Kemboi & others v Zena Roses Limited & 2 others

subject matter, but different Claimants. Cause No. E005 of 2025 was designated as the lead file. Accordingly, the findings and final orders made in this judgment shall apply to and dispose of both causes, subject to the respective Claimants’ individual entitlements. 2. The Claimants in Cause No. E005 of 2025 are Eighty-Nine (89) employees who were engaged by the Respondents in various capacities including supervisors, machine operators, pickers, field workers, harvesters, graders, pack house workers, and maintenance staff. 3. The 1st Respondent, Zena Roses Limited, is described in the Statement of Claim as a limited liability company duly incorporated in Kenya and engaged in the business of growing, packaging, and exporting cut flowers to both local and international markets. 4. The 2nd Respondent is described as the director of the 1 st Respondent. 5. The Interested Party, Kenya Plantations and Agricultural Workers Union (KPAWU), is a registered trade union under the 2 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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Labour Relations Act and has the statutory mandate to represent the claimants who are its members. The Claimants’ case 6. The Claimants instituted the claim herein vide a Statement of Claim dated 17th September 2025 seeking the following reliefs against the Respondents jointly and severally: i. Adoption of the Conciliator’s report dated 11th July 2025 as part judgment of this Honourable Court ii. A declaration that the termination of the Claimants employment was unlawful, unfair and unconstitutional. iii. Salary arrears for June 2022, July 2022, August 2022, September 2022 and 14 days worked in the month of October 2022. iv. Compensation equivalent to twelve (12) months' gross salary for each Claimant under Section 49(c). v. General damages for wrongful and unlawful termination and for non-payment of salaries. vi. A declaration that the 2nd Respondent is personally liable to satisfy the decretal sum. 3 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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vii. The sum of Kshs. 27,270,083/- as set out vide the calculations here below. viii. An order compelling the Respondents to issue certificates of service to all the Claimants forthwith. ix. A declaration that the 2nd Respondent is personally liable to satisfy the decretal sum arising from this claim. x. Interest on all monetary awards at court rates from the date of judgment until payment in full. xi. Costs of this suit. xii. Any further relief that this Honourable Court deems just and expedient. 7. The Claimants’ case is that, on 14 th October 2022, they reported to work as usual, only to find the farm gates closed and a notice pinned thereon stating that the farm had been closed until further notice. They averred that the notice further instructed them to leave their names and telephone contacts at the gate for purposes of future communication. 8. The Claimants development, stated they that sought alarmed clarification by the from sudden the 2 nd Respondent, who allegedly informed them orally that their 4 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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services were no longer required on grounds that the 1 st Respondent’s workload had reduced, that the company was not receiving payments from its foreign clients, and that company operations had consequently become untenable necessitating the termination of their employment on account of redundancy. 9. They further aver that the reasons advanced by the Respondents were false and misleading and were intended to conceal the Respondents’ unlawful conduct. The Claimants alleged that the 1st Respondent was still exporting flowers and earning revenue at the time of the alleged redundancy. 10. It is the Claimants case that the termination of their employment was communicated orally and casually without regard to due process, consultation or their dignity as workers. In addition, the Claimants asserted that no written notices were issued to them or to the Interested Party or to the area Labour Officer as required under section 40(1) of the Employment Act. 11. The Claimants contended that the termination was abrupt, discriminatory and undertaken in bad faith, thereby violating their constitutional right to fair labour practices under Article 41 of the Constitution of Kenya, 2010. 5 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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12. They particularized the alleged illegality and unfairness of their termination from employment as: a) Failing to issue one month 's prior written notice of redundancy. b) Failing to notify and consult with the trade union and the Labour Officer. c) Failing to apply the principle of "last in, first out," d) Denying the Claimants a hearing as envisaged under Section 40 and 41 of the Employment Act, 2007. e) Failing to pay severance pay as provided under Section 40(1)(g). f) Failing to pay salary arrears for June, July, August, September, and October 2022. g) Failing to issue certificates of service as mandated by Section 51. 13. The Claimants contended that the Respondents’ actions contravened sections 35, 36, 40, 41, 43, 45 and 49 of the Employment Act and violated their rights under Articles 27, 28, 41 and 47 of the Constitution. 6 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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14. They further averred that, being aggrieved by the termination, they lodged a complaint with the Interested Party, which subsequently reported the dispute to the Ministry of Labour pursuant to section 62 of the Labour Relations Act. A conciliator was thereafter appointed and, upon hearing the parties, prepared a report dated 11th July 2025 under reference number MLSP/LDIR/114/2025. 15. The Claimants aver that the Conciliator found that their termination was unfair and recommended that the Respondents pay: a) Kshs. 12,103,459, being the balance agreed upon under the Memorandum of Agreement dated 2nd October 2024 between the Respondents and the Interested Party b) Compensation for unfair termination under section 49(1)(c) of the Employment Act c) Outstanding salary arrears d) General damages arising from the unlawful termination and delayed payment of salaries. 7 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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16. The Claimants aver that, despite the Conciliator’s findings and recommendations, the Respondents have willfully refused to comply with the same. 17. They further aver that, upon learning of the Conciliator’s Report and the liabilities arising therefrom, the 2 nd Respondent deliberately embarked upon a scheme to defeat justice by disposing of assets belonging to the 1 st Respondent. 