https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2016

Mwanangu v Cathmed (Employment and Labour Relations Cause E003 of 2024) [2026] KEELRC 2016 (KLR) (16 July 2026) (Ruling) Neutral citation: [2026] KEELRC 2016 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Malindi Employment and Labour Relations Cause E003 of 2024 K Ocharo, J July 16, 2026 Between Patrick Kihia Mwanangu Claimant and Cathmed Respondent (On the Respondent/Applicant's Notice of Motion dated 31st October 2025, seeking directions on whether sums awarded pursuant to Section 49(1)(c) of the Employment Act, 2007, are subject to statutory deductions) Ruling A. Introduction And Background 1.By a Judgment of this Court (Ocharo Kebira, J.) delivered on 30th September 2025 in the substantive cause, the Claimant, Patrick Kihia Mwarangu, succeeded in his claim against the Respondent, Cathmed Limited, on a finding that his termination from employment was both procedurally and substantively unfair. The Court entered Judgment for the Claimant in the following material terms: (a) a declaration that the termination was procedurally and substantively unfair; (b) compensation pursuant to Section 49(1)(c) of the Employment Act, 2007, in the sum of Kshs. 1,400,000.00, being the equivalent of four (4) months' gross salary; (c) unpaid salary for April 2024 in the sum of Kshs. 350,000.00; (d) costs of the suit; and (e) interest on (b) and (c) at court rates from the date of Judgment until payment in full. 2.Following delivery of the Judgment, the Claimant's advocates, M/s Ngari & Kaburu Advocates, by a letter dated 6th October 2025, furnished the Respondent's advocates, M/s Muturi Gakuo & Kibara Advocates, with a tabulation of party-and-party costs totalling Kshs. 197,009.00, and requested settlement of the sum of Kshs. 1,947,009.00, being the aggregate of the taxed costs and the judgment sum of Kshs. 1,750,000.00. 3.It is deposed, in the supporting affidavit of Francesca Duranti, a director of the Respondent, that without awaiting a formal taxation process and in a show of good faith, the Respondent remitted to the Claimant's advocates, by RTGS transfer dated 24th October 2025, the full sum of Kshs. 1,334,500.00, representing the taxed costs in full together with the judgment sum of Kshs. 1,750,000.00 after deduction, at source, of statutory deductions which the Respondent remitted to the relevant statutory bodies. 4.By a letter dated 30th October 2025, the Claimant's advocates took the position that the Judgment "was purely for compensation against unlawful termination of Employment," that the Court "awarded [the] client General Damages as compensation together with the costs of the suit amounting to a sum of Kshs. 1,947,009/=," and that the award "is not in any way subjected to any tax deduction whatsoever." The Claimant's advocates accordingly objected to any deduction or remittance made against the award, asserting that it would be "unimaginable to allege secondary employee income" upon the sum awarded, and gave notice that they were instructed to move the Court for a clear interpretation of the Judgment, while reserving the right to pursue full payment of the gross judgment sum, which the Respondent understood to be a threat of execution for the sum corresponding to the statutory deductions already remitted. 5.It is that impasse which culminated in the Notice of Motion dated 31st October 2025 now before Court, brought under Section 3 of the Employment and Labour Relations Court Act, 2011, Rule 47 of the Employment and Labour Relations Court (Procedure) Rules, 2024, and Section 49(1)(a)(b)(c) and (2) of the Employment Act, 2007. B. The Application And The Grounds Thereof 6.The Respondent/Applicant seeks the following orders—1.That this Honourable Court be pleased to certify this Application urgent and set it down for inter-partes hearing on priority basis.2.That pending the hearing and determination of this Application, the Claimant/Respondent, his agents, be restrained from instituting execution proceedings against the Respondent/Applicant in respect of the statutory deductions already remitted to the relevant statutory bodies.3.That this Honourable Court be pleased to give directions and clarification on whether payments made to an employee pursuant to Section 49(1)(c) of the Employment Act, 2007, are subject to statutory deductions under Section 49(2) of the said Act.4.That this Honourable Court be pleased to find and declare that the sums awarded to the Claimant/Respondent in the Judgment of this Court delivered on 30th September 2025 were properly subjected to statutory deductions before payment of the net balance to the Claimant.5.That the Claimant/Respondent bears the costs of this Application. 7.The Application is premised, in the main, on the following grounds appearing on its face and in the supporting affidavit of Francesca Duranti—a.that Judgment was delivered by this Court on 30th September 2025 awarding the Claimant/Respondent a total sum of Kshs. 1,750,000.00 in compensation and unpaid salary;b.that the Applicant has since complied with the Judgment by paying the Claimant/Respondent the judgment sum less statutory deductions, in accordance with Section 49(2) of the Employment Act, 2007, and has additionally remitted the taxed costs of Kshs. 197,009.00 in full;c.that the Claimant/Respondent has nonetheless threatened execution for the sum corresponding to the statutory deductions, alleging that the full gross sum ought to have been paid to him directly, without the judgment sum being subjected to any deduction;d.that it is paramount that this Court pronounce itself on whether awards made under Section 49(1)(c) of the Employment Act, 2007, are payable gross or net of statutory deductions, Section 49(2) of the Act expressly providing that "any payments made by an employer under this section shall be subject to statutory deductions"; ande.that unless the Court