When engaging in an employment contract, termination of the contract is often overlooked. It is important to plan for what happens when the employment relationship turns sour, and an employer needs to terminate an employment. It would be beneficial to the employer to terminate the employment as soon as possible so that the employee has no access to business affairs. Understandably, this would save the employer time and resources used going through the termination procedure. However, this would not be equitable to the employee being terminated particularly where proper procedure was not followed and results in financial loss for the employee. It is important for employers to follow the proper legal procedure to terminate employment to avoid wrongful dismissal or unfair termination claims.
There are several ways to terminate an employment contract:
- Termination by agreement: both the employer and employee mutually agree to terminate the employment contract.
- Resignation: the employee voluntarily elects to terminate their employment and gives notice to the employer to this effect.
- Automatic termination: the employment is terminated either by performance of the contract or where the term of contract has expired.
- Termination by the employer: the employer elects to terminate the employment relationship either by notice or summary dismissal.
- Redundancy: means the loss of employment initiated by the employer because the services of an employee are no longer needed.
The Employment Act, 2007, Kenya (“the Act”)
The aim of the Employment and Labour Relations Courts and the law in Kenya is to protect the employee from termination without just cause as that would amount to unfair termination or wrongful dismissal. The Employment Act, 2007 outlines the proper procedure to be followed when termination an employment contract and summarily dismissal.
- First, either party initiating the termination must give adequate notice, or pay the other party in lieu of notice.
- Where employment is terminated by the employer, the employer must give just cause for the termination and provide proof of the reason. Therefore, it is crucial for employers to record interactions consistently and properly with the employees. This includes recording any warnings, disciplinary hearings, any record of misconduct by the employee, or any breach of contract that would justify termination. The Act does not outline what are the fair reasons for termination but lists what does not constitute fair reasons for termination including pregnancy, going on leave, employees’ membership in a trade union.
- Where the reason for termination is on grounds of misconduct, the employee is entitled to a hearing to defend themselves from the claim. The employee should not be terminated without a fair hearing or disciplinary process as this would constitute wrongful dismissal.
- Summary dismissal is where the employer terminates the employment without notice or with less notice due to a gross breach of contract by the employee. The Act, outlines what amounts to gross misconduct including but not limited to insubordination by the employee, the employee is suspected of committing a criminal offence and the employee willfully neglects to perform their duties.
- In all cases where termination is initiated by the employer, it is the burden of the employer to ensure that the termination was justified. Unfair termination occurs where the employer fails to prove that the reason for termination was valid and that the reason was fair and that the employment was done in the fair procedure.
- Where wrongful dismissal or unfair termination has occurred, the remedies are available to the wronged employee at the discretion of the labour officer. The remedies include compensation for wages lost due to lack of notice or unjustified termination in addition to any other loss consequential to that. Alternatively, the employee may opt for reinstatement as an employee in the company.
It is important of employers to plan for termination already when initiating employment. In most cases, this will eliminate any ambiguity on how to terminate the employment contract. This involves implementing internal employment policies and HR-handbooks outlining the proper termination procedure. Additionally, employers would benefit from training their staff members on their internal compliance and termination policies particularly on behaviour that would constitute gross misconduct leading to summary dismissal.
How we can help
At Agema Analysts, we can give a review of your current employment structure and properly advice on any gaps or requirement to be met to ensure that your internal policies comply with the employment Act. In addition, we also conduct trainings on employment and compliance to educate staff on the proper procedure to be followed.
This piece was written by Ikigai member, Elizabeth Omol of Agema Analyst. Agema Analysts is a specialized legal cross-border investment and risk advisory firm providing strategic advisory services and cutting-edge solutions to critical legal, investment, and risk areas. We are grateful to Elizabeth and the Agema Analyst team for this insightful article on the employment procedures in Kenya.
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