Masiga v Max Cure Hospital Ltd (Cause E099 of 2025) [2026] KEELRC 2141 (KLR) (23 July 2026) (Judgment)

Masiga v Max Cure Hospital Ltd (Cause E099 of 2025) [2026] KEELRC 2141 (KLR) (23 July 2026) (Judgment) Neutral citation: [2026] KEELRC 2141 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Kisumu Cause E099 of 2025 Nzioki wa Makau, J July 23, 2026 Between Susan Awuor Masiga Claimant and Max Cure Hospital Ltd Respondent Judgment 1.Through a Memorandum of Claim dated 23rd October 2025, the Claimant instituted this suit alleging unfair termination of employment. She seeks the following reliefs:a)A declaration that the termination of her employment was unlawful and/or unfair;b)Kshs. 307,600/- being salary for the unexpired period of her fixed-term contract;c)Kshs. 400,000/- punitive damages for malicious and oppressive conduct and for emotional distress occasioned to her by the termination and the withholding of her salary for 5 months;d)Interest on (b) and (c), at court rates;e)Costs of the suit; andf)Any other relief the court may deem fit and just to grant. 2.The Claimant states that she was employed by the Respondent as a Sales Manager with effect from 20th July 2024 under a contract dated 20th June 2024, initially serving a six-month probationary period at a monthly salary of Kshs. 80,541/-. Upon successfully completing probation, she was confirmed in employment under a one-year fixed-term contract dated 2nd January 2025, due to expire on 31st December 2025. She avers that she served diligently until 13th August 2025, when she was issued with a 30-day performance improvement notice warning that her employment would be terminated if her performance did not improve. She contends that the notice was, in reality, a disguised termination notice because no performance appraisal was undertaken upon expiry of the improvement period. Instead, she was verbally informed that her employment had been terminated with effect from 13th September 2025. According to the Claimant, the termination was unjustified as the Respondent simultaneously attributed it to poor performance and a downturn in the health sector. She further avers that, by the time her employment was terminated, the Respondent had withheld her salary for five consecutive months, despite approximately three and a half months remaining before the expiry of her fixed-term contract. 3.The Respondent opposed the claim through a Memorandum of Response dated 20th November 2025. While admitting that it employed the Claimant as a Sales Manager, it denies that the termination was unfair. It maintains that the performance improvement notice dated 13th August 2025 was issued pursuant to Clause 16 of the employment contract, which permitted termination where an employee failed to attain the agreed Key Performance Indicators. The Respondent contends that the Claimant was informed of her poor performance, acknowledged the concerns raised, and was afforded an opportunity to improve, but failed to meet the required standards, thereby justifying the termination. It denies that the termination was occasioned by financial difficulties or lack of business, insisting that poor performance was the sole reason for the dismissal. Regarding the delayed payment of salary, the Respondent acknowledges that there were arrears but attributes the delay to the Claimant's failure to complete the clearance process following termination. It nevertheless maintains that all salary arrears were subsequently settled and prays that the suit be dismissed with costs. 4.At the hearing, each party called one witness. The Claimant testified in support of her case, adopting her witness statement dated 23rd October 2025 as her evidence-in-chief and producing the documents contained in her list of documents of the same date together with the supplementary list of documents dated 23rd January 2026. She maintained that the allegations of poor performance were unfounded and that she was never subjected to a disciplinary hearing before her employment was terminated. 5.The Respondent called its Human Resource Manager, Mr. John Bor, who adopted his witness statement dated 12th January 2026 as his evidence-in-chief and produced the documents contained in the Respondent's list of documents dated 20th November 2025. During cross-examination, he acknowledged that the Respondent had not produced any performance appraisal report to support the allegation of underperformance. 