Termination

Termination of employment refers to the end of an employee’s contract with an employer. This can occur for various reasons, which can generally be categorized into voluntary and involuntary terminations.

Voluntary Termination

Voluntary termination occurs through the employee’s decision to end the employment contract, such as through resignation. The Employment Act requires that an employee who resigns must give the employer notice, typically 30 days or as specified in the employment contract.

Additionally, voluntary termination may occur due to retirement. This happens when an employee decides to stop working upon reaching a certain age set by law or fulfilling specific criteria established by the company or as mandated by law.

Involuntary Termination

Involuntary termination occurs when an employer ends an employee’s contract against the employee’s will. This can happen for various reasons and is generally categorized into layoffs, dismissal (firing), and redundancy.

A layoff occurs when an employer needs to reduce the workforce, often due to economic conditions, restructuring, or changes in business direction. This is not typically related to the employee’s performance.

Dismissal, or firing, occurs when an employee is terminated due to performance issues, misconduct, or violation of company policies. It is important to highlight that under dismissal, an employer may summarily dismiss an employee. Summary dismissal takes place when an employer terminates the employment contract without notice or with less notice than what the employee is entitled to by law or under the contract.

Redundancy occurs when a job position is eliminated because it is no longer necessary.

Termination notice

Typically, the law requires that before terminating an employment contract, either voluntarily by the employee or involuntarily by the employer, a notice of termination must be given. The length of this notice varies depending on the type of employment contract.

For contracts that pay wages daily, either party can terminate the contract at the end of any day without notice.

For contracts that pay wages at intervals of less than one month, either party can terminate the contract at the end of the next pay period after giving written notice.

For contracts that pay wages or salaries at intervals of one month or more, either party can terminate the contract after giving 28 days’ written notice.

Some contracts, especially those for management positions, require longer notice periods than the standard 28 days. In such cases, the employment contract may specify a longer notice period, such as three months, as allowed by law.

It is important to underscore that if an employee cannot understand the written notice of termination, the employer must explain the notice orally in a language the employee understands.

Payment In Lieu of Notice

Payment in lieu of notice (PILON) is a payment made by an employer to an employee, or vice versa, when the employment contract is terminated without the employee serving their full notice period. Instead of requiring the employee to work through the notice period, the employer or employee provides a payment equivalent to what the employee would have earned during that time.

If an employee gives notice of termination and the employer waives any part of this notice, the employer must pay the employee remuneration equivalent to the notice period not served, unless both parties agree otherwise.

Service Pay

Service pay is a form of compensation provided to employees when their employment contract is terminated. It is typically calculated based on the number of years the employee has worked for the employer. Service pay is designed to offer financial support to employees as they transition out of their current job.

The Employment Act provides that employees whose contracts are terminated with 28 days’ notice or more are entitled to service pay for each year worked.

Employees Who are Not Entitled to Service Pay

Employees who are members of the following are not entitled to service pay:

• A registered pension or provident fund scheme under the Retirement Benefits Act;
• A gratuity or service pay scheme established under a collective agreement;
• Any other scheme established by the employer with more favorable terms than the service pay scheme under the Act; and
• The National Social Security Fund (NSSF).

Gratuity Pay

Gratuity is a discretionary payment made by an employer to an employee when an employment contract is terminated. The Employment Act does not expressly provide for gratuity. Instead, it is typically provided at the employer’s discretion or if specified in the employment contract or a collective bargaining agreement. It becomes binding only if it is based on an employment contract or a collective bargaining agreement.

Termination on Account of Redundancy

 Termination on account of redundancy occurs when an employer ends an employee’s contract because the job position is no longer necessary. This can happen due to various reasons such as economic conditions, restructuring, technological changes, or shifts in business strategy.

Under the Employment Act, an employer is prohibited from terminating a contract of service on account of redundancy unless the following conditions are met:

• Notification to Trade Union and Labour Officer

If the employee is a member of a trade union, the employer must notify the union and the labour officer in charge of the area where the employee is employed of the reasons for and the extent of the intended redundancy. This notification must be given at least one month before the intended date of termination.

• Notification to Non-Union Employees

If the employee is not a member of a trade union, the employer must notify the employee personally in writing and inform the labour officer.

