https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2014

REPUBLIC OF KENYA IN THE EMPLOYMENT AND LABOUR RELATIONS COURT AT MOMBASA ELRC APPEAL NO. E005 OF 2026 NAUSHAD TRADING COMPANY LIMITED .................................................................... APPELLANT VERSUS CHARLES KAUNDA MUNYWOKI …...................... RESPONDENT ***(Being an appeal from the Judgment and Decree of the Chief Magistrate's Court at Mombasa, Hon. J.B. Kalo, Chief Magistrate, delivered on 15th December 2025 in Mombasa Chief Magistrate's Court Employment and Labour Relations Cause No. E433 of 2021, consolidated with Cause Nos. E430, E431 and E432 of 2021)*** JUDGMENT **A. INTRODUCTION** 1. This is an appeal against the Judgment of the Chief Magistrate's Court at Mombasa (Hon. J.B. Kalo, CM) delivered on 15th December 2025 in Cause No. E433 of 2021, in which the trial court found that the Respondent, Charles Kaunda Munywoki, was an employee of the Appellant, Naushad Trading Company Limited, that his employment was unlawfully and unfairly terminated, and consequently entered judgment in his favour in the sum of Kshs 418,200, together with costs, interest and a certificate of service. 2. The Respondent's claim before the trial court, as set out in his Statement of Claim dated 28th June 2021, was that he was employed by the Appellant as a loader from 2005 until 4th January 2021, when he reported for duty after annual leave and was denied entry to the Appellant's premises, being informed by a security guard that his services had been terminated and that casual workers had been engaged in his place. He asserted that he earned approximately Kshs 25,500 per month, was never issued a warning letter or subjected to any disciplinary process, was never paid house allowance, and sought terminal dues comprising notice pay, house allowance, service pay and compensation for unfair termination, totalling Kshs 1,096,500. 3. The Appellant's Statement of Response dated 30th July 2021 denied the existence of any employer-employee relationship. It averred that the Respondent was engaged, when work was available, as an independent handyman/loader through a “gang leader,” one Christopher Enock, who would gather a group of casual dock-workers (colloquially “sogis”) to load and offload cargo as required; that payment was made per bag or per task to the gang leader, who in turn distributed it among the sogis; that the Respondent was free to work elsewhere; and that no employment relationship, whether permanent, casual or otherwise, ever arose. 4. The suit proceeded, by consent of the parties recorded on 5th February 2025, under Rule 59 of the Employment and Labour Relations Court (Procedure) Rules, 2016, on the basis of the documents, witness statements and written submissions on record, without oral evidence being taken or witnesses cross-examined. **B. THE JUDGMENT OF THE TRIAL COURT** 5. The trial court framed the issues for determination as (i) whether the Respondent was an employee of the Appellant, (ii) whether he had proved his claim, and (iii) whether the specific heads of claim had been proved. 6. On the first issue, the trial court had regard to the National Social Security Fund (“NSSF”) statement produced by the Respondent, showing remittances made in his name for the period 2011 to 2020, and to the “Sogis Daily Record” produced by the Appellant, covering the period 2nd to 30th September 2019, together with a “master roll” for 2021. Noting that the Appellant had not specifically denied that the Respondent commenced working for it in 2005, nor stated when it first engaged his services, the trial court found that the Respondent began working for the Appellant in 2005 and, applying section 37 of the Employment Act, 2007, held that by reason of the length and continuity of that engagement his contract of service fell to be deemed one where wages were payable monthly, in reliance on Evans Ketiezo Aligulah v Eldomatt Wholesale and Supermarket Ltd [2011] eKLR. 7. On the second issue, the trial court found that, there being no evidence of the process followed in terminating the Respondent's contract, the termination was unlawful and unfair. 8. On quantum, the trial court noted that the Appellant's own payment records showed the Respondent earning between Kshs 985 and Kshs 1,640 per day, but nonetheless found the Respondent's assertion of a monthly wage of Kshs 25,500 to be “reasonable” and adopted it. On that wage, the court awarded one month's pay in lieu of notice (Kshs 25,500), house allowance for three years by reason of the statutory limitation period (Kshs 137,700), and compensation equivalent to ten months' wages for unfair termination (Kshs 255,000), declining the claim for service pay on the ground that the Respondent was a member of the NSSF. The aggregate award was Kshs 418,200. **C. GROUNDS OF APPEAL** 9. Aggrieved, the Appellant filed a Memorandum of Appeal dated 7th January 2026 setting out twelve grounds, which may fairly be condensed as follows: that the trial court erred in finding an employer-employee relationship in the face of evidence of a piece-rate, need-based engagement through a gang leader; that the court misdirected itself in applying section 37 of the Employment Act to convert the engagement into monthly employment absent proof of continuous service or that the work could not reasonably be completed within the statutory period; that the court placed undue and conclusive weight on NSSF remittances and length of association as proof of permanent employment; that it failed to properly evaluate the Appellant's documentary evidence of daily, intermittent and