18. According to the Claimants, the 2 nd Respondent has thereby rendered the 1st Respondent a “hollow shell” incapable of meeting its legal obligations to them. On this basis, the Claimants urged the court to pierce the corporate veil and hold the 2nd Respondent personally liable for the debts and obligations of the 1st Respondent. The 1st Respondent’s case 19. In response to the claim, the 1 st Respondent filed a Statement of Response dated 13th February 2026, denying that it wrongfully terminated the Claimants’ employment. It maintained that the cessation of the Claimants’ employment resulted from a lawful redundancy necessitated by frustration 8 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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of contract as a result of which it issued a formal notification to all its employees explaining the insurmountable financial difficulties that compelled it to close Zena Roses Limited (Asai Farm). 20. The 1st Respondent contended that the entire operation at Asai Farm ceased abruptly following a bank foreclosure, which affected its entire workforce. It maintained that the “last in, first out” principle was inapplicable because all permanent employees were declared redundant simultaneously. 21. The 1st Respondent further denied the Claimants’ allegation that it had failed to engage in consultations. It maintained that it remained in continuous engagement with the Interested Party and that conciliation meetings concerning all 239 employees, comprising management staff, permanent employees and casual workers, commenced as early as 24 th October 2022. 22. The 1st Respondent averred that a Memorandum of Agreement was executed on 2nd October 2024, under which the parties agreed that the available surplus would be utilised to pay Kshs. 10,000,000 to the 239 employees and Kshs. 6,000,000 towards 9 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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union dues. It maintained that payment to the Interested Party, as the Claimants’ agreed representative, constituted fulfilment of its obligations to the Claimants. 23. The 1st Respondent further contended that the employment relationship was frustrated by operation of law when the bank exercised its statutory power of sale over the company’s assets, rendering performance of the employment contracts impossible. It maintained that those circumstances absolved it from liability for compensation arising from unfair termination. 24. Consequently, the 1st Respondent maintained that the termination of the Claimants on account of redundancy was substantively fair because the cessation of its operations had been necessitated by insurmountable financial distress and a bank foreclosure arising from a debt of Kshs. 160,000,000. According to the 1st constituted a valid and Respondent, fair reason those for circumstances redundancy as contemplated under section 43 (sic) of the Employment Act. ` 25. The Court was thus urged to dismiss the Claimants’ suit in its entirety with costs. 10 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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The 2nd Respondent’s case 26. The 2nd Respondent filed a Statement of Response dated 13 th February 2026, in which she averred that she had been improperly joined in the proceedings. She contended that, at all material times, the Claimants were employed by the 1 st Respondent, a distinct legal entity incorporated under the Companies Act. 27. The 2nd Respondent denied having entered into any contract of service with the Claimants and maintained that there was no privity of contract between herself and the Claimants. 28. She denied being the Claimants’ employer within the meaning of section 2 of the Employment Act and maintained that the 1 st Respondent, being a duly incorporated company, bears its own rights and obligations under the law and that its directors cannot be held personally liable for its employment obligations in the absence of a statutory or judicial exception. 29. The 2nd Respondent further averred that the Claimants had neither pleaded nor proved any fraud, misrepresentation or gross misconduct attributable to her personally that would justify lifting or piercing the 1st Respondent’s corporate veil. In 11 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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addition, she contended that the Claimants’ pleadings disclosed no reasonable cause of action against her and that the suit against her ought to be struck out pursuant to Rule 33 of the Employment and Labour Relations Court (Procedure) Rules, 2024. 30. The suit was canvassed by way of written submissions. The Claimants’ submissions 31. In their written submissions dated 13th June 2026, the Claimants identified the following issues for determination: i. Whether an employment relationship existed between the Claimants and the Respondents ii. Whether the purported redundancy complied with section 40 of the Employment Act iii. Whether the termination of the Claimants’ employment was unfair and unlawful iv. Whether the Respondents violated the Claimants’ constitutional rights v. Whether the Court should adopt and enforce the Conciliator’s findings and recommendations 12 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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vi. Whether the corporate veil of the 1 st Respondent should be lifted and the 2nd Respondent held personally liable vii. Whether the Claimants are entitled to the reliefs sought. 32. On the first issue, the Claimants submitted that they were employed in various capacities, including as supervisors, machine operators, harvesters, field workers, packhouse employees, store clerks, maintenance personnel and graders. They averred that they served continuously for varying periods between 2005 and 2022 and were remunerated monthly by the 1st Respondent. 33. According to the Claimants, the Respondents acknowledged the employment relationship by entering into the Memorandum of Agreement with the Interested Party concerning payment of redundancy dues. They contended that the Memorandum of Agreement, the redundancy computations and the partial payments made through the Interested Party constituted unequivocal admissions that they had been employed by the 1st Respondent. 13 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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34. On the second issue whether the redundancy complied with section 40 of the Employment Act, the Claimants submitted that the Respondents did not comply with the mandatory requirements of section 40. They averred that when they reported to work on 14th October 2022, they found the farm gates closed and a notice pinned thereon informing them that the farm had been closed. 