Atola v Thika Cloth Mills Limited (Appeal E263 of 2023) [2025] KEELRC 2697 (KLR)
The bottom line
#Kenya's Employment Court confirmed that repeated one-month fixed term contracts do not make a worker permanent, and no terminal dues were owed.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the trial magistrate erred by finding that the Appellant was on casual contract of one-month contracts each hence not entitled to protections under the Employment Act
- 2.Whether the trial magistrate erred in finding that the Appellant was fairly terminated
- 3.Whether the trial Magistrate erred in not awarding the Appellant his terminal dues
Key legal issues
#Whether successive one-month fixed term contracts converted into permanent employment under section 37 of the Employment Act
No. The Appellant was on fixed term contracts with start and end dates; section 37 conversion applies only to casual workers, so the contracts did not assume permanency.
The court found it undisputed that the Appellant served on one-month contracts renewed monthly, paid at the end of each contract including leave pay, house allowance and overtime. A termination letter stating service from 2014 to 2020 did not make him permanent. Section 37 conversion presupposes casual employment as the starting point; fixed term contracts with defined start and end dates cannot be converted into open-ended contracts, and renewal severally does not constitute regular open-ended employment.
Whether the termination was fair
Yes. The Appellant was paid 30 days' salary in lieu of notice, exceeding the seven days' notice provided by the last contract.
The February 2020 contract stipulated termination by giving or paying in lieu of seven days' notice. The Appellant received one month's (30 days') pay in lieu of notice, which was more generous than the contractual term. The court therefore agreed with the trial magistrate that the termination was legal and fairly done, rejecting the redundancy and old-age discrimination arguments.
Whether the Appellant was entitled to terminal dues (leave, overtime, service gratuity)
No. He was paid leave and overtime at the end of each contract and had received his dues on retirement in 2013; no service pay was payable.
The payslips showed that the Appellant's basic salary together with overtime and leave entitlements were paid monthly at the end of each contract. Since each contract was separate and independent, anything unpaid could only be claimed at the end of each contract. On service gratuity, the Appellant was employed on short contracts and had already been paid his dues when he retired from the Respondent, so no service pay accrued.
Legal principles established
#- A fixed term contract employee does not acquire permanency merely because the term contracts are renewed severally; section 37 of the Employment Act converts casual employment, not fixed term contracts, into permanent employment
- Under a fixed term contract, unpaid entitlements, if any, can only be claimed at the end of each separate contract
Court orders
#- 1.The appeal is found without merit and is dismissed
- 2.The order on costs at the trial court that the Respondent be awarded half the costs at lower scale is overturned
- 3.Each party to bear their own costs at the trial court and of this appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- On appeal from
- Chief Magistrate's Court (trial before Honourable O. Wanyaga, SRM)
- Jurisdiction invoked
- First appellate jurisdiction over an appeal from a magistrate's court (Memorandum of Appeal dated 18th December 2023)
Relief refused
#Prayer that the appeal be allowed and the judgment and orders of 29th November 2023 be set aside and substituted with an order allowing the Claimant's claim dated 19th April 2021
The court found the Appellant was on short fixed term contracts which could not convert to permanent contracts under section 37, and that the termination was lawful and fair
Terminal dues: leave pay, overtime and service gratuity
Payslips showed payment of leave and overtime at the end of each independent contract, and the Appellant had been paid his dues upon retirement in 2013
Costs
Each party bears their own costs at the trial court and of this appeal; the trial court's order awarding the Respondent half costs at lower scale was overturned.
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.
In the upshot the appeal is found without merit and is hereby dismissed with each party bearing their own costs of this appeal.
In the interest of justice and the nature of relationship between parties the court overturns the order on costs at trial court that the Respondent be awarded half the costs at lower scale and order that each party bears their costs at the trial court and this appeal.
The court therefore finds and holds that the Respondent was on short fixed term contracts and section 37 could not convert a fixed term contract into an open ended contract.
This court therefore agrees with the trial court that the termination was legal and done fairly.
An employer is allowed the prerogative to employ an employee under a fixed term contract with a start and end date.
[A]n appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled.
Issues in the judgment
#The coram names the judge as 'PRESIDING JUDGE-APPEALS DIVISION' without a formal rank designation such as 'J', and the appeal record omits the trial court case number and this appeal's own filing number
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Atola v Thika Cloth Mills Limited (Appeal E263 of 2023) [2025] KEELRC 2697 (KLR)", Case Analysis (2025). Memorandum of Appeal dated 18th December 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/2697/eng@2025-10-03
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.