Unfair Dismissal in Kenya: What the ELRC Awards and What It Rejects

Employees ask what their claim is worth. Employers ask what their exposure is. Both questions have the same answer, and it turns less on whether the dismissal was justified than on what the file shows.

This article covers what the ELRC awards, how it assesses claims, and what determines where in the statutory range a case lands.

What makes a termination unfair?

Kenyan law applies two tests, and failing either is enough.

Substantive unfairness — no valid reason relating to conduct, capacity, compatibility or operational requirements. An employer must prove the reason; the burden does not sit with the employee.

Procedural unfairness — the section 41 process was not followed. The employer must explain the reason to the employee in a language they understand, in the presence of a fellow employee or union representative of the employee's choosing, and hear and consider the response before deciding.

The second test defeats more employers than the first. A dismissal with overwhelming justification, conducted without a hearing, is unfair.

What can the court award?

Compensation of up to twelve months' gross salary. This is the principal remedy and it is discretionary within that ceiling.

Terminal dues — accrued salary, accrued leave, notice or pay in lieu, and service pay where the employee was not covered by NSSF or an equivalent scheme.

Reinstatement or re-engagement, available within three years of dismissal but rarely ordered. Courts recognise that the relationship has usually broken down beyond repair.

Damages for breach of contract where the contract provided better terms than the statutory minimum.

Note that compensation and terminal dues are separate. An employee who was paid their notice and leave is not thereby compensated for the unfairness.

How does the court decide the amount?

The Act directs the court to consider a range of factors, and in practice these drive the outcome.

Length of service. The most significant single factor. Long service materially increases awards.

Whether any procedure was followed. No hearing at all pushes toward the upper range. A flawed but genuine process pushes downward.

The employee's conduct. Contribution to the dismissal reduces compensation, even where the process was defective.

Opportunity to mitigate. Whether the employee found alternative work, and how quickly.

The employer's conduct. Bad faith, humiliation, or withholding terminal dues to pressure a settlement all aggravate.

Consistency. Whether comparable conduct by others was treated differently.

What claims can be brought alongside?

Discrimination. The Employment Act prohibits discrimination on grounds including race, sex, pregnancy, religion, disability and HIV status. Discriminatory dismissal is unfair independently.

Sexual harassment. Employers with twenty or more employees must have a policy. Failure to address a complaint can found constructive dismissal.

Constructive dismissal. Where an employee resigns in response to the employer's repudiatory conduct — unilateral pay reduction, demotion, unilateral relocation, or ignoring a serious grievance.

Unpaid statutory entitlements. Overtime, leave, service pay and unremitted deductions, which can span the whole employment.

Time limits

Claims must be brought within three years of the cause of action. Employees who delay lose the claim entirely, and negotiations do not stop the clock unless expressly agreed.

Employers should note the corollary: a former employee can bring a claim well after everyone has moved on, which is why records must be kept for at least five years after termination as section 74 requires.

How the process runs

The employee files a statement of claim. The employer files a memorandum of response within the time allowed — missing this risks judgment in default, and setting it aside costs time and money.

The matter proceeds to mediation in many cases, which the court actively encourages. Where mediation fails, it goes to hearing with witness evidence and cross-examination. Judgment follows, and either party may appeal.

Realistic timeline: one to three years from filing to judgment, longer with an appeal. Both sides should weigh that against the amount in issue.

Evidence: what actually decides these cases

For the employer: the written contract, the disciplinary policy, the show-cause letter with specific allegations, contemporaneous hearing minutes signed by those present, the outcome letter with reasons, prior warnings, and evidence of consistent treatment of comparable cases.

For the employee: the contract, payslips, correspondence, any admission by the employer, evidence of the circumstances of dismissal, and records of attempts to find alternative work.

Employers lose on documents that were never created. Minutes reconstructed after a claim is filed carry very little weight, and courts are practised at identifying them. Our employment and labour law practice reviews the file before advising on prospects, because the file is the case.

Suspension, disciplinary action short of dismissal, and appeals

Not every disciplinary process ends in dismissal, and the intermediate steps carry their own exposure.