35. They contended that there was no prior written notice, consultation, notification to the Labour Officer, application of the prescribed selection criteria, hearing, payment of severance pay or payment of salary arrears. In this regard, they submitted that the purported redundancy therefore constituted a complete violation of section 40 of the Employment Act. 36. Relying on sections 10(7), 47(5) and 74 of the Employment Act, the Claimants submitted that the Respondents were required to maintain employment records and produce them before the Court. That it was therefore incumbent upon the Respondents to place before the Court evidence demonstrating that the 14 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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requisite notices had been issued which evidence was not produced. 37. The Claimants maintained that the Respondents having failed to comply with section 40(1)(a) and the other mandatory requirements of section 40, the termination was unfair. 38. With respect to the requirement for consultation and selection criteria, the Claimants submitted that the Respondents violated section 40(1)(c) because no consultations were undertaken before their services were terminated. In support of their position, the Claimants relied on the cases of Francis Maina Kamau v Lee Construction [2014] eKLR, Thomas De La Rue (K) Ltd v David Opondo Omutelema, and Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 Others for the proposition that consultation is an integral component of a lawful redundancy process. 39. The Claimants thus submitted that the Respondents disregarded the statutory safeguards enacted to protect employees facing redundancy. They maintained that the purported redundancy was procedurally defective and unlawful. 15 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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40. On whether the termination was unfair and unlawful, the Claimants relying on sections 43 and 45 of the Employment Act, submitted that although the Respondents allegedly informed them that the company’s workload had reduced and that its foreign clients were not making payments, no evidence was produced to substantiate those assertions. They averred that the Respondents did not produce audited accounts, financial statements, export records, evidence of insolvency or evidence demonstrating a genuine operational necessity for the redundancy. 41. The Claimants submitted that redundancy must arise from a genuine operational requirement and must not be used as a pretext for terminating employees. In support of this position, they relied on the decision in Africa Nazarene University v David Mutevu & 103 Others. The Claimants argued that the Respondents failed to discharge the burden imposed upon them under sections 40, 43 and 45 of the Employment Act. 42. They consequently urged the Court to find that the purported redundancy did not comply with section 40 and that the termination was substantively and procedurally unfair. 16 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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43. On whether their constitutional rights were violated, the Claimants invoked Articles 28, 41 and 47(1) of the Constitution and submitted that the Respondents had treated them in an unlawful, degrading and humiliating manner that was devoid of basic human decency. They contended that they were not afforded an opportunity to be heard before the decision affecting their employment and livelihoods was made. They further submitted that they were denied the basic requirements of procedural fairness and natural justice and that the decision was unilateral, arbitrary and contrary to statutory and constitutional requirements. 44. According to the Claimants, the Respondents’ conduct exposed them and their families to immense economic hardship, emotional distress and uncertainty. 45. The Claimants further submitted that the violation of their constitutional rights was further confirmed by the Conciliator’s Report dated 11th July 2025 which found that they had been unfairly terminated compensation and and recommended damages. They payment contended that of the Respondents had neither challenged nor sought to set aside 17 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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the Conciliator’s findings and that the said findings therefore remained uncontroverted and constituted persuasive evidence that the Respondents had acted unlawfully and in violation of their rights. 46. The Claimants consequently urged the Court to find that the Respondents violated their rights under Articles 28, 41 and 47 of the Constitution and to award the remedies recommended in the Conciliator’s Report together with the other reliefs sought. 47. On whether the Conciliator’s Report should be adopted and enforced, the Claimants submitted that the Court ought to adopt, uphold and enforce the findings and recommendations contained in the report dated 11th July 2025. They maintained that the dispute had been lawfully reported to the Ministry of Labour pursuant to the Labour Relations Act, following which the Cabinet Secretary had duly appointed a Conciliator. They further contended that the Conciliator had afforded the parties an opportunity to present their respective positions, documents and evidence and had, upon considering the material placed before her, issued her report on 11th July 2025. 18 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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48. The Claimants submitted that the Conciliator found that their employment had been unfairly and unlawfully terminated and recommended payment of Kshs. 12,103,459, compensation for unfair termination, salary arrears and other outstanding terminal dues and employment benefits. They maintained that the recommendations were founded on the Memorandum of Agreement executed by the Respondents and the Interested Party on 2nd October 2024, which constituted a binding acknowledgment of the obligations owed to the affected employees. 49. The Claimants further contended that the Respondents had neither challenged the Conciliator’s Report nor demonstrated any procedural impropriety, excess of mandate or error in its findings. They argued that, having voluntarily executed the Memorandum of Agreement and participated in the conciliation process, the Respondents were estopped from denying their acknowledged obligations or selectively accepting the outcome of that process. 