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The employer – employee relationship is based on a contract of service between the parties where the employer offers to employ the employee to perform certain tasks in consideration of payment of a remuneration and the employee accepts the offer and performs the task as directed by the employer.

A contract of service is defined in the Employment Act as an agreement, whether oral or in writing, and whether expressed or implied, to employ or to serve as an employee for a period of time.

Types of Employment Contracts

A contract of Service should be for a period of time. Where the period is more than 3 months, the contract should be in writing. It is the obligation of the employer to draw-up the contract to be signed by the employee. The contract should state the form and duration of the contract.

Generally, there are various types of employment contracts. It can be either probationary contract, fixed-term contract or open-ended contract.

1. Probationary Contract

The Employment Act defines probationary contract as a contract of employment, which is of not more than twelve months duration or part thereof, is in writing and expressly states that it is for a probationary period.

A probationary contract is one that;

• is of not more than 12 months;
• is in writing; and
• expressly states that it is for a probationary period.

The Probation period is the time at the start of an employment when an employer evaluates and assesses the ability, competence and suitability of the employee for the role. Probation also provides a coaching or training opportunity where the new recruit learns the new job.

Probation should initially be for a period of not more than six months and may be extended for a further period of not more than six months with the agreement of the employee.

A probationary contract may terminated by giving not less than seven days’ notice of termination, or by payment of seven days’ wages in lieu of notice. The employer does not have to give reasons for the termination.

2. Fixed-Term Contract

A fixed-term contract is one that is for a specified period of time.

It is the end-point or expiry of the contract which is the defining feature of a fixed term contract. Section 10(3)(c) of the Employment Act requires that where the contract is for a fixed term, the contract should state the date when it is to end.

Usually a fixed-term contract terminates on expiry of the term. However, a fixed term contract can also be determined by conditions such as completing a specific task or the occurrence of an event.

• Termination of a Fixed-Term Contract

A fixed term contract automatically terminates once the time lapses, the task is completed or the event occurs, depending on the wording of the contract. If the wording of the contract provides that the contract will automatically terminate once the time lapses, or if the task is completed or the event occurs then there will be no requirement to give notice of termination of the contract.

If the contract provides that the contract may be renewed subject to employee’s performance then the employer may notify the employee at the end of the term that the contract will not be renewed. The general rule, however, is that a fixed term contract carries no rights and obligations beyond their date of expiry. The employer has the discretion to renew or not to renew. A fixed term contract cannot be automatically renewed.

In the case of Rajab Barasa & 4 Others Vs Kenya Meat Commission (2016) eKLR, it was held that a fixed term contract will not be renewed automatically, even when there exists a clause allowing for renewal.  The Court held that the expectation of the employees that their fixed term contracts would be renewed, had no basis as there was no express, clear and unambiguous promise given by the Employer on renewal.  The employer retains the discretion, even where there is a clause allowing for renewal.

Where at the time of expiry of the term of a fixed term contract the employee is on a journey, Section 39 of the Employment Act provides that the employer may, for the purpose of the completion of the journey, extend the period of service for a sufficient period, but in any case not exceeding one month, to enable the employee to complete the journey.

• Renewal Based on Legitimate Expectation

The exception to the general rule that fixed term contracts cannot be automatically renewed is where the employee had a legitimate expectation that the contract will be renewed. Legitimate expectation may arise where:

