https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1991

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT AT NAIROBI** **ELRC APPEAL NO. E200 OF 2025** *(Before D. K. N. Marete)* **REDCOURT/BOMA HOTEL LIMITED………………..……..……………APPELLANT** VERSUS **RICHARD MBATHA NGUNGA…………………......……………………RESPONDENT** **JUDGMENT** This matter was originated by way of a Memorandum of Appeal dated 19th June, 2025. It arises from a judgment delivered on 16th May, 2025 at Milimani Chief Magistrate’s Court in MCELRC/E309/2023. In this impugned judgment, the trial court found that the Respondent had been constructively dismissed from employment by the Appellant and awarded him one month’s salary in lieu of notice, salary for the period March, 2022 to January 2023 amounting to Kshs. 501,671.00, severance pay, and six months’ gross salary as compensation for unfair termination, together with costs. The grounds of appeal come out thus; 1. The Learned trial Magistrate erred in law and in fact in finding that the Respondent was procedurally and substantially terminated from employment by the Appellant’s conduct. 2. The Learned trial Magistrate erred in law and in fact in finding that the Appellant’s witness testified that the Appellant was no longer able to afford the Respondent. 3. The Learned trial Magistrate erred in law and in fact in finding that the invitation to the Respondent to reapply for his position amounted to termination of his employment. 4. The Learned trial Magistrate erred in law and in fact in failing to appreciate that the Respondent was asked to reapply so that the Appellant could find him a suitable placement as the hotel reopened in phases. 5. The Learned trial Magistrate erred in law and in fact in finding that the Respondent was rendered redundant, and in applying Section 40(1) of the Employment Act to the Appellant’s conduct. 6. The Learned trial Magistrate erred in law and in fact in awarding the Respondent one month’s salary in lieu of notice. 7. The Learned trial Magistrate erred in law and in fact in awarding the Respondent salary for the period March 2022 to January 2023, notwithstanding that he had not worked during that period. 8. The Learned trial Magistrate erred in law and in fact in failing to consider that the Appellant, as a hotelier, was adversely affected by the Covid-19 pandemic and had yet to fully recover. 9. The Learned trial Magistrate erred in law and in fact in failing to consider that the Respondent had in fact consented to being placed on unpaid leave. 10. The Learned trial Magistrate erred in law and in fact in awarding the Respondent severance pay in the absence of the Collective Bargaining Agreement relied upon for his pleaded claim of service pay. 11. The Learned trial Magistrate erred in law and in fact in awarding severance pay suo motu, contrary to the trite principle that parties are bound by their pleadings. 12. The Learned trial Magistrate erred in law and in fact in awarding six months’ compensation for unfair termination. The Appellant prays that the appeal be allowed, the judgment of the trial court be set aside, the suit be dismissed, and the costs of this appeal be awarded to the Appellant. It is the Appellant’s case and submission that the trial court fundamentally misdirected itself in finding that the Respondent’s employment was terminated or at all. It is further submitted that the Respondent voluntarily consented to unpaid leave in March, 2020 that the leave arrangement was a legitimate and proportionate response to the Covid-19 pandemic. The invitation to re-apply in March 2022 was not a termination but an administrative step to facilitate redeployment as the hotel re-opened in phases. The Appellant further submits that, there having been no termination, the Respondent could not have been rendered redundant that Section 40(1) of the Employment Act, 2007 was wrongly invoked, that the notice pay, salary arrears, and severance awards were improperly made and that six months’ compensation was excessive in all the circumstances. Reliance is placed on **Cargill Kenya Limited v Mwaka & 3 others, Civil Appeal No. 54 of 2019 [2021] KECA 115 (KLR)**, for the proposition that an employer is entitled to place employees on temporary unpaid leave as a measure of operational necessity. The Respondent’s case and submission is that the trial court correctly found constructive dismissal on the evidence. It is submitted that an employment relationship cannot exist in a vacuum: the Respondent neither performed any duties nor received any remuneration from March, 2020 that the Appellant’s own letter of March, 2022 invited him to apply for a position he already held and that no response was ever made to his demand letter. On procedural fairness, it is submitted that no notice of redundancy was given to the Respondent’s union or to the labour officer as required by Section 40(1)(a) and (b) of the Employment Act, that no criteria were communicated for the selection of staff for retrenchment, and that the failure to comply with Section 40 in its entirety rendered the redundancy unlawful. The Respondent urges that the appeal be dismissed with costs and that the judgment and decree of the trial court be upheld. After a considered look and scrutiny of the Memorandum of Appeal, the Record of Appeal, the proceedings and evidence on record and the submissions of the parties the issues for determination therefore become; 1. Whether the Respondent’s employment was terminated by the Appellant’s conduct. 