Picture this: A Nairobi-based company, frustrated with an underperforming sales manager, sends him a one-line termination letter on a Friday afternoon — no warning, no hearing, no reasons. The employer assumes a month’s notice pay settles the matter. Six months later, the Employment and Labour Relations Court awards the former employee 12 months’ gross salary in compensation, plus notice pay and accrued leave.
This scenario plays out regularly in Kenya’s labour courts. The reason is simple: most employers misunderstand what the law actually demands before employment can end. The Employment Act, 2007 (Cap. 226) places significant legal obligations on employers, and the courts enforce them strictly. Understanding termination procedures under Kenyan employment law is not optional; it is commercially and legally essential.
The Legal Framework: Employment Act, 2007
The primary statute governing termination of employment in Kenya is the Employment Act, 2007 (Cap. 226). The Act draws a clear distinction between different modes of separation:
- Termination — ending employment with notice or payment in lieu (Sections 35–36)
- Summary Dismissal — immediate termination for gross misconduct without notice (Sections 44–45)
- Redundancy — termination driven by operational requirements, not individual conduct (Section 40)
Each mode carries its own procedural requirements. Getting the category wrong — for example, treating a redundancy as a simple termination — is itself grounds for an unfair termination finding.
The two governing tests for any termination are set out in Section 45(2) of the Employment Act, 2007:
A termination is unfair if the employer fails to prove:
(a) that the reason for termination is valid;
(b) that the reason is fair — related to the employee’s conduct, capacity, or compatibility, or based on the employer’s operational requirements; and
(c) that the employment was terminated in accordance with fair procedure.
Both tests must be satisfied. A valid reason poorly executed is still an unfair termination. A perfectly run process for an invalid reason produces the same result.
Substantive Justification: Proving a Valid Reason
Section 43 of the Employment Act, 2007 places the burden of proof squarely on the employer. Where an employer fails to prove the reason for termination, the termination is automatically deemed unfair.
The standard of proof is not criminal — it is a balance of probabilities. The employer must demonstrate that, at the time of termination, it genuinely believed valid grounds existed. This is a subjective test, which means the employer’s sincere and reasonable belief — even if later proved wrong — can sustain a termination, provided it was not arbitrary or capricious.
Valid reasons under the Act include:
- Misconduct — dishonesty, insubordination, violence, persistent lateness, unauthorised absenteeism
- Poor performance — failure to meet clearly set and communicated performance standards
- Incapacity — illness or injury preventing the employee from performing their duties
- Operational requirements — redundancy driven by economic, structural, or technological changes
The employer must be able to produce evidence of the reason. A bare assertion in a termination letter, unsupported by documented warnings, investigations, or performance records, will not survive judicial scrutiny.
Procedural Fairness: The Section 41 Hearing
Even where a valid reason exists, the employer must comply with the procedural requirements under Section 41 of the Employment Act, 2007. This section applies to terminations on grounds of misconduct, poor performance, or physical incapacity.
The Section 41 process requires:
Step 1 — Notice of Allegations Before any hearing, the employer must inform the employee, in a language the employee understands, of the reason or reasons being considered for termination. This is typically done through a show-cause letter or charge notice.
Step 2 — Employee’s Response The employee must be given a reasonable opportunity to respond to the allegations, either in writing or verbally. The employee is entitled to be accompanied by a fellow employee or a trade union representative.
Step 3 — The Hearing The employer must hear and consider the employee’s representations before making any decision. A predetermined outcome — a termination letter drafted before the hearing is held — is a serious procedural failure.
Step 4 — The Decision and Termination Letter Only after the hearing may the employer make a decision. If termination is decided upon, the employee must receive a written termination letter stating the reasons, the effective date, and the terminal benefits payable.
Step 5 — Certificate of Service Under Section 51 of the Employment Act, 2007, every employee is entitled to a certificate of service upon separation. Failure to issue one is a statutory breach.
