James Kyaluma v Mukys Importers Limited

ELRC Appeal No. E107 of 2025 Some ten months later, he sued the Respondent for unfair termination and for various terminal and contractual dues. 2. The learned trial magistrate found that the termination of his employment was both substantively and procedurally unfair. She nevertheless dismissed the claim in its entirety, holding that, by the disclaimer, the Appellant had given up every claim he had against the Respondent. It is that holding that is the subject of this appeal. 3. The appeal is narrow, but it calls for careful analysis. The question is whether, by executing the disclaimer, the Appellant foreclosed his right to pursue the Respondent on everything, including his claim for compensation for unfair termination, or whether the disclaimer reached only the dues it identified. The answer lies in the authorities cited, in the circumstances of the case, and above all in the words of the document itself. B. BACKGROUND (a) The pleadings 4. By a Memorandum of Claim dated 11th March 2024, the Appellant pleaded that he was employed by the Respondent 2

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ELRC Appeal No. E107 of 2025 on or about 16th February 2017 as a welder/mechanic, stationed at its site opposite Nyali Police Station, at a monthly salary of Kshs 18,000/-. He pleaded that on 12th April 2023 he was stopped at the gate and told that he had been sacked; that the Respondent’s Human Resource Officer, one Maureen, told him that the reason was that he had been late on some occasions; and that he was accorded no hearing. 5. He sought a declaration that the dismissal was unfair, a certificate of service, costs and interest, and the following sums: one month’s salary in lieu of notice, Kshs 18,000/-; compensation for unfair termination at twelve months’ salary, Kshs 216,000/-; accrued leave, Kshs 89,653/-; gratuity, on the premise that the Respondent had not remitted NSSF contributions, Kshs 54,000/-; and house allowance at 15% of his salary for 74 months, Kshs 199,800/-. The total was Kshs 577,453/-. The Memorandum of Claim is silent on the payment he received from the Respondent and on the document he signed. 3

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ELRC Appeal No. E107 of 2025 6. By its Response dated 5th April 2024, the Respondent admitted that it employed the Appellant from February 2017 but denied that it terminated his employment. Its case was that from the middle of 2022 he took to reporting late, absenting himself without permission, ignoring instructions and doing unsatisfactory work; that he was warned verbally and then in writing on 18th February 2023; that he tore up a notice to show cause dated 12th April 2023; and that on 17th April 2023 he walked out of a meeting with his supervisors and never returned. It pleaded that he came to the Human Resource Manager on 6th May 2023 for his dues, which were calculated and paid, and that on 8th May 2023 he signed “a document indicating he had received Kshs 41,000/= and a disclaimer stating that he had no further claim against the respondent in regard to his dues and benefits.” It further pleaded that he had taken all his leave, that his salary was inclusive of house allowance, and that the claim for gratuity was unfounded because his dues had been paid and he had signed a discharge. 4

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ELRC Appeal No. E107 of 2025 (b) The evidence 7. The suit was heard on 4th February 2025. The Appellant testified in Kiswahili. He adopted his witness statement and produced the demand letter and the certificate of service. He denied that he was ever late, that he received any warning letter or notice to show cause, or that he was invited to any disciplinary meeting. In cross-examination, he said that he had no letter of appointment and no payslip, that he was paid Kshs 41,000/- on 8th May 2023, and that he signed a document. Asked whether the document stated that the payment was in full and final settlement of his dues, he said: “They did not inform me what was the money for.” He said that he never reported the matter to the labour office. 8. The Respondent called its Human Resource Manager, Maureen Nkatha (RW1). She adopted her statement and produced the warning letter, the notice to show cause, the dues computation dated 8th May 2023, a petty cash voucher dated 6th May 2023 and the certificate of service. In crossexamination, she conceded that there were no minutes of the alleged disciplinary meeting, that the Appellant had not 5

