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Court of AppealDismissedCivil Appeal 137 of 2020

National Bank of Kenya Limited v Nyamu & 10 others

Court of Appeal
13 May 2022
3,543 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~14 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal confirmed that employers must give reasons and a hearing before forcing staff into early retirement, even when contracts allow it.

What this practically means

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Executive summary

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The appellant, National Bank of Kenya Limited, appealed against a judgment of the Employment and Labour Relations Court (Makau, J.) which found that the early retirement of eleven employees was unfair and awarded each ten months' salary as compensation. The employees had declined a 2014 voluntary early retirement offer, intending to serve until the official retirement age of 60, but in June 2015 the Bank exercised its discretion under clause 9.4.1 of its Human Resources Manual to retire them early from age 50, giving one month's notice and terminal dues but no reasons. The Court of Appeal, in a unanimous first-appeal judgment, framed two issues: whether the early retirement amounted to unfair termination, and whether the ten-month compensation award was justified. On the first, the Court held that although the Manual permitted early retirement at the Bank's discretion, the employees' rejection of VER meant the forced early retirement effectively terminated their contracts, engaging section 43 of the Employment Act, which requires the employer to prove reasons for termination. The Bank gave no reasons and no hearing; the reason (operational requirements) surfaced only at trial, too late. The discretion was therefore improperly exercised and the termination unfair. The Court rejected the argument that the trial judge rewrote the parties' contract, holding that giving effect to section 43 is not contract rewriting. On compensation, the Court held the award under section 49(1)(c) was discretionary and the trial judge gave adequate reasons - long service, absence of misconduct, and diminished re-employment prospects - so there was no basis to interfere. The appeal was dismissed with costs to the respondents.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.whether the respondents were unfairly terminated having been sent on early retirement
  2. 2.if so, whether the trial judge rightly awarded the respondents ten months' compensation

Key legal issues

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01

Whether early retirement at the employer's discretion amounted to unfair termination

Holding

Yes. The employer failed to give reasons or a hearing before exercising its discretion to retire the respondents early, so the discretion was improperly exercised and the termination was unfair under sections 43 and 45 of the Employment Act.

Reasoning

The Human Resources Manual permitted early retirement at the Bank's discretion from age 50, but did not specify how the contract was to be ended. Section 43 requires the employer to prove reasons for termination. The Bank gave no reasons in the retirement letter and accorded no hearing; the reason (operational requirements) emerged only at trial, too late. Following Leonard Gethoi Kamweti, the employees were entitled to reasons and a hearing.

p. 6
02

Whether the trial judge rewrote the parties' contract by importing fairness requirements

Holding

No. The statutory duty under section 43 to give reasons for termination overrides the contractual early-retirement clause; applying it is not rewriting the contract.

Reasoning

While courts generally enforce parties' contractual intentions and cannot rewrite valid contracts, section 43 of the Employment Act expressly requires an employer to prove and communicate reasons for termination. Giving effect to that statutory requirement does not amount to rewriting the contract, so the appellant's reliance on the freedom-of-contract principle failed.

p. 6
03

Whether the award of ten months' salary as compensation was justified

Holding

Yes. The trial judge gave adequate reasons: long service of over 25 years, no misconduct contributing to termination, and diminished employment prospects past age 50.

Reasoning

Compensation under section 49(1)(c) is discretionary. An appellate court interferes only where the judge misdirected himself or was clearly wrong, occasioning injustice. Here the judge considered length of service, absence of misconduct, and lean re-employment prospects, which the Court considered adequate reasons for ten months' compensation.

p. 7

Legal principles established

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  • Even where an employer exercises a contractual discretion to retire an employee early, section 43 of the Employment Act obliges the employer to prove and communicate the reasons for termination; failure renders the termination unfair.
  • An early retirement at the employer's behest, where the employee has declined voluntary early retirement, operates as a termination of the employment contract attracting statutory protections.
  • An appellate court will not interfere with a trial judge's exercise of discretion under section 49(1) of the Employment Act unless the judge misdirected himself or was clearly wrong, occasioning injustice.

Court orders

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  1. 1.Appeal dismissed with costs to the respondents

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority
majority
majority
On appeal from
Employment and Labour Relations Court of Kenya at Nairobi
ELRC Civil Cause No. 1476 of 2015 (consolidated)
Jurisdiction invoked
First appeal to the Court of Appeal under the Employment and Labour Relations Court Act / Appellate jurisdiction (not expressly stated in the judgment)
Consolidated with
ELRC Civil Cause No. 1476 of 2015 Consolidated with Causes No. 1467, 1468, 1469, 1470, 1471, 1472, 1473, 1474, 1475 of 2015 & 1629 of 2016

Relief refused

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Appellant's prayer to set aside the finding of unfair termination and the award of ten months' compensation

The Court found adequate reasons supported the award and no basis to interfere with the trial court's exercise of discretion

Costs

Appeal dismissed with costs to the respondents

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

In sum, we find no basis upon which to interfere with the trial court's decision. In other words, the appeal lacks merit and is hereby dismissed with costs to the respondents.
Final orders - dismissal of appeal
In view of the express requirements of section 43, the appellant was required to give reasons for retiring the respondents, and effectively terminating their contract.
p. 6Statutory duty to give reasons for termination
the respondents' earlier rejection of VERS, and their intention to remain in employment until age 60 years meant that an early retirement at the appellant's behest would in effect terminate the employment contract.
p. 6Early retirement as termination
We consider these to be adequate reasons for an award of ten months' compensation.
p. 7Sufficiency of reasons for compensation award

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "National Bank of Kenya Limited v Nyamu & 10 others", Case Analysis (2022). Civil Appeal 137 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/704/eng@2022-05-13

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.