https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1472

Naivas Limited v Muthoka (Appeal E011 of 2025) [2026] KEELRC 1472 (KLR) (29 May 2026) (Judgment) Neutral citation: [2026] KEELRC 1472 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Nakuru Appeal E011 of 2025 J Rika, J May 29, 2026 Between Naivas Limited Appellant and Peter Kitali Muthoka Respondent (An Appeal from the Judgment of the Hon. Chief Magistrate’s Court in Cause No. E224 of 2023 between the Parties herein, delivered by Hon. Christine Menya on 24th January 2025]Rika J) Judgment 1.The Respondent filed a Claim at the Trial Court against the Appellant, his former Employer, for unfair and unlawful termination. 2.He was granted compensation for unfair termination and terminal benefits, amounting to Kshs. 904,654. He was granted costs, interest and certificate of service. 3.The Respondent filed a Memorandum of Appeal, dated 6th March 2025, citing 8 grounds of appeal, as follows: -a.The Trial Court failed to appreciate that the Respondent admitted he was selling cakes to one Pastor Ben, in breach of his contract of employment.b.The Trial Court erred, by failing to appreciate that M-pesa messages and WhatsApp screenshots corroborated the Appellant’s position, that M-pesa transactions involved purchase [s] of cakes.c.The Trial Court erred in holding that the Appellant ought to have called witnesses, to show that money sent was for purchase of cakes, the Respondent having admitted the fact at the hearing.d.The Trial Court erred by disregarding documentary evidence, which was supported through oral evidence.e.The Trial Court failed to appreciate the probative value of the documentary evidence.f.The Trial Court erred in finding that the Appellant needed to avail other persons the Respondent was communicating with, over cake business.g.The Trial Court erred in finding that the Appellant should have called other Employees who colluded with the Respondent in the cake business.h.The Trial Court erred in awarding the Respondent compensation for unfair and unlawful termination, and capping it at equivalent of 12 months’ salary. 4.The Appellant proposes that: -a.The Appeal is allowed with costs.b.Judgment of the Trial Court is set aside in its entirety.c.Any other suitable order. 5.Parties agreed that the Appeal is considered and determined on the strength of the Record of Appeal, the Supplementary Record of Appeal, and Submissions. They confirmed / undertook filing and exchange of Submissions at the last appearance before the Court on 24th March 2026. The Court Finds: - 6.The 8 grounds of appeal do not challenge the award of 2 leave days at Kshs. 4,010; 12 public holidays worked at Kshs. 48,120; overtime at Kshs. 36,491; and salary for 17 days worked at Kshs. 34,085. 7.These awards, amounting to Kshs. 122,706 are sustained. 8.The 8 Grounds concern whether the Appellant established valid reason or reasons, to justify termination, under Sections 43 and 45 of the Employment Act, and whether the Trial Court erred in granting compensation equivalent of 12 months’ salary and notice pay. 9.The procedure adopted on termination does not seem to have been contested, and there was nothing in the Judgment on procedure, forming part of the grounds of appeal. 10.The Respondent conceded on cross-examination that he was selling cookies. He is recorded as stating that selling cookies, did not affect his work. 11.At page 3 of 9, paragraph 5 of the Judgment from the top, the Respondent is specifically stated to have told the Court that, ‘’ selling cakes, did not affect his work.’’ 12.This in the view of the Court was sufficient, to justify that the Respondent was engaged in his own business, while clause 2 of his contract required him, to devote his time and attention to the Appellant. 13.Clause 2 states that he would not engage in any other business, either directly or indirectly. So why was he selling cookies or cakes? 14.Claus 5 of the contract states that one’s interest, should not conflict with that of the Appellant. 15.Ground 1 in the letter of dismissal was justifiable. The Appellant admittedly was involved in his own business. The business may well have been in competition to that of the Appellant. He conceded he was selling cookies. He was directly involved in other business, whether that business was in competition with the Respondents or not. Involvement on its own, was against his contract of employment. 