2. Whether the awards of notice pay, salary arrears and severance pay were properly made. 3. Whether the award of six months’ compensation for unfair termination was warranted. 4. Who shall bear the costs of this appeal. On the 1st issue, this being a first appeal, this court is enjoined to re-evaluate the evidence on the record and arrive at its own independent conclusions on both fact and law, while bearing in mind that it neither saw nor heard the witnesses testify and will not interfere with the trial court’s findings merely because it might have reached a different result on the same evidence. This is the finding in the celebrated authority of **Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123.** Section 2 of the Employment Act, 2007 defines an employee as a person employed for wages or a salary. As the trial court correctly observed, relying on **Benjamin Joseph Omusamia v Underhill Spring Resort & Spa Limited [2020] eKLR**, a relationship in which neither wages are paid nor services rendered ceases to constitute employment within the meaning of the Act. This court accepts, as did the trial court, that the initial decision to place the Respondent on unpaid leave in March 2020 was, in the circumstances then prevailing, a legitimate and proportionate response to the disruption caused by the Covid-19 pandemic. The Respondent’s consent to that arrangement is not in dispute and the leave arrangement is not impugned. However, consent to a stated, temporary, pandemic-necessitated measure is not a waiver of the right to remuneration once the stated basis for that measure has passed. The Appellant’s own letter of 21st March 2022 represented that business was improving and that the hotel was reopening in phases and invited the Respondent to submit a written application for a position. That letter, on its face, does not offer to reinstate the Respondent to his existing position; it invites him to compete, with other applicants, for a position in a hotel where he had already been employed for approximately ten years. This court agrees with the trial court that this combination of circumstances, namely an indefinite period without pay or duties, a representation of improved business and an invitation to reapply for one’s own position without any offer of reinstatement, followed by silence in response to a demand letter, amounts in law to a termination of employment by conduct. This conclusion draws support from a decision of this court, differently constituted, in materially similar circumstances involving this same Appellant, **Maina v Red Court Hotel Limited/Boma Hotel [2024] KEELRC**. Grounds 1, 3 and 4 of the appeal accordingly fail. Ground 2 takes issue with the trial court’s characterisation of the evidence of Ms Ambani as amounting to testimony that the Appellant could no longer afford to retain the Respondent. The trial court’s finding on this point is a finding of fact grounded in its assessment of the witness’s evidence this court, not having heard Ms Ambani, is not in a position to depart from it. Ground 2 also fails. As to Ground 4, the trial court did not fail to appreciate the Appellant’s explanation for the reapplication process; it considered and rejected it, finding that the invitation to reapply was inconsistent with the existence of a continuing employment relationship. That finding was open to the trial court on the evidence and this court does not disturb it. As to Ground 5, and the question as to whether the trial court was entitled to characterise the termination as one arising from redundancy and to apply Section 40 of the Employment Act, 2007 having found that the Respondent’s employment was terminated, and having regard to the Appellant’s own evidence that the termination was precipitated by the economic effects of the pandemic on the hospitality sector, this court is satisfied that the termination was, in substance, one for reasons of redundancy within the meaning of Section 2 of the Employment Act, 2007 aforecited. The Appellant’s reliance on **Cargill Kenya Limited v Mwaka & 3 others [2021] KECA 115 (KLR)** for the proposition that an employer is entitled to place employees on temporary unpaid leave as a measure of operational necessity is correct as far as it goes, but