account. 21. This Court has pronounced itself on the gang system in the loading trade. In Naushad Trading Company Ltd v Chomulose [2026] KEELRC 2297 (KLR), which followed 15

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Elrc Appeal No. E182 Of 2025 Naushad Trading Company Limited v Munywoki [2026] KEELRC 2014 (KLR), the employer’s defence was that loaders at its Mombasa go-downs were a pool of hands summoned and paid by a gang leader, per bag, and free to work elsewhere. The Court rejected the contention that such a need-based arrangement could not, as a matter of law, be an employment relationship, observing that: “Section 18 of the Employment Act expressly regulates ‘a contract of service entered into under which a task or piece-work is to be performed by an employee’ — language which presupposes that a piece-rate worker is an employee under a contract of service, the piece-rate being no more than the method of calculating remuneration. The question in every case is not whether the parties labelled the arrangement ‘piece-rate’ but whether, on the facts, an employment relationship in substance existed.” 22. The Court further held that an employer who neither denies nor particularises when its dealings with a claimant began cannot resist a finding of continuous employment by producing a sample of daily records from a few weeks of the relationship. The same reasoning applies here with equal force. It is also consistent with Vincent Owino Oduor v Mitchell Cotts Freight (K) Limited (supra), in which gang 16

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Elrc Appeal No. E182 Of 2025 leaders not shown to be in any legitimate outsourcing business were held to be “just a façade, used in supply of labour, and used in protecting the Respondent from employment liability”, and with Cable & Wireless Plc v Muscat (supra), which held that an employer does not cease to be one simply by arranging for wages to be paid through a third party. 23. I am therefore satisfied, as the learned magistrate was, that the Respondent was at all material times the Appellant’s employee. Grounds 1 and 2 of the appeal, so far as they challenge that finding, fail. (b) The authorities relied upon by the Appellant 24. The Appellant’s authorities do not assist it, and each is distinguishable on its facts. (i) In Rapid Kate Services Limited v John Mutisya & 2 others (supra), the Court of Appeal had before it a written contract between the employer and the gang leader, requiring him “at his own expense and through his own contracted manpower resources” to load and offload goods. The gang leader himself testified that he 17

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Elrc Appeal No. E182 Of 2025 hired and paid the workers. The claimants, on the other hand, “did not shed light on how they were engaged, how work was allocated to them and who paid their wages”. Here, the position is the reverse on every point. There is no contract with any intermediary. The intermediaries were paid with the Appellant’s money and for its account. The gang leader was not called. The Respondent explained in detail how he reported, whom he reported to, how his attendance was recorded and how he was paid. The Court of Appeal did not hold that a worker supplied through a gang leader can never be the principal’s employee. It held only that, on the evidence before it, those claimants had not proved that they were. (ii) Everret Aviation Limited v Kenya Revenue Authority (supra) cuts against the Appellant. There, the High Court applied the tests of control, integration and who bears the risk of loss and the chance of profit, and it found that freelance pilots engaged for short, specific tasks were employees under oral contracts of service. 18

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Elrc Appeal No. E182 Of 2025 The Court held that “the duration of the contract is not material”. The same tests, applied here, lead to the same result. (iii) In Thome v Katuma & another (supra), the claim failed because the claimant produced nothing to corroborate his oral account, and even his own pleadings gave inconsistent dates of employment. Here, the Respondent’s account is corroborated by documents in the Appellant’s own name, some of them produced by the Appellant itself. (iv) Kenya Power & Lighting Co. Ltd v Nathan Karanja Gachoka & another (supra) states the uncontroversial principle that awards must rest on evidence. The awards here did. I return to them below. (c) Did the Respondent’s engagement convert under section 37? 25. Section 2 of the Employment Act defines a casual employee as a person whose terms of engagement provide for payment at the end of each day and who is not engaged for more than twenty-four hours at a time. Casual employment 19

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Elrc Appeal No. E182 Of 2025 is, by design, transient. Section 37 ensures that it does not become a device for denying long-serving workers the protections of the Act. Where a casual employee works for a period, or a number of continuous working days, amounting in aggregate to not less than one month, or performs work that cannot reasonably be expected to be completed within an aggregate of three months or more, the contract is deemed to be one in which wages are paid monthly, and section 35(1)(c) applies to it. Under section 37(2), a rest day after six continuous working days, and any public holiday, counts as part of the continuous working days. Under section 37(3), an employee whose contract has converted, and who works continuously for two months or more, is entitled to the terms and conditions he would have enjoyed had he not been engaged as a casual. The effect of conversion is that the employee can be dismissed only on a month’s notice (or pay in lieu) and in accordance with Part VI of the Act. 26. The Respondent’s evidence was that he worked for the Appellant from August 2020 to 20th April 2023, reporting daily and signing the attendance register every day. The 20

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Elrc Appeal No. E182 Of 2025 Appellant did not put forward any other date for the start of the engagement, and its own witness could not say when it began. Under section 10(7) of the Act, where an employer fails to produce a written contract or the prescribed particulars, the burden of proving or disproving an alleged term of employment falls on the employer. Section 74 obliges the employer to keep records of every employee’s engagement and pay. The Appellant is the custodian of the attendance registers and wages vouchers, which its own witnesses said were returned to it “for record and accountability purposes”. It chose to produce six days out of the whole period. That selection proves nothing about the days it chose not to produce. The inference is that the complete record would not have supported the Appellant. The Respondent’s own exhibit, dated December 2022, together with the Appellant’s registers from 2021, confirms that he was at the Appellant’s go-down throughout that period. 27. The work of loading and offloading at a permanent go-down is not a task that ends within three months. It is continuous 21

