Termination of employment in Kenya

Termination of employment in Kenya is primarily governed by the Employment Act, 2007 (Cap. 226), which commenced on 2 June 2008. The Act is supplemented by:

• The Constitution of Kenya, 2010 (Article 41: fair labour practices)

• The Labour Relations Act, 2007

• The Labour Institutions Act, 2007

• Relevant Collective Bargaining Agreements (CBAs)

• Judicial precedent from the Employment and Labour Relations Court (ELRC) and the Court of Appeal

2. Grounds for Lawful Termination

Under Sections 43 and 45 of the Employment Act, an employer must have valid and fair reasons to terminate employment. Acceptable grounds include:

a) Misconduct

Serious breaches of workplace rules, dishonesty, insubordination, gross negligence, or criminal conduct. Examples include theft, fraud, fighting at the workplace, reporting to work under the influence of drugs or alcohol, and wilful damage to employer property.

b) Poor Performance / Incapacity

Failure to meet reasonable performance standards after being given adequate warning, support, and an opportunity to improve. Also includes physical or mental incapacity that prevents the employee from performing their duties.

c) Incompatibility

An employee's inability to work harmoniously with colleagues or fit into the employer's operational environment, provided it materially affects productivity or workplace cohesion.

d) Operational Requirements (Redundancy)

Where the employer's business needs necessitate the elimination of positions. This includes restructuring, economic downturns, technological changes, or closure of business units.

e) Expiry of a Fixed-Term Contract

Where a contract was for a defined period and the period has lapsed. However, repeated renewals can create an expectation of permanency.

3. The Two-Pillar Test: Substantive and Procedural Fairness

Kenyan law requires that both elements be satisfied for a termination to be lawful:

Failure to satisfy either pillar renders the termination unfair, regardless of how justified the other pillar may be.

4. Notice Periods (Section 35)

The Employment Act prescribes minimum notice periods depending on the type of contract:

Notice must be in writing. An employer may choose to pay salary in lieu of notice rather than requiring the employee to work through the notice period.

5. Procedural Requirements for Termination (Sections 41 & 45)

Before terminating an employee, the employer must:

1. Notify the employee in writing of the allegations or reasons being considered for termination.

2. Give the employee an opportunity to be heard (a disciplinary hearing or show-cause meeting). The employee is entitled to:

   • Be informed of the charges in advance (reasonable time to prepare a defence).

   • Be accompanied by a fellow employee or shop steward.

   • Present their case and respond to allegations.

3. Consider the employee's response genuinely before making a decision.

4. Communicate the decision in writing, stating clearly the reasons for termination and the effective date.

5. Communicate the decision in writing, stating clearly the reasons for termination and the effective date.

6. Pay all terminal dues promptly upon termination.

The hearing need not resemble a courtroom trial, but it must be a genuine opportunity for the employee to respond, not a rubber-stamp exercise.

6. Summary Dismissal (Section 44)

An employer may dismiss an employee without notice (summary dismissal) where the employee is guilty of gross misconduct, including:

• Wilful disobedience of a lawful order

• Gross neglect of duty

• Misconduct in the course of duty inconsistent with fulfilling the contract

• Absence from work without permission or reasonable cause for more than two consecutive days

• Being intoxicated at work

• Commission of a criminal offence against or to the detriment of the employer or employer's property

 Important: Even in summary dismissal, the employee must still be given a hearing before the decision is taken. The employer must still satisfy procedural fairness.

7. Termination on Account of Redundancy (Section 40)

Redundancy is defined as the loss of employment through no fault of the employee where the services become superfluous. An employer must comply with the following:

Mandatory Steps:

1. Notification:

   • If the employee is a trade union member: notify the union and the labour officer at least one month before the intended termination date.

   • If the employee is not a union member: notify the employee personally in writing and the labour officer.

2. Selection Criteria:

   • The employer must have due regard to:

     1. Seniority in time (LIFO: Last In, First Out)

     2. Skill, ability, and reliability of each employee

     3. The need to retain employees with specialized knowledge
        

1. Severance Pay:

   • An employee terminated for redundancy is entitled to severance pay of not less than 15 days' pay for each completed year of service (unless a more favourable CBA or contract provision exists).

2. Priority for Re-engagement:

   • If the employer later recruits for similar positions, the redundant employee should be given priority.

Key Case Law:

• Ecobank Kenya Ltd v Ngina (Civil Appeal No. 4 of 2020): The Court of Appeal upheld that a general restructuring communication does not satisfy the personalised notice requirement under Section 40. Each affected employee must receive individual written notice.

• Jane I. Khalachi v Oxford University Press E.A. Ltd (Cause No. 924 of 2010): Employers have the prerogative to determine business structures and make positions redundant, but must follow proper procedure.

8. Unfair Termination (Section 45)

A termination is automatically unfair if based on:

• Race, colour, tribe, sex, religion, political opinion, nationality, or social origin

• Pregnancy or any reason connected with pregnancy

• Trade union membership or participation in trade union activities

• Filing a complaint or participating in proceedings against the employer

• Absence from work during maternity/paternity leave

• The employee's HIV status

 The burden of proof lies with the employer to demonstrate that the termination was fair (Section 47(5)).

9. Remedies for Unfair Termination (Section 49)

Where the ELRC finds that a termination was unfair, it may award:

• Reinstatement without loss of pay (rare in practice)

• Re-engagement in the same or comparable position

• Compensation of up to 12 months' gross wages (this is the statutory maximum for the unfair termination component)

In addition, the employee remains entitled to:

• Outstanding salary and allowances

• Payment in lieu of notice (if not given)

• Accrued leave pay

• Service gratuity or pension benefits (where applicable)

• Certificate of service

• Severance pay (in redundancy cases)

Compensation for unfair termination is separate from terminal benefits. Courts routinely award both.

10. Terminal Dues and Entitlements

Upon termination (whether fair or unfair), the employee is entitled to:

11. Constructive Dismissal

Where an employer makes working conditions so intolerable that a reasonable person would resign, this is treated as a dismissal by the employer (constructive dismissal). The employee bears the burden of proving that:

• The employer's conduct was a fundamental breach of the employment contract

• The employee resigned in response to the breach (not for unrelated reasons)

• The employee did not delay unreasonably before resigning

The ELRC has recognised constructive dismissal in cases involving unilateral salary cuts, demotion without cause, harassment, and sustained hostile work environments.

Conclusion

Kenyan termination law is firmly rooted in the principles of fairness, both substantive and procedural. Employers who cut corners on process, even when the grounds for termination are legitimate, risk costly awards in the ELRC. The key takeaway: always follow fair procedure, always document, and always pay what is owed. Employees, on the other hand, should be aware of their rights and the timelines within which they must act.