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ELRC Appeal No. E107 of 2025 signed for any of the letters, that he was never issued with a letter of appointment, and that there were no payslips. She said that the Respondent kept a master roll which “acts in place of payslip”, and that the master roll would show that the salary included house allowance, but she admitted that she had not produced it. On leave, she said that, owing to the nature of the work, employees had alternate rest days and a Sunday off, and that this “stood as their annual leave”. On gratuity, she said: “I have nothing against that just he received his dues.” She explained that the Appellant had a pending loan of Kshs 4,000/-, which is why he was paid Kshs 41,000/-. (c) The document 9. Because the appeal turns on it, the document must be described with some care. It appears at page 30 of the Record of Appeal. It is a single typed page prepared by the Respondent. Against the Appellant’s name, it records his appointment date as 01/02/2017 and his termination date as 17/04/2023. Under the heading “WORKING DUES”, it records a basic salary of Kshs 18,000 and five years of service. 6

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ELRC Appeal No. E107 of 2025 Under the heading “TERMINAL BENEFITS CALCULATIONS”, it lists a single item: “15 DAYS SALARY 5YRS, 90005 = 45,000. TOTAL = KSH45,000.” Under “DEDUCTION”, it lists a pending loan of Kshs 4,000/-, leaving a “DUE BALANCE” of Kshs 41,000/- (a typed figure of 39,000 having been struck out and corrected by hand). It is signed for the HR Department and by the Managing Director. At its foot, the following appears, with the blanks filled in by hand: “EMPLOYEES DISCLAIMER I, James Kyaluma ID NO 12963215 Acknowledge receipt of ksh 41,000 in full and final settlment of dues owed to me by Mukys Importers Limited. I also acknowledge that I have no further claim against the company.” 10. The document is signed by the Appellant and dated 8th May 2023. The petty cash voucher of 6th May 2023, also signed by him, describes the payment of Kshs 41,000/- as “Terminal dues for James Kyaluma”. (d) The judgment of the trial court 11. The learned magistrate framed two issues: whether the Appellant was unfairly terminated, and whether he was entitled to the reliefs sought. On the first, she found, on a 7

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ELRC Appeal No. E107 of 2025 balance of probabilities, that the Respondent terminated the Appellant’s employment, noting that the Respondent’s own dues computation recorded a termination date of 17th April 2023. She rejected the defence of absconding, relying on Peter Nzioka Musembi v Esquire Wholesalers Limited [2019] KEELRC 999 (KLR), and found that the Respondent had proved no valid reason. She found further that service of the warning letter and the notice to show cause was not proved, that no minutes of the alleged disciplinary meeting were produced, and that there was no evidence that the Appellant was accompanied. The termination was therefore substantively and procedurally unfair. 12. On the second issue, relying on Thomas De La Rue (K) Ltd v David Opondo Omutelema, Coastal Bottlers Ltd v Kimathi Mithika and Trinity Prime Investment Limited v Lion of Kenya Insurance Company Limited, she held that “despite having found that the Claimant was unfairly dismissed”, the Appellant was bound by the discharge note and was “not entitled to any claim against the Respondent as per the disclaimer except for issuance of Certificate of Service”, 8

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ELRC Appeal No. E107 of 2025 which had already been issued. The claim was dismissed with no order as to costs. 13. It bears noting that the judgment reproduces the disclaimer as an acknowledgment of “Kshs.45,000/= in full and final settlement of my dues owed”. That is not what the document says. The figure acknowledged is Kshs 41,000/-, and the judgment omits the second sentence altogether. More importantly, the judgment does not examine what the document, read as a whole, actually discharged. C. THE APPEAL (a) The grounds 14. By a Memorandum of Appeal dated 9th June 2025, the Appellant faults the learned magistrate on four grounds, namely that she erred: (i) in holding that the execution of the discharge voucher operated as a full and final settlement of all claims, barring any subsequent claim, without considering the voluntariness, context and legality of the discharge; (ii) in failing to appreciate that a discharge voucher cannot be relied upon by an employer to defeat statutory 9

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ELRC Appeal No. E107 of 2025 rights or contractual entitlements of an employee that have been found to have been breached; (iii) in failing to consider and award the claims for notice pay, compensation for unfair termination, accrued leave, gratuity and house allowance; and (iv) in misapprehending the legal and factual matrix of the claim and dismissing it without cogent legal reasoning. (b) The Appellant’s submissions 15. In submissions dated 7th April 2026, the Appellant argued that the learned magistrate treated the discharge voucher as dispositive of the entire dispute without the inquiry that the Court of Appeal requires. Relying on Coastal Bottlers and Thomas De La Rue, counsel submitted that a discharge binds only if it was freely and willingly executed by an employee seized of all the relevant information, and that the court below made no inquiry into whether the Appellant understood its import or signed it under economic pressure. He argued, relying on Caroline Atieno Osweta v Kenya Yungheng Plate Making Limited [2013] KEELRC 408 (KLR), which followed Simon Muguku Gichigi v Taifa Sacco Society 10