• Fair Selection Criteria

The employer must consider the seniority, skill, ability, and reliability of each employee within the affected class when selecting employees for redundancy.

• Compliance with Collective Agreements

If there is a collective agreement between the employer and a trade union that outlines terminal benefits payable upon redundancy, the employer must ensure that employees are not disadvantaged for being or not being a member of the trade union.

• Payment for Leave

The employer must pay off any due leave in cash to the employee who is declared redundant.

• Notice or Wages in Lieu of Notice

The employer must provide the employee declared redundant with at least one month’s notice or pay one month’s wages in lieu of notice.

• Severance Pay

The employer must pay the employee declared redundant severance pay at a rate of not less than fifteen days’ pay for each completed year of service.

Termination of Probationary Contracts

 A probationary contract is a type of employment agreement used by employers to evaluate an employee’s performance and suitability for a role within a specified trial period. During this period, both the employer and the employee have the opportunity to assess whether the employment arrangement meets their expectations and requirements. Probationary periods allow both parties to terminate the employment relationship more easily than after the probationary period has ended.

Exemption from Notification and Hearing

The requirement for notification and hearing before termination on grounds of misconduct does not apply to the termination of probationary contracts.

Duration of Probationary Period

A probationary period shall not exceed six months. However, it may be extended for an additional period of up to six months with the employee’s agreement.

It is important to note that the Employment Act prohibits an employer from placing an employee under a probationary contract for a total period exceeding twelve months.

Termination Notice

Either party to a probationary contract may terminate the contract by giving at least seven days’ notice. Alternatively, the employer can terminate the contract by paying the employee seven days’ wages in lieu of notice.

Termination on Ground of Poor Performance

The procedure for termination on grounds of poor performance was laid down in the case of Maina Mwangi v Thika Coffee Mills Limited [2014] eKLR as follows:

• The employer’s first duty is to inform the employee that their performance has fallen below the set standards. This ensures that the employee is aware of the issue and has an opportunity to improve.
• The employer should then propose training, guidance, and fresh instructions to the employee. This helps the employee understand what is expected of them and gives them the tools to improve their performance.
• The employer is required to allow the employee time to improve. This means that the employer should set reasonable expectations for improvement and provide support to help the employee meet these expectations.
• If no improvement is noted after a reasonable passage of time, the employer should issue a formal warning to the employee and advise them that they may be separated from the employer due to poor performance. This gives the employee a clear understanding of the consequences of their poor performance.
• The next phase involves investigations by the employer to determine if the employee could fit better in another role within the organization. During the investigation, the employer should engage the employee to discuss their skills, experience, and interests.
• If, at the end of these steps, dismissal of the employee is deemed necessary, then the employer must give a show cause notice that explains to the employee, in a language they understand, the reason why termination is being considered. This ensures that the employee is fully informed about the reasons for termination.
• The employer must hear and consider any representations that the employee is entitled to make. This means that the employee has the opportunity to present their side of the story or offer any mitigating circumstances that may impact the decision to terminate their employment. The employee is entitled to have another employee or a shop floor union representative of their choice present during this hearing.

Summary Dismissal in Employment Law

Summary dismissal refers to the immediate termination of an employee’s contract by an employer due to gross misconduct. As highlighted above summary dismissal takes place when an employer terminates the employment contract without notice or with less notice than what the employee is entitled to by law or under the contract.

Grounds for Summary Dismissal

• Absence Without Leave

An employee who, without leave or other lawful cause, absents themselves from the place appointed for the performance of their work may be subject to summary dismissal. This absence must be unauthorized and without valid justification.

• Intoxication During Working Hours

If an employee becomes intoxicated during working hours, rendering themselves unwilling or incapable of performing their duties properly, they can be summarily dismissed. Intoxication impairs an employee’s ability to fulfill their responsibilities effectively and safely.

• Willful Neglect or Improper Performance

An employee who willfully neglects to perform their work, or performs their duties carelessly and improperly, can be dismissed. This includes neglecting duties that are clearly defined within their contract or performing tasks in a manner that is careless or improper.