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Elrc Appeal No. E182 Of 2025 work, and it was done continuously for some two years and eight months. Either limb of section 37(1) is satisfied many times over. The learned magistrate’s passing reference to seven years is plainly a slip, since the pleadings and evidence put the period at under three years, but it does not affect her conclusion. Her finding that the Respondent’s engagement had converted into one to which section 35(1) (c) applied was correct. It follows that the rights and protections of the Employment Act, including those in Part VI on termination, were available to him. (d) Was the termination fair? 28. Section 45(2) of the Employment Act provides that a termination is unfair if the employer fails to prove that the reason for it is valid, that the reason is fair (relating to the employee’s conduct, capacity or compatibility, or to the employer’s operational requirements), and that it was effected in accordance with fair procedure. Fairness therefore has two aspects, both of which the employer must prove: substantive fairness (a valid and fair reason, section 43) and procedural fairness (a fair process, section 41). See 22

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Elrc Appeal No. E182 Of 2025 Walter Ogal Anuro v Teachers Service Commission [2013] eKLR. The employee’s initial burden under section 47(5) is only to show that an unfair termination occurred. Once he does so, the burden of justification passes to the employer. 29. The Respondent discharged his burden. His account was that on 20th April 2023, after completing his shift, he was told by the supervisor not to report to work again because he had not renewed his medical certificate. He said this was the result of the Appellant’s own refusal to issue the letter needed for the renewal. That account was not displaced. The Appellant’s defence was a complete denial that any employment existed. Having taken that position, it offered no alternative account of how the engagement ended. 30. On substantive fairness, the Appellant proved no reason at all. If the reason was the lapse of the medical certificate, that reason was one of the Appellant’s own making: it withdrew the letter that the renewal required and then dismissed the Respondent for not having the renewal. A reason manufactured by the employer is neither valid nor fair within the meaning of sections 43 and 45(2). 23

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Elrc Appeal No. E182 Of 2025 31. On procedural fairness, nothing was shown. The Respondent was not told, in a language he understood, of any reason for which termination was being considered. He was not given the opportunity to be accompanied, and he was not heard, as section 41 requires. He was simply turned away at the end of a shift. The termination was unfair on both counts, and the learned magistrate was right so to hold. (e) Were the reliefs justified? 32. The Appellant’s challenge to each award rests entirely on the premise that there was no employment relationship. Once that premise falls away, the challenge falls with it. None of the awards has been attacked on any other basis, and each rests on the material before the trial court and on the Appellant’s uncertain defence, which consisted of a denial but produced no records. Taking each award in turn: (i) Notice pay. The Respondent’s contract having converted to one under section 35(1)(c), he was entitled to a month’s notice or pay in lieu under section 36. The daily wage of Kshs. 1,800 was not disproved. Over twenty-six working days that gives Kshs. 46,800. 24

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Elrc Appeal No. E182 Of 2025 The trial court’s figure of Kshs. 46,000 is, if anything, in the Appellant’s favour, and there is no cross-appeal. (ii) Compensation. An award under section 49(1)(c) is discretionary. An appellate court will interfere only where the trial court acted on a wrong principle, took into account an irrelevant factor, failed to take into account a relevant one, or reached a figure plainly wrong. Three months’ salary, for a termination with neither reason nor process after nearly three years of service, is a moderate award and discloses no error of principle. (iii) Leave pay. Section 28 entitles an employee to at least twenty-one working days’ leave for every twelve months of service. The employer, as the custodian of records under section 74, bears the burden of showing that the leave was taken or paid for. The Appellant produced nothing. The award of thirty-three days at Kshs. 1,800 per day, Kshs. 59,400, was justified. (iv) Service pay. Under section 35(5) and (6), an employee whose contract is terminated under section 35(1)(c) is 25

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Elrc Appeal No. E182 Of 2025 entitled to service pay unless he is a member of the National Social Security Fund or another qualifying scheme. The Respondent’s evidence was that he was never registered, although deductions were made. The Appellant, which alone could have shown otherwise, did not. The exclusion was not established, and the award of Kshs. 46,000 for two completed years stands. (v) Certificate of service. Section 51 makes this an entitlement of every employee on termination. 33. The learned magistrate declined the claim for house allowance, and there is no cross-appeal against that. It is therefore not before me. E. DISPOSITION 34. For these reasons, the appeal lacks merit. I make the following orders: (a) The appeal is dismissed. (b) The judgment of the trial court delivered on 21st August 2025 in Mombasa MCELRC No. E813 of 2023 is upheld in its entirety. 26

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Elrc Appeal No. E182 Of 2025 (c) The Appellant shall bear the Respondent’s costs of this appeal. DATED, SIGNED AND DELIVERED at MOMBASA this 30th day of September 2026. ……………………………………………………. Ocharo Kebira JUDGE 27

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