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ELRC Appeal No. E107 of 2025 Limited, that an employer cannot circumvent its statutory obligations by producing a form of discharge, and that, having treated the voucher as a bar, the court below abdicated its duty to determine the remedies. He urged the Court to allow the appeal and either determine the claim on its merits or remit it for determination. (c) The Respondent’s submissions 16. In submissions dated 18th April 2026, the Respondent supported the judgment. It submitted that a discharge voluntarily executed by an employee upon receipt of terminal dues is a binding contract, unless impeached on a recognised ground such as fraud, coercion, misrepresentation or mistake, citing Thomas De La Rue and Coastal Bottlers. It argued that the Appellant neither pleaded nor proved any vitiating factor; that financial need does not amount to duress; that a finding of unfair termination does not, of itself, entitle an employee to remedies; that accrued statutory entitlements may lawfully be compromised after termination; that the Appellant cannot approbate and reprobate by keeping the money while disowning the 11

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ELRC Appeal No. E107 of 2025 discharge; and that he did not refund or offer to refund what he received. It relied also on Damodar Jivabhai & Co Ltd & another v Eustace Sisal Estates Ltd [1967] EA 153 for the proposition that the function of the court is to give effect to the intention of the parties as expressed in their agreement. It also cited Maweu v Paper Converters (K) Ltd and Ireri v Cobra Security Company Limited, but did not avail copies of them. Nothing turns on them, since the governing principles are those laid down by the Court of Appeal, to which I now turn. D. ISSUES FOR DETERMINATION 17. Having considered the record and the submissions, the following issues arise for determination: (i) whether the Appellant is bound by the disclaimer he executed on 8th May 2023; (ii) if so, what the disclaimer discharged, and in particular whether it foreclosed his claim for compensation for unfair termination and his other claims; and 12

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ELRC Appeal No. E107 of 2025 (iii) what reliefs, if any, the Appellant is entitled to, and whether this Court should assess them rather than remit the matter to the trial court. E. ANALYSIS AND DETERMINATION (a) The duty of this Court 18. This is a first appeal. The Court is required to reconsider the evidence, evaluate it afresh and draw its own conclusions, bearing in mind that it neither saw nor heard the witnesses and making due allowance for that: Selle & another v Associated Motor Boat Co Ltd & others [1968] EA 123. The central question in this appeal, however, is the construction of a document, a matter on which the trial court enjoyed no advantage over this Court. (b) Is the Appellant bound by the disclaimer? 19. A contract of employment is governed by the general law of contract as much as by the Employment Act, and so is the instrument by which the parties settle their accounts at its end. The Court of Appeal has settled the approach that a court must take to such an instrument. In Coastal Bottlers 13

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ELRC Appeal No. E107 of 2025 Limited v Kimathi Mithika [2018] KECA 523 (KLR), it held, at paragraph 18: “Whether or not a settlement agreement or a discharge voucher bars a party thereto from making further claims depends on the circumstances of each case. A court faced with such an issue, in our view, should address its mind firstly, on the import of such a discharge/agreement; and secondly, whether the same was voluntarily executed by the concerned parties.” 20. In so holding, the Court of Appeal explained its earlier decision in Thomas De La Rue (K) Ltd v David Opondo Omutelema [2013] KECA 492 (KLR), where it had said: “We would agree with the trial court that a discharge voucher per se cannot absolve an employer from statutory obligation and that it cannot preclude the Industrial Court from enquiring into the fairness of a termination. That is however, as far as we are prepared to go. The court has, in each and every case, to make a determination, if the issue is raised, whether the discharge voucher was freely and willingly executed when the employee was seized of all the relevant information and knowledge.” 21. The same approach was applied in Star Publications Ltd v Simiyu [2023] KECA 23 (KLR). These decisions bind this Court and the trial court. To the extent that Caroline Atieno Osweta and Simon Muguku Gichigi, both decisions of this 14

