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ELRCPartially AllowedNot stated in judgment

Mbugua v CMC Motors Limited & another (Cause 2307 of 2017) [2024] KEELRC 717 (KLR)

Employment and Labour Relations Court
14 March 2024
6,868 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court awarded an employee the maximum 12 months' salary for unfair termination over poor performance, but he lost claims for Kshs 65 million in commissions and severance pay.

What this practically means

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Executive summary

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The Claimant, employed by the Respondents from 1994/1995 and risen to Brand Manager for Mazda after a long tenure promoting the Volkswagen brand, was terminated on 13th June 2017 on grounds of poor performance following a performance improvement plan (PIP). He claimed outstanding commissions of Kshs 65,230,200 for Volkswagen vehicles sold to government, twelve months' compensation for unfair termination, severance pay, remittance of pension, costs and interest. The Respondents denied the commission claim, asserting that government sales were house deals commissioned through their agent Pewin Motors Ltd, and maintained the termination followed a 60-day PIP. The court framed three issues: fairness of termination, entitlement to commissions, and entitlement to severance pay. On fairness, it found no valid and fair reason: no annual appraisals were produced, the Respondents' own witness called the Claimant a good employee, and a redundancy notice issued a month after termination undercut the poor-performance narrative. Procedurally, the PIP was communicated late, its start date contradicted the parties' agreement, and the Claimant was terminated one day after the PIP was extended, without a show cause letter or hearing. Termination was held substantively unjustified and procedurally flawed, hence unfair under section 45. The commission claim failed for want of strict proof, the Claimant having acknowledged commissions were not payable to individuals on government house deals. Severance pay failed as termination preceded the redundancy notice. The court awarded maximum compensation of twelve months' salary (Kshs 2,760,000), subject to statutory deductions, with interest at court rates from judgment, plus costs. The pension claim had been settled by consent dated 25th April 2018.

Questions the Court framed

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

  1. 1.Whether the Claimant's termination of employment was unfair and unlawful
  2. 2.Whether the Claimant is entitled to the unpaid commissions sought
  3. 3.Whether the Claimant is entitled to severance pay

Key legal issues

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01

Whether termination on grounds of poor performance was substantively justified

Holding

Not justified - no valid and fair reason was proved

Reasoning

Poor performance is a valid ground under section 44(4)(g) but must be proved under sections 43 and 47(5). The Respondents produced no annual performance appraisals as required by their own manual. The Claimant had served 22 years with sterling performance, the Respondents' witness admitted he was a good employee, and a redundancy notice issued a month after termination showed the company itself was struggling. The court held there was no valid and fair reason.

p. 11
02

Whether the termination was procedurally fair

Holding

Procedurally flawed and unfair under section 45

Reasoning

Section 41 requires explanation of reasons and an opportunity to make representations. The PIP was communicated after its purported start date, the commencement date contradicted the parties' agreement, and although the PIP was extended for 30 days to 30th June 2017, the Claimant was terminated the next day, 13th June 2017. No show cause letter or disciplinary hearing was given. Payment in lieu of notice could not cure the flawed process.

p. 12
03

Whether the Claimant proved entitlement to commissions of Kshs 65,230,200

Holding

Not proved

Reasoning

The Claimant acknowledged that government sales were house deals not attracting individual commission, that Pewin Motors Ltd was the appointed agent and was paid the commission, and that he was not in charge of government sales. His list lacked figures and invoices and he produced no agreement entitling him to the commission. Under section 108 of the Evidence Act and the strict-proof rule for special damages, the claim failed.

p. 12
04

Whether the Claimant was entitled to severance pay

Holding

Not entitled

Reasoning

Severance pay under section 40 of the Employment Act is payable on redundancy. The Claimant was terminated on 13th June 2017 on grounds of poor performance; the redundancy notice came later, in July 2017, after termination. He was accordingly not entitled to severance pay.

p. 12
05

What compensation was appropriate for the unfair termination

Holding

Maximum 12 months' salary, Kshs 2,760,000

Reasoning

Considering the Claimant's 22 years of service, his sterling performance on the Volkswagen brand, and the hurried manner in which he was pushed out without his views being heard, the court found this a proper case for the maximum award of twelve months' gross salary under section 49 of the Employment Act, noting he had already received one month's salary in lieu of notice among his terminal dues.

p. 13

Legal principles established

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  • Where poor performance is the reason for termination, the employer bears a high level of proof and must show a policy or practice for measuring performance
  • Termination for poor performance while the employee is still on an extended performance improvement plan, without a show cause letter or disciplinary hearing, is procedurally flawed and unfair under section 45 of the Employment Act
  • A claimant alleging entitlement to commission must specifically plead and strictly prove it, the burden lying on him under section 108 of the Evidence Act

Court orders

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  1. 1.Unpaid commission claim rejected
  2. 2.Severance pay claim rejected
  3. 3.Respondent to pay 12 months' salary as compensation for unfair termination at Kshs 230,000 per month, totalling Kshs 2,760,000
  4. 4.Award subject to statutory deductions but to attract interest at court rates from date of judgment until payment in full
  5. 5.Costs of the suit to the Claimant

The bench

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

Wrote the judgment

Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 (first-instance employment claim)

Relief refused

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Outstanding commissions of Kshs 65,230,200 from 2010

Claimant did not specifically plead and strictly prove entitlement; he acknowledged commissions were not payable to individuals on government house deals and produced no agreement or supporting figures

p. 12

Severance pay of Kshs 5,228,667

Severance pay applies on redundancy; the Claimant was terminated for alleged poor performance before the redundancy notice was issued

p. 12

Costs

Costs of the suit awarded to the Claimant (order e: 'Costs of the suit.')

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.

The Claimant was therefore terminated while still on PIP without any notice.
p. 12procedural fairness in poor-performance terminations
the termination of Claimant's employment was not substantially justified in that there was no valid and fair reason for the termination
p. 11substantive justification
Where poor performance is shown to be reason for termination, the employer is placed at a high level of proof as outlined in section 8 of the Employment Act, 2007.
p. 11employer's burden of proof on poor performance
Besides, commission being like a special claim, the claimant was required to specifically plead and strictly prove his entitlement to the same.
p. 12proof of commission claims
a. Unpaid Commission.....rejected b. Severance pay..........rejected c. 12 months' salary as compensation @ Kshs 230,000..Kshs 2,760,000/= d. This award shall be subject to statutory deductions but attract interest at Court rates from date of judgment until payment in full e. Costs of the suit.
p. 13final orders/disposition

Issues in the judgment

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minor

The claim figure is internally inconsistent: the pleadings claim commissions for 217 vehicles totalling Kshs 65,230,200, but in testimony the Claimant stated the figure was based on 230 vehicles

minor

Typographical inconsistencies in dates within the pleadings (e.g. letter of 26/1/2016 vs 26/1/2017)

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, "Mbugua v CMC Motors Limited & another (Cause 2307 of 2017) [2024] KEELRC 717 (KLR)", Case Analysis (2024). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/717/eng@2024-03-14

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