5.

0 TERMINATION OF EMPLOYMENT

Expected outcome of Topic 5:

• Understand the grounds for termination of employment relationship.
• Understand the law relating to wrongful dismissal and unfair termination.
• Understand the remedies for breach of employment contract.

TERMINATION OF EMPLOYER-EMPLOYEE RELATIONSHIP

Introduction:
A contract of employment can be terminated by any party at any time. However,
when termination occurs, legal liability, particularly as against the employer may
occur. Persons dismissed from employment are likely to have two basic types of
claim: - they may either claim to have been dismissed in breach of contract or they
may claim to have been dismissed in breach of their statutory rights.

A dismissal in breach of contract is usually called a “wrongful dismissal”. A claim for

breach of statutory rights will usually take the form of a claim for “unfair dismissal”.
More often than not, the pleadings will more often be a hybrid of the two without
much of a differentiation, and this is out of sheer practice.

Ways by which employer-employee relationship may be terminated:

Termination of the employment relationship can occur in any of the following ways:
1. Mutual Consent or agreement:
This derives from the doctrine of freedom of contract. The parties to the contract
merely agree to end the contract of employment. The agreement must be clear and
voluntary and therefore it should not be laced with duress etc from either party.

2. Lapse of time (effluxion of time) – expiry of fixed term contract:

If a contract specifies the duration for which the employer-employee relationship
is to subsist, the contract terminates upon the lapse of such time. The recent judicial
developments have clearly suggested that, when the period lapses the employer is
under no obligation to renew the contract, and it would be futile to sue for wrongful
dismissal if the employer refuses to renew the contract. The vice versa is also true,
as the employee is under no obligation to renew the contract.
See, Nelson vs James Nelson & Sons Ltd (1914); Dixon vs British Broadcasting
Corporation (1979); Morris Oddy & Co. Ltd vs Hayles (1971) and Kenyan
authorities regarding renewal.

3. Lapse of time (effluxion of time) - retirement:

If a contract specifies that the employment is permanent and pensionable with age
of retirement being specified, the contract will terminate when the employee attains

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that age. But if the employment is described as permanent & pensionable without
the age of retirement being specified or where there is simply no reference to time
or period of employment, the duration of contract of employment is determined
through reasonable interpretation of the contract which is dependent on the custom,
practice or usage of the job in question e.g. for the civil servant the period is 60
years.

4. Frustration:
This occurs when circumstances beyond the control of either party to a contract
make ii incapable of being performed in the form which it was undertaken by the
contracting parties. It arises where there is fundamental change of circumstances.
In that case, the contract will terminate automatically and the frustrating event will
not be treated as a dismissal either for purposes of any dismissal claim, whether at
common law or under statute. See Davis Contractors Ltd vs Fareham District
Council (1950). At common law a contract discharged by frustration is terminated
automatically regardless of opinion or knowledge of parties concerned. That position
was adopted in the case of Hirji Mulji –vs- Cheong Yue SS Co. Ltd (1926) AC.497.

Supervening events that could frustrate a contract are illness, death, imprisonment,
bankruptcy of employer and liquidation. Permanent illness will frustrate a contract
as much as a prolonged one because it prevents the employer from obtaining
substantially what he bargained for.

However, before an employer terminates on account of illness, there are factors

that ought to be considered carefully else it may amount to an unfair termination.
In the case of Marshall vs Harland & Wolff Ltd (1972), the factors to be
considered before terminating were spelt as being; - the terms of the contract
including any provisions for sick pay; how long the employment was likely to last in
the absence of sickness; the nature of the employment; the nature of the illness or
injury, how long it has continued and the prospects of recovery and the period of
past employment. It is an established principle of law that a contract will not be
frustrated by supervening events if parties had made provision for that event in the
contract.