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ELRC Appeal No. E107 of 2025 Court at first instance, may be read as authority for the proposition that a discharge may simply be disregarded whenever an employee later establishes a breach of the law, they cannot stand with the Court of Appeal’s decisions and I decline to follow them in that respect. The authorities cited by the Respondent correctly state the general principle that a discharge may foreclose further claims. Whether it does so in a particular case depends on the facts of that case, including, critically, the manner in which the document relied upon by the employer is couched. 22. I shall take the second limb, voluntariness, first, since it was the focus of the Appellant’s argument. The Appellant admitted that he signed the document. His case was not that the signature was not his, or that he signed something other than what is on record. A contract freely made may, however, be avoided on recognised grounds. It may be set aside if it was induced by a misrepresentation of fact made by the other party, or procured by fraud. It may be void or voidable for a fundamental mistake as to the nature of the document or the transaction. It may be set aside for duress, 15

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ELRC Appeal No. E107 of 2025 which in its economic form requires illegitimate pressure applied by the other party that leaves the victim no practical choice but to submit. It may be set aside for undue influence arising from a relationship of trust or domination that is abused. And it may be unenforceable for incapacity or illegality. 23. None of these was pleaded. Order 2 rule 4(1) of the Civil Procedure Rules requires a party to plead specifically any matter, such as fraud, that makes a claim or defence not maintainable or that would otherwise take the opposite party by surprise. The Appellant did not mention the payment or the document in his Memorandum of Claim, and when the Respondent pleaded the discharge, he filed no reply to answer it. Nor was any vitiating factor proved. The Appellant’s only evidence on the point was that “they did not inform me what was the money for.” That assertion sits uneasily with the petty cash voucher of 6th May 2023, which he signed and which describes the payment as “terminal dues”, and with the document itself, which sets out, in figures, how the sum was arrived at. The contention that he 16

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ELRC Appeal No. E107 of 2025 “did not appreciate the issues as he was desperate to get money” came only in his submissions below, and submissions are not evidence. Even if it had been proved, a departing employee’s need for money is not, without more, duress in law. Nothing on record shows that the Respondent threatened to withhold what was due to him unless he signed, or applied any pressure of an illegitimate kind. 24. The burden of proving the facts that would vitiate the document lay on the Appellant, who asserted them (sections 107 and 109 of the Evidence Act). He did not discharge it. To that extent, the learned magistrate was correct in finding that the document was binding on the parties. The first and second grounds of appeal, in so far as they rest on want of voluntariness, fail. (c) What did the disclaimer discharge? 25. That, however, is not the end of the inquiry. It is where the trial court stopped, and it is where, with respect, it fell into error. The first limb of the test in Coastal Bottlers requires the court to address its mind to the import of the discharge. A binding contract binds the parties to what it says, not to 17

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ELRC Appeal No. E107 of 2025 more. As the Court of Appeal emphasised in Coastal Bottlers, quoting Sir Charles Newbold P in Damodar Jivabhai, an authority the Respondent itself relies on, the function of the court is “to enforce and give effect to the intention of the parties as expressed in their agreement.” The intention must be found in the words the parties used, read as a whole, in their ordinary meaning, and in the light of the circumstances in which the document was made. The trial court was required to ask not merely whether the Appellant was bound, but to what he was bound. 26. A keen and critical reading of the document, fairly looked at, reveals that the disclaimer was given in respect of the dues owed, being those specifically computed in it, and not in respect of every entitlement that might remain for determination by a court before it becomes due and owing. I have reached that conclusion for the following reasons. 27. First, the disclaimer is not a free-standing instrument. It is the foot of a computation sheet. The sheet identifies the Appellant, records his dates of appointment and termination, sets out his “working dues”, and then, under the heading 18

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ELRC Appeal No. E107 of 2025 “terminal benefits calculations”, lists one item and one item only: fifteen days’ salary for each of five years of service, totalling Kshs 45,000/-. It then deducts a loan and arrives at a balance of Kshs 41,000/-. The operative words of the disclaimer, “Acknowledge receipt of ksh 41,000 in full and final settlment of dues owed to me”, point directly back to that computation. The “dues owed” that were settled in full and final terms are the dues that the Respondent itself identified, computed and paid. 28. Secondly, the sentence on which the Respondent relies, “I also acknowledge that I have no further claim against the company”, must be read with the sentence it follows and to which the word “also” joins it. It confirms that, having been paid in full and final settlement of the dues owed, the Appellant has no further claim in respect of them. It is not qualified by words such as “whatsoever”, “of any nature” or “arising out of my employment or its termination”. It does not mention the termination, any claim that might arise from it, or any right to seek redress before a court or a labour officer. The contrast with the instruments considered by the 19