• The employer makes an unambiguous promise to the employee that the contract will be renewed. For instance, where the employer promises the employee that the contract will be renewed if the employee performs satisfactorily and the employee performs to the satisfaction of the employer. In the case of Teresa Carlo Omondi Vs Transparency International Kenya (2017) eKLR, the court held that there was a legitimate expectation on the part of the employee where “there was a promise for renewal, subject to fulfilment of certain conditions. These conditions were fulfilled. The claimant performed satisfactorily. She was appointed as an Independent Consultant for a key partner. There is no doubt her services were still required by the respondent.”
• If the employer does any act or omits to do something which leads an employee to believe that the contract will be renewed. For instance, if the employer continues to give the employee work and pays the employee even after the expiry of the contract. In the case of Cleopatra Kama Mugyenyi Vs Aidspan (2019) eKLR, regarding the issue of legitimate expectation, the court held that there must have been an indication by act or omission from the employer to indicate renewal was forthcoming to wet the Claimants appetite that their contracts would be renewed and hence submit legitimate expectation.
• Where it is the employer’s practice to renew fixed term contracts. In the case of Teresa Carlo Omondi Vs Transparency International Kenya (2017) eKLR, on the issue of legitimate expectation, the court expressed itself as follows: It must be shown that the employer, through regular practice, or through an express promise, leads the employee to legitimately expect there would be renewal. The expectation becomes legally protected, and ought not to be ignored by the employer, when managerial prerogative on the subject is exercised. Legitimate expectation is not the same thing as anticipation, desire or hope. It is a principle based on a right, grounded on the larger principles of reasonableness and fair dealing between employers and employees.

3. Open-ended Contracts

An open-ended contract is one that does not have a definite period of time. They are commonly known as “permanent and pensionable” contract. However, like all contracts, they can be terminated by notice.

Section 35 of the Employment Act provides as follows:

1. “A contract of service not being a contract to perform specific work, without reference to time or to undertake a journey shall, if made to be performed in Kenya, be deemed to be—

• where the contract is to pay wages daily, a contract terminable by either party at the close of any day without notice;
• where the contract is to pay wages periodically at intervals of less than one month, a contract terminable by either party at the end of the period next following the giving of notice in writing; or
• where the contract is to pay wages or salary periodically at intervals of or exceeding one month, a contract terminable by either party at the end of the period of twenty-eight days next following the giving of notice in writing.

2. Subsection (1) shall not apply in the case of a contract of service whose terms provide for the giving of a period of notice of termination in writing greater than the period required by the provision of this subsection which would otherwise be applicable thereto.”

Open-ended contracts are more common than fixed-term contracts in Kenya.

The primary legislative provision governing dispute resolution under the Employment Act is Section 87 which provides as follows:

• Subject to the provisions of this Act whenever:

1. an employer or employee neglects or refuses to fulfill a contract of service; or
2. any question, difference or dispute arises as to the rights or liabilities of either party; or
3. touching any misconduct, neglect or ill-treatment of either party or any injury to the person or property of either party, under any contract of service,

the aggrieved party may complain to the labour officer or lodge a complaint or suit in the Industrial Court.

• No court other than the Industrial Court shall determine any complaint or suit referred to in subsection (1).
• This section shall not apply in a suit where the dispute over a contract of service or any other matter referred to in subsection (1) is similar or secondary to the main issue in dispute.

The Industrial Court was reconstituted to the Employment and Labour Relations Court(ELRC). The ELRC, established under Employment and Labour Relations Court Act No. 20 of 2011 pursuant to Article 162(2) of the Constitution, has exclusive original and appellate jurisdiction to hear and determine all disputes referred to it in accordance with Article 162(2) of the Constitution and the provisions of the ELRC Act or any other written law which extends jurisdiction to the Court relating to employment and labour relations including:

• disputes relating to or arising out of employment between an employer and an employee;
• disputes between an employer and a trade union;
• disputes between an employers’ organisation and a trade union’s organisation;
• disputes between trade unions;
• disputes between employer organisations;
• disputes between an employers’ organisation and a trade union;
• disputes between a trade union and a member thereof;
• disputes between an employer’s organisation or a federation and a member thereof;
• disputes concerning the registration and election of trade union officials; and
• disputes relating to the registration and enforcement of collective agreements.

Rule 28 of the Employment (General) Rules, however, provides as follows:

 “An employee who is aggrieved by the actions of his employer may, if the grievance is not settled amicably by the employer, file a complaint in the Industrial Court”.

This Rule along with Article 159 of the Constitution which encourages the settlement of disputes through alternative modes such as reconciliation, mediation, arbitration and traditional dispute resolution mechanisms, encourages the use of alternative modes of dispute resolution so long as the same is not repugnant to justice and morality or inconsistent with any given laws.