task-based engagement; that it found unfair termination absent proof that termination occurred at the Appellant's instance, and improperly shifted the burden of proof under section 47(5) of the Employment Act before the Respondent had discharged his own burden; that it failed to have regard to the factors under section 49(4) of the Act in assessing compensation; that the award of ten months' compensation was excessive, punitive and unsupported by reasons; that the award of house allowance was made absent proof of entitlement or of whether the wages paid were consolidated; and that the adoption of a monthly wage of Kshs 25,500 was arbitrary and unsupported by the evidence on record, which showed variable daily earnings. The Appellant prayed that the appeal be allowed, the judgment set aside and the claim in the lower court dismissed, or, in the alternative, that the findings on unfair termination and the awards of compensation and house allowance be set aside, or that the quantum of damages be substantially reduced, together with costs. **D. THE RESPONDENT'S GROUNDS OF OPPOSITION** 1. The Respondent opposed the appeal in its entirety, principally on the following grounds: that section 37 of the Employment Act was correctly applied, given the Respondent's uncontroverted testimony of engagement from 2005 to 2021 – a period of some sixteen years – the continuous NSSF remittances made in his name from 2011, and the Appellant's own admission, in a contemporaneous email of 18th November 2021 to NSSF officials, that it held wage records “for the past five years” and had been directed by NSSF “in the year 2011” to remit contributions on the sogis' behalf, an admission said to be inconsistent with the Appellant's stance that no employment relationship ever existed; that the trial court did not treat NSSF remittance as conclusive proof but weighed it together with the length of association, the Appellant's own attendance and payment records, and the complete absence of evidence of a fair or lawful termination process; that the evidential burden shifted to the Appellant once the Respondent gave prima facie evidence of termination by exclusion from the Appellant's premises, a burden the Appellant did not discharge, having called no witness and produced no document to justify or explain the termination; and that the award of ten months' compensation, being below the statutory maximum of twelve months under section 49(1)(c) of the Employment Act, was not shown to proceed on any wrong principle and ought not to be disturbed on appeal. The Respondent prayed that the appeal be dismissed with costs and the judgment of the trial court upheld in its entirety. **E. ISSUES FOR DETERMINATION** 1. Having considered the record, the rival submissions and the applicable law, the following issues arise for determination: (a) Whether the disposal of the suit under Rule 59 of the Employment and Labour Relations Court (Procedure) Rules, 2016 was appropriate to the nature of this dispute; (b) Whether the trial court had a proper basis, on the pleadings before it, to invoke section 37 of the Employment Act, 2007; (c) Whether, applying the correct legal test, an employer-employee relationship existed between the parties; (d) Whether the termination of the Respondent's engagement was unfair; (e) Whether the quantum awarded – the monthly wage adopted, notice pay, house allowance and compensation for unfair termination – was properly arrived at. **On Rule 59 of the Employment and Labour Relations Court (Procedure) Rules, 2016** 1. A preliminary observation, made only in passing as it does not form a distinct ground of appeal, is warranted. Rule 59 permits a court, on application or by consent, to dispense with the formal calling of oral evidence and to determine a cause on the documents and written submissions filed. That procedure is best suited to causes that are not seriously contentious on the facts, where the essential narrative is largely undisputed and the dispute turns principally on the legal characterisation of agreed or documented facts. Where, as here, the parties advanced starkly divergent and mutually exclusive accounts of the very nature of their relationship – one asserting sixteen years of monthly employment, the other an occasional, piece-rate engagement through an intermediary – such a dispute ordinarily calls for the testing of evidence through cross-examination, the credibility and demeanour of witnesses very often being decisive in cases of this character. This matter, in the court's respectful view, was not the most suitable candidate for disposal under Rule 59. That said, the court is mindful that the parties consented to proceed in that manner on 5th February 2025, that no ground of appeal impugns that mode of disposal, and that it is not now open to either party to resile from a course adopted by consent. The observation is made for the guidance of the trial courts and proceeds no further; the appeal is determined on the record as constituted. **On the invocation of section 37 of the Employment Act** 1. Section 37 of the Employment Act operates upon a “casual employee,” a term of art defined in section 2 of the Act as an employee engaged for work on a daily basis and paid wages at the completion of each day's work. Section 37 provides that where such a casual employee works for an aggregate of not less than one month, or performs work that cannot reasonably be expected to be completed within an aggregate of three months, the contract of service “shall be deemed” to be one where wages are paid monthly, thereby importing the notice provisions of section 35(1)(c) of the Act. 2. A review of the pleadings discloses that neither party invited the trial court to characterise the relationship as one of casual employment. The Respondent's Statement of Claim and witness statement are unambiguous: he pleaded and testified that he was employed under an oral agreement of permanent, continuous, monthly-salaried employment from 2005 – not that he began as a casual employee later converted by operation of law. The Appellant, for its part, was equally unambiguous in denying that the Respondent was ever a casual employee, or an employee of any kind: it pleaded that he was an independent contractor or piece-rate worker engaged through a gang leader, outside any contract of service altogether. 