50. Relying on Articles 41 and 159(2)(c) of the Constitution, the Claimants submitted that adopting the report would promote 19 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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fair labour practices and give effect to the constitutional imperative of promoting alternative dispute-resolution mechanisms. They accordingly urged the Court to adopt and enforce the Conciliator’s Report dated 11 th July 2025, enter judgment in accordance with its recommendations and grant the consequential orders sought, including costs and interest. 51. On whether the corporate veil should be pierced, the Claimants contended that the 2nd Respondent exercised complete control over the 1st Respondent and, after their claims had crystallised, disposed of or transferred assets associated with the enterprise, including the sale of Asai Farm and the lease of Sosiani Farm for 25 years, while leaving their dues unpaid. 52. The Claimants argued that the timing and circumstances of the transactions demonstrated an intention to defeat or frustrate the enforcement of their claims and constituted an abuse of the corporate form. Relying on Victor Mabachi & Another v Nurtun Bates Ltd, they maintained that the evidence of control, knowledge, dissipation of assets and resulting prejudice established exceptional circumstances warranting the lifting of the corporate veil. 20 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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53. They urged the Court to hold the 2 nd Respondent jointly and severally liable for all sums found due, together with costs and interest. 54. Lastly, on whether they were entitled to the reliefs sought, the Claimants submitted that, having demonstrated that the termination was unlawful, unfair and wrongful and that the Respondents violated the statutory and constitutional safeguards protecting employees, they were entitled to the reliefs they sought in their Statement of Claim. The Respondents submissions 55. In their submissions dated 17th June 2026, the Respondents framed the issues for determination to be: i. Whether the total operational closure of Asai Farm via a bank foreclosure serves as a valid substantive justification for redundancy and legally frustrates the underlying employment contracts by operation of law. ii. Whether the Claimants, having participated in and benefited from a post termination collective settlement framework, may lawfully repudiate that framework and 21 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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pursue parallel statutory remedies arising from the same termination event. iii. Whether a subset of Claimants within a consolidated mass redundancy suit can legally maintain an independent settlement track outside the union-led global settlement framework iv. Whether a conciliator’s recommendation under the Labour Relations Act creates enforceable obligations absent acceptance by the parties or adoption by a court of competent jurisdiction. v. Whether the court must order a strict accounting, reconciliation, and setoff of all payments previously made so as to prevent duplicative recovery and unjust enrichment. vi. Whether there exists any legal or factual basis to pierce the corporate veil of the 1st Respondent and imposing personal liability upon the 2nd Respondent. vii. Whether constitutional and general damages are available in addition to the remedies expressly provided under the Employment Act. 22 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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viii. Whether a maximum compensation contemplated under Section 49 (1)(c) of the Employment Act is justifiable in circumstances involving a bona fide closure arising from insolvency and foreclosure. 56. On the first issue, whether the termination of the Claimants’ employment was unfair and unlawful, the Respondents submitted that the closure of Asai Farm resulted from genuine and insurmountable financial distress and constituted a valid operational requirement under section 40 of the Employment Act. They maintained that the workers’ strike over delayed salaries created an operational deadlock that compelled the Board to close the farm permanently. The Respondents submitted that the closure was subsequently reinforced by Standard Chartered Bank’s foreclosure on the farm’s title to recover Kshs. 160,000,000, thereby rendering continued performance of the employment contracts impossible. 57. On the issue whether the post-termination settlement framework precluded the Claimants from pursuing parallel remedies, the Respondents submitted that the parties had voluntarily participated in a collective dispute-resolution 23 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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process involving the Interested Party, the Ministry of Labour, the Memorandum of Agreement dated 2 nd October 2024 and subsequent conciliation proceedings. Invoking the doctrines of accord and satisfaction, estoppel, election and compromise, they contended that the Claimants could not seek enforcement of the negotiated instruments while simultaneously pursuing independent statutory remedies outside that framework. 58. On the third issue, the Respondents submitted that the 89 Claimants formed part of a larger group of 239 employees affected by the closure. They argued that permitting the Claimants to pursue settlement would employees and a separate undermine disrupt the parity and more among collective favourable the affected dispute-resolution framework. 59. On the issue whether the Conciliator’s Report was binding and enforceable, the Respondents submitted that a conciliator’s recommendation does not, by itself, constitute a binding judgment or award. They maintained that the report could only become binding upon acceptance by the parties or adoption by the Court and could not impose obligations beyond those 24 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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contained in the Memorandum of Agreement or support overlapping claims for salary arrears, compensation and damages. 60. With regard to the previous disbursements, salary arrears and set-off, the Respondents submitted that Kshs. 9,876,000 had already been disbursed to the Claimants through the Interested Party, substantially satisfying the initial Kshs. 10,000,000 payment contemplated in the Memorandum of Agreement. They further maintained that salaries for June and July 2022 had been paid and that only those for August, September and 14 days of October 2022 remained outstanding. They therefore urged the Court to order a full reconciliation and deduct all previous payments from any sums found due to prevent double recovery. 