Cargill does not assist an employer who, having placed employees on unpaid leave, subsequently issues an invitation to re-apply without any offer of reinstatement and then maintains silence in response to a demand. That is not a continuation of a legitimate leave arrangement; it is, on the facts, a cessation of the employment relationship for economic reasons. Sections 40(1)(a), (b), (c), (d) and (g) were not complied with. Ground 5 fails. The 1st issue is thus answered against the Appellant. On the 2nd issue, addressing notice pay first, Section 40(1)(f) of the Employment Act, 2007 requires an employer, on declaring an employee redundant, to pay not less than one month’s notice or one month’s wages in lieu of notice. The Appellant relied in the alternative on **Mutiso v South Eastern Kenya University (SEKU) [2024] KEELRC 647 (KLR)** for the proposition that an employee who contributed to his own redundancy by unreasonable conduct is not entitled to notice pay. That authority does not assist the Appellant: there is no finding that the Respondent contributed to his redundancy, and the question of employee conduct does not arise in the same way as in a constructive dismissal scenario. The one month’s notice pay was properly awarded. Ground 6 fails. On the salary arrears, Grounds 7, 8 and 9 all turn on the Appellant’s contention that the Respondent’s consent to unpaid leave, together with the continuing effects of the pandemic, excused non-payment throughout the period in question. The Respondent’s Statement of Claim sought salary for the entire period from March, 2020 amounting to Kshs. 1,718,109.00. The trial court did not award that sum; it awarded Kshs. 501,671.00 representing ten months of salary, being the period from March, 2022 to January 2023, the period after which the Appellant’s own letter represented that business had improved. Consent in March, 2020 to a pandemic-necessitated leave arrangement cannot be extended indefinitely, and does not excuse the non-payment of salary for a period during which the Appellant itself represented that business had recovered. Grounds 7, 8 and 9 fail and the award of Kshs. 501,671.00 is affirmed. On severance pay, Grounds 10 and 11 contend that the Respondent’s Statement of Claim did not pray for severance pay under Section 40(1)(g) of the Employment Act, 2007 but rather for service pay and that the trial court erred in awarding severance pay *suo motu*. It is correct that the Respondent’s pleaded prayer used the words “service pay” rather than “severance pay.” However, the Respondent’s pleaded case included the assertion that he had been rendered redundant and that no Section 40 process had been followed and both parties addressed Section 40 compliance, the question of redundancy, and the applicable CBA at considerable length in evidence and in submissions. The trial court’s award of severance pay was not granted *suo mot*u; it was the appropriate remedy arising from the issues properly and fully before the court. The use of “service pay” in the prayer rather than “severance pay” is a labelling distinction that does not affect the substance of the claim and the court was entitled to grant the relief that properly followed from its findings. Grounds 10 and 11 fail. The 2nd issue is answered against the Appellant. On the 3rd issue, Section 49(1)(c) of the Employment Act, 2007 permits an award of compensation for unfair termination of up to a maximum of twelve months’ gross salary. This Court notes, for completeness and accuracy, that the trial court’s judgment contains an apparent clerical slip: having stated that it would allow six months’ salary as compensation, the trial court then cited Section 49(1)(b) rather than Section 49(1)(c) as the basis for the award. The award itself is unaffected; the correct provision is Section 49(1)(c) and the substance of the trial court’s reasoning makes clear that compensation under that provision was what was intended and awarded. Six months represents exactly half of the statutory maximum. The trial court gave reasons for the award, having regard to the Respondent’s approximately ten years of service and to what it described as the manner in which the Appellant handled the separation. Those are relevant considerations under Section 49(4) and the award is within the range of the trial court’s discretion. This court finds no basis to interfere. Ground 12 fails. The 3rd issue is answered against the Appellant. On the 4th issue, costs follow the event. The Appellant has failed on all twelve grounds. I am therefore inclined to dismiss the appeal with costs to the Respondent. Delivered, dated and signed this **15th** day of **July** 2026. **D. K. Njagi Marete** **JUDGE** Appearances: 1. Mr. Muriuki instructed by Nderu Ngaruni & Kimeru Advocates for the Appellant. 2. Miss Wesonga instructed by Omongo Gatune & Company Advocates for the Respondent.