3. It follows that whether the Respondent was a “casual employee” whose engagement had, by operation of section 37, matured into deemed monthly employment was not an issue joined by the parties, was not the subject of evidence directed to the specific statutory criteria in section 37(1)(a) or (b), and was not squarely canvassed before judgment. A court is not at liberty to found its decision on a statutory theory that neither party pleaded, led evidence on, or had a fair opportunity to meet; parties are bound by their pleadings, and a court must confine itself to the issues properly placed before it. The trial court's invocation of section 37 was, with respect, misdirected, and this ground of appeal succeeds. That misdirection does not, however, dispose of the appeal in the Appellant's favour, for it remains necessary to determine, independently of section 37 and on ordinary principles, whether an employer-employee relationship existed between the parties. **On the true nature of the relationship** 1. The determination whether a person is an employee under a contract of service, as opposed to an independent contractor under a contract for service, does not turn on any single, decisive test but on an assessment of the totality of the relationship, as this court explained in Christine Adot Lopeyio v Wycliffe Mwathi Pere [2013] eKLR: there is no agreed-upon definition of the determinant factors, and the facts of each case must be carefully examined. The recognised indicators include the degree of control exercised over the manner and means of the work, the extent to which the worker is integrated into the operations of the alleged employer, whether the worker bears the risk of profit and loss as one in business on his own account, and the presence of mutual, ongoing obligations to offer and accept work. 2. The Appellant's difficulty on this record is that its own case shifted between at least three distinct characterisations of the Respondent's status – an independent contractor, a piece-rate worker, and a person “engaged under a gang leader” – without the Appellant ever settling on, or explaining the interrelation of, these descriptions. These are not interchangeable labels, and it is necessary to draw the distinctions the Appellant's own pleadings and submissions elided. 3. An independent contractor is properly understood as a person who carries on business on his own account, who bears the commercial risk of profit and loss, who is ordinarily free to engage his own labour or subcontract, who supplies his own tools and organises his own method of work, and who contracts for a defined result rather than for his personal service as such. A piece-rate worker, by contrast, is not a status outside employment at all: section 2 of the Employment Act expressly defines “piece work” as work the pay for which is ascertained by the amount of work performed irrespective of the time occupied in its performance, and section 35 of the Act expressly contemplates piece-rate, daily-rate and periodic wage earners alike as persons engaged under a contract of service, differentiated only by the method of computing wages and notice. An employee paid by the piece remains, in the ordinary case, an employee. Engagement “under a gang leader,” for its part, describes not a legal status of the worker at all, but a mode of recruitment and supervision – a labour-gang or intermediary arrangement, historically and presently common in the loading and offloading trade at ports and go-downs, whereby a principal engages a gang leader or foreman to muster, direct and sometimes remunerate a pool of workers on the principal's behalf. The interposition of a gang leader does not, of itself, exclude the existence of a contract of service between the principal and the individual worker; everything depends on where, in substance, control, integration and the source of remuneration truly lie. 4. By simultaneously invoking all three characterisations – contractor, piece-worker and gang-engaged handyman – without clarifying which, if any, correctly described the Respondent's position, or how a single relationship could coherently bear all three descriptions at once, the Appellant left its own case in a state of unresolved ambiguity. It is the Appellant, as the party in exclusive possession of its own engagement records, payroll practices and NSSF correspondence, that was best placed to remove that ambiguity. Having failed to do so, the ambiguity falls to be resolved against it and not in its favour. **On the gang / “sogi” system and the NSSF evidence** 1. This brings the court to the gang or “sogi” system explained in the witness statements of Christopher Enock and Khatau Mahmood. As described, a gang leader solicits work from companies requiring manual loading and offloading, musters a pool of casual dock-workers (“sogis”) to meet a given assignment, and is paid by the engaging company per bag or per task, distributing the proceeds among those he has called upon. This is a recognisable and longstanding informal labour arrangement in Mombasa's warehousing and cargo-handling sector. It does not, however, operate as a talisman that automatically places every worker so engaged outside the protection of the Employment Act. Where, as the Appellant's own witnesses concede, the engaging company itself insists on NSSF and NHIF registration of individual sogis in their own names, maintains daily records of who among the gang is called upon and how much each is paid, and does so not for a single engagement but repeatedly over many years, the gang system operates as a mode of engagement and supervision rather than as a shield excluding the company from the status of employer. 