• Use of Abusive or Insulting Language

Using abusive or insulting language, or behaving in a manner that is insulting to the employer or a person in authority, constitutes gross misconduct. Such behavior can create a hostile work environment and undermine authority.

• Refusal to Obey Lawful Commands

An employee who knowingly fails or refuses to obey a lawful and proper command issued by their employer or a person in authority may be summarily dismissed. The command must be within the scope of the employee’s duties and must be reasonable and lawful.

• Arrest for a Cognizable Offence

If an employee is arrested for a cognizable offence punishable by imprisonment and is not released on bail, bond, or otherwise lawfully set at liberty within fourteen days, this can be grounds for summary dismissal. This provision ensures that employees involved in serious legal issues do not disrupt the workplace.

• Criminal Offence Against Employer

Committing, or being reasonably suspected of committing, a criminal offence against the employer or the employer’s property can justify summary dismissal. This includes actions that cause substantial detriment to the employer’s interests or property.

The Process of Termination by an Employer

Terminating an employee is a significant action that must be handled with care and in compliance with legal requirements. Below is a process that an employer should follow to ensure a fair and lawful termination:

Review of Grounds for Termination

The employer is required to determine the reason for termination, which could be misconduct, poor performance, redundancy, or other legitimate reasons. The employer must ensure that these grounds are documented and can be substantiated with evidence.

In any claim arising from the termination of a contract, the employer bears the burden of proving the reason or reasons for the termination. If the employer fails to provide adequate proof, the termination will be considered unfair.

The reasons for termination must be based on matters that the employer genuinely believed to exist at the time of termination. These reasons must be the actual factors that led to the decision to terminate the employee’s services.

Fair Procedure for Termination

The employment of a worker shall not be terminated for reasons related to the worker’s conduct or performance before he is provided an opportunity to defend himself against the allegations made, unless the employer cannot reasonably be expected to provide this opportunity. The ideal procedure is captured as follows:

Investigations

If an employee commits an offence deemed serious and requires investigations such as fraud and theft, an employer is required to immediately undertake thorough investigations.

Suspension

When serious misconduct necessitates investigation or clarification, an employer may suspend the employee. The suspension period must be reasonable to allow for the necessary investigations. During this time, the employee may be summoned back to work for disciplinary proceedings or other tasks as determined by the employer.

Suspension is not considered a disciplinary measure. If the suspended employee is found not guilty of the alleged misconduct, they will be notified in writing, and the suspension will be lifted effective from the time of notification. Any salary withheld during the suspension will be paid retrospectively. The Court of Appeal in the case of Globe Motors Holding Ltd v Akinyemi Adegoke Oyewole (2022) JELR 109330 since suspension does not terminate the employment contract or dismiss the employee, the employee remains in continuous employment with the employer until they are either recalled, formally terminated, or dismissed. Pending recall or dismissal, the suspended employee is entitled to their wages or salary unless the employment contract or suspension letter explicitly states that salary will not be paid during the suspension period.

Notice to Show Cause

Upon establishing the grounds for termination, the employer must issue a show cause letter to the employee to show cause why within specified time frame, disciplinary action should not be instituted against him/her. A Notice to Show Cause is a formal document issued by an employer to an employee, requiring the employee to explain or justify their conduct, actions, or performance. This notice typically precedes potential disciplinary action and provides the employee with an opportunity to present their side of the story.

Disciplinary Hearing

 If the response to the Notice to Show Cause is not satisfactory, the employer will send a written invitation to the employee at least three working days before the hearing. This invitation will specify the date, time, and place of the hearing and inform the employee of their right to be accompanied by a fellow employee or a trade union representative (for unionisable employees).

During the disciplinary hearing, the employee may present documentary evidence to support their case.

Disciplinary Measures

Disciplinary measures are actions taken by an employer if an employee is found guilty of misconduct, poor performance, or violation of company policies. These measures aim to correct behavior, maintain order, and ensure compliance with organisational standards. The measures may include verbal warning, written warning, demotion, or termination. Employees should be informed of their right to appeal any disciplinary action. The appeal process should be clearly outlined, allowing the employee to present their case to a higher authority within the organisation.

