Macharia v Kenya Institute of Management (Cause E037 of 2023) [2025] KEELRC 1212 (KLR)
The bottom line
#A Kenyan employer who promised but never paid severance was ordered to compensate a redundant employee with eight months' salary for unfair termination.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.whether termination of the Claimant's contract through redundancy was unfair and unlawful
- 2.whether she is entitled to the remedies claimed, with costs and interest
Key legal issues
#Whether redundancy was carried out fairly and lawfully under Section 40 of the Employment Act
Genuine redundancy existed but the process was unfair because statutory payments were withheld for close to 5 years
The court accepted the redundancy was genuine since the Claimant's branch was closed and she did not dispute its genuineness. However Section 40(1) requires all conditions, including contemplated payments, to be met before termination. The Respondent issued only promissory notes and paid nothing, which Section 45(4)(b) requires to be judged against justice and equity. Withholding benefits for close to 5 years made the process unfair, unlawful and inequitable, warranting compensation.
Compensation for unfair termination
8 months' salary (Kshs. 1,040,000) awarded
In exercising discretion under Section 49, the court considered the Claimant's 5 years of service, that she did not contribute to the termination, her permanent and pensionable position, that she received nothing on termination, and uncertainty about alternative employment. It awarded 8 months' gross salary rather than the 12 months sought.
House allowance on a consolidated salary
Declined because salary was consolidated
The employment contract defined salary as gross consolidated, and the promotion letter stated a consolidated monthly salary. The pay slip describing the amount as 'basic' was not a variation of the contract. House allowance could therefore not be claimed in arrears on top of a consolidated salary.
November 2020 salary
Granted at Kshs. 130,000 because the notice took effect on 29th November 2020
The termination notice issued in October 2020 took effect on 29th November 2020, so the Claimant remained an employee until that date. No reason existed not to pay her November 2020 salary, and the court granted it in full.
Legal principles established
#- Redundancy benefits must be paid before the effective date of termination on account of redundancy
- Failure to pay redundancy benefits contrary to principles of justice and equity renders the process unfair and warrants compensation
- Pension disputes are not employer-employee disputes for the E&LRC; responsibility rests with scheme trustees
Court orders
#- 1.Declaration that termination of the Claimant's contract by the Respondent was unfair, unlawful, unjust and inequitable
- 2.Respondent to pay severance at Kshs. 650,000 and arrears of salary at Kshs. 195,000 in accordance with the mediation report
- 3.Respondent to pay November 2020 salary at Kshs. 130,000
- 4.Respondent to pay compensation equivalent of 8 months' salary at Kshs. 1,040,000 for unfair, unlawful, unjust and inequitable termination
- 5.Sums under paragraphs [b] and [c] to attract interest at court rate from 29th November 2020 until payment in full
- 6.Sum in paragraph [d] to attract interest at court rate from the date of Judgment until payment in full
- 7.Costs to the Claimant
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Article 162(2) of the Constitution / Employment and Labour Relations Court Act (Employment and Labour Relations dispute under the Employment Act)
Relief refused
#House allowance arrears of Kshs. 633,000
Salary was consolidated; the pay slip describing Kshs. 130,000 as basic did not vary the contract
Pension contributions (5%)
Pension disputes rest with scheme trustees, not the E&LRC; claim not well articulated
HELB loan instalments
Claimant conceded she had no HELB statements
Imprest refund and leave allowance
Imprecise and unsupported by evidence
Costs
Costs to the Claimant.
Quotable passages
#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 conditions, including all the contemplated payments, shall be met, before an Employer terminates the contract on account of redundancy.
Redundancy process was unfair and unlawful. It amounted to unfair and unlawful termination, warranting payment of compensation to the Claimant.
The Respondent shall pay to the Claimant, compensation equivalent of 8 months' salary at Kshs. 1,040,000 for unfair, unlawful, unjust and inequitable termination.
The Respondent shall pay to the Claimant her November 2020 salary at Kshs. 130,000.
Costs to the Claimant.
Issues in the judgment
#Judgment states the Claimant was employed in 2005 in one paragraph and refers to a contract dated 7th August 2015 in another, an internal inconsistency
Inconsistency on years of service: the court states the Claimant worked for about 5 years despite pleading employment from 2005
Respondent's letter dated 'Monday, November 2021' yet refers to revenue projections for December 2022 and January 2023, an internal date inconsistency
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Macharia v Kenya Institute of Management (Cause E037 of 2023) [2025] KEELRC 1212 (KLR)", Case Analysis (2025). not stated in the judgment as provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/1212/eng@2025-04-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.