Termination for Redundancy: A Separate and Stricter Regime
Where the reason for termination is operational — not linked to the individual employee’s conduct — the employer must follow the redundancy procedure under Section 40 of the Employment Act, 2007. This regime is more demanding than ordinary termination.
Section 40 requires the employer to:
- Give the employee one month’s written notice of redundancy (or payment in lieu)
- Notify the Cabinet Secretary responsible for Labour and the relevant trade union where applicable, at least one month in advance
- Apply a fair selection criterion for redundancy — last in, first out is the common baseline, though merit and skills may be considered
- Pay a severance allowance of not less than 15 days’ pay for each year of completed service
A court will not accept operational justifications dressed up as performance-based terminations. If the real reason is restructuring or cost-cutting, the redundancy process must be followed — and failure to do so renders the termination substantively and procedurally unfair.
Summary Dismissal: When Immediate Termination Is Lawful
Section 44 of the Employment Act, 2007 permits summary dismissal — termination without notice — where the employee’s conduct amounts to a fundamental breach of the contract of service. Examples of conduct warranting summary dismissal include:
- Wilful destruction of property
- Theft or fraud
- Attending work under the influence of alcohol or drugs
- Sexual harassment or workplace violence
- Gross insubordination
Even in summary dismissal, procedural fairness under Section 41 is not waived. The employer must still notify the employee of the allegations, hold a hearing, and hear the employee’s response — before dismissing. An employer who skips this step and immediately dismisses, regardless of how egregious the misconduct, risks a finding of procedural unfairness.
What the Courts Say: Three Cases Every Employer Must Know
Case 1: Walter Ogal Anuro v Teachers Service Commission [2013] eKLR — ELRC Cause No. 955 of 2011
This is one of the most frequently cited decisions on termination in Kenya. The Employment and Labour Relations Court held that for a termination to pass the fairness test, there must be both substantive justification and procedural fairness. The Court articulated what has since become the gold standard in Kenyan employment law:
“Substantive justification has to do with the establishment of a valid reason for the termination while procedural fairness addresses the procedure adopted by the employer to effect the termination.”
In that case, the Teachers Service Commission had a genuine reason to terminate the claimant — a certificate irregularity — but failed to take its disciplinary investigation to completion. The Court found a valid substantive reason but condemned the termination as procedurally unfair, awarding the claimant 8 months’ compensation plus notice pay. The case confirmed that passing one test but failing the other is not enough — both tests must be satisfied simultaneously.
Case 2: Pius Machafu Isindu v Lavington Security Guards Limited [2017] eKLR — Court of Appeal, Civil Appeal No. 301 of 2015
The Court of Appeal in this landmark decision restated — and elevated — the mandatory nature of the procedural safeguards under the Employment Act. The Court held:
“There can be no doubt that the Act places heavy legal obligations on employers in matters of summary dismissal for breach of employment contract and unfair termination involving breach of statutory law. The employer must prove the reasons for termination/dismissal (Section 43); prove the reasons are valid and fair (Section 45); prove that the grounds are justified (Section 47(5)), amongst other provisions. A mandatory and elaborate process is then set up under Section 41 requiring notification and hearing before termination.”
This decision confirmed that Section 41 is not aspirational guidance — it is a mandatory legal obligation. Employers cannot contract out of it, waive it by mutual agreement in the heat of a disciplinary moment, or satisfy it with a superficial box-ticking exercise. The case has since been adopted by courts across Kenya as the authoritative statement on procedural fairness in employment termination.
Case 3: Wambui v Hallmark Marketing Limited [2026] KEELRC 138 (KLR) — Petition E097 of 2022 (Judgment delivered 28 January 2026)
This recent and significant decision from the Employment and Labour Relations Court addresses constructive dismissal and the intersection of termination law with constitutional protections against discrimination. The petitioner, a Customer Service Officer who had worked for five years without a written contract, developed pregnancy-related complications in 2021 and was placed on medically recommended bed rest. When she notified her employer of the need for extended bed rest, she was met with hostility, placed on indefinite unpaid leave purportedly due to COVID-19 restructuring, and then swiftly removed from all work communication platforms — her email access blocked and her number removed from company WhatsApp groups.
