https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1546

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT** **APPEALS DIVISION** **APPEAL NO. E063 OF 2025** **KENAGRO SUPPLIERS LTD…………….................................APPELLANT** **-VERSUS-** **ALLAN MWANGI KARUGA……………………………… RESPONDENT** **(Being an appeal from the Judgment of Honourable Mukami Wachira(SRM) delivered on 7th February, 2025 at Ruiru in MCELRC E167 of 2024*)*** **JUDGMENT** 1. Through the Memorandum of Appeal dated 1st March, 2025 the Appellant appeals against whole of the Judgment of Honourable Mukami Wachira (SRM) delivered on 7th February, 2025 at Ruiru in MCELRC E167 of 2024 on grounds inter alia: 1. The Honorable court erred in Law and fact in holding that the termination procedure contemplated under section 41 of the Employment Act was not followed and the termination of the Respondent herein was wrongful, unfair and unlawful 1. The Honorable court erred in Law and fact in awarding the Respondent herein an award of Kshs 210,000/= as service pay for the period he worked for the Appellant herein 1. The Honorable court erred in Law and fact in awarding the Respondent herein Kshs 70,000/= being a one month in lieu of notice 2. The Honorable court erred in Law and fact in holding the Respondent herein was entitled to a certificate of service 3. The Honorable court erred in Law and fact in awarding the Respondent herein Kshs 420,000 /= as a compensation for unfair termination. 4. The Honorable court erred in Law and fact by failing to factor in the fact that the Respondent herein was registered under mandatory a retirement and benefit fund namely NSSF and a private benevolent fund 5. The Appellant consequently prayed that the appeal be allowed and the judgment by learned Magistrate delivered on 7th February, 2025, be set aside and the appellant be awarded the costs of the Appeal. 6. The Appeal was disposed of by written submission **APPELLANT’S SUBMISSIONS** 1. The Appellant’s Advocate, Mr. Karuiki submitted among others that the appellant did not terminate the respondent’s contract but opted not to renew the same for the year 2024. The issue was therefore failure to renew a fixed term contract and not termination hence section 9(1) of the Employment Act, did not apply to the contract issued on 6th January, 2020. Counsel submitted that section 36 of the Employment Act did not apply since the issue was about non-renewal. Counsel in that regard invited the court to consider decisions in the case of **Transparency International-Kenya v. Teresa Carlo Omondi Civil Appeal No. 81 of 2018** on the issue of what constitutes legitimate expectation and the case of **Samwel Chacha Mwita v. KEMRI [2014]eKLR** where the court stated that a fixed term contract expires naturally on the date of expiry and termination thereof will not constitute an unfair termination. Based on these decisions, counsel submitted that the respondent was not entitled to any remedy for unfair termination. 2. Regarding reasons for non-renewal counsel submitted that this due to legal and genuine reasons. These were among others that the respondent was underperforming and failed to give proper mentorship to his team and that he was issues with a notice to show cause and in response, the appellant admitted the charges and upon evaluation, the appellant opted not to renew the respondent’s contract. On the award, counsel submitted that the award of six months’ salary as compensation was harsh and too high and ought to be set aside. **RESPONDENT’S SUBMISSIONS** 1. Counsel for the respondent Mr. Mburu submitted among others that the trial magistrate was right in holding as she did that the respondent was unfairly terminated since the appellant failed to adhere to the statutory obligation as provided under section 41 of the Act and that the appellant did not present before the trial court evidence that it complied with these mandatory provisions of the law. According to counsel, the bar was unreasonably set higher for the respondent yet there were others like Lawrence Kibet who also failed to meet their targets but their contracts were renewed. According to counsel, the respondent was terminated for reasons of misconduct and that failure to meet targets was considered by the appellant as gross misconduct yet the letter dated 19th February, 2024 was cunningly disguised as “end of contract.” 2. Mr. Mburu contended that appellant’s inconsistency whether the termination was summary dismissal or end of contract coupled with discriminatory treatment where others who did not meet targets but were not terminated, spoke volumes and showed that the termination of the respondent’s service was premeditated. Further, the appellant during the trial did not point out which targets the respondent failed to meet leading to termination of his service and that the appellant did not consider the responses by the respondent in the show cause letter. In support of his submissions counsel relied on the case of **Angela Wokabi Muoki v. Tribe Hotel Ltd [2016] KEELRC 7 (KLR)** where the court stated that termination of employment is a serious issue to happen to an employee therefore reasons must be assigned to the same in terms of section 43 of the Employment Act. **DETERMINATION** 1. The court has considered the grounds in the Memorandum of Appeal, the Record of Appeal and the submissions filed by the parties herein and authorities relied on and would as usual state that it is now settled law that the duty of the first appellate court is to re-evaluate the evidence in the subordinate court both on points of law and facts and come up with its own findings and conclusions as was held in **Abok James Odera t/a A.J Odera & Associates v John Patrick Machira t/a Machira & Co. Advocates [2013] eKLR,** where it was stated that:- *“This being a first appeal, we are reminded of our primary role as a first appellate court namely, to re-evaluate, re-assess and reanalyze the extracts on the record and then determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.”* 1. The Judgment of the trial court was that the respondent’s claim was allowed and the trial court awarded him a consolidated sum of Kshs. 700,000/- on account service pay, one month’s salary in lieu of notice and six months’ salary on account of compensation for unfair termination of service. The Court further awarded the respondent costs of the suit. 2. The appellant feeling aggrieved by the finding of the trial court, brought the present appeal against the entire judgment of the trial court and urged that the same be set aside in its entirety and be replaced with a judgment allowing the appeal and dismissing the suit in the *court aquo.* 3. As observed above concerning the role of this court as a first appellate court, its primary role is to re-evaluate, re-assess and reanalyse the extracts on the record and then determine whether the conclusions reached by the learned trial court are to stand or not and give reasons either way. The Court as an appellate court is further reminded not to replace its own opinion of what could have been a better interpretation and ultimate finding on the facts before the trial court if those facts and evidence, align with reasonable conclusions over the issues in dispute and are supported by law. 4. The appellant has urged this court to overturn the finding by the trial court that the termination of the respondent’s service was unfair and argued that the respondent having been engaged on a fixed term contract, the respondent was under no obligation to renew his contract. 