16.Ground 4 of the letter of summary dismissal reiterated that that the Respondent was involved in a conflict of interest. This ground was established, and was founded on clause 5 of the Respondent’s contract. 17.There was evidence of M-pesa receipts from colleagues and 3rd parties. The Respondent explained that he was the treasurer of a welfare association at the Appellant and that the money received was by way of welfare contributions. 18.Alternatively his explanation was that he was being paid money through his M-pesa account, by persons who were not members of the unregistered welfare group, because such persons were engaged in various transactions concerning the Respondent. 19.Nicholas was not a member of the welfare but was a business partner to the Respondent’s Dad. He sent money to the Respondent, because he was doing business with the Respondent’s Dad. 20.The Trial Court, like the Conciliator, saw photos and WhatsApp extract in which according to the Trial Court, ‘’ it is clear that the Claimant [Respondent herein] could have been doing cake business.’’ 21.The Court found the documents insufficient to establish valid reason justifying termination, posing the question: ‘’ but would the extracts be enough.’’ 22.The Conciliator in the findings, adopted a similar approach as the Trial Court, stating that. ‘’the Employer, Naivas Limited, could not prove beyond reasonable doubt, that the two cake photos extracted from the Claimant’s WhatsApp account and the Claimant’s communication with his pastor, correspond to running a bakery at Whitehouse Nakuru, and the cake sales thereof.’’ 23.While the Conciliator specifically imposed a standard of ‘beyond reasonable doubt’ on the Appellant on proof of reason, the Trial Court cautioned itself at page 7 of 9, paragraph 5 from the bottom [the Appellant should have clearly bound, paginated and numbered the lines in its Record of Appeal] against imposing such a standard, stating that ‘’ I would not wish to appear as if I am expecting proof beyond reasonable doubt...’’ In the end however, the Trial Court did just that: imposed on the Appellant standard of proof ‘beyond reasonable doubt.’ 24.The Trial Court expected the Appellant to establish the purpose for which the Respondent received M-pesa payments. It was expected to avail a witness to testify that the money received by the Respondent, was specifically for sale of cakes. The Trial Court expected the Appellant to avail persons with whom the Respondent was communicating with, over cake business. The Trial Court also expected the Appellant to call as witnesses, the Respondent’s colleagues who were implicated in the Respondent’s cake business. The Internal Auditor had explained to the Court that implicated Employees were taken through individual disciplinary hearings. It was not likely that they would be called by the Appellant, to show that the Respondent was involved in cake business. 25.The standard imposed on the Appellant was not the standard required in proof of reason or reasons to justify termination, under Section 43 of the Employment Act. 26.Section 43 [2] sets the standard of proof of termination reason as follows:-‘’ The reason or reasons for termination of a contract, are matters that the Employer, at the time of terminating the contract, genuinely believed to exist, and which caused the Employer to terminate the services of an Employee.’’ 27.As stated by the Honourable Trial Court, it was clear that the Respondent could have been doing cake business. Why would the Trial Court call for further justification from the Appellant, if it was clear that the Respondent could have been doing cake business? 28.The standard of proof of reason or reasons to justify termination was not required to go beyond ‘’could have been doing.’’ The Appellant was not required to prove that the Respondent was actually doing cake business. It was enough that he could have been doing the business. 29.The Court is satisfied that there were valid reasons to justify termination, and that the Trial Court, erred, by imposing a higher standard of proof of these reasons upon the Appellant, than is prescribed under Section 43 of the Employment Act.It Is Ordered: -a.The Appeal is partly allowed.b.The award of compensation and notice pay for unfair and unlawful termination is set aside.c.The award of terminal benefits at Kshs. 122,706 is sustained.d.No order on the costs of the Appeal. DATED, SIGNED AND DELIVERED ELECTRONICALLY AT NAKURU, UNDER RULE 68[5] OF THE E&LRC [PROCEDURE] RULES, 2024, THIS 29TH DAY OF MAY 2026.JAMES RIKAJUDGE