61. On the issue whether the 1st Respondent’s corporate veil should be lifted, the Respondents submitted that no fraud, sham or deliberate abuse of the corporate form had been proved to justify holding the 2nd Respondent personally liable. They maintained that the sale of Asai Farm resulted from a bona fide foreclosure by a secured creditor and that insolvency 25 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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or realisation of assets did not, without more, justify piercing the corporate veil. They further contended that Sosiani Farm was a separate entity that had neither employed the Claimants nor formed part of the dispute. 62. With regard to the alleged violation of the Claimants’ constitutional rights, the Respondents invoked the doctrine of constitutional avoidance and submitted that the dispute was adequately governed by the Employment Act. They contended that an alleged breach of the Act did not automatically constitute an independent constitutional violation and that awarding general damages in addition to the statutory remedies would amount to double compensation in the absence of proof of a distinct constitutional injury. 63. On the issue whether the Claimants were entitled to the maximum compensation of 12 months’ salary, the Respondents submitted that the Claimants had not disproved the evidence of financial collapse, foreclosure and permanent closure. They argued that the maximum award would be disproportionate and urged the Court to cap compensation at three months’ basic salary, taking into account the employer’s 26 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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insolvency, previous payments and the need for parity among all the affected employees. 64. In the end, the Respondents proposed a settlement comprising Kshs. 12,103,459 for permanent employees, subject to reconciliation and set-off; Kshs. 841,300 for seasonal workers; compensation capped at three months’ salary; and a mutual waiver of interest and costs. 65. The Respondents accordingly urged the Court to reject the Claimants’ individual computations, order a full reconciliation of all payments and direct each party to bear its own costs. Determination 66. I have carefully considered the pleadings, the documents placed on record and the parties’ written submissions. In my view, the following issues arise for determination: i. Whether the termination of the Claimants’ employment was founded on a genuine and valid redundancy 27 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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ii. Whether the 1st Respondent complied with the requirements governing redundancy under section 40 of the Employment Act iii. What is the legal effect of the Memorandum of Agreement dated 2nd October 2024 and the Conciliator’s Report dated 11th July 2025 have iv. Whether the circumstances of this case warrant the lifting of the 1st Respondent’s corporate veil and the imposition of personal liability upon the 2 nd Respondent v. What reliefs should issue? Whether the termination of the Claimants’ employment was founded on a genuine and valid redundancy 67. Redundancy is defined under section 2 of the Employment Act as: “The loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are 28 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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superfluous, and the practices commonly known as abolition of office, job or occupation and loss of employment.” 68. In principle, an employer is entitled to re-organise its operations or reduce its workforce for genuine economic or operational reasons. Nevertheless, where a termination is challenged, sections 43 and 45 of the Employment Act require the employer to prove the reason for the termination and demonstrate that the reason was valid and fair. 69. In justifying its decision to render the Claimants redundant, the 1st Respondent averred that it experienced insurmountable financial difficulties and that Standard Chartered Bank exercised its statutory remedy of foreclosure over Asai Farm on account of an outstanding debt of approximately Kshs. 160,000,000. It contended that the foreclosure made continued operations and performance of the Claimants’ contracts of employment impossible. 70. The Claimants disputed that assertion and contended that the alleged financial difficulties and bank foreclosure were unsupported by cogent evidence. They maintained that the 1 st 29 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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Respondent continued exporting flowers and generating revenue at the material time. 71. From the documentary evidence placed before court, it is clear that operations at Asai Farm ceased and that the farm was closed. The 1st Respondent attributed the closure to longstanding financial difficulties, an outstanding secured debt of approximately Kshs. 160,000,000 and the eventual realisation of the security by Standard Chartered Bank. In support of its position, it produced correspondence addressed to the Agricultural Employers’ Association, debt-settlement proposals, conciliation documents and documents relating to the bank’s exercise of its statutory remedies. 72. Although the Claimants alleged that the 1 st Respondent continued exporting flowers and generating revenue, there was evidence before the Court to displace the Respondents’ evidence that Asai Farm ceased operations and was subsequently realised by the secured creditor. 73. The Court is not called upon to determine whether closure of the farm was the most commercially prudent option available to the 1st Respondent. Its role is to determine whether the 30 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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reason advanced for the termination of the employment of the Claimants was genuine and related to the employer’s operational requirements. 74. On a balance of probabilities, I am satisfied that the 1 st Respondent experienced serious financial difficulties and that the closure of Asai Farm resulted in the loss of employment for the Claimants’. The closure of the farm constituted a genuine operational reason capable of necessitating termination on account of redundancy. 