Employers and employees are, due to the nature of their relationship and the desire in many instances to continue with the relationship, encouraged to resolve their disputes in the least acrimonious way possible. This may involve the use of internal processes that may be codified in a Human Resource Manual or external processes which involve third parties. In either case, the principles of fair hearing, natural justice and fair administrative action shall apply.

A sample dispute resolution clause that may be included in an employment contract is included below:

Should any dispute arise between the Parties hereto with regard to the interpretation, rights, obligations and/or implementation of any one or more of the provisions of this Employment Contract, the same shall be resolved in the manner set out in the Human Resource Manual.

OR

1. Should any dispute arise between the Parties hereto with regard to the interpretation, rights, obligations and/or implementation of any one or more of the provisions of this Employment Contract, the Parties to such dispute shall in the first instance attempt to resolve such dispute by amicable negotiation and in good faith in an attempt to reach a just and equitable solution satisfactory to both parties.
2. Should such negotiations fail, the parties may within Fifteen (15) days refer the case to mediation and appoint a single mediator as may be mutually agreed between the Parties. The mediation shall be conducted by a single mediator of not less than seven (7) years standing.
3. Should such negotiations fail to achieve a resolution within Thirty (30) days, either Party may declare a dispute by written notification to the other, whereupon such dispute shall be referred to arbitration under the following terms:

• such arbitration shall be resolved under provisions of the Kenyan Arbitration Act 1995 (as amended from time to time);
• the tribunal shall consist of one arbitrator to be agreed upon between the Parties failing which such arbitrator shall be appointed by the Chairman for the time being of the Chartered Institute of Arbitrators upon the application of any Party;
• the place and seat of arbitration shall be Nairobi and the language of arbitration shall be English;
• the award of the arbitration tribunal shall be final and binding upon the Parties to the extent permitted by law and any Party may apply to a court of competent jurisdiction for enforcement of such award. The award of the arbitration tribunal may take the form of an order to pay an amount or to perform or to prohibit certain activities.

1. Notwithstanding the above provisions of this clause, a Party is entitled to seek preliminary injunctive relief or interim or conservatory measures from any court of competent jurisdiction pending the final decision or award of the arbitrator.

When it comes to the use of internal processes, employers are encouraged to develop a human resource policy which should detail the manner to be followed in resolving disputes between employees as well as disputes between employers and employees.  The policy ought to lay out the process to be followed, the officers involved in the resolution process, classification of offences especially in disciplinary processes as well as a right to appeal or alternative recourse in case the employee is unhappy with the findings of the internal body/ office. Such a policy must be clear and understood by the employees for effective implementation of the same and to avoid any challenges that may arise from implementation of the process. The application of the policy should also be mentioned in the specific employment contracts to ensure that both parties are bound to observe the provisions of the policy.

When it comes to external processes, the most popular mode of alternative dispute resolution is arbitration. The age-old question has however been whether an arbitration clause in an Employment Agreement can oust the jurisdiction of the labour court. Some courts have held that the dispute resolution process laid out in the labour laws must be followed to protect the employees from any adverse provisions that may be contained in the employment contract. The court in Stephen Nyamweya & Another V Riley Services Limited[1] the judge observed the following:

• The law does however provide for an elaborate conciliation process in employment matters. In this case, the Respondent opted to include its own unique mechanism for dispute resolution. Unfortunately, by some strange coincidence the dispute resolution clause as drawn is incapable of implementation owing to certain absurdities contained therein.
• Counsel for the Respondent cited a host of authorities on interpretation of commercial contracts to give effect to the intention of the parties and asked the Court to adopt the principles contained in these authorities. I however take the view that employment contracts are distinct as against commercial contracts.
• First, employment contracts are drawn by the employer in a standard format to be applied to all employees, with minimal adjustments on job description and remuneration. Second, the employee has no opportunity to negotiate on standard clauses. That being the case, the employer owes the employee a duty of care to ensure that every clause is capable of implementation without too much trouble.
• One of the unique features of the Industrial Court is that parties can access justice expeditiously, at a minimal cost and without too may legal hurdles. While employers are encouraged to adopt ADR at the work place, they are expected to do it in a way that facilitates the quick resolution of disputes rather than cause delay.
• At any rate, if an employer attempts to halt or delay the jurisdiction of the Court, they must do so in a way that manifestly aids the cause of justice. To my mind, the Respondent had the capacity to eliminate the absurdities contained in the ADR clause in the Claimants’ contracts of employment which it now seeks to rely on to bar the Claimants from accessing justice before this Court.
• I therefore find the preliminary objection by the Respondent not well taken and hereby overrule it. I also strike out the said Clause 11.2 [arbitration clause] from the Claimants contracts of employment and direct that this case will proceed as if the said clause did not exist.