intervenes, the Applicant stands to suffer unwarranted execution and financial loss notwithstanding its full compliance with the Judgment and the law, and that it is in the interest of justice and equity that the Court clarifies and confirms the Applicant's compliance with the law. C. The Claimant/respondent's Opposition 8.The Claimant/Respondent has not filed formal grounds of opposition to the Application. His position, however, is sufficiently discernible from the correspondence of his advocates, M/s Ngari & Kaburu Advocates, exhibited before the Court, and in particular the letter dated 30th October 2025, in which the following contentions are advanced in opposition to the Applicant's case—a.that the Judgment of Ocharo Kebira, J., "was purely for compensation against unlawful termination of Employment," the Court having awarded the Claimant "General Damages as compensation together with the costs of the suit" amounting to Kshs. 1,947,009.00;b.that, being an award of a compensatory character, the Judgment sum "is not in any way subjected to any tax deduction whatsoever," and that it would be "unimaginable to allege secondary employee income" upon the sum so awarded;c.that the Claimant/Respondent accordingly objects to any tax deduction and/or remittance effected over the Court's award, and reserves the right to pursue payment of the full, undeducted judgment sum; andd.that, in the event the Applicant maintains its position, the Claimant/Respondent is instructed to move the Court for a clear interpretation of the Judgment. D. Analysis And Determination 9.I have carefully considered the Notice of Motion dated 31st October 2025, the grounds set out on its face and in the supporting affidavit of Francesca Duranti, the correspondence passing between the parties' respective advocates, and the position taken by the Claimant/Respondent as disclosed in that correspondence, together with the record of the substantive cause and the Judgment delivered herein on 30th September 2025. 10.The singular issue falling for determination is whether the sums awarded to the Claimant pursuant to Section 49(1)(c) of the Employment Act, 2007 — namely, compensation for unfair termination — are, as a matter of law, subject to statutory deductions, or whether, as the Claimant/Respondent contends, such an award, being compensatory in character, is payable gross and free of any deduction. The statutory starting point 11.The answer to that question begins, and very nearly ends, with the plain language of the statute itself. Section 49(1)(c) of the Employment Act, 2007, empowers this Court, where it finds a termination to be unfair, to award an employee—“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." 12.Section 49(2) of the same Act then provides, in terms that admit of no ambiguity—“Any payments made by the employer under this section shall be subject to statutory deductions." 13.The word "shall" in subsection (2) is peremptory, and the phrase "any payments made... under this section" is deliberately broad. It does not distinguish between the three limbs of compensation available under subsection(1) —namely, wages in lieu of notice under paragraph(a),the proportionate wage under paragraph(b),and the discretionary compensatory award under paragraph(c) —nor does it exempt the compensatory award on account of its being assessed by the Court rather than fixed by contract. Where the language of a statute is clear and unambiguous, this Court's duty is to give effect to it according to its plain and ordinary meaning; it is not open to a court, still less to a litigant, to read into Section 49(2) an exception that Parliament did not enact. The submission that an award under paragraph (c) is somehow of a different genus from the payments contemplated in subsection (2), and thereby escapes deduction, is not supported by the text and cannot be sustained. 14.That construction is reinforced, rather than displaced, by the fiscal law of general application. Section 5(2)(c) of the Income Tax Act (Cap. 470) expressly deems, as "gains or profits" from employment chargeable to tax, "an amount received as compensation for the termination of a contract of employment or service, whether or not provision is made in the contract for the payment of that compensation." The Employment Act and the Income Tax Act thus speak with one voice: the character of a payment as "compensation" for the wrong of unfair termination, as opposed to consideration for work actually done, does not remove it from the reach of statutory deduction. Indeed, it is precisely because compensation of this kind might otherwise be thought to fall outside the ordinary wage bracket that both statutes contain express, deeming provisions to bring it within the net. The position taken by this Court in prior decisions 15.This construction is not novel to this Ruling. It has been consistently applied by this Court in a line of decisions in which awards of compensation under Section 49(1)(c) have, without exception, been treated as subject to statutory deductions. 16.In Titus Muriuki Ndirangu v Beverly School of Kenya Limited [2022] KEELRC 827 (KLR), this Court, in capping the compensation payable to the claimant, held—“Section 49(1)(c) of the Act caps the maximum compensation for wrongful dismissal or unfair termination at twelve months' gross salary subject to statutory deductions." 17.and, having assessed the compensation payable at six months' gross salary, went on to hold in respect of the resultant sum—“This amount is subject to statutory deductions." 18.In Radar Limited v Machera (Appeal E061 of 2022) [2023] KEELRC 1918 (KLR), this Court held in equally unambiguous terms—“Section 49(2) of the Act is mandatory for every employer to make a statutory deduction of all payments made to an employee," 19.and made final orders to the effect that the awards made, including the compensation for unfair termination, "shall be subject to Section 49(2) of the Employment Act, 2007." 