https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1575

Mwangi v SBM Bank (Kenya) Ltd (Cause E404 of 2023) [2026] KEELRC 1575 (KLR) (11 June 2026) (Judgment) Neutral citation: [2026] KEELRC 1575 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Nairobi Cause E404 of 2023 ON Makau, J June 11, 2026 Between Erick Kariuki Mwangi Claimant and Sbm Bank (Kenya) Limited Respondent Judgment Introduction 1.By an Amended Memorandum of Claim dated 28th November 2024 the Claimant sued the Respondent for unfair termination of his employment by the Respondent on account of redundancy, and prayed for the following:-a.A declaration that the Respondent's termination/dismissal of the Claimant's employment was illegal, unlawful, unfair and inhumane.b.An order for the Respondent to pay the Claimant compensatory damages calculated at Kshs 1,652,352.00 or in lieu whereof, reinstate the Claimant's employment.c.An order for the Respondent to freeze the Claimant's loan until this suit is heard and determined.d.In the alternative an order that the Respondent to freeze the Claimant's loan until the Claimant gets a stable income to service the said loan.e.An order directing the Respondent to cause the claimant to be delisted from CRB.f.An order barring the Respondent, its servants and/or agents from converting the Claimant's Loan to market rate and/or instructing external debt collectors to torment the Claimant.g.An order for the Respondent to pay the Claimant's costs for this claim thereon.h.12 months' salary for unlawful redundancy..........Kshs 1,652,352i.1 months' salary in lieu of Notice............................Kshs. 137,696j.House Allowance for 40 months, beingKshs 137,696 x 15% .......... Kshs 826,160Total ..................Kshs. 2,616,208.00 2.The Respondent filed a Memorandum of Response and Counterclaim dated 5th March 2025 denying the alleged unfair or unlawful termination, and averred that the redundancy process was undertaken in strict conformity with the law and good labour practices. It further averred that it paid the Claimant his terminal dues and denied the reliefs sought Therefore it prayed for the suit to be dismissed with costs. 3.As regards the Counterclaim, the Respondent averred that it advanced the Claimant loans during his service which he defaulted after the separation. Therefore, it prayed for judgment against the Claimant for:-a.A sum of Kshs.983,139.28 as at 5th September 2024 together with interest thereon at the contractual rate until payment in full.b.Costs of the Suit and the Counterclaim.c.Interest on (a) and (b) above at court rates from the date of filing the Memorandum of Response and Counterclaim until payment in full. 4.The Claimant filed a Memorandum of Response to the Counterclaim dated 28th April 2025 denying all the allegations therein. He averred that the default on the loan repayment was not deliberate but was occasioned by the unlawful termination of his employment. The Claimant further contended that this Honourable Court lacks jurisdiction to entertain the Counterclaim as the Respondent has already converted the loan into a commercial loan. Evidence 5.The Claimant testified as CW1 and adopted his written statement dated 16th May 2023 as his evidence in chief. He also produced 10 documents in the list dated 16th May 2023 and they were marked as exhibits 1 – 10 respectively. 6.In brief, his testimony was that he was employed by the Respondent on 18th August 2018, as Senior Relations Officer – Portfolio Management for a monthly salary of Kshs.137,696. Thereafter he served diligently until 6th December 2021 when he received an email from the Respondent’s HR Department addressed to all the staff members, stating that it had not attained the desired numbers of staff to exit through Voluntary Employee Exit Scheme (VEES), and it would proceed carry out redundancy process. 7.On 7th December 2021, he received another email from the HR Department addressed to him, referring to the earlier email and inviting him to a meeting with the Head of HR Department. In the meeting, he was handed a termination letter dated 6th December 2021declaring him redundant effective the same date, 7th December 2021. Immediately after receipt of the termination letter, he was deactivated from the Bank’s Administrative System and other interactive applications for execution of his duties. 8.On 14th December 2021, he received yet another letter from the HR Department, similar to the one dated 6th December 2021 with additional information that his last day of work would be 15th January 2022. He contended that the Respondent grossly withheld information relating to the redundancy and thereby making it opaque and unfair. The selection criteria of the affected employees were never disclosed rendering the exercise discriminatory, biased and a violation of his fundamental rights as an employee. Therefore, he contended that his redundancy was unjustified because his position still exists and the Respondent has hired other employees in that position. 