Appeal Against Termination

An employee who believes their employment has been unjustifiably terminated is entitled to appeal the decision to an impartial body, such as a higher authority within the organization or a court. However, an employee may be considered to have waived their right to appeal if they do not exercise this right within a reasonable period after the termination.

Upon receiving an appeal from a terminated employee, the employer must review the appeal to determine if it raises new evidence or highlights an apparent error in the disciplinary process. The review should be thorough and impartial, ensuring that all relevant information is considered before making a final decision. If the appeal raises new evidence or highlights an apparent error, the employee should be invited to an appeal hearing, and a decision should be rendered based on the hearing. If the appeal does not raise new evidence or highlight an apparent error, the employee should be informed, in writing, that the appeal has been reviewed and found insufficient to warrant further action, and therefore, it is declined.

Understanding Unfair Termination

The law prohibits an employer from terminating the employment of an employee unfairly. The Employment Act mandates that for a termination to be considered fair, the employer must prove the following:

• The reason for termination must be valid.
• The reason for termination must be related to the employee’s conduct, capacity, or compatibility, or based on the operational requirements of the employer.
• The termination must be carried out in accordance with fair procedures.

Rights of the Employee

An employee who has been continuously employed by their employer for at least thirteen months before the date of termination has the right to complain if they believe the termination was unfair.

Grounds for Unfair Termination

A termination is deemed unfair if:

• The employer cannot prove the reason for termination.
• The employer did not act in accordance with justice and equity in terminating the employment.
• The termination is for reasons specified in Act, such as discrimination or retaliation.

Considerations for Fair Termination

When determining if a termination was just and equitable, a labour officer or the Employment and Labour Relations Court will consider:

• The procedure adopted by the employer in making the termination decision.
• The communication of the decision to the employee.
• The handling of any appeal against the decision.
• The conduct and capability of the employee up to the termination date.
• Compliance with statutory requirements.
• Previous practices of the employer in similar circumstances.
• Any previous warning letters issued to the employee.

Unacceptable Reasons for Termination

The following are not considered fair reasons for dismissal or disciplinary action:

• Pregnancy or reasons related to pregnancy.
• Taking or planning to take entitled leave.
• Trade union membership or activities.
• Seeking office in a trade union or acting as a trade union officer.
• Refusal to join or withdrawal from a trade union.
• Discrimination based on race, color, tribe, sex, religion, political opinion, nationality, social origin, marital status, HIV status, or disability.
• Initiating a complaint or legal proceedings against the employer, unless the complaint is irresponsible and unfounded.
• Participation in a lawful strike.

Complaint and Appeal Process

An employee who has been unfairly terminated or summarily dismissed can:

• Present a complaint to a labour officer within three months of the dismissal.
• The labour officer will review the complaint, allowing both the employee and the employer to state their case, and recommend a resolution.
• The employee retains the right to appeal to the Employment and Labour Relations Court.

Burden of Proof

In cases of unfair termination or wrongful dismissal:

• The employee must prove that the termination or dismissal was unfair.
• The employer must justify the grounds for termination or dismissal.

Remedies for Unfair Termination

If a labour officer deems a termination or summary dismissal unjustified, they may recommend the employer:

• Pay the employee wages for the notice period to which they were entitled.
• Pay the employee for the proportion of wages due for the time worked.
• Pay the employee for any other losses resulting from the dismissal.
• Pay an amount not exceeding twelve months’ wages based on the employee’s gross monthly wage at the time of dismissal.

Reinstatement and Re-engagement

A labour officer may also recommend:

• Reinstating the employee, treating them as if the employment had not been terminated.
• Re-engaging the employee in comparable work to that which they were employed in prior to dismissal, at the same wage.

Certificate of Service

Upon termination, an employer must issue a certificate of service to the employee, unless the employment lasted less than four consecutive weeks. This certificate should include:

• Employer’s name and postal address.
• Employee’s name.
• Date of commencement and cessation of employment.
• Nature and usual place of employment.
• Any other prescribed particulars.

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The information provided in this article is for general informational purposes only and does not constitute legal advice. For guidance or inquiries regarding Data Protection and Compliance in Kenya, contact us via email at info@dmklaws.co.ke and dmklaws@gmail.com or call +254 111 888 681.