6.At the close of hearing parties filed written submissions. Claimant's Submissions 7.The Claimant identifies the following issues for determination:(a)Whether the Respondent had a valid and fair reason to terminate her employment;(b)Whether the Respondent complied with section 41 of the Employment Act;(c)Whether the admitted withholding of her salary for four to five months amounted to a fundamental breach of contract, constructive dismissal and violation of her constitutional and statutory rights;(d)Whether she is entitled to damages for the unexpired term of her fixed-term contract and the other reliefs sought; and(e)Who should bear costs of the suit. 8.On the validity of the termination, the Claimant submits that the Respondent failed to discharge the burden imposed by sections 43 and 45 of the Employment Act to prove a valid and fair reason for dismissal. She argues that although the Respondent cited poor performance, it produced no evidence of agreed performance targets, appraisal reports, warning letters or objective performance evaluations to substantiate the allegation. She further contends that the Respondent's admitted failure to pay her salary for approximately five months undermined its claim of poor performance, as it could not reasonably attribute any alleged shortcomings to her while failing to meet its own contractual obligations. She therefore urges the Court to find that the allegation of poor performance was merely an afterthought intended to justify an otherwise unlawful termination. In support of this position, she relies on Walter Ogal Anuro v Teachers Service Commission [2013] eKLR where the Court held that a lawful termination must be founded on both substantive justification and procedural fairness. 9.On procedural fairness, the Claimant submits that the Respondent failed to comply with section 41 of the Employment Act. She argues that she was never issued with a proper show-cause notice, invited to a disciplinary hearing, afforded an opportunity to be accompanied by a fellow employee or union representative, or given an opportunity to respond to the allegations before the decision to terminate her employment was made. She maintains that the purported performance improvement notice was merely a disguised termination notice rather than a genuine opportunity to improve. She places reliance on the case of Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR for the proposition that section 41 prescribes mandatory procedural safeguards that must be observed before terminating an employee's services, and again cites Walter Ogal Anuro v Teachers Service Commission [2013] eKLR to submit that failure to satisfy either substantive or procedural fairness renders a termination unfair. 10.Regarding the admitted withholding of salary, the Claimant submits that the Respondent's failure to pay her salary for four to five months constituted a fundamental breach of the employment contract and the Employment Act. She argues that sections 17, 18 and 19 of the Employment Act impose a mandatory obligation on employers to pay wages as they fall due and that no lawful justification was advanced for withholding her salary. She contends that persistent non-payment of wages amounted to a repudiatory breach of contract, constructive dismissal and a violation of Articles 41 and 47 of the Constitution. She further submits that the Respondent's breach preceded any allegations of poor performance and therefore disentitled it from relying on such allegations. In support of these arguments, she relies on Kennedy Nyabuti v East African Safari Express Ltd [2013] eKLR where the Court held that failure to pay salary amounts to a fundamental breach of contract, and Coca Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR in which the Court of Appeal held that an employer's conduct may amount to constructive dismissal where it demonstrates an intention not to be bound by the employment contract. 11.On remedies, the Claimant submits that her fixed-term contract was prematurely terminated approximately three and a half months before its expiry and that she had a legitimate expectation of serving until 31st December 2025. She therefore seeks Kshs. 307,600/- being salary for the unexpired term of the contract, arguing that payment of salary arrears after demand did not cure the Respondent's breach or extinguish her claim for unfair termination. She relies on Transparency International Kenya v David Onsongo [2017] eKLR and Edinah Nyaboke Gwachi v Kapric Apparels (EPZ) Limited [2016] KELRC 272, where the Court awarded compensation for the unexpired portion of fixed-term contracts terminated prematurely. 12.The Claimant further submits that the Respondent's conduct of withholding her salary for several months before terminating her employment was oppressive, arbitrary and undertaken in bad faith. She urges the Court to award aggravated or constitutional damages, in addition to compensation under section 49 of the Employment Act, taking into account the manner of termination, the prolonged withholding of wages, the emotional distress occasioned to her and the abrupt loss of her livelihood. Finally, the Claimant submits that interest should accrue from the dates the withheld salaries fell due and that costs should follow the event because the Respondent's conduct necessitated the institution of the suit. She further points to the Respondent's Human Resource Officer's testimony, which allegedly admitted that the Claimant's salary had remained unpaid for at least four months and that the Respondent had not produced evidence demonstrating poor performance. She consequently urges the Court to allow the claim and grant the reliefs sought in the Memorandum of Claim. Respondent's Submissions 13.On its part the Respondent identifies the following issues for determination:(i)Whether the termination of the Claimant's employment was lawful and contractually justified;(ii)Whether it complied with the procedural requirements under the Employment Act and the employment contract;(iii)Whether the withholding of salary for five months amounted to an unfair labour practice or constructive dismissal; and(iv)Whether the reliefs sought are merited. 