5. Dismissal with notice:

Contracts of employment have provision for notice period within which either party
to the contract may intimate to the other his/her desire to terminate the contract.
Upon expiry of such notice period the contract terminates. In lieu of such notice,
the party terminating the relationship may pay the other the equivalent of such
salary as would be earned over notice period. The idea is that the other party is
given time to adjust without interruption.
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Where contract is silent on the question of termination by notice, a term will be
implied at common law to make provision for it. The principal function of notice rule
is to give both sides an opportunity of leaving employer-employee relationship at no
cost. The length of notice may be set so as to grant one or both parties some degree
of monetary compensation for the ending of the relationship. The development of
notice rule is historically linked to changes in typical duration of the contract of
employment. When it became normal for contracts to have indefinite duration as
opposed to fixed term contracts it became necessary for parties and for the courts
through the technique of implied term to make provision for termination by notice.

See the provisions of S. 35 of the Employment Act on the periods of notice where a
contract of service is one not involving performance of specific work or it is without
reference to time.

A notice of dismissal by the employer must be definite and explicit and must state
the date of termination. A mere warning of impending dismissal will not suffice. Once
a notice of dismissal has been given, it cannot be withdrawn by the employer without
the consent of the employee. See Morton Sundour Fabrics Ltd vs Shaw (1967);
Riodarn vs War Office (1961) and Harris and Russel Ltd vs Slingsby (1973)

Further, for notice by employer to suffice, it must meet the thresholds of s. 41

(procedural fairness) and 45 (substantive fairness), of the Employment Act
discussed below.

6. Dismissal without notice:

An employer may dismiss an employee without notice (summary dismissal) for just
cause. Where that is not so the employer may be liable for damages for unlawful or
wrongful dismissal or unfair termination. Is there a difference between “unlawful or
wrongful dismissal” and “unfair termination”?

Under S. 44(3) the Employment Act empowers an employer to dismiss an employee

summarily i.e. without notice, when the employee has by his conduct indicated that
he has fundamentally breached his obligations arising under the contract of service.

Under S. 44(4) the Employment Act empowers an employer to summarily dismiss his
employees for certain reasons. The said reasons are deemed to amount to gross
misconduct and are as follows:
1. without leave or other lawful cause, an employee absents himself from his work;
2. during working hours, by becoming or being intoxicated, an employee renders
himself unwilling or incapable to perform his work properly;

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3. 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;
4. 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;
5. an employee refuses, to obey a lawful and proper command which is within the
scope of his duty to obey, issued by his employer or a person placed in authority
over him by his employer.
6. in the lawful exercise of any power of arrest given under any written law, an
employee is arrested for a cognizable offence punishable by imprisonment and is
not within fourteen days either released on bail or otherwise lawfully set at
liberty; or
7. 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.
Under S. 41 the employer is required to notify and give a hearing to an employee
before terminating his employment on grounds of misconduct.

Under S. 43 in any claim arising out of termination of a contract, the employer shall
be required to prove the reasons for the termination, and where he fails to do so,
the termination shall be deemed to have been unfair within the meaning of section
45.

Under S. 45 the law sets out:

- the circumstances under which termination will be deemed unfair which include
that the reason is not valid; reason is not related to employee’s conduct, capacity or
operational requirements; procedure is not fair and it is found in the circumstances
of the case the employer did not act in accordance with justice and equity in
terminating employment.
- the period one needs to be in employment being 13 months to able to complain of
unfair termination. Is this Constitutional?
- factors to be considered in deciding whether it was just and equitable for the
employer to terminate employment which include procedure adopted in reaching the
decision to dismiss; conduct and capability of employee; compliance with statutes by
employer; previous practice of the employer and existence of warning letters to the
employee.

Under S. 49 the law sets out:

- the remedies for wrongful dismissal and unfair termination which include wages for
notice period; general damages not exceeding 12 months’ salary and reinstatement.
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- factors to be considered in deciding the remedies to recommend which include
wishes of the employee; circumstances of termination; practicality of reinstatement;
common law principle against specific performance in employment; length of service;
reasonable expectation of employee as to length of time they would have worked for
the employer; opportunities for the employee to secure comparable employment;
value of any severance payable by law; any unpaid wages, expenses or other claims;
expenses as a result of termination; conduct of employee which may have
contributed to termination; failure of employee to mitigate losses due to unjustified
termination and any compensation including ex-gratia payment made by the
employer.

