https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2410

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT AT NAIROBI** **PETITION NO. E042 OF 2025** **PATRICK KIOGORA MWIRIGI 1ST PETITIONER** **ANGELA KILOKO MUTUKU 2ND PETITIONER** **IRENE WANJA 3RD PETITIONER** *VERSUS* **SOCIAL HEALTH AUTHORITY 1ST RESPONDENT** **THE PUBLIC SERVICE COMMISSION 2ND RESPONDENT** **THE HON. ATTORNEY GENERAL 3RD RESPONDENT** **RULING** The petitioners filed an application dated 18 December 2025, under the provisions of Article 50, 10, 41, 47, 48 and 159 of the Constitution, Section 5 of the Judicature Act, Sections 12 and 20 of the Employment and Labour Relations Court Act, and seeking Orders: 1. *Spent.* 2. *Spent.* 3. *The court be pleased to cite for contempt of court and punish:* 4. *Dr. Mercy Mwangangi, Chief Executive Officer of the 1st respondent, and* 5. *Mr. Paul Fwamba, Chief Executive Officer of the 2nd respondent.* *For willful disobedience of the judgment and decree of the court delivered on 29 July 2025, which judgment and decree have not been stayed or reviewed, and that the said contemnors be fined and/or committed to civil jail for a term not exceeding 6 months.* 1. *A Notice to Show Cause is issued to Dr Mercy Mwangangi, Chief Executive Officer of the 1st respondent and Pau Fwamba, Chief Executive Officer of the 2nd respondent, requiring them to show cause why they should not be cited for contempt of court.* 2. *Upon a finding of contempt, the court be pleased to impose appropriate sanctions against the said officers for contempt of court.* 3. *Costs of the application be provided for.* The application is supported by the Affidavit of the 2nd petitioner, Angela Kiloko Mutuku, and on the grounds that, on 29 July 2025, the court delivered judgment and a decree that remain binding and enforceable. The respondents were directed to comply with their constitutional right to fair labour practices, and employees who opt to retire under the Social Health Insurance Act are entitled to an exit package, as found in the judgment. In the judgment, the court declared that the staff of the defunct NHIF competitively and on priority recruited and absorbed in the service of the 1st respondent and to retain their NHIF salaries personal to self unless such salaries are lawfully varied through consultations, consent, negotiations or in accordance with the applicable law. The 1st and 2nd respondents, through their respective chief executive officers (CEOs), were, at all material times, aware of the judgment and decree of the court. However, there is willful disobedience. The CEO of the 1st respondent, with the acquiescence and failure of action by the CEO of the 2nd respondent, has willfully acted IN a manner inconsistent and contrary to the judgment herein. The 1st and 2nd respondents have failed and refused to formulate, tabulate, and formally communicate the exit package terms applicable to employees who may opt to exit the service of the 1st respondent, despite a formal demand having been issued to them by letter dated 6 August 2025. Mutuku avers in the Supporting Affidavit that on 26 November 2025, several former employees of NHIF were deployed to SHA and received letters dated 7 November 2025 from the CEO directing: 1. To declare the conclusion of their temporary deployment to SHA; 2. Require them to exercise the statutory option that only arises after completion of the competitive recruitment process; and 3. Effect retrospective removal from the SHA payroll with effect from 1 November 2025. These actions were undertaken without lawful variation of the terms and in direct defiance of the court's judgment. The 2nd respondent has contravened the judgment and decree. Through a letter dated 21 November 2025, the CEO directed that the temporary deployment of all staff of the defunct NHIF to SHA be extended for a further 6 months, or until the recruitment exercises at the SHA are fully completed. The directive also required SHA to immediately implement the decision and communicate the same to the employees. Instead, SHA issued a contrary communication and failed or refused to communicate the 2nd respondent's directive to staff. Also, salary payments were stopped without confirmation that the MDAs had assumed their payroll obligations, leaving affected employees unpaid by either institution and violating their rights. Mutuku avers that the actions of the 1st and 2nd respondents' CEO, and the employees, including Mohamed Abass Mohamed, Dr Peris Kerich, Nicholas Muriithi, Adrian Nyambura Wanjie, Juliah Sungu Atwoli, Nancy Mokeira Ombega, and Wilberforce Walubengo Wasika, have remained in active service without salary. They have been subjected to contradictory deployment instructions, denied implementation of terms personal to them, and suffered financial hardship due to the stoppage of salaries without lawful transition. These contempt proceedings are necessary to uphold the dignity of the court and compel compliance with the judgment herein. It is intended to prevent continued violations of employees’ rights to fair labour practices and administrative action, and to ensure that no employee is removed from the payroll before MDAs formally assume salary obligations. In reply, the 1st respondent did not file any Replying Affidavit. In reply, the 2nd respondent filed the Replying Affidavit of Paul Famba, the secretary and CEO, who avers that the Social Health Insurance Act was enacted on 19 October 2023 and commenced on 22 November 2023. The Act replaced the National Hospital Insurance Act. With respect to the transition of NHIF staff, the