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ELRCPartially AllowedELRC Appeal No. E356 of 2025

Mutuku v Zheng Hong (K) Limited (Appeal E356 of 2025) [2026] KEELRC 2443 (KLR)

Employment and Labour Relations Court
31 August 2026
1,996 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~8 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court ruled that a contract's termination clause cannot replace the Employment Act's mandatory process for redundancy.

What this practically means

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Executive summary

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This is a first appeal to the Employment and Labour Relations Court at Nairobi against the judgment of the trial magistrate delivered on 9 October 2025 in MCELRC E1332 of 2023, dismissing a general worker's claim for unfair termination. The appellant was employed on 6 August 2018 at Ksh 24,150 per month and terminated on 3 October 2021, the respondent citing closure of its operations by the Kenya Revenue Authority on 9 July 2021 and invoking clause 13 of the contract (termination on notice or payment in lieu). The trial magistrate found the contract clause was validly invoked and the claimant had not discharged her burden of proving unfair termination. On appeal, the court, sitting as a first appellate court, re-evaluated the material on record. It held that under sections 41 and 43 of the Employment Act the employer must give valid, genuine and reasonable reasons regardless of any contractual termination clause, and that termination for operational reasons translates to redundancy governed by section 40, whose procedure was not followed. The termination was therefore unfair under section 45(3), though the respondent's effort to explain the reasons mitigated compensation, set at 3 months' salary (KSh. 72,450) for 3 years of service. Leave pay was refused on the strength of the respondent's work records, and house allowance refused as the salary was consolidated and above the minimum wage. A certificate of service was declared due. The appeal was partially successful, with judgment in MCELRC E1332 of 2023 reviewed accordingly and 50% costs of the appeal and trial court awarded. Delivered by M. Mbarũ, J, on 31 August 2026.

Questions the Court framed

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

  1. 1.Whether the trial magistrate erred in holding that the respondent had valid reasons for terminating the appellant's employment
  2. 2.Whether the respondent complied with proper procedure in effecting the termination
  3. 3.Whether the alleged operational challenges amounted to redundancy requiring compliance with section 40 of the Employment Act
  4. 4.Whether the appellant was entitled to the terminal dues sought

Key legal issues

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01

Whether a contractual termination clause alone suffices to terminate employment

Holding

No. The Employment Act supersedes the contractual clause; valid, genuine and reasonable reasons must be given under sections 41 and 43.

Reasoning

The court held there is a paradigm shift under the Employment Act: termination is no longer at the employer's will. Recourse must be had to the Act as the bare minimum, and a termination clause in a contract is regulated in law.

p. 5
02

Whether operational reasons for termination amount to redundancy under section 40

Holding

Yes. Termination due to KRA closure of the business was redundancy requiring section 40 procedure; failure to comply rendered it unfair.

Reasoning

The termination was not disciplinary but operational, translating to redundancy. Both employer and employee are insulated under the law; section 40 procedure had to be followed, and the employer's effort to explain reasons was devoid of due process.

p. 6
03

Entitlement to compensation

Holding

3 months' compensation (KSh. 72,450) was appropriate given 3 years of service and the respondent's effort to explain reasons despite lack of due process.

Reasoning

Having served from August 2018 to October 2021 (3 years), compensation of 3 months was found appropriate, noting the respondent made an effort to explain the reasons for termination though devoid of due process.

p. 7

Legal principles established

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  • Even where an employment contract contains a termination clause, the employer must give valid, genuine and reasonable reasons under sections 41 and 43 of the Employment Act
  • Operational reasons for termination constitute redundancy regulated by section 40 of the Employment Act, and failure to follow due process renders termination unfair under section 45(3)

Court orders

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  1. 1.Employment terminated unfairly
  2. 2.Compensation KSh. 72,450
  3. 3.50% costs of the appeal and the trial court proceedings

The bench

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

majority

Wrote the judgment

On appeal from
Magistrates' Court (Employment and Labour Relations)
MCELRC E1332 of 2023
Jurisdiction invoked
First appeal from the trial magistrate's judgment in MCELRC E1332 of 2023

Relief refused

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Leave pay

Respondent filed work records confirming allocation of annual leave days

p. 7

House allowance

Salary was consolidated and above the minimum wage; claiming house allowance would be unjust enrichment

p. 7

Costs

50% costs of the appeal and the trial court proceedings

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.

Accordingly, judgment in Nairobi in MCELRC E1332 of 2023 is hereby reviewed in the following terms: a) Employment terminated unfairly. b) Compensation KSh. 72,450. c) 50% costs of the appeal and the trial court proceedings.
p. 7Final orders
even where an employment contract between the parties includes a termination clause, the employer has a legal duty under sections 41 and 43 of the Act to inform the employee of the reasons for the termination of employment
p. 5Duty to give valid reasons despite contractual termination clause
It is not sufficient to cite the termination clause in the employment contract and then dismiss the employee without fault. Section 40 of the Act exists to ensure that the employer is protected, that the employee is fairly treated and paid the terminal dues, and that the employment relationship is terminated lawfully.
p. 6Redundancy procedure mandatory
The court is alive to the fact that this is the first appeal; therefore, the court is called upon to re-evaluate all the material on record and arrive at its own conclusions on the disputed facts.
p. 4Duty of first appellate court

Issues in the judgment

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minor

The judgment attributes Kenfreight (E.A.) Limited v Benson K. Nguti to the Supreme Court, which is inconsistent with the case's known provenance; recorded as printed

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, "Mutuku v Zheng Hong (K) Limited (Appeal E356 of 2025) [2026] KEELRC 2443 (KLR)", Case Analysis (2026). ELRC Appeal No. E356 of 2025. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2443/eng@2026-08-31

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