The Court made three far-reaching findings. First, the employer’s failure to produce a written contract meant the burden of proving employment terms rested on the employer under Section 10(7) of the Employment Act — a burden the employer could not discharge. Five continuous years of salary payments established an indefinite employment relationship. Second, the sequence of events — a request for medical leave immediately followed by placement on unpaid leave and digital exclusion — constituted constructive dismissal on account of pregnancy, which is expressly prohibited under Section 46(a) of the Employment Act, 2007. The purported COVID-19 restructuring was unsubstantiated and could not justify the employer’s conduct. Third, and most significantly for employers, the Court found that the dismissal violated the petitioner’s constitutional rights under the Constitution of Kenya, 2010, resulting in a separate award of Kshs. 3,000,000 for constitutional rights violations — on top of the maximum 12 months’ salary compensation for unfair termination.
The total award came to Kshs. 4,426,250, a figure that reflects the compounding exposure employers face when a termination also engages constitutional protections. The case is a clear signal: pregnancy-based adverse employment action carries liability on multiple legal fronts simultaneously, and COVID-19 restructuring — even cited years after the pandemic — will not be accepted as a cover for discriminatory dismissal without credible evidence of genuine operational changes.
Common Mistakes Employers Make — and Their Consequences
Kenya’s employment courts repeatedly see the same errors. The most costly include:
Terminating without a hearing. The single most common reason for unfair termination awards. Even where the misconduct is undeniable, skipping the Section 41 hearing renders the termination procedurally unfair.
Using vague or general reasons in the termination letter. “We no longer require your services” is not a reason. Courts treat the absence of a stated reason as a failure of the substantive test under Section 43.
Conflating redundancy with poor performance. Employers restructuring their businesses sometimes frame terminations as performance-based to avoid paying severance. Courts examine the substance, not the label — and penalise the mismatch.
Failing to issue a certificate of service. This is a low-cost obligation that generates unnecessary litigation. Employees have a statutory right to one; withholding it is indefensible.
Setting notice periods below the statutory minimum. Section 35 of the Employment Act prescribes minimum notice periods. Contractual clauses providing for shorter notice are void to the extent they fall below the statutory minimum.
Remedies for Unfair Termination
Where a court finds a termination unfair, Section 49 of the Employment Act, 2007 provides a range of remedies:
- Reinstatement — return to the same position, with back pay for lost time
- Re-engagement — employment in a comparable role at agreed terms
- Compensation — up to a maximum of 12 months’ gross salary
In determining the quantum of compensation, courts consider factors including the employee’s length of service, the employee’s conduct, efforts to mitigate loss, and the availability of comparable employment. The 12-month cap is a ceiling, not a guarantee — courts routinely award lesser amounts depending on the circumstances.
The burden of proof under Section 47(5) operates in two stages: the employee must first establish a prima facie case that termination occurred and that it was unfair or unprocedural. Once this threshold is crossed, the burden shifts to the employer to justify the termination.
Practical Guidance for Employers: A Compliance Checklist
KNK Advocates’ Employment & Labour Law practice works with businesses across Kenya to build and maintain compliant HR frameworks. As a practical starting point, employers should ensure the following are in place
- ✅ A written employment contract that meets the minimum requirements of the Employment Act
- ✅ A disciplinary and grievance policy, properly communicated to all staff
- ✅ Documented performance management processes — warnings must be in writing and signed
- ✅ A show-cause letter process before any disciplinary hearing
- ✅ Minutes or records of disciplinary hearings
- ✅ A written termination letter that states the reason, the date, and the terminal dues payable
- ✅ A certificate of service, issued promptly upon separation
- ✅ Redundancy documentation — selection criteria, notice letters, Labour Office notification
If any step is missing, the termination is exposed to a legal challenge. The cost of getting the process right is a fraction of what an unfair termination award can reach.