9.As regards the counterclaim, he contended that he failed to service his loans because of lack of means after the Respondent unfairly terminated his employment. He confirmed his willingness to pay the loan but blames the respondent for rendering him financially miserable, with loans to pay and a young family to provide for. He also faulted the Respondent for according a moratorium without prior consultation. He further faulted the respondent for listing him on the CRB and for its failure to pursue the insurance company which had covered loss of employment through redundancy, to recover the loan. 10.On cross examination, he confirmed that he was a Senior Relationships Officer and there was a meeting on 6th December 2021 before the redundancy notice was issued. The notice was given to him on 7th December 2021which indicated that his last day of work was 15th January 2022. Subsequently, he was called by the bank to sign documents and he had no other option given other than to sign. He stated that paragraph 15 to 20 of his witness statement is erroneous and can be disregarded. 11.He confirmed that he was aware of the Voluntary Employment Separation Scheme (VESS) but he never applied for it. He further confirmed that he had a loan which is still outstanding. He also confirmed that his loan was to be put on a moratorium but he was still unable to service it. He stated that there was insurance cover for redundancy as shown on Pages 76 – 89 of the Respondent's bundle. He admitted that he was paid an amount after the termination but he never used it to repay the loan. 12.In re-examination, he clarified that on 6th December 2021 there was a meeting to communicate that the VESS process had ended and redundancies would be done. On 7th December 2021 he was given a termination letter and it was to take effect immediately. He stated that the VESS and redundancy were separate processes. He stated that on 6th December 2021 the list of people to be laid off was not published. 13.Finally, he clarified that the Respondent had outsourced an insurance company to cover the redundancy and maintained that the bank should have pursued the insurer for his loan. 14.The Respondent called its Head of Employee Relations and HR, Simon Muriithi Maina, as its witness and he testified as RW1. He adopted his witness statement dated 24th March 2025 as his evidence in chief and produced a bundle of 25 documents in the list dated 25th March 2025 as exhibits D. 1 – 25 respectively. 15.In brief, his testimony was that the claimant was employed by the respondent as a Senior Relations Officer- Portfolio Management from 18th August 2018 for a consolidated monthly salary of Kshs. 110,000. He contended that the claimant was not diligent in his work and he was served with a show cause letters dated 13th October 2020 and 15th October 2020 for contravening the employer’s Code of Conduct which culminated in a warning letter on 26th October 2020. 16.As regards the impugned redundancy, RW1 stated that the respondent inherited a heavy interim organization structure of more than 800 employees after acquisition of two defunct banks, Fidelity Commercial hereinafter referred to as “Fidelity Bank” and Chase Bank (K) Limited (in liquidation) hereinafter called “Chase Bank”. Subsequently, with approval of the regulator, the respondent closed several branches between 2018 and 2021and undertook a restructuring exercise to streamline its operations. 17.He further stated that, as part of the restructuring, the Respondent implemented a fit-for-purpose structure where some roles fell off and the excess number of staff had to be offloaded. By a memo dated 5th October 2021, the Respondent invited employees to a VESS and also informed the staff of its intention to declare redundancies if the VESS did not yield the ideal number of 177 employees. 18.He stated that the VESS yielded only 80 employees, forcing the Respondent to proceed with implementing the redundancy as communicated vide the Memo dated 5th October 2021. Consequently, by a Memo dated 6th December 2021, it communicated to the staff, its decision to terminate employment on account of redundancy, and further informed that the affected staff will be individually informed the following day, that is, 7th December 2021. 10.He stated that the redundancy notice dated 6th December 2021 was served to the affected staff, the Ministry of Labour, the CEO of Kenya Bankers Association and the Central Baker of Kenya (CBK). He contended that the claimant’s role of Senior Officer – Portfolio Management was among the employees affected by the restructuring as it was not included in the Respondent’s new structure, and the claimant and two colleagues in that role became redundant. He contended that consultations were held between the Claimant and Respondent under the employment laws. 20.He contended that the Claimant was on 14th December 2021 issued with one-month termination notice on account of redundancy effective 15th January 2022. He contended that the letter gave the Claimant superior redundancy package than the minimum terms prescribed by the Employment Act. He contended that, on 13th January 2022, the claimant signed a settlement agreement for his terminal dues dated 20th December 2021. 21.He further testified that the Claimant had applied and obtained Staff Personal Loan of Kshs 1,100,000 on 2nd July 2020 payable within 60 months and for an interest of 7% provided he remained in the employment of the Respondent. The bank had a discretion to adjust the interest to commercial rates if the Claimant left employment for whatever reason. At the time of the Claimant’s exit, his loan balance was Kshs. 822,099.69, and on 22nd December 2021, he wrote a commitment to continue servicing the loan by monthly instalments of Kshs. 21,799.35, but he defaulted in his loan repayment. 