75. I therefore find that the 1st Respondent established a valid operational reason for declaring the Claimants redundant. The redundancy was substantively justified. Whether the redundancy complied with section 40 of the Employment Act 76. Section 40(1) of the Employment Act provides for redundancy as follows: 40. Termination on account of redundancy 31 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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(1) An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions— (a) where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy; (b) where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer; (c) the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy, (d) where there is in existence a collective agreement between an employer and a trade union setting out 32 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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terminal benefits employer has payable not placed upon redundancy, the the employee a at disadvantage for being or not being a member of the trade union; (e) the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash; (f) the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and (g) the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service. 77. The evidence before the court is that the Claimants reported to work on 14th October 2022 and found the farm gates closed. They averred that a notice displayed at the gate informed them that the farm had been closed until further notice and directed them to leave their names and telephone contacts for purposes of future communication. 78. The Respondents relied on a Ministry of Labour Conciliation Notice dated 17th October 2022, correspondence dated 25 th and 33 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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29th October 2022 and conciliation meetings that commenced on or about 24th October 2022. All those events occurred after the farm had been closed and the Claimants had effectively lost their employment. 79. Post-termination negotiations and conciliation could not retrospectively cure the failure to issue the statutory notice before the redundancy took effect. The consultation contemplated under section 40 must precede termination. Its purpose is to afford the parties a genuine opportunity to consider alternatives to redundancy or measures to mitigate its consequences. That purpose cannot be achieved where termination has already occurred. 80. The Respondents did not produce a notice issued at least one month before 14th October 2022 notifying the Interested Party and the Labour Officer of the reasons for and the extent of the intended redundancy. Neither was there evidence of consultation with the Claimants or their union before the closure of the farm. 81. It is therefore clear that the 1 st Respondent failed to comply with the mandatory notification and consultation requirements. 34 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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82. The 1st Respondent’s financial difficulties did not suspend the operation of section 40 of the Employment Act. The requirements of that provision are mandatory and apply even where the operational reason for the redundancy is genuine. 83. I consequently find that, although the redundancy was substantively justified, it was procedurally unfair for failure to comply with the mandatory requirements of section 40 of the Employment Act. Accordingly, the termination was unfair within the meaning of section 45 of the Act. What is the legal effect of the Memorandum of Agreement dated 2nd October 2024 and the Conciliator’s Report dated 11th July 2025? 84. It is common ground that, following the closure of Asai Farm, the Interested Party reported a trade dispute to the Ministry of Labour and Respondent. participated Those in negotiations negotiations with culminated the 1 st in the Memorandum of Agreement dated 2nd October 2024. 85. The Respondents stated that the agreement provided for payment of Kshs. 10,000,000 to the affected employees and a 35 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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further amount towards outstanding union dues. They further acknowledged that a balance remained outstanding. 86. The Memorandum of Agreement was voluntarily executed by the 1st Respondent and the Interested Party, which was acting on behalf of its members. No party sought to invalidate it on grounds of fraud, mistake, misrepresentation, illegality or want of authority. 87. The 1st Respondent cannot rely on the Memorandum of Agreement as the basis upon which it paid Kshs. 10,000,000 and simultaneously deny the obligations arising under the same instrument. The payment constituted part-performance of the agreement and an acknowledgment that terminal dues were payable to the affected employees. 88. I therefore find that the Memorandum of Agreement dated 2 nd October 2024 is binding upon the parties according to its express terms. 89. With regard to the conciliation report, it is my considered view that a conciliator appointed under the Labour Relations Act facilitates settlement of a trade dispute but does not exercise adjudicative authority equivalent to that of a court or arbitrator. 36 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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Where conciliation does not produce a settlement accepted by all parties, the conciliator’s recommendations do not, without more, acquire the force of a judgment or arbitral award. 90. The Conciliator’s Report dated 11th July 2025 is relevant and may be considered together with the other evidence. It is, however, not automatically enforceable in its entirety merely because the Respondents did not institute separate proceedings to set it aside. The report does not need setting aside as it is not a binding agreement. The Report cannot, therefore, be adopted as a part judgment of the Court. 91. The Claimants cannot recover twice in respect of the same obligation. Any amounts previously paid through the Interested Party or directly to the individual Claimants must be deducted from the corresponding sums found due. At the same time, the negotiated settlement cannot be construed as extinguishing independent statutory entitlements even if it is demonstrated that the employees knowingly and voluntarily compromised those claims. Section 3(6) of the Employment Act provides that the terms and conditions of employment set out in the Act shall constitute minimum terms and conditions of employment of an 37 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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employee and any agreement to relinquish, vary or amend the terms therein set shall be null and void. 92. The Respondents asserted that Kshs. 9,876,000 was disbursed to the Claimants through the Interested Party. The Claimants disputed the effect and completeness of those payments. A reconciliation is therefore necessary to determine the amount received by each Claimant, the particular entitlement against which it was paid and the balance, if any, remaining outstanding. Whether the corporate veil should be lifted 93. The 1st Respondent is a limited liability company and, in law, a legal person separate and distinct from its directors and shareholders. Its debts and obligations are ordinarily its own and cannot automatically be transferred to its directors. 