First Schedule of the Act provided that the NHIF Board was to wind up the fund within one year and that the cash balances and all other assets be transferred to the SHA. The Board of SHA was to competitively recruit and appoint its staff subject to the approved staff establishment and in terms and conditions of service as determined by the Board. The schedule also provided that the staff of NHIF were eligible to apply for the positions advertised by SHA and be considered for appointment where found suitable. The SHA was to review the qualifications of all NHIF staff and prioritise those deemed suitable for positions in the approved staff establishment. Famba avers that, under the schedule, a staff member of the NHIF, not appointed by the SHA, had the option to either retire from public service or be redeployed within it. Hence, in 2024, the NHIF was transiting to the SHA. The Public Service Commission (PSC) temporarily deployed all NHIF staff at SHA pending the completion of the competitive recruitment for SHA. This was done before staff were given the option to retire from public service or be redeployed within it. Famba avers that after the judgment herein on 29 July 2025, the PSC was aggrieved and hence sought a stay under Rule 5(2) (b) of the Court of Appeal Rules through Nairobi Court of Appeal Civil Application No. E499 of 2025. A ruling thereof is pending. Subsequently, the PSC has sought leave of the Court of Appeal to appeal out of time through Nairobi Court of Appeal Civil Application No. E274 of 2026. The application is pending. Regarding the contempt application, Famba avers that he is a law-abiding citizen and has not deliberately disobeyed court orders or the court's judgment, as alleged. Despite the PSC's dissatisfaction with the court's judgment, there is compliance. The PSC considered and approved the human resource management instruments for SHA. It advised SHA to undertake a fair, merit-based, competitive recruitment of staff within its approved staff establishment, and all unsuccessful candidates who have opted for redeployment have been assigned accordingly. The PSC has advised the various Ministries, state departments, and agencies to which the staff of the defunct NHIF have been deployed to ensure that they retain their prevailing salaries, pursuant to a consent order dated 23 July 2025. Famba avers that the deployments have come with challenges, including minor mistakes at the deployment site. In such cases, complaints have been made to the PSC and have been addressed. In the case of Adrian Wanje Nyambura, upon receipt of the complaint, the PSC addressed it and took corrective action through a letter dated 9 June 2026. For the employees who opted to retire from the service, this should be done in accordance with the applicable Staff Retirement Scheme, Trust Deed and Rules that applied to the defunct NHIF. The scheme outlines the nature and details of retirement benefits for retired staff across categories, as well as how terminal benefits should be calculated. In view of the transition provisions of the SHA, the retirement process and resultant emoluments for retiring officers are to be tabulated and processed by the SHA. Famba thus avers that there is no willful disobedience of court orders as alleged, and he has acted in compliance with the court decree. During deployments, he has implemented the PSC's decisions once issued. There is no basis to issue a notice to show cause for alleged contempt of court, and no reasonable basis has been demonstrated that he, as CEO, is in contempt. The petitioners filed the Further and Supplementary Affidavit of Angela Kiloko Mutuku, who avers that the respondents have continued to remove staff from the 1st respondent's payroll before the transition, through deployment and absorption by the receiving departments, or upon retirement, thereby exposing the staff to financial hardship and uncertainty. This is continued disobedience of the court order. The respondents have not formulated an exit package for those who wish to retire from the service, nor have they applied the collective agreement (CBA) dated 16 December 2022, which provides the formula for calculating the exit package. Mutuku averred that the petitioners have issued the respondent with a list of employees who wish to retire from the service, but the respondents' exit packages have not been issued. The respondents' continued deployment of staff who wish to retire and are not to be deployed constitutes an unfair labour practice. 25 officers have received deployment letters despite opting to retire from the service. The respondents have downgraded the staff deployed to various government agencies without justification, thereby further contempt of court. Mutuku also avers that in the judgment delivered on 29 July 2025, the respondents were directed that the employees of the defunct NHIF who opted to retire upon operation of the SHA are entitled to an exit package. Those who applied for positions advertised by SHA were to receive priority and, further, to retain their salaries unless lawfully varied. In the application, the petitioners submitted that the judgment herein was issued on 29 July 2025, and the respondents have refused and neglected to comply. The former employees of the defunct NHIF have not been paid their dues since October 2025. There is knowledge of the judgment, as it was preceded by the consent recorded on 23 July 2025, disposing of part of the issues in dispute. The issues herein are in two parts: first, the computation of the exit package for employees off the former NHIF who opted