22.RW1 contended that the Claimant had been enrolled for Credit Life Cover with an Insurance company, and the respondent notified the insurer about the redundancy. He further stated that the Claimant was entitled to collect the money from the insurer and remit it to the Respondent to offset the loan, but he never did so. He was also paid his terminal dues of Kshs613,043.55 on 24th January 2022 but never utilized part of it to repay the loan. 23.He contended that the Claimant was never subjected to any coercion or duress as alleged, and averred that the Claimant was accorded opportunity to mitigate the adverse effects of the redundancy including a moratorium on his loan repayment and a fully funded outplacement training on 20th December 2021 to equip him with skills to help him after the separation. Therefore, he prayed for judgment against the claimant for Kshs.983,139.28, being the outstanding loan plus accrued interest. 24.On cross examination, he stated that on 5th October 2021 the Respondent undertook a VESS while redundancy process began on 6th December 2021. He admitted that the Respondent served the Claimant with a redundancy notice dated 6th December 2021 on 7th December 2021, and the effective date was 7th December 2021. He further contended that the notice to the labour officer was by letter dated 6th December 2021 and it was served on 7th December 2021. 25.On further cross examination, he stated that the actual termination notice was dated 14th December 2021 and it was to take effect on 15th January 2022. He contended that there was consultation before then. He stated that the list of affected staff was not given to the Claimant or labour officer. 26.He admitted that he had not filed minutes of the consultation meetings before the redundancy. He stated that the whole Claimant’s department was declared redundant and as such the dispute of selection criteria did not arise. 27.He admitted that Pioneer Insurance was outsourced by the Respondent to provide services and it was to pay 6 months loan instalments towards clearing the loan to the bank. 28.In re-examination, RW1 reiterated that Pioneer Assurance was to cater for 6 months of the loan repayment instalments in the case of redundancy of the Claimant. He stated that the Claimant was required to claim from the insurer and remit to the bank. 29.He contended that the information about restructuring is at pages 21, 22, 32 and 33 of the Respondent's documents. He reiterated that the whole department of portfolio management was declared redundant because the services in the department were no longer required. He referred to Pages 47 – 58 of the Respondent's bundle of documents as evidence that the whole department was laid off. 30.He contended that the letter dated 6th December 2021 was notice of termination and the letter dated 14th December 2021 was termination letter to enable effect on 15th January 2022. He further stated that the Respondent still paid him one month's salary in lieu of notice. 31.After the close of the hearing, the Claimant filed written submissions dated 23rd January 2026 and the Respondent filed written submissions dated 20th February 2026. Having considered the pleadings, evidence and submissions, the following issues fell for determination:-a.Whether the Respondent unfairly and unlawfully terminated the Claimant’s employment on account of redundancy.b.Whether the Claimant is entitled to the reliefs sought.c.Whether the Respondent is entitled to the Counterclaim. Analysis a. Unfair and Unlawful Termination 32.The Claimant contended that the termination of his employment was unfair and unlawful while the Respondent contended that the redundancy process was undertaken in strict conformity with the law. Section 45(2) of the Employment Act, 2007 provides that:-“(2)A termination of employment by an employer is unfair if the employer fails to prove: -(a)that the reason for the termination is valid;(b)that the reason for the termination is a fair reason—(i)related to the employee's conduct, capacity or compatibility; or(ii)based on the operational requirements of the employer; and(c)that the employment was terminated in accordance with fair procedure.” Reason for the termination 33.In this case the termination was on account of redundancy and the employer is therefore, required to prove that the redundancy was justified by a valid reason. Section 40(1)(a) (b) of the Employment Act, 2007 provides that:-“(1)An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions—(a)where the employee is a member of a trade union, the employer notifies the union to which the employee is a member 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 not less than a month prior to the date of the intended date of termination on account of redundancy;(b)where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;”[emphasis added]. 34.In a legion of court decisions, redundancy has been found to be a valid reason for termination. Section 2 defines redundancy as follows:-“the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the Employer, where the services of an Employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment”. 