The court in James Heather – Hayes v African Medical and Research Foundation (AMREF)[2] however disagreed with the ruling in Stephen Nyamweya & Another V Riley Services Limited in upholding the arbitration clause in the employment contract. The judge noted that:

“Arbitration is a choice of the parties in so far as alternative dispute resolution is concerned.  One of is undisputed advantages is its granting of party autonomy whereby parties to an arbitration agreement are awarded the autonomy of choosing their own judge(s) and other facilities in dispute resolution.  This was so in the instant case and the parties contract and must be honoured…it is not the duty of this court to redraw agreements by parties.  The court can only come in to facilitate an interpretation and implementation of these contracts and no more.  I agree with the applicant/respondent that there is a subsisting contract that issues in dispute shall be referred to arbitration and I find as such”.

The judge went on to observe that the ruling in the Riley Services Case was only so because of the absurdity in the arbitration clause and that an employer and employee are free to contract and choose an alternative form of dispute resolution. However, seeing the rationale of the court in the Riley Services Case, it is important that when drawing a dispute resolution clause, the employer should ensure that the clause is clear, unambiguous and if necessary, explained to the employee at the time of executing the contract; and is devised to ease the process of dispute resolution as opposed to delaying the course of justice.

[1] [2013] eKLR

[2] [2014] eKLR

Being a director does not make a person an employee of the company as directorship is an office, not necessarily employment. If, however, the company enters into a Contract of Service with the director, with terms making the director an employee under the common law test, then the director becomes an employee. In these circumstances, relevant aspects of employment law including statutory protection as to unfair dismissal and redundancy apply in addition to the law relating to directors.

As an employee, the director will be bound by the provisions of their contract of service as well as by the implied terms in an employment relationship.  These include the implied terms of mutual trust and confidence, to act in good faith and not to disclose confidential information.

The salaries of directors who are also employees will be in accordance with the terms of their contracts of employment or service agreements.

Directors who are employees are usually mandated to carry out the tasks highlighted below.

1. Board Governance:

• Leading the company in a manner that aligns with the vision of the board.
• Communicate well, in a timely and accurate manner, all information necessary for the board to be able to carry out its functions.
• Provide strategic advice to the members of the board to keep them aware of developments within the industry.
• Ensure that the appropriate policies are developed to meet the company’s mission and objectives.
• Ensure statutory compliance.

2. Financial Responsibility:

• Develop resources that are sufficient enough to ensure the financial health of the organization.
• Fund raising and developing other sources of revenue.
• Preparation and submission a well-articulated fiscal report to the board including monthly budgets which reflect the true financial state of the company.
• Ensure maximum resource utilization, and works towards achieving economies of scale.

3. Organisation and Mission strategy:

• Work with board and staff to ensure that the company’s mission is fulfilled through implementation of programs, strategic planning and community outreach.
• Enhancement of the company’s image by being active and visible in the community and by working closely with other professionals, civic and private organizations.
• Preparation of corporate and annual business plans, and monitoring progress against these plans to ensure that the company attains its objectives cost effectively.

4. Organization Operations:

• Overseeing and implementation of appropriate resources to ensure that the operations of the organization are appropriate.
• Hiring and retention of competent, qualified staff.
• Direct and control the work of resources of the company to ensure the recruitment and retention of required numbers and types of well-motivated, trained and developed staff to ensure that it achieves its mission and objectives.
• Responsible for effective administration of operations.
• Responsible for signing all notes, agreements, and other instruments made and entered into and on behalf of the organization.
• Develop and maintain research and development programmes to ensure that the company remains at the forefront in the industry, applies the most cost-effective methods and approaches, provides leading-edge products and services and retains its competitive edge.
• Develop and maintain an effective marketing and public relations strategy to promote the products, services and image of the company in the wider community.

