Mutuku v Zheng Hong (K) Limited (Appeal E356 of 2025) [2026] KEELRC 2443 (KLR) (31 August 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT AT NAIROBI** **APPEAL NO. E356 OF 2025** **ANNE MUENI MUTUKU APPELLANT** **-VERSUS-** **ZHENG HONG (K) LIMITED RESPONDENT** **(Being an appeal from the judgment of Hon. A. Nyoike delivered on 9 October 2025 in Milimani MCELRC E1332 of 2023)** **JUDGMENT** The appeal arises from the judgment delivered on 9 October 2025 at Nairobi in MCELRC E1332 of 2023. The appellant, aggrieved by the judgment, appeals on the following grounds: 1. The learned trial magistrate erred in both law and fact by holding that the respondent had valid reasons for terminating the appellant’s employment 2. The learned trial magistrate erred in both law and fact by holding that the respondent complied with proper procedure in effecting the appellant’s termination 3. The learned magistrate erred in both law and fact by failing to appreciate that the respondent’s alleged operational challenges amounted to redundancy, which required compliance with the statutory procedure, thereby rendering the termination unfair and unlawful. 4. The learned trial magistrate erred in both law and fact in finding that the appellant was not entitled to the terminal dues sought. The background to the appeal is the Appellant's claim that she was employed by the respondent on 6 August 2018, as a General Worker earning a salary of Ksh 24,150 per month. She was unfairly dismissed on 3 October 2021, without lawful cause or justification. The Respondent, in the termination notice, alleged that KRA had shut down its operations, an allegation the appellant refuted, as the company was operational. She had done nothing to warrant termination of her employment. The Appellant prayed for judgment against the respondent for payment of:- 1. One month salary in lieu of notice Kshs. 24,150 2. Compensation for unfair termination as at 12 months salary Kshs. 289,800 3. Leave pay 4. House allowance 5. Certificate of service 6. Costs 7. Interests In reply, the respondent’s case was that its operations were closed down by the Kenya Revenue Authority (KRA) on 9 July 2021 and, as a result of the company’s operations being closed, it resorted to terminating the employment contracts of its employees as it could no longer sustain them and because it had outstanding bills to clear. The appellant was terminated under clause 13(b) of the employment contract, which provided for termination upon one month's notice, and the termination was not based on her conduct. The appellant was paid a consolidated salary, and the housing allowance is not payable. She was also paid her leave days and the overtime worked. She was granted days off on weekends and public holidays. The respondent urged the court to dismiss the claim with costs. The learned magistrate, having assessed the evidence, found that the appellant contradicted herself: she claimed that her employment was unlawfully terminated and that no reasons were given, but then said that she was indeed notified of the reasons for the termination. The court found that under clause 13 of the employment contract the respondent could, as it indeed did, invoke the clause to terminate the employment contract by giving one month’s salary in lieu of notice. The appellant, by her own admission, stated that she received her November salary despite not having worked. The appellant, having been vested with the burden of proving that her termination was unfair, nevertheless fell short of this requirement, and her claim falls on this basis. On the appeal, The appellant submitted that a valid reason for termination denotes lawful, substantive, and justifiable reason warranting termination as held in **Naima Khamis vs Oxford University Press (E.A) Ltd [2017] KECA 480 (KLR**) that termination is also deemed substantively unfair where the employer fails to give valid reasons to support the termination whilst procedural unfairness arises where the employer fails to follow the laid down procedures as per contract, or fails to accord the employee an opportunity to be heard by law required. The respondent’s purported justification of terminating her employment, namely that the KRA had allegedly shut the company down, was neither proved nor substantiated before the court, as the alleged letter emanating from the KRA was not properly produced in evidence in accordance with the law. The makers of the document were never called to testify, and no KRA official was summoned to authenticate, identify, and formally produce the alleged letter or statement. The evidence amounted to inadmissible hearsay evidence. The appellant further submitted that where an employer intends to terminate an employment relationship on the grounds of redundancy, the employer is strictly bound by the procedural safeguards set out in section 40 of the Employment Act 2007. The appellant relied on the case of **ELRCA/E105/2024 Dominic Mbithi Nzwili vs Zheng Hong Kenya Ltd,** where the court held that redundancy is termination of employment, occupation, job or career by involuntary means or through no fault of the employee, where services become superfluous, and section 40 of the Act must be followed. The employment relationship was terminated through a termination notice taking effect immediately without issuing the one-month redundancy notice contemplated under section 40(1)(a) and (b) of the Act. The appellant argues that even where an employer has good reasons for declaring a position redundant, the employees affected have to be chosen in accordance with fair process as contemplated under section 40(1)(a) and (c). in **Doris Kairuthi Kaaria & 59 others** **v Kenya Methodist University** **[2017] eKLR** the court held that the employer ought to have, before the redundancy, instituted objective qualifications for skill, reliability, and ability attached to the office held by the workers against the skills, reliability possessed by the individual workers targeted in the redundancy. The respondent’s purported reason for termination was not only unproven, but even if proved, the respondent failed to comply with mandatory legal requirements governing redundancy. The resultant termination was therefore unlawful, unfair, and unjustified in law, thereby entitling the appellant to the reliefs sought. No submissions by the respondent. **Determination** The court is alive to the fact that this is the first appeal; therefore, the court is called upon to re-evaluate all the material on record and arrive at its own conclusions on the disputed facts. However, the court must keep in mind that it did not have the opportunity to assess the demeanour of the witnesses as the trial magistrate did. Thus, take such a fact into account as held in **Top Tank Company Limited v Amos Ondiek Wandaye [2018] eKLR*.