to retire, and secondly the payment of the exit package. There was a CVA at the NHIF that provided the method for calculating the exit package. The respondents were directed to compute and pay the exit package, which they have failed to address, leading to these proceedings. By virtue of the consent order, the staff retained by SHA and staff who opted to move to the PSC were entitled to be retained on their personal terms as held with NHIF. However, the respondents have refused to obey the court orders despite the available CBA. Instead, the staff have been removed from the SHA payroll without basis, leaving them in a vacuum. While SHA has refused to pay the salary, no other agency under the 2nd respondent has taken up these employees. The court orders herein were explicit that no employee would be discriminated against for having worked for NHIF. While PSC has issued a communication to SHA to retain the affected employees, it has gone ahead and recruited new employees while refusing to pay the existing ones. Despite the court allowing payment of an exit package to those willing to retire, the respondents have refused to compute and make the payments, leaving the employees in limbo and without deployment. For those who have been deployed, their personal salary and benefits have not transitioned, effectively placing them at a lower grade without justification. The petitioners submitted that the respondents' conduct constitutes a direct refusal to obey the court orders herein, which is contempt. The orders sought in the application herein should be allowed, with the contemnors, Dr Mercy Mwangangi and Paul Famba, being directed to attend and show cause why they should not be committed for contempt of court. The petitioners rely on the following cases: **Teachers Service Commission v Kenya National Union of Teachers & 2 others [2013] eKLR; Econet Wireless Kenya Limited v Minister for Information & Communication of Kenya & another [2005] eKLR;** and **Shimmers Plaza Limited v National Bank of Kenya Limited [2015] eKLR**. The 1st respondent submitted that there is no proof of knowledge of the court orders or willful disobedience by the respondents. The records filed by the petitioners are mere assertions without proof and cannot support the alleged contempt of court. The threshold for contempt has not been met. There are no payroll records, bank statements, or databases to confirm nonpayment of salaries. The lists filed by the employees do not confirm the current status of the 1st respondent's staff establishment. The question of resignations, transfers, or those who have left for different reasons remains. All cannot be applied in a subjective criterion to claim there is contempt of court. Without details of the reasons for the exit, the allegations made by the petitioners are without proof of contempt. The 1st respondent submitted that the transition from NHIF to SHA payroll was complex and was carried out between the national government and various agencies. The payroll migration is not a question of contempt and requires time to be effected. The respondents have administratively addressed the matter to resolve any disparities. Hence, the petitioners have not laid the proper foundation for a case of contempt of court. The cited cases are isolated and not the general prevailing situation. Adrian Wambua is an individual case. The petitioners have not disclosed that he applied for a redisposition. It is therefore incorrect to say that the respondents failed to act on the request. There is ongoing communication between the parties. Such has broken the chain of any alleged contempt of court. The question of payment of an exit package cannot be based on the contempt basis, and the petitioners have failed to disclose that there exists Nairobi Court of Appeal No. E499 of 2025 challenging the award of the exit package. While the matter is active before the Court of Appeal, this cannot form a proper basis for contempt. The petitioners have relied on the exit package under the CBA in recognition of the need to obey court orders; hence, there is no contempt of court as alleged.is unlawful as declared by the Supreme Court in **Petition E024 of 2024.** The respondent submitted that there were instances of errors in which some employees requested their exit packages to be paid but were redeployed instead. To ensure a proper transition and avoid disruptions to essential services, the error was noted and is being addressed. This acknowledgement is in recognition that there is no contempt of court as alleged. The orders sought should be dismissed with costs. The 2nd respondent opted not to make any submissions. **Determination** To begin with, the court acknowledges submissions that there exists Nairobi Court of Appeal Civil Application No. E499 of 2025. The matter is pending. Save that the judgment herein has not been stayed. The judgment herein delivered on 29 July 2025 is lawful and valid. The legitimate expectation by the decree holder is that it should be enforced. In the judgment, the court directed that: ***1. The declaration that, to comply with their constitutional right to fair labour practices, the employees who will opt to retire by operation of the Social Health Insurance Act are entitled to an exit package as found in this judgment.*** The basis of the orders (1) cited above was the consent orders of 23 July 2025 by the parties and the findings at paragraphs 18 and 20 of the subject judgment. And, under order (2): ***2. The order compelling the 1st and 2nd respondents to compute and pay an exit package to the staff of the defunct NHIF who opt to retire from service by operation of the Social Health Insurance Act.