5. Liaison between organization and stakeholders:

• Appearing at official events.
• Liaison between the organization and external stakeholders.
• Develop and maintain relationships with not-for-profit organization leaders.
• Work closely with leaders of other companies to cultivate strong and long term strategic relationships to increase the company’s effectiveness.
• Establish professional contacts that can be of significant value to the company.
• Establish and maintain effective formal and informal links with major customers, relevant government departments and agencies, local authorities, key decision-makers and other stakeholders generally, to exchange information and views and to ensure that the company is providing the appropriate range and quality of services.

1. Matters regarded as professional misconduct

Under Section 30 of the Human Resource Management Professionals Act, 2020, a Human Resource Manager is guilty of professional misconduct if he/she: –

• deliberately fails to follow the laid down human resource procedures of his employer or client save those which are in violation of law;
• refuses, fails or neglects to apply established human resource principles in the course of discharging his professional functions;
• engages himself in corrupt activities or practices;
• is guilty of gross negligence in the conduct of his professional duties;
• engages himself in negative practices such as nepotism, tribalism, racism and other acts of discrimination in the discharge of his professional functions;
• discloses information acquired in the course of his duties to any person without the consent of his employer or client or otherwise than required by law;
• uses his position to obtain favours of a sexual kind or other benefits for which he is not entitled to in the discharge of his professional functions;
• engages in activities which are in conflict with those of his employer or client or activities which are contrary to those for which he is registered as a human resource professional;
• is found guilty of fraud or any dishonest act;
• allows any person to practice in his name as a Human Resource Professional unless such a person is the holder of a practicing certificate and is in partnership with him or employed by him;
• enters for the purpose of or in the course of practicing as a human resource professional, into partnership with a person who does not hold a practicing certificate or secures any professional business through the service of such a person or by means not open to a Human Resource Professional;
• pays or allows or agrees to pay or allow directly or indirectly, to any person (other than a person who holds a practicing certificate, is a retired partner or the legal representative of such a partner) any share, commission or brokerage out of the fees for, or profits of, his professional services;
• expresses an opinion on any matter with which he is concerned in a professional capacity without obtaining sufficient information on which to base the opinion;
• fails to keep the funds of a client in a separate banking account or to use any such funds for purposes for which they are intended; and
• does or fails to do any other act which may be prescribed.

2. The inquiry procedure

• The Disciplinary Committee

If the Council of the Institute of Human Resource Management believes that a Human Resource Manager may have been guilty of any of the matters listed above, it refers the matter to the Disciplinary Committee to inquire into the matter. The committee consists of five members appointed by the Council, from among the members of the council. The committee appoints one of its members to be the Chairperson.

The Manager whose conduct is being inquired should be afforded an opportunity to be heard in person. The Committee has power to regulate its own procedure. During inquiry proceedings, the committee may administer oaths, and enforce attendance of persons as witnesses and the production of books and documents.

• Sanctions

If, upon recommendation by the Disciplinary Committee, the Council is satisfied that a Manager is guilty of professional misconduct, the council may: –

• Issue the human resource manager with a letter of admonishment;
• Suspend the registration of the human resource manager for a specified period not exceeding twelve months;
• Withdraw or cancel the practicing certificate of the human resource manager for such period not exceeding five years as may be appropriate;
• Impose a fine which the Council deems appropriate in the circumstances; or
• Remove the name of the human resource manager from the register of qualified human resource managers.

The Council should inform the manager in question as soon as practically possible of the action taken against him.

A manager whose name has been removed from the register or whose practicing certificate has been suspended should surrender to the Council his or her certificate of registration or practicing certificate. Failure to surrender the registration certificate or practicing certificate amounts to professional misconduct, thus one being liable to fine not exceeding one hundred thousand shillings.

• Right of Appeal

If a manager is aggrieved by the Council’s decision, he/she may appeal to the High Court within sixty (60) days from the date of the decision. The High Court may annul or vary the decision as it finds necessary.