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ELRC Appeal No. E107 of 2025 Court of Appeal is instructive. In Coastal Bottlers, the employee confirmed that he had “no further claim against the Company whatsoever”, and the Court of Appeal found it clear that the parties intended to absolve the employer “from any further claims under the contract of employment and even in relation to the respondent’s termination.” In Star Publications, the employee declared that he “irrevocably discharge[d] and release[d]” the employer “from any and/or any further liability to me for any obligation whatsoever.” Those were releases in the widest terms. The document before me is not. 29. Thirdly, the Respondent’s own pleading describes the document in exactly these limited terms. At paragraph 13 of its Response, and again in RW1’s witness statement, the Respondent pleaded that the Appellant signed “a disclaimer stating that he had no further claim against the respondent in regard to his dues and benefits.” That is the Respondent’s own understanding of the instrument it prepared and now relies on. Having pleaded it so, the Respondent cannot, in 20

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ELRC Appeal No. E107 of 2025 submissions, enlarge it into a release of every conceivable claim. 30. Fourthly, the circumstances in which the document was made point the same way. On 8th May 2023, the Respondent’s position was, as it remained at trial, that it had not terminated the Appellant’s employment at all, and that he had walked out. A party that denies that there has been a termination can hardly be said to have bargained for, and paid for, the release of a claim for unfair termination. Nothing in the document is attributed to such a claim. The whole of the sum paid is described as “terminal benefits”. A compromise requires that the parties be of one mind on the claim being compromised. On this record, there is nothing to show that the claim for unfair termination was ever in the contemplation of either party when the document was signed. 31. Fifthly, the document is the Respondent’s own standard form, prepared by its Human Resource department and signed by its Managing Director. The Appellant did no more than fill in his name, identity number and the figure, and 21

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ELRC Appeal No. E107 of 2025 sign it. If the Respondent intended the disclaimer to reach beyond the dues it had computed, it was for the Respondent to say so. Any doubt as to the reach of the words must be resolved against the party that chose them and now seeks to rely on them. 32. Sixthly, a release that extinguishes a claim not yet adjudicated operates as a surrender of the employee’s right to seek redress for an unfair labour practice under Article 41 of the Constitution and of his right of access to justice under Article 48. Such a surrender will not be lightly inferred. It must be expressed in clear and unequivocal terms, by an employee who knows what he is giving up. 33. I therefore hold that the disclaimer discharged the Respondent from liability for the dues that it computed and paid, namely the payment of fifteen days’ salary for each year of service, and from any further claim in respect of those dues. It did not discharge the Respondent from entitlements it did not mention, and it did not extinguish the Appellant’s claim for compensation for unfair termination. 22

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ELRC Appeal No. E107 of 2025 (d) Terminal benefits and compensation for unfair termination distinguished 34. The distinction between a terminal benefit and compensation for unfair termination lies at the heart of this conclusion, and it bears elaboration. 35. Terminal benefits, or terminal dues, are the sums that accrue to an employee by operation of the contract of employment, a collective agreement or the statute, by reason of his service and of its coming to an end. They include wages earned but not paid, pay for leave earned but not taken, pay in lieu of notice where notice is not given, service pay or gratuity where the law or the contract provides for it, and the like. Their defining features are that they are earned or accrued; that they are owed whatever the reason for, or the fairness of, the separation; and that they are ascertainable at the point of exit. They are debts. An employer can compute them and pay them when the employee leaves, as the Respondent did here. They are precisely what an instrument acknowledging receipt of “dues owed” speaks to. 23