Practical Guidance for Employees: Know Your Rights
If you have been dismissed or terminated and believe the process was flawed, you have legal options. Under Section 90 of the Employment Act, 2007, claims for unfair termination must be filed within three years of the cause of action arising — but acting promptly is always advisable, as evidence and witnesses become harder to secure with time.
Your claim can be filed at the Employment and Labour Relations Court, and you may be entitled to up to 12 months’ compensation, notice pay, accrued leave, and a certificate of service.
Under Kenya’s Employment Act, 2007, a valid termination must satisfy two tests: substantive justification (a valid, provable reason) and procedural fairness (due process under Section 41). An employer who fails either test faces an unfair termination finding, with compensation capped at 12 months’ gross salary under Section 49.
Frequently Asked Questions
1. Can an employer terminate employment without giving reasons? No. Under Section 43 of the Employment Act, 2007, an employer is legally required to prove the reason for termination. If no reason is given or proved, the termination is automatically deemed unfair. KNK Advocates regularly advises employers on how to frame and document termination reasons to withstand scrutiny.
2. What is the difference between termination and dismissal in Kenya? Termination generally refers to ending employment with the required notice or payment in lieu. Dismissal, particularly summary dismissal under Section 44, is immediate separation without notice, reserved for gross misconduct. Both routes require procedural fairness — the difference lies in notice entitlements.
3. Is a verbal warning enough before termination? Generally, no. Courts expect a documented paper trail — written warning letters, signed acknowledgements, and performance improvement plans where relevant. Verbal warnings, with no written record, will rarely satisfy the substantive burden under Section 43.
4. Can an employer terminate an employee who is on sick leave? An employer may terminate on grounds of incapacity if the illness genuinely prevents the employee from performing their duties. However, Section 41 still applies — the employee must be notified, given a fair hearing, and medical evidence considered. Terminating while an employee is on sick leave without following this process is legally risky.
5. What does “constructive dismissal” mean under Kenyan law? Constructive dismissal occurs when an employer’s conduct amounts to a fundamental breach of the employment contract, forcing the employee to resign or making continued employment untenable. The courts treat such a forced exit as dismissal by the employer, and the employee may claim compensation as if they had been formally dismissed. In the 2026 decision of Wambui v Hallmark Marketing Limited [2026] KEELRC 138, the ELRC held that blocking an employee’s email access and removing her from work communication platforms following a request for pregnancy-related medical leave constituted constructive dismissal — and separately violated her constitutional rights, resulting in additional damages. KNK Advocates has advised clients on both sides of constructive dismissal disputes.
6. How is compensation for unfair termination calculated in Kenya? Section 49 of the Employment Act, 2007 caps compensation at 12 months’ gross salary. Courts exercise discretion and consider factors such as length of service, employee contribution to the termination, efforts to secure alternative employment, and the availability of comparable work. The 12-month maximum is not automatic.
7. What happens if an employer skips the Section 41 hearing? The termination will be found procedurally unfair, regardless of whether a valid substantive reason existed. As confirmed in Pius Machafu Isindu v Lavington Security Guards Limited [2017] eKLR, Section 41 is mandatory — it cannot be bypassed. The employer will be exposed to compensation liability.
8. How long does an employee have to file an unfair termination claim in Kenya? Section 90 of the Employment Act, 2007 sets a three-year limitation period from the date the cause of action arose. However, it is strongly advisable to seek legal advice immediately after termination, as early engagement gives both employers and employees the best chance of resolving matters efficiently.
⚠️ Legal Disclaimer
The content of this article is published by Khayesi & Khayesi Advocates LLP for general informational and educational purposes only. It does not constitute legal advice and must not be relied upon as such.
Reading this article does not create an advocate-client relationship between you and Khayesi & Khayesi Advocates LLP or any of its advocates. The information provided reflects Kenyan law as at the date of publication and may not account for subsequent legislative changes, court decisions, or the specific facts of your situation.
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Published by KNK Advocates | knkadvocates.co.ke/our-perspective/ | Employment & Labour Law