94. As rightly submitted by the Claimants, the corporate veil may be lifted in exceptional circumstances, including where a company is used as a vehicle for fraud, improper conduct or deliberate evasion of existing legal obligations. Fraud and other improper conduct must, however, be specifically pleaded and 38 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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strictly proved. They cannot be inferred solely from a company’s inability or failure to satisfy its debts. 95. The Claimants alleged that Asai Farm was sold, that Sosiani Farm was leased for twenty-five (25) years and that other assets were transferred or disposed of after their claims arose. They contended that those transactions were undertaken to place the assets beyond their reach. 96. No sale agreement, lease, transfer instrument, company resolution, bank record or other documentary evidence was produced to establish the alleged transactions, their dates, the parties involved, the consideration received or the manner in which the proceeds were applied. 97. Further, no evidence was presented demonstrating that the 2 nd Respondent received or appropriated the proceeds of any company asset for her personal benefit. The allegation that the assets were disposed of with the intention of defeating the Claimants’ claims therefore remained unproved. 98. The fact that the 2nd Respondent was a director, even if she exercised considerable control over the company’s affairs, is insufficient to justify lifting the corporate veil. Control is 39 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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ordinarily inherent in directorship and must be accompanied by proof that the corporate structure was used fraudulently or for another legally improper purpose. 99. Lifting the corporate veil is an exceptional remedy and cannot be founded on suspicion, however strongly held. The Claimants bore the burden of proving the exceptional circumstances upon which they relied and did not discharge that burden. 100. I consequently decline to lift the 1 st Respondent’s corporate veil or hold the 2nd Respondent personally liable. The claim against the 2nd Respondent therefore fails. What reliefs should issue? 101. Having found that the 1st Respondent failed to comply with the mandatory requirements of section 40 of the Employment Act, I now consider the reliefs sought by the Claimants in their Statement of Claim: i. Adoption of the Conciliator’s Report dated 11th July 2025 as part judgment of this Honourable Court For the reasons already given, the Conciliator’s Report dated 11th July 2025 does not, by itself, have the force 40 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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of a judgment or binding arbitral award. Although it constitutes relevant and persuasive evidence, it cannot be adopted as part of the judgment of the Court. The Memorandum of Agreement dated 2 nd October 2024 is, however, binding according to its terms and shall be enforced subject to reconciliation and deduction of all payments already made. The prayer for adoption of the entire Conciliator’s Report as part of the judgment is therefore declined. ii. A declaration that the termination of the Claimant’s employment was unlawful, unfair and unconstitutional. The Court has found that, although the 1 st Respondent had a valid operational reason for declaring the Claimants redundant, it failed to comply with the mandatory procedural requirements of section 40 of the Employment Act. A declaration is therefore issued that the termination of the Claimants’ employment was procedurally unfair and 41 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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unlawful within the meaning of section 45 of the Employment Act. The Claimants did not establish a distinct constitutional violation separate from the breach of the Employment Act. The prayer for a declaration that the termination was unconstitutional is therefore declined. iii. Salary arrears for June 2022, July 2022, August 2022, September 2022, and 14 days worked in the month of October 2022. The Claimants sought salary arrears for June, July, August and September 2022, together with salary for the fourteen (14) days worked in October 2022. The 1st Respondent maintained that salaries for June and July 2022 had been paid and produced payroll and payment records in support of that position. The claims for those months shall therefore be allowed only in respect of any Claimant for whom the 1 st Respondent cannot demonstrate payment. 42 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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The Respondents acknowledged that certain salaries for August and September 2022 and the days worked in October 2022 remained outstanding, although they maintained that those sums were incorporated into the collective settlement framework. Each Claimant is therefore entitled to any unpaid salary for August and September 2022 and for the 14 days worked in October 2022, subject to verification against the payroll records and deduction of any amounts already paid under the same head. iv. Compensation equivalent to twelve (12) months' gross salary for each Claimant under Section 49(c). The Claimants sought compensation equivalent to twelve (12) months’ gross salary under section 49(1)(c) of the Employment Act. I have taken into account the Claimants respective periods of service, the abrupt and undignified manner communicated, the in which absence of the prior closure was notice and consultation, the delay in paying the terminal dues and 43 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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the resulting financial hardship. I have also considered that the redundancy arose from genuine financial and operational difficulties, affected the entire workforce and was not discrimination individual motivated or by malice, considerations Claimant. 