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ELRC Appeal No. E107 of 2025 36. Compensation for unfair termination is of an altogether different character. It is not earned by service, and it is not a debt. It is a remedy for a statutory wrong: the unfair termination of employment prohibited by section 45 of the Employment Act. It comes into existence only when a labour officer or the court, having inquired into the termination under sections 43, 45 and 47, finds it unfair. Even then, whether it is awarded at all, and in what amount up to the equivalent of twelve months’ gross salary, lies in the discretion of the court under section 49(1)(c), read with section 50, and is assessed against the factors in section 49(4). Until that adjudication, nothing is due and nothing is owing. A document acknowledging receipt of money “in full and final settlement of dues owed” cannot, without more, be read as extinguishing a claim that was not then a due, was not owed, and whose very foundation the employer denied. 37. This accords with the proposition in Thomas De La Rue, affirmed in Coastal Bottlers, that a discharge voucher per se cannot preclude the court from enquiring into the fairness of a termination. The trial court undertook that inquiry and 24

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ELRC Appeal No. E107 of 2025 found the termination unfair. There is no cross-appeal against that finding. Having so found, the court was bound to go on to consider the remedies. It did not do so, because it treated the discharge as having disposed of them. That was a misdirection. 38. The Respondent is right that a finding of unfair termination does not, of itself, entitle an employee to every remedy sought, and that the remedies are discretionary. But a discretion must be exercised, and exercised judicially. It was not exercised at all. The Respondent’s further argument that the Appellant cannot approbate and reprobate, and that he ought to have refunded the money, falls away once the scope of the disclaimer is understood. The Appellant does not repudiate the discharge. He retains what he was paid, for what it was paid for, and he seeks only what the discharge did not cover. (e) A word on the framing of discharges 39. This appeal illustrates why parties who intend to be bound by a discharge voucher or a similar document must express its extent with clarity. An employer that intends a payment 25

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ELRC Appeal No. E107 of 2025 to settle not only the dues it has computed but every claim arising from the employment and its termination, including a claim for compensation for unfair termination, must say so in terms. The document should identify the heads being paid and the basis of each. It should state expressly whether it extends to claims arising from the manner or fairness of the termination, and whether the employee thereby gives up the right to pursue them before a labour officer or a court. Where, as here, the employee is not comfortable in the language of the document (the Appellant testified in Kiswahili, and the document is in English), prudence dictates that its effect be explained to him in a language he understands, and that he be given an opportunity to take advice. 40. Clarity serves both sides. An employee who, with full knowledge, signs a release in clear terms will be held to it, as Coastal Bottlers and Star Publications show. An employer who chooses narrower words will be held to those. The courts will give effect to the discharge the parties expressed. 26

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ELRC Appeal No. E107 of 2025 They will not write into it a release the parties did not express. (f) Should the matter be remitted? 41. Since the trial court did not assess the remedies, the ordinary course would be to remit the matter for that purpose. I do not consider that course necessary or just. The full evidence is on record. The finding that the termination was unfair stands unchallenged. Remitting the matter would add delay and expense to a dispute over a termination that occurred more than three years ago. The principal objective of this Court under section 3 of the Employment and Labour Relations Court Act is to facilitate the just, expeditious and proportionate resolution of disputes, and Article 159(2)(b) of the Constitution enjoins the courts not to delay justice. Section 78(1)(a) of the Civil Procedure Act empowers an appellate court to determine a case finally. I shall therefore determine the reliefs myself. 27

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ELRC Appeal No. E107 of 2025 F. RELIEFS (a) Compensation for unfair termination 42. Section 49(1)(c) of the Employment Act empowers the court to award compensation of up to twelve months’ gross salary. In deciding whether to award compensation and in what amount, the court takes into account the factors in section 49(4), among them the wishes of the employee; the circumstances in which the termination took place, including the extent, if any, to which the employee caused or contributed to it; the employee’s length of service; his reasonable expectation as to how long the employment would have continued but opportunities available to for him the to termination; secure the comparable employment; and any compensation or other payment in respect of the termination made by the employer and received by the employee. 43. Applying those factors to the case that was before the trial court, I note the following. The Appellant served the Respondent for a little over six years, from February 2017 to April 2023, as a skilled welder and mechanic. By the 28