Under S. 50 the law sets out that the employment court should be guided by the
principles in s. 49.

Under S. 90 the law sets out the limitation of employment claims to 3 years.

7. Resignation with notice:

Contracts of employment have provision for notice period within which either party
to the contract may intimate to the other his/her desire to terminate the contract.
Upon expiry of such notice period the contract terminates. In lieu of such notice,
the party terminating the relationship may pay the other the equivalent of such
salary as would be earned over notice period. The idea is that the other party is
given time to adjust without interruption.

The doctrine of notice operates differently as between the employer and the
employee in the sense that the employee is not required to give reasons or an
explanation why he has terminated employment.

8. Resignation without notice:

Contracts of employment have provision for notice period within which either party
to the contract may intimate to the other his/her desire to terminate the contract.
This however would not stop an employee from terminating without notice, and the
only thing that will befall such employee is that he will be in breach of contract and
the employer may take appropriate legal action against him.

9. Constructive dismissal:
Different considerations arise where the employee’s resignation is prompted by a
breach of contract or repudiatory act committed by the employer. In that case, the
resignation will be called a “constructive dismissal”. It should be noted that this term
has no statutory authority and is merely a convenient shorthand expression for a

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resignation on the part of the employee prompted by an action on the part of the
employer which may be categorised as a repudiatory act or breach of contract.

In Western Excavating (ECC) Ltd –vs- Sharp (1978) QB 761, it was held that for
liability to arise, evidence is needed that the employer is guilty of conduct which
shows that he did not intend to be bound by one or more initial terms of contract.
The essential terms are said to include the essential terms that employer will not
seek to destroy the parties mutual trust and confidence for instance by constantly
changing essential terms to his/her detriment.

This has occurred in instances where employer expressly requires employee to

resign or face dismissal or when he changes the terms and conditions of
employment in some fundamental way which leaves an employee with no chance
but to resign. This is traceable in the case of Gerishon Majanja –vs- Caltex Oil
Ltd. Demotion unless resulting from misconduct may as well have that effect (unfair
dismissal)

See, Sophie Muthoni Njagi v Rift Valley Railways (Kenya) Limited [2020] eKLR;
Coca Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR;
Benuel Mariera v Awanad Enterprises Ltd [2014] eKLR; Boniface Nyaga Njiru v
Board Of Trustee Gichugu Water & Sanitation Trust [2014] eKLR

10. Redundancy:
This arises due to closure of place of work or enterprise or where excess labour in
enterprise is laid off for economic reasons. In such event the employer is liable to
make redundancy payment to the employee, which is calculated by reflection to
employee’s security, salary level and age.

S. 40 of the Employment Act stipulates the conditions that an employer has to

comply with if he has to terminate the employment of an employee on account of
redundancy. Importantly is the requirement in law that the employer must pay the
employee declared redundant a service pay at the rate of not less than 15 days for
every year worked.

Failure to comply with s. 40 would render an employer liable for unfair termination.

REMEDIES FOR BREACH OF CONTRACT OF EMPLOYMENT

1. Repudiation:
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If breach of contract of employment is so fundamental as to indicate lack of
intention to contract the aggrieved party can repudiate the contract.

2. Damages – measure of damages:

If breach is by the employer, the employee is entitled to damages in the measure of
loss of earnings. However, the employee is under duty to mitigate the loss that arises
from such breach. If he does not damages may not be rewarded at all. The English
position is that if he does, damages may be punitive or exemplary. That was decided
in Parry –vs- Cleaver. See the provisions of S. 49 of the Employment Act on the
measure of damages for wrongful dismissal and unfair termination.

3. Specific Performance:
This is where a court orders an employer to reinstate the employee. Specific
performance is an equitable and discretionary remedy. It is a rare remedy on the
basis of public policy. S. 49(4)(d) reiterates the said position and urges the court to
consider the common law principle that there should be no order for specific
performance in a contract of service except in very exceptional circumstances. The
ultimate question is why?

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