In the Kenyan corporate landscape, terminating an employment contract is often a sensitive and legally fraught process. For employers, the stakes are high; a single procedural oversight can lead to costly “unfair termination” lawsuits in the Employment and Labour Relations Court (ELRC).
At Otwal & Partners LLP, we believe that proactive legal compliance is the best defense. This guide outlines the essential pillars of handling employee termination within the framework of the Employment Act, 2007 and Kenyan common law.
1. The Two Pillars: Substantive and Procedural Fairness
Under Kenyan law, a termination is only deemed “fair” if it satisfies two specific criteria:
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Substantive Justification: You must have a valid and fair reason for the termination.
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Procedural Fairness: You must follow the specific steps mandated by law to arrive at that decision.
Even if an employee is caught in a blatant act of misconduct, failing to follow the correct procedure can result in a court awarding the employee up to 12 months’ gross salary in compensation.
2. Valid Grounds for Termination
According to Section 43 of the Employment Act, the burden of proof lies with the employer to justify termination. Valid reasons generally include:
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Misconduct: Breach of company policy, theft, insubordination, or absenteeism.
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Poor Performance: The employee consistently fails to meet targets despite being allowed to improve.
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Physical or Mental Incapacity: When an employee is no longer able to perform their duties due to ill health.
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Redundancy: The loss of a job through no fault of the employee (e.g., restructuring or downsizing).
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Fundamental Breach: Repudiatory breaches of the employment contract.
3. The Mandatory Procedure (Section 41)
For terminations based on misconduct or poor performance, Section 41 of the Employment Act prescribes a strict “Right to be Heard” process:
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The Explanation: The employer must explain to the employee, in a language they understand, the reasons why termination is being considered.
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The Notice of Hearing: The employee must be given reasonable notice of a disciplinary hearing.
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Right to Representation: Crucially, the employee has the right to be accompanied by a fellow employee or a union representative of their choice during the hearing.
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The Hearing: The employer must hear and consider any representations made by the employee or their representative before making a final decision.
4. Notice Periods and Terminal Dues
Once the decision to terminate is legally reached, the employer must ensure all financial obligations are met:
| Payment Category | Legal Requirement |
| Notice Pay | Payment in lieu of notice (as per the contract) or the employee works through the notice period. |
| Accrued Leave | Cash equivalent of any earned but untaken leave days. |
| Severance Pay | Applicable in redundancy cases (minimum 15 days’ pay for every year worked). |
| Salary to Date | All days worked up to the final date of employment. |
| Certificate of Service | Mandatory under Section 51, regardless of the reason for leaving. |
5. Common Pitfalls to Avoid
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Summary Dismissal without Cause: Terminating an employee “on the spot” is only legal for “gross misconduct,” and even then, Section 41 procedures should ideally be followed to mitigate risk.
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Vague Termination Letters: Always state the specific grounds for termination clearly.
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Ignoring the Contract: Ensure you are not in breach of specific clauses within the signed Employment Agreement that might offer more protection than the minimum statutory requirements.
Legal Insight: The Kenyan courts have increasingly shifted toward protecting the “dignity of the employee.” Treating a departing staff member with respect and adhering strictly to the law doesn’t just prevent litigation—it protects your brand’s reputation.
How Otwal & Partners LLP Can Help
The nuances of labor law require a steady hand. Whether you are conducting a redundancy exercise, managing a difficult disciplinary case, or drafting airtight employment contracts, our team is here to provide strategic legal counsel.
Protect your business. Ensure compliance.
Contact Otwal & Partners LLP today for a consultation on your employment law matters.
