Termination of a Contract

We have all the information you need to know in the workplace in Kenya about Termination of a Contract which means minimum notice period, severance package, ending a contract

Termination of employment can be initiated by either of the parties to a contract of employment (Employment Act, section 35 (1)). Lawful termination of employment under common law includes:

  • Termination of employment by agreement: When the employer and employee agree to bring a contract of employment to an end in accordance with an agreement. This may be in the case of terminating a contract of apprenticeship where the training period expires - the contract would obviously come to an end.
  • Automatic Termination: A contract of employment may be terminated automatically in circumstances such as death, loss of business of the employer or a contractual relationship whose specified term come to an end.  
  • Termination of employment by the employee/Resignation: This happens when an employee due to material breach of the contract by the employer decides to resign from her employment.
  • Termination of employment by an employer: An employer may also terminate the employment of an employee but there is a need to comply with the provisions of the law and contract relating to termination. 

On what grounds can a contract of employment be terminated by an employer?

A contract of employment may be terminated by an employer on the following grounds:

  • By mutual agreement between the employer and the worker (Industrial Training Act, section 13 (1) (a)).
  • By the employer when the employee dies before the expiration of the period of employment.
  • By the employer if the worker is found by medical examination to be unfit for employment. 
  • Due to sickness or accident the employee becomes unable to carry out his or her work (Employment Act, section 41(1)).
  • By the employer on the basis of misconduct of employee (Employment Act, section 44 (3)) 

What must an employer do if he or she wants to terminate a contract of employment?

A contract of employment may be terminated at any time by an employer who must give the employee a period of notice of termination (e.g. at close of day in case of contract for daily wages, one month or more in case of monthly pay contracts). 

What form of notice should an employer give a worker when terminating employment?

A termination notice shall be in writing. In case the employee does not understand the notice, the employer is responsible to ensure that the notice is explained orally to the worker in a language he/she understands (section 35 (2) (3)).  

If the employee is employed on a daily wage contract, the notice is given at the close of any day without notice. 

Can an employer terminate an employee immediately without allowing them to work during the notice period? Does the law allow this?

In event the employer wants to terminate an employee without allowing her/him to serve the notice period the employer will be required to pay the employee the amount that an employee would have received if she/he had worked during the notice period. This is what is usually referred to as payment in lieu of notice (section 36) also (section 38). 

Section 36 provides for payment of equivalent salary in lieu of notice instead of serving the notice. The length of notice will depend on the interval at which salary is paid.

Must I, as an employer, pay for transportation after a contract of employment is terminated?

The law is silent about this kind of payment.

What happens if an employee is terminated but they have outstanding leave they have not taken?

In the case of accrued leave upon termination the employer shall pay an employee on a pro rata basis an amount in cash for the accrued annual leave to which that employee is entitled (section 40 (1) (e)) - provided that it is taken not later than six months after the end of leave cycle or twelve months after the end of leave cycle if (if the employee consented or extension is justified by operational requirements) (section 28(4)). 

Can I as an employee terminate a contract of employment without notice?

Yes. An employee may terminate a contract of employment without notice if s/he pays the employer a sum equal to the amount of remuneration which would have accrued to the worker during the period of the notice (section 36).

Can an employer terminate an employee because s/he does not like the worker?

No. Under the law there are four grounds that may justify termination of the employment by the employer and these are:

  • Misconduct of an employee.
  • Physical incapacity.
  • Poor performance.
  • Employer’s operational requirements/retrenchment. 

An employer may also terminate an employee due to participation in an illegal strike. 

Therefore for an employer to terminate an employee he/she should have a genuine reason as specified in section 45 (2) and section 46. An employee cannot be fired because an employer does not like them - unless the grounds for this dislike are based on the above-mentioned factors.

What amounts to fair termination of employment?

In order for termination to be fair in the eyes of the law it has to be both substantively and procedurally fair. The employer needs to have a valid and fair reason for termination. 

Apart from this valid reason of termination the employer must follow fair procedures for termination as provided under the Employment Act, section 45 (2) and section 46.).  In any form of termination the employer is required to prove the reasons for the termination, otherwise it will be termed as unfair (section 45 (2)). The procedures for termination are different depending on the reason for termination but they all have a common item - the right of an employee to be heard before a termination decision is taken against an employee (section 41 (2)).

In case I, as an employee, am caught red-handed committing a serious misconduct, for example stealing, is an employer required to follow the procedure for termination?

Yes. Notwithstanding the serious misconduct of the employee, and the evidence available, the law requires that procedures outlined under the law be followed. Failure to follow the procedure will amount to summary dismissal, meaning an employee is terminated without being availed of an opportunity to defend herself/himself before a fair disciplinary committee. In labour laws summary dismissal amount to unfair termination with consequences specified in section 47 and 49 (1) & (3).

Can I, as an employee, be terminated when facing a criminal charge before a court of law?

No one can terminate or take disciplinary action against an employee who is facing the same charges before a court of law unless the two charges are different or do not arise in the same cause of action. 

In case a worker is terminated unfairly what would be the consequences for the employer?

If the labour officer makes the decision that the summary dismissal or the termination of contract of an employee is unjustified, he/she may recommend to the employer to pay the employee any or all of the following:

  • The wages which the employee would have earned had the employee been given the period of notice to which he/she was entitled under this Act or his/her contract of service. 
  • Where dismissal terminates the contract before the completion of any service upon which the employee’s wages became due, the proportion of the wage due for the period of time for which the employee has worked; and any other loss consequent upon the dismissal and arising between the date of dismissal and the date of expiry of the period of notice referred to in paragraph (a) which the employee would have been entitled to by virtue of the contract. 
  • The equivalent of a number of months’ wages or salary not exceeding twelve months based on the gross monthly wage or salary of the employee at the time of dismissal.

Alternatively, the employer may have to:

  • Reinstate the employee and treat the employee in all respects as if the employees employment had not been terminated; or 
  • Re-engage the employee in work comparable to that in which the employee was employed prior to their dismissal, or other reasonably suitable work, at the same wage.

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