35.In Kenya Airways Limited v. Aviation & Allied Workers Union Kenya & 3 Others (Civil Appeal 46 of 2014) [2014] KECA 403 (KLR), observed that: -“Redundancy is a legitimate ground for terminating a contract of employment provided there is a valid and fair reason based on operational requirements of the employer and the termination is in accordance with fair procedureThe decision to declare redundancy has to be that of the employer. In the above New zealand case of G. N. Hale & Son Ltd, it was held that so long as the employer genuinely believed that there was a redundancy situation, then any dismissal was justified, and it was not for the Court, or the union, to substitute their business judgment with that of the employer. The decision to declare redundancy, as I have said, is that of the employer based on purely commercial considerations and not principles such as sustainable development, noble and lofty as it may be.” 36.In the instant case, RW1 testified that the respondent inherited a heavy interim organization structure with over 800 employees from the defunct Fidelity Bank and Chase Bank after acquisition. Owing to the heavy organizational structure and the subsequent closure of several branches between 2018 and 2021, the Respondent undertook a restructuring exercise to streamline its operations. 37.As part of the restructuring, the Respondent implemented a fit-for-purpose structure where some roles fell off. About 177 employees were impacted including the claimant and instead of declaring redundancies, the Respondent issued a memo dated 5th October 2021 inviting staff to take up VESS. The Memo, also informed the staff of its intention to declare redundancies if the ideal number of staff failed to apply for the VESS. 38.The VESS failed to yield the targeted numbers, forcing the Respondent to proceed with implementing a redundancy exercise. The Claimant's role of Senior Officer, Portfolio Management did not find its way into the new fit-for-purpose structure and the Claimant and two of his colleagues were all laid off. 39.The Claimant contended that the reasons given for the redundancies was a sham since there was no restructuring, reorganization and or abolition of the Claimant's position as the Respondent had outsourced cheap labour to get rid of the employees while the said positions still existed. The Claimant stated in paragraph 51 of the Amended Memorandum of Claim dated 28th November 2024 that his role with the Respondent still exists and that there are people currently executing the very roles that he used to execute. However, the Claimant did not adduce any evidence to substantiate that allegation. 40.RW1 testified that the whole department of portfolio management was declared redundant and the services in the department were no longer required. The Respondent produced Notices of Termination Letters, and Full and Final Dues Settlement Letters for George Muita Muriuki and Bilha Mumbi Warui, who held the same role as the Claimant, to prove that the whole department was laid off. 41.Having considered the evidence presented, I am satisfied that the Respondent has proved on a balance of probability that there existed a redundancy situation which justified the commercial decision to restructure its business by reducing branches and excess staff. Consequently, I hold that the reason for the terminating the Claimant’s employment was valid and fair as it was based on the operational requirements of the employer as contemplated under Section 45(2)(b)(ii) of the Employment Act, 2007. Procedure 42.Section 45(2)(c) of the Employment Act, 2007 places on the employer the burden of proving that termination of employment contract was done in accordance with fair procedure. The specific procedure for termination on account of redundancy is set out in Section 40(1) of the Employment Act, 2007, thus: -“(1)An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions—(a)where the employee is a member of a trade union, the employer notifies the union to which the employee is a member 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 not less than a month prior to the date of the intended date of termination on account of redundancy;(b)where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;(c)the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;(d)where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;(e)the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;(f)the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and(g)the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days’ pay for each completed year of service.” 