*** The understanding in this regard is that the 1st respondent transitioned from the defunct NHIF. The employees who opted not to work under SHA or retire reverted to the 2nd respondent as the repository of public service. The orders under (2) are dual in nature. The 1st and 2nd respondents are accountable for both computation and payment: 1. **Computation** of an exit package to the staff of the defunct NHIF who opt to retire from service by operation of the SHI Act. 2. **Payment** of an exit package to the staff of the defunct NHIF who opt to retire from service by operation of the SHI Act. Whereas computation does not require much delay, payment requires the availability of funds. Judgment was issued on 29 July 2025. It has been over a year since then. There is no computation or payment as directed in the judgment. CBA dated 16 December 2022 between the NHIF and Kenya Union of Commercial Food and Allied Workers (KUCFAW) provides the formula for calculating the exit package. Although the respondents assert that the referenced CBA addressed by the **Supreme Court in Petition E024 of 2024,** **National Hospital Insurance Fund Management Board v Kenya Union of Commercial Food and Allied Workers & another; Attorney General (Interested Party) [2025] KESC 37 (KLR)** was declared invalid, they have not offered any alternative tabulation of an exit package. However, the Supreme Court Judgment cited above pertains to a 2013 CBA. Since there exists a CBA applicable for 2022 and for the period in which the judgment was issued. The CBA provides a sufficient template for computing and paying an exit package upon retirement from service. The refusal to compute and pay the exit packages to retiring employees is unjustified. The 2nd respondent asserts that for those who opt to retire, there exists the Staff Retirement Scheme, Trust Deed and Rules that applied to the defunct NHIF. That the scheme demonstrates the nature and details of the various retirement benefits for retired staff across different categories and how the terminal benefits should be calculated. However, as addressed above, these schemes, trusts and other benefits do not negate the judgment herein directing the respondents to compute and pay an exit package to the staff who opt to retire from service. Stalling on undertaking a tabulation or making payment does not foster industrial peace at all. It will only invite applications and counter applications such as herein. Indeed, contempt of court occurs when a party willfully and deliberately refuses or ignores a court order. Once a court order has been brought to a party's attention, there is a requirement to obey it, even when one disagrees with the Orders. Hence, where there is willful disobedience, Courts possess the inherent power to enforce compliance with their lawful orders by imposing sanctions for contempt of court. In **Republic v Mohammed & another [2018] KESC 51 (KLR),** the Court held that the Court will not condone deliberate disobedience of its orders and will not shy away from its responsibility to deal firmly with proved contemnors. However, this power to commit a person to jail or impose sanctions for contempt must be exercised with the utmost care and only as a last resort. It is of utmost importance, therefore, for the respondents to establish that the alleged contemnor’s conduct was deliberate, in the sense that there was willful action in a manner that flouted the Court Order. Is there willful and deliberate disobedience of the court orders herein? Save to urge the court of various alleged challenges, there is no compliance with the judgment delivered on 29 July 2025. Is there justification for such conduct? The judgment was issued over a year ago on 29 July 2025. Any employee of the defunct NHIF who wished to exit service or retire has been denied a fair chance to settle and have closure. The conduct of the respondents, in the knowledge of the judgment and what is required to be done, is without justification. On the matters set out above, the parties' submissions make it apparent to the court that the PSC has made considerable efforts to abide by the court's judgment. However, the same cannot be stated of the 1st respondent. Unfortunately, both respondents are bound together. Finding contempt in one and allowing the other free would not achieve much. The intention to have the staff of the 1st respondent who are in the public service go without the computation and payment of the retirement due should be highly concerning to the 2nd respondent. The 1st respondent's inaction casts the 2nd respondent in a bad light. In the given circumstances, the court shall allow the respondents, jointly and severally, to address the matter and the judgment dated 29 July 2025 within the next 30 days, closing on 11 September 2026. **The court will mention the matter on 23 September 2026 for the following purposes:** 1. **For the respondents to report compliance with the judgment herein.** 2. **In the alternative, the personal attendance of Dr Mercy Mwangangi and Paul Famba, CBS shall be required in open court to show cause why they should not be committed for the deliberate refusal to comply with the judgment herein.** 3. **In the interim, parties are at liberty to draw a consent in settlement of the matter and confirm full settlement on 23 September 2026.** **Delivered in open court this 14th day of August 2026** **M. MBARŨ** **JUDGE** **In the presence of:** Court Assistant: Kemboi ……………………………………………… and …………………………………..………