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ELRC Appeal No. E107 of 2025 Respondent’s own certificate of service, he “was highly effective in his duties and cooperative where teamwork was needed.” He did not seek reinstatement. His employment was brought to an end without any proved reason and without any semblance of the process that section 41 demands, and the Respondent sought to explain the separation by an allegation of absconding that it could not substantiate. He testified that he has since been reduced to casual jobs. On the other side of the scale, the record discloses that there was some concern about his attendance and performance, reflected in the warning letter and the notice to show cause, although neither was proved to have been served on him; he made no contemporaneous protest, and he did not approach the labour office; and he received Kshs 45,000/- on his exit (Kshs 41,000/- in cash and the remainder applied to his loan), which, although it was a terminal benefit and not compensation, cushioned him to a degree. 44. Weighing these considerations, I consider an award of five months’ gross salary to be just. The Appellant’s gross 29

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ELRC Appeal No. E107 of 2025 monthly salary, being his basic salary of Kshs 18,000/together with the house allowance of 15% to which, as I find below, he was entitled, was Kshs 20,700/-. The award is therefore Kshs 103,500/- (Kshs 20,700 × 5). (b) Notice pay 45. The Appellant was paid monthly. Under section 35(1)(c) of the Employment Act, his contract was terminable by one month’s notice in writing, and under section 36 either party may terminate it by paying the other the wages due for the notice period in lieu of notice. No notice was given, and the Respondent’s justification, absconding, was rejected by the trial court without challenge. Pay in lieu of notice is not among the dues computed in the disclaimer. The Appellant is entitled to one month’s salary in lieu of notice, which I award as pleaded, Kshs 18,000/-. (c) Accrued leave 46. Section 28(1)(a) of the Employment Act entitles an employee, after every twelve consecutive months of service, to not less than twenty-one working days of leave with full pay. Section 74 obliges the employer to keep records of, 30

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ELRC Appeal No. E107 of 2025 among other things, the leave taken by each employee. The Respondent pleaded that the Appellant had taken all his leave, and listed “leave records” among its documents, but it did not produce them. The only reasonable inference is that, had they been produced, they would not have supported its case. RW1’s evidence was that the weekly rest days “stood as” annual leave. That is not correct in law. The weekly rest day under section 27(2) and annual leave under section 28 are distinct entitlements, and the one cannot be converted into the other. The claim for leave is not among the dues computed in the disclaimer. The Appellant is entitled to pay in lieu of the leave not taken, which I award as pleaded, Kshs 89,653/-. (d) Gratuity 47. Gratuity is a contractual benefit, not a statutory one. It is payable only where the contract of employment or a collective agreement provides for it. As the Court of Appeal observed in Bamburi Cement Ltd v Farid Aboud Mohammed [2016] KECA 525 (KLR): 31

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ELRC Appeal No. E107 of 2025 “By its own meaning, the word gratuity denotes a gratis payment by an employer in appreciation of service. The employee does not make any contribution towards this payment.” 48. In that case, the Court of Appeal set aside an award of gratuity because the collective agreement on which it depended did not entitle the employee to it. Here, there was no written contract, and the Appellant neither pleaded nor proved any term, express or implied, entitling him to gratuity. RW1’s remark that she had “nothing against” gratuity was not an admission that the Respondent had agreed to pay it. It was said in the same breath as her assertion that he had already received his dues. The claim for gratuity therefore fails. 49. There is a further reason. As pleaded, the claim for gratuity was computed at fifteen days’ salary for each year of service, and it was premised on the Respondent’s failure to remit NSSF contributions. In substance, it is the service pay contemplated by section 35(5) and (6) of the Employment Act. That is precisely the item that the Respondent computed at fifteen days’ salary for each of five years and 32

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ELRC Appeal No. E107 of 2025 paid under the document of 8th May 2023. It is the very head that the disclaimer settled in full and final terms. The Appellant is bound by that settlement, and he cannot reopen it. (e) House allowance 50. Section 31(1) of the Employment Act obliges an employer, at its own expense, to provide reasonable housing accommodation for each of its employees at or near the place of employment, or to pay the employee, as rent, in addition to his wages, such sufficient sum as will enable him to obtain reasonable accommodation. Under section 31(2), the obligation does not apply to an employee whose contract of service contains a provision consolidating into the basic wage an element intended to be used as rent or otherwise to enable him to house himself, or whose contract is the subject of a collective agreement providing for such consolidation. 51. The exception in section 31(2) is not established by a bare assertion. The employer who invokes it must show a contractual provision to that effect. In Grain Pro Kenya Inc. 33