14.On the lawfulness of the termination, the Respondent submits that the dismissal was firmly grounded on the parties' employment contract. It argues that Clause 5 subjected the Claimant's performance to evaluation through Key Performance Areas (KPAs) and Key Performance Indicators (KPIs), while Clause 16(A) expressly entitled the Respondent to terminate the contract where the Claimant failed to meet the prescribed performance standards after reasonable notice. It contends that the Performance Improvement Notice issued on 13th August 2025 constituted the contractual notice contemplated under Clause 16(A), as it identified the Claimant's performance shortcomings, afforded her thirty days to improve and warned that failure to do so would result in termination. According to the Respondent, the Claimant failed to attain the required standards, thereby triggering its contractual right to terminate her employment. In support of this position, it relies on Consolidated Bank of Kenya Ltd v Martin Gitonga Kimani [2018] eKLR for the proposition that an employee is bound by the terms of an employment contract voluntarily executed, and Kenya Tea Development Agency v Lydia Awiti [2017] eKLR, where the Court upheld performance-based termination undertaken in accordance with contractual provisions after reasonable notice and an opportunity to improve. The Respondent further submits that its reference to financial challenges occasioned by delays in payments from the Social Health Authority (SHA) merely explained the prevailing business environment and did not negate the existence of genuine performance concerns. 15.On procedural fairness, the Respondent submits that it fully complied with sections 41, 43 and 45 of the Employment Act. It argues that the Performance Improvement Notice informed the Claimant of the specific performance concerns, afforded her a reasonable opportunity to improve, and clearly communicated the consequences of failing to meet the required standards. It contends that the performance improvement period itself constituted both notice and an opportunity to respond and that the Claimant neither challenged the allegations nor utilised the internal mechanisms available to her during that period. The Respondent submits that a formal disciplinary hearing is not mandatory in every case involving poor performance. It relies on Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR for the proposition that procedural fairness in performance-related terminations is achieved where the employee is informed of the performance concerns, given an opportunity to improve and heard before termination. It also cites Nation Media Group Limited v Nzivo [2016] eKLR, where the Court upheld a termination following a performance improvement process as compliant with sections 41, 43 and 45 of the Employment Act. 16.Regarding the delayed payment of salary, the Respondent submits that although salary arrears accumulated for five months, all outstanding amounts were subsequently paid and there is therefore no outstanding salary claim. It further argues that the Claimant cannot maintain a claim for constructive dismissal because she did not resign in response to the alleged breach but remained in employment until her contract was terminated by the Respondent. In support of this argument, it relies on Kenya Revenue Authority v Reuwel Waithaka Gitahi & 2 others [2019] eKLR, where the Court of Appeal held that constructive dismissal presupposes resignation by the employee in response to the employer's repudiatory conduct, and Kibera Industries Ltd v David Mboya Ochieng [2020] eKLR, in which the Court held that delayed payment of salary, though a serious breach, does not amount to constructive dismissal where the employer, rather than the employee, terminates the employment relationship. The Respondent further submits that delayed salary payments attributable to systemic financial challenges in the health sector did not invalidate an otherwise lawful termination based on poor performance. It argues that the Claimant's performance obligations under the contract were tied to KPAs and KPIs and were not dependent solely on the Respondent's financial position. 