Dismissals and Termination of Employment in Kenya

Legal information about notice periods, severance pay, summary dismissals, grounds for termination and more.

1. Dismissal of employees

1.1 Reasons for dismissal

Under the Employment Act an employer may summarily dismiss an employee for the following reasons:

  1. Gross misconduct
  2. Poor performance
  3. Employers’ operational requirements
  4. Breach of fundamental terms of an employment contract 

However the dismissal can be challenged by the employee thus the Act is very specific that the employer has to ensure that the dismissal was both substantively and procedurally proper.

The employer is also under obligation to he:ar and consider any representations which the employee may make before taking the decision to terminate the employee.

During the process the employee is entitled to have a fellow employee present and if the employee is a union member then a union representative can be present. 

1.2 Form

The termination notice shall be in writing and such notice has to be received and acknowledged by the employee.

The Act further requires an employer to explain to the employee, in a language the employee understands, the reasons it is considering terminating the services of the employee.

1.3 Notice period

The notice period before termination and/or dismissal depends on the nature and the terms of the employment contract. 

However, in the absence of express provisions on the notice period the Employment Act provides that:

  1. Where the employee is employed on a daily wage contract, the contract is terminable by either party at the close of any day without prior notice.
  2. Where the employee is employed on a weekly or two week basis the notice period shall be one or two weeks respectively or payment of an equivalent in lieu of notice 
  3. Where the contract is to pay wages or salary on a monthly basis the notice period shall be 28 days in writing or payment of the equivalent of monthly’s salary in lieu of notice.
  4. For the termination of probationary contract, either party may terminate the contract by giving not less than seven days notice or payment of equivalent of seven days pay in lieu of notice. 

1.4 Involvement of employee representatives

N/A

1.5 Involvement of a union

In cases where the there is termination on account of redundancy and the affected employee/s are members of a union, the employer will be required to notify the union of the intended redundancy not less than a month prior to the date of the intended termination on account of redundancy. 

1.6 Approval of state authorities necessary

Whereas there is no pre-requisite approval for dismissal of an employee, there is need for an employer to notify the National Employment Authority of the termination or dismissal within two weeks of the termination. 

1.7 Collective redundancies

The labour laws in Kenya make provision for declaration of redundancies in general without differentiating between individual or collective redundancies. The Law provides for the substantive and procedural legal requirements to be met by an employer before terminating an employee on account of redundancy:

Notification of intended termination to be issued to the individual employee as well the County Labour Officerand the union.

This period of one month is intended for the person receiving the notice to confirm that the preconditions of redundancy have been complied with.  These preconditions include the communication of reason for, and extent of, the redundancy, and the selection criteria. At this stage, the employer has not selected the specific employees who are likely to be made redundant. This period is necessary for any disputes over issues to be settled before the redundancy is affected.

Selection of the employees to be terminated from employment. 

In the selection the employer is supposed to pay regard to various factors such as seniority in time, skill, ability and reliability of each employee of the particular class of employees affected by the redundancy. 

These factors are not exhaustive and other reasonable factors can be considered as well provided that the employer can show that they were applied uniformly to all the employees in that category. 

Consultations 

The employer is required to consult with the employees regarding the reason for, and the extent of, the redundancy and the criteria to be followed.

The employer is required to provide the union, where its employees are members, and its employees who are not members with a reasonable opportunity to constructively engage in the consultations.

The employer is also required to consider whether there are any alternative employment positions that can be filled by the affected employees within the company.

Such consultations are important for procedural fairness.

Issuance of the Notice of termination

After the consultation, the following happens:

  1. The employer issues final termination notices to the affected employees
  2. In lieu of notice, the employer pays the employee one month’s wages.
  3. Payment of terminal dues 

The Act requires that the employer pay terminal dues equally to all affected employees regardless of their membership in a trade union. 

1.8 Summary dismissals

An employee is summarily dismissed when the contract of employment is terminated without the requisite notice as per the terms of the contract or statutory provision as a result of a fundamental breach of contractual terms 

Summary dismissal can only be lawful and justifiable if the conduct resulting in dismissal falls within the Act’s definition of Gross misconduct. 

However the employee is allowed to challenge and dispute the facts and reasons provided by the employer for the dismissal, as well as challenge the legality of the decision. 

Therefore the termination of an employee has to be both substantively and procedurally fair failure to which such termination will be considered as unlawful and unfair termination.

1.9 Consequences if requirements are not met

In cases where the employee has been dismissed without just cause the employee may: 

  1. present a complaint to the labour officer.
  2. institute a claim in the industrial courts. 

Should a determination be made whether by the labour office or a court of law that the dismissal was unjustified the following remedies are available under the law:

  1. The wages which the employee would have earned had the notice period which they were entitled to has been issued as per the contract 
  2. The proportion of wages due for the period of time for which the employee worked if the employee was dismissed before the completion of a period for which a wage is payable
  3. Payment for any other loss, resulting out of the dismissal, suffered between the date of dismissal and date of expiry of the period notice is required either statutorily or contractually. 
  4. Payment of equivalent the salary for a given number of months but capped as twelve (12) months 
  5. Reinstatement of the employee with benefits as if the person had not been terminated
  6. Reengagement in work comparable to which the employee used to do prior to the dismissal earning the same wage.

1.10 Severance pay

Before termination of an employee’s contract on account of redundancy, the employer is required to pay the affected employee his severance pay which is calculated at fifteen (15) days’ pay for each completed year of service, in addition to all other terminal dues. 

1.11 Non-competition clauses

The employment does not make express provision for non-competition clauses, however, there are certain niche industries that have customarily adopted these clauses as part of their employment relationship contracts. Courts have enforced these clauses and have awarded employers damages for an employee’s breach of the non-compete clauses. 