Where a human resource manager has been suspended from practicing, he/she may appeal to the Council for the lifting of the suspension at any time before the expiry of the suspension. If the Council is satisfied, it will lift the suspension upon receipt of the prescribed fee, and restore the manager’s registration and practicing certificate.

The disciplinary procedure is provided under Section 41 of the Employment Act. The procedure generally encompasses the following steps:

1. Explaining to the employee in a language the employee understands, the reason for which the employer is considering termination;
2. Allowing a representative of the employee, either another employee or a shop floor union representative of his choice, to be present during this explanation;
3. Hearing and considering any representations which the employee makes in defense of the grounds of termination, and hearing the representations of the employee’s representative.

An employer is required to follow the set internal disciplinary rules (if any) while conducting the disciplinary process.  Section 12 of the Employment Act requires that these rules be set by an employer when he has more than 50 employees.  Employers who do not have internal disciplinary rules must strictly adhere to the irreducible statutory minimum procedures as enumerated above.

To supplement the above irreducible statutory minimum procedures, courts have come up with the following effective guidelines and objective steps:[1]

1. A report to the relevant authority that a misconduct has been committed by an employee.
2. A preliminary report to gather relevant information on the alleged misconduct.
3. If the evidence is obvious and the misconduct is gross, the employer can summarily dismiss the employee.
4. If the evidence is not obvious and the misconduct is not gross or its weight is not clear during the preliminary investigation, the proper notification is drawn. The notification commonly referred to as a Show Cause Letter must clearly spell out the intended ground for termination being misconduct, poor performance or physical incapacity. The particulars must be clear enough for the employee to be able to effectively defend himself or herself. The notice must give the employee reasonable time within which to respond.

Additionally, the notice should inform the employee of his fundamental right to have at the hearing a person of his choice, his Union or a fellow employee. Whether the employee is aware of this right or not, the duty is vested upon the employer to reiterate these rights and dully accord them to an employee being subjected to disciplinary proceeding.

Where an employee chooses not to have such representation or the presence of a fellow employee of his choice, then this must be carefully recorded as when raised at any hearing before a Court of law, the Court is as a matter of justice, caused to refer to such proceedings. In the absence of such confirmation that the employee was represented by his Union or a fellow employee of his choice present, then employer makes a fundamental omission in the disciplinary process that does not meet the tenets of section 41 of the Employment Act, thus negating the proceedings and any decisions therefrom.[2]

5. Upon responding or the time allowed lapsing, the employee should be called to a hearing. At the hearing all relevant information should be recorded in a fair process where the complainant is not leading or chairing the proceedings. The employee should be given ample chance to exculpate oneself. A third party of the employee’s choice should be permitted to attend the hearing.
6. A report of the hearing proceedings should be drawn and formally maintained by the employer as evidence of due process of fairness. The report must set out the findings on the allegations, any mitigating or aggravating factors and the recommendations which may include the termination.
7. The decision made must then be communicated to the employee.

[1] NICHOLUS MUASYA KYULA v FARMCHEM LTD [2012] eKLR

[2] Fredrick Saundu Amolo v Principal Namanga Mixed Day Secondary School & 2 others [2014] eKLR

Absenteeism – Without leave or other lawful cause, an employee absents himself from the place appointed for the performance of his work.

Intoxication – During working hours, by becoming or being intoxicated, an employee renders himself unwilling or incapable to perform his work.

Dereliction – An employee willfully neglects to perform any work which it was his duty to perform, or if he carelessly and improperly performs any work which from its nature it was his duty, under his contract, to have performed carefully and properly.

Disorderly Conduct – An employee uses abusive or insulting language, or behaves in a   manner insulting, to his employer or to a person placed in authority over him by his employer.

Insubordination – An employee knowingly fails, or refuses, to obey a lawful and proper command which it was within the scope of his duty to obey, issued by his employer or a person placed in authority over him by his employer.

Commits a criminal offence – where an employee commits, or on reasonable and sufficient grounds is suspected of having committed a criminal offence against or to the substantial detriment of his employer or his employer’s property.