2. On the question whether NSSF remittance is proof of an employment relationship, the Appellant is correct that no single authority elevates such remittance to conclusive proof; the decisions it cites – Hezron Ombati Babu v Menengai Oil Refineries Limited [2019] eKLR, David Barasa v British Peace Support Team & Another [2016] eKLR, and Asakhulu v West Kenya Sugar Company Limited [2024] KEELRC 705 – each caution against treating NSSF or NHIF deductions as, by themselves, dispositive. Those authorities do not, however, and could not, lay down an invariable rule of universal application; each expressly directs attention to the facts and circumstances of the particular case before it. Whether NSSF remittance evidences an employment relationship must accordingly be assessed contextually, alongside the length, regularity and character of the engagement and the conduct of the parties, and ought not to be applied as a mechanical rule transplanted wholesale from other, factually distinct disputes. The authorities cited by the Appellant do not, in other words, cast any rule in stone. 3. On the facts of this case, the Appellant's own email of 18th November 2021 to NSSF officials, produced in the record, states that “[i]n the year 2011 we were advised by your office to remit their contributions,” an acknowledgment of continuous, decade-long remittance made in the Respondent's name specifically. The explanation now advanced – that these sums were merely deducted from the sogis' own daily earnings and remitted on their behalf, without the Appellant itself assuming employer status – is not convincing in the absence of any document showing the wage or payment from which such deductions were in fact made. If the Appellant's position were correct, one would expect to find, at a minimum, a wage record identifying the gross sum paid to the Respondent on a given occasion, the NSSF deduction made from it, and the net sum actually disbursed to him. No such record was produced for any period before September 2019, notwithstanding that the Appellant itself asserts an NSSF relationship dating to 2011 and the Respondent asserts an engagement dating to 2005. The bare assertion that contributions were “deducted” and “remitted on their behalf,” unsupported by any deduction record, does not adequately account for a decade of continuous registration and remittance in the Respondent's individual name – particularly where it is the Appellant's own witness, Mr Khatau Mahmood, who concedes that “there is no way we can remit for them without appearing under the tag employer.” **Finding on the employment relationship** 1. Having regard to the totality of the material before the trial court – the length and continuity of the Respondent's association with the Appellant, spanning some sixteen years; the Appellant's sustained registration of the Respondent for NSSF purposes in his own name over the greater part of that period; the absence of any document, from either party, evidencing a discrete, arm's-length contract for service of the kind ordinarily entered into with an independent contractor; the Appellant's own shifting and unreconciled characterisations of the relationship; and the Appellant's failure to produce engagement records predating September 2019 despite its evident capacity to do so – this court finds, on ordinary principles independent of section 37, that the Respondent was at all material times an employee of the Appellant within the meaning of the Employment Act, 2007. The trial court's ultimate conclusion on this issue is accordingly upheld, though for reasons that depart materially from its own. **On unfair termination** 1. It is not seriously disputed, even in the Appellant's own submissions, that no document, record or witness account was placed before the trial court explaining the circumstances in which the Respondent's engagement came to an end, still less demonstrating compliance with the notification, hearing and valid-reason requirements of sections 41, 43 and 45 of the Employment Act. Once the Respondent gave evidence, unchallenged by any countervailing account, that he was denied entry to the Appellant's premises and informed that his services had been terminated, a prima facie case of termination was made out, and the evidential burden shifted under section 47(5) of the Act to the Appellant to justify the termination. The Appellant called no evidence on this score at all. The trial court's finding that the termination was unlawful and unfair is accordingly well founded and is upheld. **On quantum** 1. It is on the question of quantum that this court finds the trial court fell into error, and it is here that the appeal succeeds in material part. 2. The Respondent's own case as to his earnings was, on a fair reading of his witness statement, imprecise: he deposed only that he was