1.12 Miscellaneous

N/A

2. Dismissal of managing directors

2.1 Reasons for dismissal

EMPLOYED (employment contract)

Reasons for termination have to be provided to the employee otherwise the termination is considered unfair.

Reasons for termination are broadly categorized into four as follows:

  • Misconduct
  • Physical incapacity
  • Poor performance
  • Employer’s operational requirements

The reasons given should be fair, and should not be based on:

  1. A female employee’s pregnancy 
  2. The employee going on contractually agreed leave
  3. Employee’s membership to, or participation in, or refusal to withdraw from, a trade union
  4. The employee’s race, colour, tribe, sex, religion, political opinion or affiliation, national extraction, nationality, social origin, marital status, HIV status or disability
  5. Employee’s initiation of a legal proceedings against the employer

Participation by an employee in a lawful strike

APPOINTED BY B.O.D. (member of the Board selected by the Board)

These would typically be set out in the company’s Articles of Association, which lay out the director’s roles and set out the circumstances when dismissal may happen.

Reasons for dismissal may vary from one company to another because the reasons are set out in the Articles of a Company, and these are not the same for every company.

Generally, grievous breach of statutory duties, such as:

  1. failure to file the Company’s annual returns
  2. misuse of Company property
  3. Mismanagement of the Company
  4. acting outside their scope to the detriment of the company (for instance opening up illegal bank accounts in the name of the company, though this area is catered for by the company Articles) 

would present a valid reason for a director’s termination.

2.2 Form

EMPLOYED (employment contract)

Notice should be given in writing.

APPOINTED BY B.O.D. (member of the Board selected by the Board)

Ordinary resolution at a meeting. 

2.3 Notice period

EMPLOYED (employment contract) 

Notice period provided in the contract, or, in absence of this, statutory notice of 28 days.

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

A special notice of 28 days of the resolution to remove the director and the resolution to appoint another director must be sent to the members of the company and the delinquent director.

Thereafter, a 21 days notice for holding a meeting is sent out to members and the director.

2.4 Involvement of employee representatives

EMPLOYED (employment contract) 

Not applicable. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

Not applicable. 

2.5 Involvement of a union

EMPLOYED (employment contract) 

A union is involved where termination is on account of redundancy. The employer is required to notify the union, which the employee is a member of, on the reasons for and the scope of the intended redundancy at least one month before the termination. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

Not applicable. 

2.6 Approval of state authorities necessary

EMPLOYED (employment contract) 

During redundancy, the local Labour office is involved. The employer is required to notify the Labour office of the intended redundancy at least one month before the termination. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

The company is required to notify the Registrar of Companies of the change within 14 days of the Resolution being passed.

2.7 Collective redundancies

EMPLOYED (employment contract) 

The conditions that should be complied with are:

  • notification of the employee’s trade union of the redundancy at least one month before termination
  • notification of the employee personally in writing 
  • give due regard to seniority in time, skill, ability and reliability of the employees when making the selection as to which employees to declare redundant
  • ensuring equality in payment of terminal benefits arising out of collective agreements with employees’ trade unions
  • payment of any leave days due in cash
  • payment of one month’s wages in lieu of notice, where adequate notice was not given

payment of severance pay. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

Not applicable. 

2.8 Summary dismissals

EMPLOYED (employment contract) 

This is dismissal where no notice is required. Reasons for this, among others, are:

  1. Absenteeism without leave or reason
  2. Intoxication at work
  3. Willful neglect to perform work
  4. Use of abusive language or behavior towards a superior
  5. Employee knowingly fails to obey a lawful and proper command which is within the scope of his employment
  6. Employee arrested for a cognizable offence which is punishable by imprisonment, and is not bailed out or lawfully released within 14 days

Commission or reasonable suspicion of commission of a criminal offence to the employers detriment. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

This is also catered for by the Company’s Articles of Association. 

2.9 Consequences if requirements are not met

EMPLOYED (employment contract)

  • The director may file a suit against the company seeking compensation
  • They may also seek to be reinstated to the position
  • They make a claim for severance pay in cases of redundancy or monetary claims for leave days not taken, or overtime worked

They may also seek general damages.

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

  1. The dismissed director may file a suit as against the company 
  2. The court may declare the decision null and void

Any other consequence as set out in the Company’s Articles.

2.10 Severance pay

EMPLOYED (employment contract) 

Is payable when termination is on account of redundancy at a rate not less than 15 days pay for each completed year of service. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

Not applicable.

2.11 Non-competition clauses

EMPLOYED (employment contract) 

This would depend on the employment contract. 

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

A person who ceases to be a director continues to be subject to the duty

  1. To avoid conflicts of interest with regard to the exploitation of any property, information or opportunity that the person became aware of while a director; and
  2. Not to accept benefits from third parties with regard to things done or omitted to be done by that person before ceasing to be a director.

APPOINTED BY B.O.D. (member of the Board selected by the Board) 

  • Upon the 28 day notice of resolution to remove a director being sent, the director may, within 21 days, write to the company with their representations requesting that members be notified of the representations, and thereafter the director may be heard at the meeting. 
  • Because termination of a director should be by ordinary resolution, a simple majority is required for the removal of a director.
  • At the meeting, when the Resolution to remove a Director has been passed, the second resolution to appoint a new director is then passed.
  • When the process is complete, it is prudent that the Company notify the following: 
    • Banks where the dismissed director was a signatory to the company accounts so that he can be removed;
    • Suppliers of the Company;
    • Clients;
    • All other stakeholders. 

2.12 Miscellaneous

N/A