43.Having read the section 40 of the Act, the ILO convention 158 on termination of employment and the local jurisprudence, the following are the mandatory steps an employer must follow after reaching a commercial decision to terminate his employee’s employment on account of redundancy:-a.Notification of the intended redundancy.The first step is that the employer must issue a written notice to the area Labour Officer and the employees or the employees’ trade union if the employees are member. The notice must be given at least one month prior to the termination date, and it must state the reason for redundancy. This notice is a general announcement meant to usher the parties into the next mandatory step.b.ConsultationThe second step is that the employer must engage his employees in genuine consultations on the reason for the termination, any alternatives to redundancy including redeployment, the selection criteria, and most vital the redundancy package if the exit becomes unavoidable.c.SelectionThe third step is that the employer must use fair selection criteria including seniority in time, skills, ability and reliability. Redundancy is for no fault on the part of the employee and therefore the employer must not victimize or discriminate any employee based on previous disciplinary records.d.Termination letterThe fourth step is that after selecting and identifying the employee who must exit, the employer issues a termination notice setting out the redundancy package payable.e.Payment of redundancy dues.The fifth step is clearance and payment of the exit package. The minimum redundancy package is set out in section 40(1) of the Employment Act including salary in lieu of notice, severance pay, accrued leave, and any unpaid salary/wages.f.Certificate of serviceThe last step is the issuance of a certificate of service. This mandatory requirement under section 51 of the Employment Act and failure to comply is an offence which attracts a fine upon conviction. 44.In this case the Respondent issued a memo dated 5th October 2021 wherein it requested staff who were willing to take up the Voluntary Employment Separation Scheme (VESS) to apply and informed staff of its intention to declare redundancies if the ideal number of staffs failed to apply for the Voluntary Early Separation Scheme. The memo was circulated via email to the group mailing list for all employees. 45.The Respondent also served the "Voluntary Early Separation Scheme" notice dated 5th October 2021 on the Ministry of Labour and Social Protection, the Federation of Kenya Employers and the Kenya Bankers Association. The notice set out the terms of the Scheme, and stated that if the uptake of the VESS was not good, the Respondent would declare redundancies. The VESS process was however distinct from the subsequent redundancy process which has a statutory underpinning. 46.Only 80 out of the targeted 177 applied for the VESS and therefore, the Respondent served all the staff with a memo dated 6th December 2021, notifying them of the decision to terminate employees on the ground of redundancy. Affected employees were to be individually served the following day. 47.On 7th December 2021, the claimant, was served with his notice of termination on ground of redundancy dated 6th December 2021. It stated that his position was declared redundant with effect from 7th December 2021, and set out the package due to him. 48.On 17th December 2021, the respondent served the Claimant with a termination letter dated 14th December 2021 indicating that his last day of work was 15th January 2022. The letter set out an exit package similar to the one communicated vide the letter dated 6th December 2021. It is common ground that the claimant was paid the said exit package but still maintained that the proper procedure for redundancy under section 40(1) of the Employment Act was not followed. 49.Having considered the chronology of events herein, I have no doubt that the respondent did not follow the right procedure with respect to notification of the redundancy. The first notice was final in nature as it terminated the employment on the same day it was served leaving no room for consultations as highlighted above. The Respondent tried to tinker that procedural blunder by issuing the termination letter dated 14th December 2021. That was too late as the contract had already been terminated effective 7th December 2021. This position was corroborated by the deactivation of the Claimant from the respondent’s systems. 50.Even if the fist letter was to be treated as the redundancy notice and the second as the termination letter, the procedure would still be wrong since that would amount to redundancy without consultations which must precede the final termination letter. 51.Besides, the area labour officer was never served with the notice of any intended redundancy as required by the law. The Respondent chose to serve the Cabinet Secretary who is not the competent government authority mandated to be notified. 52.Notification of an intended redundancy has a purpose and as such proper notices must be served. The purpose of serving the notice of intended redundancy under Section 40 of our Employment Act can be traced to the international labour standards specifically, ILO Convention 158, which was not ratified by Kenya. Article 13(1) of the Convention states that:-“(1)When the employer contemplates termination for reason of an economic, technological, structural or similar nature, the employer shall:a.Provide the workers representatives concerned, in good time, with relevant information including the reason for the terminations contemplated, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out;b.Give, in accordance with national law and practice the workers representatives concerned, as early as possible an opportunity for consultation on measures to be taken to avert or minimize the terminations and measures to mitigate the adverse effects of any termination on the workers concerned such as finding alternative employment.” 