17.On the reliefs sought, the Respondent submits that the Claimant is not entitled to salary for the unexpired portion of the fixed-term contract because Clause 16(A) permitted termination for cause without notice or payment for the balance of the contract period. It further argues that compensation for unfair termination under section 49 of the Employment Act is discretionary and does not automatically translate into payment of salary for the unexpired term of a fixed-term contract. It relies on David Mwangi Njuguna v Barclays Bank of Kenya Ltd [2017] eKLR, where the Court held that compensation for premature termination of a fixed-term contract depends on the circumstances of each case and is not equivalent to the balance of the contractual salary. The Respondent also opposes the claim for punitive damages, submitting that the Claimant has neither pleaded nor proved malice or oppressive conduct warranting such an award. It relies on G4S Security Services (K) Ltd v Calvince Okoth Ouma [2016] eKLR, where the Court of Appeal held that punitive or emotional distress damages in employment disputes require proof of exceptional circumstances beyond the fact of termination. 18.Finally, the Respondent submits that it discharged the burden imposed by section 43 of the Employment Act by producing the Performance Improvement Notice and the contractual provisions governing performance-based termination. It relies on Kenya Pipeline Company Limited v Bernard Karanja Gachinga [2020] eKLR for the proposition that courts should not substitute their own assessment for that of management where an employer demonstrates genuine performance concerns and compliance with due process. It also cites Stanbic Bank Kenya Ltd v James Mutua Munyao [2021] eKLR to submit that a claimant must establish both absence of a valid reason and procedural unfairness before a termination can be declared unfair, and Nairobi Java House Ltd v Anne Njambi Kairi [2019] eKLR for the proposition that once an employer adduces evidence justifying termination, the evidential burden shifts to the employee to rebut that evidence. The Respondent therefore urges the Court to dismiss the claim with costs or, in the alternative, to limit any award to nominal compensation. Disposition 19.The issues for determination are well set out by the Respondent. These are:(a)Whether the termination of the Claimant's employment was lawful and contractually justified;(b)Whether it complied with the procedural requirements under the Employment Act and the employment contract;(c)Whether the withholding of salary for five months amounted to an unfair labour practice or constructive dismissal;(d)Whether the reliefs sought are merited; and(e)Who is to bear the costs of the suit. 20.The Claimant herein was employed by the Respondent in the position of sales manager earning Kshs. 80,541/-. She was alleged to have been a poor performer and the Respondent asserts that the Claimant did not meet the key performance indicators. There is an allegation that she was given a chance to improve. The ''performance improvement notice'' dated 13th August 2025 was issued to the Claimant ostensibly pursuant to Clause 16 of the employment contract. This termination meted out in the manner it was meted out did not meet the requirements under section 41 of the Employment Act which is the due process paradigm of dismissal. There was therefore no contractual or valid reason for termination. 21.On the issue as to whether the Respondent complied with the Employment Act and the employment contract, I find that there was woeful failure to do the correct thing. The alleged performance improvement notice issued to the Claimant was actually a termination letter. There was no effort to allow the Claimant to improve and there was no attempt to even disguise the dismissal as a valid and fair through a process that would have met the muster for fair termination. 22.As to whether the withholding of salary for five months amounted to an unfair labour practice or constructive dismissal, the Claimant was not paid salary for 5 months. This cannot be considered as anything other than slavery and servitude where an employee works for nothing. This amounted to unfair labour practice and sufficient to found a claim for constructive dismissal. The non-payment of salaries amounted to a repudiatory breach of the contract as the employer demonstrated an unequivocal intention to no longer be bound by the essential terms of the employment contract because it refused to pay salaries and wages when they fell due. The fact that the payment was subsequently made does not cure this. 23.As to whether the reliefs sought are merited, it is my finding that the Claimant is entitled to relief and the final aspect is the costs. The Respondent brought this situation to bear by impoverishing the Claimant for 5 months. How was she to cover her expenses? This is a case where costs against the Respondent are a must. 24.In the final analysis I enter judgment for the Claimant for:a.Kshs. 80,541/- as notice being salary for one month.b.Kshs. 402,705/- as compensation for unfair termination being equivalent to 5 months salary.c.Costs of the suit.d.Interest on the sums in (a) and (b) above at Court rates from the date of judgment till payment in full.It is so ordered. DATED AND DELIVERED AT KISUMU THIS 23RD DAY OF JULY 2026NZIOKI wa MAKAU, MCIArb.JUDGE