20.Similarly, in M'Aburi v Kiegoi Tea Factory Company Limited (Cause E027 of 2024) [2025] KEELRC 936 (KLR), this Court, having awarded the claimant notice pay, compensation and house allowance, made a final order in the following terms—“The award is subject to statutory deductions." 21.These decisions speak to a settled and consistent practice of this Court: that awards of compensation under Section 49(1)(c), no less than awards of unpaid wages, salary in lieu of notice or other terminal dues, are treated as payments "made by the employer under this section" within the meaning of Section 49(2), and are accordingly subject to statutory deductions as a matter of course, in the absence of some very exceptional circumstance shown to warrant a departure — none of which has been shown, or indeed pleaded, in the present case. 22.I am not unmindful that Kenya Law has, in a recent case digest, flagged a narrower point of refinement in this area, to the effect that compensation for unfair termination, being a one-off terminal payment rather than remuneration paid in the course of an ongoing employer-employee payroll relationship, may not automatically attract every species of statutory deduction — in particular, levies such as the Affordable Housing Levy and contributions to the Social Health Insurance Fund, which are structurally premised on a continuing contribution and payroll cycle. That refinement, whatever its ultimate merit in an appropriate case, goes to the composition of the deductions properly exigible on a given award, and not to the anterior question decided in the authorities cited above and now reaffirmed in this Ruling, namely, whether an award under Section 49(1)(c) is, in principle, subject to statutory deductions at all. The Claimant/Respondent's objection in the present case is not addressed to the composition or rate of the deductions made; it is a wholesale objection to any deduction whatsoever. On that wholesale objection, the authorities are uniform, and go against the Claimant/Respondent. Disposal of the Claimant/Respondent's contention 23.Returning to the Claimant/Respondent’s position, it rests substantially on a mis-characterisation of the Judgment of 30th September 2025. The award made to the Claimant was not an award of general damages at large, sounding in delict or in the general law of contract; it was, in explicit terms, "compensation pursuant to section 49[1][c] of the Employment Act" (see paragraph 99(b) of the Judgment). The Claimant cannot, at the stage of enforcement, recast a statutory award expressly made under Section 49(1)(c) as an award of "General Damages" simply because doing so might be thought to place it beyond the reach of Section 49(2). The two subsections are inseparable; an award is either made under Section 49(1)(c), and is therefore, by force of Section 49(2), subject to statutory deductions, or it is not made under that provision at all. There is no third category of "compensation" under Section 49(1)(c) that escapes subsection (2) merely upon a change of label by the party seeking to avoid deduction. 24.Nor is there force in the suggestion that subjecting the award to deduction amounts to an impermissible allegation of "secondary employee income." The premise of both Section 49(2) of the Employment Act and Section 5(2)(c) of the Income Tax Act is precisely that compensation for termination of employment, however styled, is treated by law as income arising from the employment relationship for the purposes of withholding — a premise this Court is bound to apply, and one it has consistently applied in the authorities cited above. 25.On the material before me, I am satisfied that the Applicant has made out its case. The Respondent/Applicant remitted to the Claimant the net judgment sum after deduction of statutory deductions, and separately settled the taxed costs of Kshs. 197,009.00 in full, all as evidenced by the bank remittance advice dated 24th October 2025 and the accompanying correspondence. There is no suggestion, still less any evidence, that the deductions made were miscalculated, excessive, or remitted otherwise than to the relevant statutory bodies. The threat of execution communicated through the letter of 30th October 2025 is, in the circumstances, misconceived and premature, the Applicant having fully discharged its obligations under the Judgment. E. Disposition 26.For the reasons set out above, this Court makes the following final orders—(a)It is hereby declared that sums awarded as compensation pursuant to Section 49(1)(c) of the Employment Act, 2007, including the compensation and salary awarded to the Claimant in the Judgment of this Court dated 30th September 2025, are subject to statutory deductions by force of Section 49(2) of the Employment Act, 2007, as read with Section 5(2)(c) of the Income Tax Act (Cap. 470).(b)It is hereby found and declared that the Respondent/Applicant's remittance of the judgment sum, less statutory deductions duly paid over to the relevant statutory bodies, together with full payment of the taxed costs of Kshs. 197,009.00, constitutes due and lawful compliance with the Judgment of this Court dated 30th September 2025.(c)The Claimant/Respondent, whether by himself, his agents, servants and/or advocates, is hereby restrained from instituting or continuing with any execution or other enforcement proceedings against the Respondent/Applicant in respect of the sums lawfully deducted and remitted to the relevant statutory bodies pursuant to the Judgment aforesaid.(d)The costs of this Application shall be borne by the Claimant/Respondent, the necessity for it having arisen from the position taken in the letter of his advocates dated 30th October 2025, which this Court has found to be untenable in law.It is so ordered. DATED, SIGNED AND DELIVERED THIS 16TH DAY OF JULY 2026OCHARO KEBIRAJUDGE