53.Article 14 of the convention provides for a similar notice to be given to the competent government authority in accordance with national law and practice as early as possible. Under section 40 (1) (a)&(b) of the Employment Act, the competent authority is indicated as the Labour Officer of the area where the employee works. The Kenyan statute has further clarified in section 40(1) (b) that where an employee is not a member of a trade union the notification will be given to him/her directly and the area labour officer. 54.In this case the Claimant averred that the Respondent did not comply with section 40(1)(b) of the Employment Act since it never served him and the labour officer with proper notice, and no meaningful consultations were held between him, the employer and the labour officer before the termination on account of redundancy. 55.I have already made a finding of fact that the Respondent failed to comply with the provisions of section 40(1)(b) of the Employment Act by terminating the Claimant’s employment without a proper notice of the intended redundancy and as a result, denied him an opportunity to engage the employer in meaningful consultations. The evidence on record shows that the employer had already made up its mind to terminate the claimant’s employment and therefore the notices it served him was a mere box-ticking. 56.Our local jurisprudence has firmly established that there must be genuine consultation before redundancy and that proper notification of the intended redundancy is a condition precedent thereto. In Barclays Bank of Kenya Ltd & another v. Gladys Muthoni & 20 others [2018] eKLR the Court of Appeal held:-“We respectfully agree with the views expressed by the two learned Judges. The Constitution in Article 41 is fairly loud on the rights to fair labour practices and we think it accords with the Constitution and international best practices that meaningful consultations be held pre-redundancy. We agree with the trial court that redundancy notices are not mechanical so as to satisfy the motions of the law, and that fair labour practice requires the employer to act in good faith. It is not good faith, for example, to subject innocent employees to making fresh job applications to their employer who was not undergoing a redundancy situation, then vilify them for rejecting the manoeuvre.” 57.In Cargill Kenya Ltd v. Mwaka & 3 Others [2021] KECA 115 (KLR),the Court of Appeal held that:-“The purpose of the notice under Section 40 (1) (a) and (b) of the Employment Act, was to give the parties an opportunity to consider measures to be taken to avert or to minimize the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment. The consultations were meant to cause the parties to discuss and negotiate a way out of the intended redundancy, if possible, or the best way of implementing it if it was unavoidable.” 58.In the Germany School Society v. Helga Ohany [2023] KECA 894 (KLR) the Court of Appeal held that:-“A notice to the employee/trade union/labour officer opens up the door for a consultative process with the key stakeholders.” 59.For the reasons highlighted above, I find that the Respondent did not serve proper notice of intention to terminate the Claimant’s employment on account of redundancy. As result, no genuine consultations were done, on possibility of taking an alternative position, and if none was available, discuss ways of mitigating the adverse effects of the redundancy on him including favorable exit package. 60.The Respondent unilaterally decided to terminate the Claimant on account of redundancy and determined his exit package. While I note that an employer has the sole mandate of making commercial decisions concerning his enterprise, the employer must appreciate that redundancy is a special procedure where the employee is not to blame for the separation. As such, the employer must act fairly and strictly comply with the statutory safeguards and international labour standards. In this case the Respondent did not do so with respect to notification of the redundancy and consultations. 61.As regards the issue of selection criteria, RW1 testified that the whole department of portfolio management was declared redundant. The Respondent produced evidence showing that two other employees who held the same role as the Claimant were also declared redundant. The Claimant's role was abolished in the new fit-for-purpose structure. In circumstances where the entire role is abolished, the question of selecting which employees to declare redundant using the criteria of seniority, skill, ability and reliability under Section 40(1)(c) of the Employment Act, 2007 does not arise. 62.The Respondent relied on the decision in Makokha v. Deloitte Limited [2023] KEELRC 723 (KLR) where the court held that the fact of selection of individuals to be released from employment presupposes the presence of more than one individual in the same cadre that is affected by the redundancy, and it is only in this context that selection would be required. 