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ELRC Appeal No. E107 of 2025 Ltd v Andrew Waithaka Kiragu [2019] KECA 563 (KLR), the contract of employment was silent on whether the salary was gross or consolidated, and the Court of Appeal upheld an award of house allowance, holding at paragraph 13: “… we find the contract of employment did not indicate whether the sum of USD 600 included house allowance and specifically provided that the respondent was to be paid ‘other benefits as required by law’. … We cannot fault the Judge for that interpretation because house allowance is a benefit that is required under the Employment Act and the contract did not provide that house allowance was consolidated in the basic wage.” 52. The Court of Appeal added that, had the contract expressly stated that the salary was inclusive of house allowance, it would have applied section 31(2)(a) to exclude the claim. The principle is that house allowance is payable unless the contract of service expressly provides that it is consolidated in the basic wage, and that the burden of showing such consolidation lies on the employer. 53. Here, the claim for house allowance was not resisted with any real substance. There was no written contract at all, let alone one containing a consolidation clause. RW1 conceded that no letter of appointment was ever issued and that no 34

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ELRC Appeal No. E107 of 2025 payslips were issued. She said that the master roll would show that the salary included house allowance, but she admitted that she had not produced it. The Respondent’s own computation of 8th May 2023 describes the Kshs 18,000/- as the “basic salary”, not as a consolidated or gross salary. By section 10(7), the burden of proving the alleged term of consolidation lay on the Respondent, which failed to produce the written particulars of employment. The Respondent did not discharge that burden. House allowance was not among the dues computed and paid under the disclaimer. The Appellant is therefore entitled to it. 54. The measure adopted by the courts, and pleaded by the Appellant, is 15% of the basic salary, which is Kshs 2,700/- a month. The Respondent argued below that no award could extend beyond three years by reason of section 89 of the Act. That argument overlooks the second limb of section 89. The non-payment of house allowance recurred every month throughout the employment. It was a continuing injury, which ceased only when the employment ended on 17th April 2023. The suit, filed in March 2024, was commenced 35

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ELRC Appeal No. E107 of 2025 within twelve months after that cessation and is within time for the whole period. The same reasoning applies to the claim for leave. From 16th February 2017, the date the Appellant pleaded (the Respondent’s own computation gives the earlier date of 1st February 2017), to 17th April 2023, the Appellant served 74 complete months. The correct award under this head is therefore Kshs 2,700 × 74 = Kshs 199,800/-, which I award. (f) Certificate of service 55. The certificate of service was issued on 10th May 2023, and no further order is required. G. INTEREST AND COSTS 56. The sums awarded shall attract interest at court rates from the date of this judgment until payment in full. The appeal has succeeded only in part: the Appellant has failed on the question of voluntariness and on the claim for gratuity, and the Respondent has failed on the scope of the disclaimer. In the circumstances, each party shall bear its own costs. 36

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ELRC Appeal No. E107 of 2025 H. DISPOSITION 57. In the result, the appeal succeeds in part, and I make the following orders: (a) The appeal is partly allowed. (b) The judgment of the trial court delivered on 8th May 2025 in Mombasa MCELRC No. E139 of 2024 is set aside, save for the finding that the termination of the Appellant’s employment was substantively and procedurally unfair, which is affirmed. (c) In place of that judgment, judgment is entered for the Appellant against the Respondent as follows: (i) a declaration that the termination of the Appellant’s employment was unfair; (ii) compensation for unfair termination at five months’ gross salary, Kshs 103,500/-; (iii) one month’s salary in lieu of notice, Kshs 18,000/-; (iv) pay in lieu of accrued leave, Kshs 89,653/-; (v) house allowance, Kshs 199,800/-; making a total of Kshs 410,953/-. (d) The claim for gratuity is dismissed. 37

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ELRC Appeal No. E107 of 2025 (e) The sums awarded shall attract interest at court rates from the date of this judgment until payment in full. (f) Each party shall bear its own costs of this appeal and of the proceedings in the trial court. DATED, SIGNED AND DELIVERED at MOMBASA this 30th day of September 2026. ……………………………………………………. OCHARO KEBIRA JUDGE 38

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