1st The misconduct, peculiar to any Respondent also subsequently participated in negotiations and made partial payments through the Interested Party. Although the Claimants served for varying periods, they lost their employment circumstances and were procedurally defective in substantially subjected redundancy to similar the same process. Their different periods of service are reflected in their respective severance and other service-related entitlements and, in the circumstances, do not justify differentiated awards for unfair termination. Accordingly, a uniform award promotes consistency and parity among employees affected by the same closure. 44 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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Balancing these considerations, the Court finds that compensation equivalent to three months’ gross salary for each Claimant is fair and reasonable. v. General damages for wrongful and unlawful termination and for non-payment of salaries The Claimants sought general damages for wrongful and unlawful termination and non-payment of salaries. Compensation under section 49(1)(c) of the Employment Act is the statutory remedy for unfair termination. The Claimants did not prove a contractual wrong or a constitutional violation warranting an additional award of general damages. Such an award would duplicate the statutory remedies granted. The prayer for general damages is therefore declined. vi. A declaration that the 2nd Respondent is personally liable to satisfy the decretal sum Having found that the threshold for lifting the 1 st Respondent’s corporate veil was not met, the prayers 45 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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seeking to hold the 2nd Respondent personally liable are declined. The claim against her is dismissed. vii. The sum of Kshs. 27,270,083/- as set out vide the calculations in the Statement of Claim The Claimants sought Kshs. 27,270,083 based on the computations set out in their Statement of Claim. The Respondents disputed those computations and maintained that they did not account for payments previously made through the Interested Party. A Claimants are entitled only to the amount proved and remaining unpaid. The evidence shows that payments were made to some or all of the Claimants pursuant to the Memorandum of Agreement. Permitting recovery of amounts already paid would result in double payment and unjust enrichment. The sum of Kshs. 27,270,083 cannot therefore be awarded as a global amount without verification and reconciliation. The individual entitlements must be 46 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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ascertained with reference to each Claimant’s applicable salary, proved salary arrears, statutory terminal benefits, compensation awarded by the Court and all payments previously received under the Respondents to issue corresponding heads. viii. An order compelling the certificates of service to all the Claimants forthwith. Section 51 of the Employment Act imposes a mandatory obligation upon an employer to issue a certificate of service to an employee upon termination. The 1st Respondent did not demonstrate that it had issued certificates of service to all the Claimants. It is therefore directed to issue each Claimant with a certificate of service within thirty (30) days of this judgment. 102. In the upshot, judgment is entered in favour of the Claimants against the 1st Respondent in the following terms: i. A declaration is hereby issued that, although the redundancy was founded on a valid operational reason, 47 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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the termination of the Claimants’ employment was procedurally unfair and unlawful for failure to comply with the mandatory requirements of section 40 of the Employment Act. ii. The prayer for a declaration that the termination was unconstitutional is declined. iii. The prayer for adoption of the Conciliator’s Report dated 11th July 2025 as part judgment of the Court is declined. iv. The Memorandum of Agreement dated 2 nd October 2024 is binding upon the parties and shall be enforced according to its terms, subject to reconciliation and deduction of all payments previously made. v. Each Claimant is awarded any unpaid salary for August and September 2022 and 14 days worked in October 2022, subject to verification against the payroll records and deduction of any amounts previously paid under the same head. vi. The claims for salary arrears for June and July 2022 shall be allowed only in respect of any Claimant for 48 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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whom the 1st Respondent cannot demonstrate payment of the same. vii. Each Claimant is awarded compensation equivalent to three (3) months’ gross salary for unfair termination under section 49(1)(c) of the Employment Act. viii. The prayer for general damages is declined. ix. The prayer for payment of Kshs. 27,270,083 as a global sum is declined. The amount payable to each Claimant shall be determined through reconciliation based on the findings and awards made in this judgment. x. All payments previously made through the Interested Party or directly to the Claimants shall be credited against the corresponding heads of entitlement to prevent double recovery. xi. The 1st Respondent shall issue each Claimant with a certificate of service within thirty (30) days of this judgment. xii. The prayer to lift the 1st Respondent’s corporate veil is declined, and the claim against the 2nd Respondent is dismissed. 49 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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xiii. The monetary awards shall attract interest at court rates from the date of judgment until payment in full. xiv. The 1st Respondent shall bear the Claimants’ costs of the suit. xv. 103. The 2nd Respondent shall bear her own costs. For the avoidance of doubt, the findings and orders made in this judgment apply to and finally dispose of both Eldoret ELRC Cause No. E005 of 2025 consent adopted in Eldoret ELRC Cause No. E003 of 2026. 104. Parties are directed to meet under the Chairmanship of the Conciliator to work out the sums due to each Claimant, whose report should be filed in court within 30 days. Each party shall tabulate its figures and submit to the conciliator in 14 days before a joint meeting is held to agree on any differences arising therefrom, if any. 105. A mention date shall be taken to confirm compliance. 106. Orders accordingly. DATED, SIGNED AND DELIVERED VIRTUALLY ON 50 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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THIS 3RD DAY OF AUGUST, 2026 MAUREEN ONYANGO JUDGE 51 ELD ELRC CAUSE E055 OF 2025 JUDGMENT

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