63.As regards payment of the exit package, I find that the Respondent paid the Claimant his terminal dues including severance pay as set out in Section 40 of the Employment Act, 2007. It also issued him with a certificate of service. 64.The upshot of the above analysis is that the procedure followed by the employer passed muster with respect to the selection criteria, payment of exit package and issuance of the certificate of service. However, the employer blundered on the notification, consultations and issuance of termination letter which are the most crucial steps in my view. For that reason, I find and hold that the termination of the Claimant's employment on account of redundancy was procedurally unfair, and it resulted into an unlawful and unfair termination within the meaning of section45 of the Employment Act. b. Reliefs 65.In view of the foregoing conclusion, I find and hold that the Claimant is entitled to declaration that the termination of his employment on ground of redundancy was unfair and unlawful. He is further entitled to compensation for unfair termination under Section 49(1)(c) of the Employment Act, 2007. Considering his service period of more than three years and the fact that the termination was for no fault on his part, I award him three months salary compensation for the unfair termination. 66.The Claimant admitted that he was paid his redundancy package as set out in the termination letters dated 6th and 14th December 2021. The benefits included one-month notice pay; salary earned up to the last working day, being 15th January 2022; one and a half months' salary on consolidated pay for every completed year of service; accrued annual leave days not taken; continued enjoyment of the Respondent's Medical Insurance Cover for self and eligible dependents until 31st March 2022; enjoyment of Respondent's Group Life Insurance Cover until 31st July 2022; eligibility to enjoy 3 months moratorium on principal amounts on loan repayments after exit; and continue servicing existing staff loans at prevailing staff interest rates for a maximum period of 5 years as long as the loans remained performing. 67.In view of the foregoing admission of payment and the settlement agreement on his redundancy dues dated 20th December 2021, the prayer for salary in lieu of notice is declined. The said settlement agreement did not seem to extent to other claims not related to the redundancy dues. 68.The claimant has also made a further claim for house allowance but the Respondent opposed it contending that it paid the Claimant a consolidated salary. Clause 7 of his appointment letter provided that:-“Your consolidated salary will be Ksh.110,000 per month includes a sufficient allocation to enable the employee to obtain reasonable housing.” 69.Section 31 of the Employment Act, 2007 provides that:-“(1)An employer shall at all times, at his own expense, provide reasonable housing accommodation for each of his employees either at or near to the place of employment, or shall pay to the employee such sufficient sum, as rent, in addition to the wages or salary of the employee, as will enable the employee to obtain reasonable accommodation.(2)This section shall not apply to an employee whose contract of service—(a)contains a provision which consolidates as part of the basic wage or salary of the employee, an element intended to be used by the employee as rent or which is otherwise intended to enable the employee to provide himself with housing accommodation.” 70.By dint of Section 31(2)(a) of the Employment Act, 2007, an employer is excluded from the requirement of providing housing accommodation or paying house allowance where the contract of service contains a provision which consolidates as part of the basic wage or salary of the employee an element intended to be used by the employee as rent. The claim for house allowance is therefore declined. 71.The prayer for freezing of loan account until the suit is heard and determined is now spent and not available for any determination. 72.The rest of the prayers were in the alternative to the primary prayers that I have granted and therefore I decline to award the same. (c) Counterclaim 73.The Respondent filed a Counterclaim against the Claimant for a sum of Kshs 983,139.28 as at 5th September 2024 together with interest at the contractual rate until payment in full. 74.The Claimant in his Memorandum of Response to the Counterclaim dated 28th April 2025 contended that this Honourable Court lacks jurisdiction to entertain the Counterclaim as the Respondent has already converted the loan into a commercial loan. 75.The Respondent has cited Maiyo v. Kenya Commercial Bank & another; William Osiemo t/a William Auctioneers (Interested Party) (Cause 632 of 2019) [2022] KEELRC 36 (KLR) (12 May 2022) (Ruling) and Abraham Nyambane Atsiago v Barclays Bank of Kenya [2013] eKLR where the Court held that the employment relationship is a wide concept which cannot be restricted to the contract of service, hence the Employment and Labour Relations Court has jurisdiction to hear matters pertaining to interest rates applicable to former employees as such disputes relate to or arise out of employment between an employee and employer. 