5. The existing caselaw is that there is no obligation to renew a fixed term contract upon its expiry and that refusal or non-renewal of a fixed term contract does not constitute unfair termination of service. Further, an employer is under no obligation to give reasons for non-renewal of a fixed term contract. However, where parties agree otherwise that the contract will be renewable upon expiry, it behoves the parties especially the employer, when it opts to exercise the right of non-renewal to provide reasons for non-renewal in which case the employee’s views must be taken into account in line with the provisions of section 43 of the Employment Act. This implies that the employee is entitled to dispute the reasons for non-renewal. Of important consideration is whether the reason for which a fixed term contract was entered into still exist, the performance of the employee and other related fixed term employment contract operating environment considerations such as end of project to be executed or lack of funding to continue the project. 6. In this particular case, the respondent was accused of underperforming and that he failed to give proper mentorship to his team. He was as a consequence issued with a notice to show cause to which he responded but the respondent considered them unsatisfactory hence declined to renew his contract. 7. In its judgment, subject of this appeal, the *court aquo* stated:- “…the court has taken cognisance of the show cause letter dated 12th January, 2024 and the two responses by the claimant…it is the claimant’s case that he was terminated for failing to execute the duties of a technical sales representative yet he had risen to the ranks of a regional manager. On cross-examination, the respondent’s witness testified that the claimant had risen to the rank of a regional manager and was being paid a monthly salary of Kshs. 70,000/-. The earnings are supported by the claimant’s January pay slip…the latest contract provided is dated 6th January, 2020. The contract was to be automatically renewed every year as per clause 2.3. The effective date for renewal should be 6th January every year and not 20th of February as alleged in the letter of termination. Clause 9.1 of the same contract provided for a month’s notice or one month’s salary in lieu of notice. From the letter of termination, the claimant was not given notice…from the minutes of regional managers meeting held on 9th January, 2024, it is evident that several regions had not met the set targets. During cross examination, the respondent’s confirmed that it is only the claimant who was terminated for not meeting targets…” 1. As earlier stated, there is no obligation to renew a fixed term contract upon expiry unless it is provided in the contract that there will a renewal even if such renewal is conditional. The existence of such a provision changes the general character of fixed term contracts and henceforth makes it obligatory to provide reasons for non-renewal which the employee has a right to dispute as is the case here. It is noted from the extract of the trial court’s judgment above that several regions had not met the set targets and that during cross examination, the respondent’s witness confirmed that it was only the respondent whose service was terminated for not meeting targets. 2. From the foregoing the court notes that even though the general position is that it is not obligatory on the part of the employer to renew a fixed term contract and further that it is not obligatory to provide reasons for non-renewal, in this particular case, the contract provided for automatic renewal and that the termination was to be upon one month’s notice. The court further observes that the appellant was intent on renewing the respondent’s contract but for the allegations of underperforming, it was not renewed. The respondent disputed the allegations and sued for unfair termination and the trial court agreed with him and awarded him as contained in the lower court’s judgment. This court is of similar opinion that the appellant unfairly terminated the respondent’s service and so finds. This ground of appeal therefore fails. 3. On the issue of remedies awarded by the trial court, the appellant disputed the award of one month’s salary in lieu of notice, the court finds no merit on this ground of appeal after finding that the respondent was unfairly terminated and that this was provided for in the contract yet the respondent was given a day’s notice of non-renewal of his contract despite the fact that the contract document provided for a month’s notice or payment in lieu. 4. Regarding the award of severance pay of Kshs. 210,000/- pleaded and awarded by the trial court, this court finds this award unsupported for the reason that severance pay is only payable in cases where the termination is on account of redundancy. In this case the respondent’s service was not terminated on account of redundancy, this award was therefore not supported in law and will be set aside. This ground of appeal therefore succeeds. Concerning the award of six months’ salary as compensation for unfair termination of service, this court considers the same too high in the circumstances. The respondent was on annual contracts renewable. The contract further provided for termination upon notice of one month or a month’s salary in lieu of notice. There was therefore no assuredness of a renewal and the same for any valid reason could be terminated upon notice as provided in the contract or pay in lieu of notice. The court is therefore of the view that three months’ salary as compensation for unfair termination of service would be reasonable in the circumstances. This ground of appeal therefore succeeds to that extent. 5. **In conclusion the Court makes the following final orders in respect of this appeal.** 1. **Kshs. 70,000/- being one month’s salary in lieu of notice of termination of contract awarded by the trial Court is hereby upheld.** 2. **Award of Kshs. 210,000/- on account of severance pay is hereby set aside and is substituted with an order dismissing this claim.** 3. **Award of Kshs. 420,000/- being six months’ salary as compensation for unfair termination of service is hereby revised to Kshs. 210,000/- being three months’ salary as compensation for unfair termination of service** 4. **Total award Kshs. 280,000/-** 5. **Items (i) and (iii) will be subject to taxes and statutory deductions but will attract interest from the date of this judgment until payment in full** 6. **The appeal being partially successful, each party shall bear their costs of the appeal.** 6. **It is so ordered.** **Dated at Nairobi this 5th day of June, 2026** **Delivered virtually this 5th day of June, 2026** **Abuodha Nelson Jorum** **Presiding Judge-Appeals Division**