earning “approximately” Kshs 25,500 per month, without producing a single wage slip, bank or mobile-money record, or any other primary document evidencing actual receipt of that sum. The only documentary evidence of actual payment before the trial court was the Appellant's “Sogis Daily Record,” which, whatever its evidential shortcomings on the existence of an employment relationship, showed daily payments to the Respondent fluctuating between approximately Kshs 115 and Kshs 3,920 depending on the volume of cargo handled on a given day – figures plainly inconsistent with a fixed monthly salary of Kshs 25,500, and inconsistent also with one another from day to day. The trial court's characterisation of Kshs 25,500 as a “reasonable” monthly wage does not withstand scrutiny: it is neither the figure proved by the Respondent nor a figure derivable by any transparent arithmetic from the Appellant's own daily records, and appears, in truth, to have been adopted simply because it was the sum the Respondent asserted in his pleadings, notwithstanding that his own evidence fell short of proving it. 3. Where, as here, neither party has discharged the burden of proving the actual wage paid, the court is entitled, and indeed obliged, to arrive at a fair and principled figure rather than accept an unproved assertion by default. The Respondent's undisputed occupation was that of a loader – manual, unskilled cargo-handling labour – performed within Mombasa. In such circumstances, recourse to the statutory minimum wage prescribed for that class of work provides the most reliable and legally grounded proxy for his earnings. The wage order in force throughout the material period in 2021 was the Regulation of Wages (General) (Amendment) Order, 2018 (Legal Notice No. 1 of 2019), which came into effect on 1st May 2018 and, no further general revision having been gazetted until 1st May 2022, remained the applicable order throughout 2021. Under that Order, the basic minimum consolidated monthly wage prescribed for a general labourer – the cadre properly encompassing a loader, in the absence of proof of any specialised trade or skill – within Mombasa City was Kshs 13,572.90. 4. This court accordingly sets aside the trial court's adoption of Kshs 25,500 as the Respondent's monthly wage, substitutes therefor the statutory minimum of Kshs 13,572.90 per month as the fair proxy for his earnings, and recomputes the affected heads of claim as follows. 5. Notice pay: one month's wage in lieu of notice is accordingly reduced from Kshs 25,500 to Kshs 13,572.90. 6. House allowance: applying the same fifteen per cent formula the parties themselves invoked before the trial court, and preserving the trial court's application – unchallenged in principle – of the three-year limitation period (thirty-six months), house allowance is recomputed at Kshs 13,572.90 × 15% = Kshs 2,035.94 per month, giving a total of Kshs 73,293.84 for thirty-six months, in place of the Kshs 137,700 awarded below. 7. Compensation for unfair termination: section 49(1)(c) of the Employment Act caps compensation at twelve months' gross wages, to be assessed having regard to the factors in section 49(4) of the Act, including the employee's length of service, his reasonable expectation of continued employment, and the availability of alternative employment. The trial court awarded the equivalent of ten months' wages without express engagement with these factors beyond a bare recital that it had “considered the circumstances.” While the Respondent's long service and the complete absence of procedural fairness in his termination warrant a substantial award, an award of ten out of a possible twelve months, absent reasoned justification tied to the section 49(4) factors, was excessive. This court considers an award equivalent to six months' wages to be a fair and proportionate measure of compensation in the circumstances, and reduces the award accordingly to Kshs 13,572.90 × 6 = Kshs 81,437.40. 8. Service pay: the trial court's refusal of this head, on the ground that the Respondent was registered with the NSSF, was not appealed on this specific point and is not disturbed. **F. DISPOSITION** 1. In the result, the appeal succeeds in part and fails in part. The trial court's findings that the Respondent was an employee of the Appellant and that his termination was unlawful and unfair are upheld, and the appeal against those findings is dismissed. The appeal against the quantum awarded succeeds to the extent set out in this judgment. 2. It is hereby ordered that the Judgment and Decree of the Chief Magistrate's Court at Mombasa dated 15th December 2025 in Cause No. E433 of 2021 be and is hereby set aside as to quantum only, and substituted with judgment for the Respondent against the Appellant in the following revised sums: | | | | --- | --- | | **Head of Claim** | **Revised Award (Kshs)** | | One month's pay in lieu of notice | 13,572.90 | | House allowance (36 months, at 15% of wage) | 73,293.84 | | Compensation for unfair termination (6 months) | 81,437.40 | | **TOTAL** | **168,304.14** | 1. The said sum of Kshs 168,304.14 shall attract interest at court rates from the date of filing of the suit in the trial court until payment in full. The order for issuance of a certificate of service within 45 days is affirmed. 2. As to costs, given the divided outcome of this appeal, each party shall bear its own costs of the appeal. The order for costs made by the trial court in favour of the Respondent is not disturbed. 37. It is so ordered. Dated, signed and delivered at Mombasa this 16th Day of July 2026. **OCHARO KEBIRA** **JUDGE**