76.Section 12(1)(a) of the Employment and Labour Relations Court Act, 2011 provides that the Court has jurisdiction to hear and determine disputes relating to or arising out of employment between an employer and an employee. The Counterclaim relates to a loan advanced to the Claimant by the Respondent during the subsistence of the employment relationship on staff terms. The terms of the loan were expressly tied to the Claimant's employment status. This Court therefore has jurisdiction to determine the Counterclaim. 77.The evidence on record shows that the Claimant applied for a Staff Personal Loan of Kshs 1,100,000 on 2nd July 2020. The facility was approved and by the letter dated 20th July 2020, the Respondent advanced to the Claimant the Staff Personal Loan Facility. The Claimant expressed his willingness to be bound by the terms of the Letter of Offer by duly executing the same. 78.At the time of his exit from employment, the Claimant had an outstanding loan balance of Kshs 822,099.69 as at 22nd December 2021. The Claimant made a written commitment on 22nd December 2021 to continue servicing the loan at Kshs 21,799.35 every 15th day of every month. 79.The Claimant did not service the loan as per the written commitment. The Respondent had placed the loan on moratorium for three months in accordance with the terms of the Redundancy program at no extra cost to the Claimant to avoid accruing interest. 80.The Claimant contended that the loan was insured under a Credit Life Insurance Policy and that the Respondent should follow up with the insurer. The Respondent in its submissions dated 20th February 2026 relied on the decision in Kimani & 2 others v Britam General Insurance Company (K) Ltd & another (Civil Case E566 of 2024) [2025] KEHC 11051 (KLR) (Commercial and Tax) (25 July 2025) (Ruling) where the court held that a mortgage protection policy is fundamentally different from a credit life policy, and the existence of such a policy does not extinguish the borrower's obligation upon death unless specifically so stated. The court further held that the borrower's liability under the loan agreement remains enforceable despite the existence of the insurance policy. 81.The facility letter executed by the Claimant does not provide for automatic discharge of the debt upon occurrence of an insured event. The Claimant is the borrower under the loan agreement and remains primarily liable for repayment of the loan. The existence of an insurance policy does not extinguish the borrower's obligation under the loan agreement. Moreover, the Claimant did not join the insurer as a party to these proceedings. There is no evidence that the insurer has admitted liability or made any payment under the policy. 82.RW1 testified during re-examination that the Claimant was required to claim from the insurer and remit to the bank. The Claimant has not demonstrated that he has made any claim to the insurer or that he has remitted any payment from the insurer to the Respondent. The policy document dated 12th February 2020, shows that the person assured was the Respondent, and who was entitled to the compensation. It is therefore incorrect for the RW1 to say that the claimant was bound to pursue payment from Pioneer Assurance Company Limited and remit to the respondent. 83.Having said that, the evidence on record is clear that the Claimant is indebted to the Respondent. The Respondent produced statements of account showing the outstanding amount. The Claimant did not dispute the amount claimed. I therefore find that the Respondent has proved its Counterclaim of Kshs 983,139.28, on a balance of probability. However, the said sum shall be paid less any amount paid or payable to the respondent by Pioneer Assurance Company Limited under the Group Credit Assurance Policy dated 12th February 2020 and the corresponding interest on the same. Conclusion 84.I have found that the termination of the Claimant on account of redundancy was unfair and unlawful within the meaning of Section 45 of the Employment Act, 2007 read together with Section 40 of the Act. I have also found that the Claimant is entitled to some of the reliefs sought. I have further found that the Respondent has proved its Counterclaim against the Claimant subject to the qualification highlighted above. Consequently, I make the following orders: -a.Declaration that the termination of the Claimant’s employment on account of redundancy was unfair and unlawful within the meaning of Section 45 of the Employment Act.b.The Respondent to pay the Claimant Kshs. 112,000 x3 = Kshs. 336,000 being compensation for the unfair termination.c.The Respondent is awarded the Counterclaim against the Claimant for Kshs 983,139.28 as at 5th September 2024 subject to any sum paid or payable from Pioneer Assurance Company Limited under the Group Credit Policy, aforesaid and factoring the corresponding interest on the loan.d.The award to the claimant above shall be a set off against the award made in the counterclaim.e.Since both sides have succeeded in their respective claims, I direct that each shall bear own costs of the suit and the Counterclaim.f.The awards made above shall be paid subject to any statutory deductions, if any and they shall accrue interest at court rates from the date of this judgment. DATED, SIGNED AND DELIVERED VIRTUALLY IN OPEN COURT AT NAIROBI THIS 11TH DAY OF JUNE, 2026.ONESMUS MAKAUJUDGEAppearance:Asule for Kwamboka for ClaimantMutisya for Respondent