*** In a letter dated 3 October 2021, the respondent terminated the appellant’s employment by invoking clause 13 of the employment contract, which permitted termination upon notice or payment in lieu of notice. However, the respondent gave the reason for the decision as the company's normal operations not having resumed after it came to a standstill on 9 July 2021, when KRA closed it down. Thus, the prolonged period of 4 months had left the company struggling and unable to cope with the bills. Production had not resumed after the closure. The notice thus took effect immediately. To begin with, the new paradigm shift under the Employment Act (the Act) is that, even where an employment contract between the parties includes a termination clause, the employer has a legal duty under sections 41 and 43 of the Act to inform the employee of the reasons for the termination of employment. The reasons must be valid, genuine and reasonable. This shift is more pronounced in the employer's approach to the employment termination process. It is no longer at the employer's will. The termination clause in a contract is now regulated in law. In the case of **Njaramba v Mombasa Water Supply & Sanitation Co. Limited [2025] KEELRC 2360 (KLR),** the court held that the Act has introduced a new paradigm in employment relations. An employer cannot enforce the employment contract at will. Recourse must be to the Act as the bare minimum. This is appreciated in the case of **Kenfreight (E.A.) Limited v Benson K.Nguti [2016] eKLR**, the Supreme Court held: *The*[*Employment Act*](https://new.kenyalaw.org/akn/ke/act/2007/11)*, for example, introduced and prescribed minimum terms that the parties must consider when contracting. It established the concept of a fair hearing and imposed a duty on an employer to give reasons before dismissing or terminating an employee's services. These developments are a stark departure from the traditional power of the employer to terminate or dismiss at will as demonstrated in the earlier decisions of the courts.* This position is reiterated in the case of **International Planned Parenthood Federation v Pamela Ebot Arrey Effiom [2016] KECA 429 (KLR),** where the court held that under sections 43 and 45 of the Act, there is a significant change from the previous statutory regime, including the employer’s power to terminate employment at will. The employee must be provided with reasons for the termination of employment. These reasons must be genuine, valid, and reasonable. Furthermore, the due process of notice and hearing must be observed under section 41 of the Act. Additionally, where there are operational reasons leading to termination of employment, such is regulated under section 40 of the Act. The due process therefrom must be adhered to. It is not sufficient to cite the termination clause in the employment contract and then dismiss the employee without fault. Section 40 of the Act exists to ensure that the employer is protected, that the employee is fairly treated and paid the terminal dues, and that the employment relationship is terminated lawfully. In this case, the appellant admitted that she was informed of the reasons leading to loss of employment. That had to do with KRA's closure of the respondent's business. This was admitted. Such translates to redundancy. The employer and employee are insulated under the law. The termination of employment was not due to a disciplinary issue but for operational purposes. Under section 45(3) of the Act, termination of employment due to operational reasons that is not procedurally and fairly addressed results in unfair termination of employment as held in **Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR** and reiterated in **Cargill Kenya Limited v Mwaka & 3 others [2021] KECA 115 (KLR)**. The employer must apply valid, reasonable and justified reasons to warrant lawful termination of employment, which is lacking in this case. On such a matter, the appellant was entitled to notice, which she admitted was issued, and to payment of her wages up to and including November 2021. However, notice to terminate her employment was issued on 3 October 2021. For the duration of employment, August 2018 to October 2021, the appellant had served for 3 full years. A compensation of 3 months is hereby found appropriate in the given circumstances, noting that the respondent made an effort to explain the reasons leading to termination of employment, although devoid of due process. The appellant was earning Ksh. 24,150 per month, and the total compensation due is Ksh. 72,450. In support of the claim for annual leave, the respondent filed work records confirming the allocation of annual leave days. On the claim for house allowance, the appellant was employed as a general labourer. The wage paid at Ksh. 24,150 per month is above the due minimum wage of Ksh.13, 572.90 under the Wages Orders. To claim above the allocated wage would be unjust enrichment. A certificate of service is due at the end of employment. On costs, the appeal has a good foundation and is partially successful. 50% of the costs of the appeal and trial court are found appropriate. **Accordingly, judgment in Nairobi in MCELRC E1332 of 2023 is hereby reviewed in the following terms:** 1. **Employment terminated unfairly.** 2. **Compensation KSh. 72,450.** 3. **50% costs of the appeal and the trial court proceedings.** **Delivered in open court this 31st day of August 2026** **M. MBARŨ** **JUDGE** **In the presence of:** **Court Assistant: Kemboi** **……………………………………………… and …………………………………..………**