Suspension pending investigation should be on full pay, for a defined period, and expressed as a neutral holding step rather than a sanction. Suspension without pay before any finding is itself a breach, and indefinite suspension can amount to repudiation founding a constructive dismissal claim.

Warnings should be in writing, state the conduct, state what must change, state the period they remain live, and be acknowledged by the employee. A warning the employee never saw is not evidence of anything.

Demotion or pay reduction as a disciplinary sanction requires the employee's agreement. Imposed unilaterally it is a unilateral variation of contract, which the employee may accept, or treat as repudiation and resign claiming constructive dismissal.

Appeals. An internal appeal is not statutorily mandatory but materially strengthens the fairness of the process, and it gives the employer an opportunity to correct a defective first-instance decision before the matter reaches the ELRC. The appeal should be heard by someone senior to the original decision-maker who has not been involved.

Settlement

Most claims settle, and both sides usually do better than at judgment once costs and delay are counted.

A settlement agreement should record the payment, full and final settlement of all claims, confidentiality where appropriate, an agreed reference, and a recital that the employee had the opportunity to take independent advice. That last element strengthens enforceability.

Employers should not treat settlement as an admission. It is a decision that a defined cost now beats an uncertain cost in two years.

Calculating what is actually owed

Both sides benefit from working the numbers before arguing about liability, because the figures frequently make settlement obviously sensible.

Accrued salary to the date of termination.

Accrued leave. Untaken annual leave, calculated at 21 working days per completed year of service, paid at the current rate.

Notice or payment in lieu, per the contract subject to statutory minimums.

Service pay at fifteen days' pay per completed year, where the employee was not covered by NSSF or an equivalent scheme. Employers routinely overlook this on the assumption it never applies.

Overtime and rest day work if unpaid, which can span the entire employment.

Compensation for unfair termination, at up to twelve months' gross salary.

An employee with eight years' service on KES 150,000 monthly, dismissed without a hearing, is looking at terminal dues plus potentially substantial compensation. An employer weighing whether to run a proper process should compare that figure with the cost of a properly conducted hearing.

Redundancy: the parallel regime

Where the reason is operational rather than conduct, section 40 applies and the procedure differs.

The employer must notify the union — or the labour officer where the employee is not unionised — at least one month before the intended termination, and the notification must precede the decision. Selection must apply objective criteria. Severance is payable at not less than fifteen days' pay per completed year of service, in addition to notice and accrued leave.

An employer who decides first and notifies afterwards has already failed the test, regardless of how genuine the operational need was.

Common employer mistakes that create claims

Verbal warnings never documented. As far as the court is concerned, they did not happen. An employer relying on a history of informal conversations has no history at all.

The investigator chairing the hearing. The person who gathered the evidence should not decide the outcome where the organisation is large enough to separate the roles. Where it is not, record why.

Deciding before the hearing. A decision announced in the room immediately after the employee speaks invites the inference that the response was not considered. Adjourn and communicate in writing.

Inconsistent treatment. Dismissing one employee for conduct another was warned for requires an explanation, and seniority or personality is not one.

Withholding terminal dues. Using accrued pay as leverage to obtain a signed release is unlawful and converts a defensible dismissal into an obvious claim.

Contractor misclassification. Labelling someone a consultant does not make them one. Where the ELRC finds employment in substance, years of unpaid statutory entitlements crystallise at once.

No written contract. Section 9 requires one for any engagement over three months. Without it, disputed terms are generally resolved in the employee's favour.

Practical guidance

Employees: gather your contract, payslips and any correspondence about the dismissal before you do anything else. Note the three-year limit. Keep evidence of your efforts to find work, because mitigation affects the award.

Employers: take advice before dismissing, not after the claim. A process reviewed in advance costs a fraction of defending a claim arising from a flawed one — the clearest example in Kenyan practice of preventive spend being cheaper than remedial.

If a termination is in prospect or a claim has been filed, speak to an advocate early. Our dispute resolution team handles ELRC matters on both sides, and the assessment we give first is always about what the documents show rather than about who was right.