Thika Coffee Mills Ltd v Mwangi (Appeal E388 of 2025) [2026] KEELRC 1898 (KLR) (29 June 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT** **AT NAIROBI** **APPEAL NO. E388 OF 2025** **[Formerly High Court Appeal E147 of 2024 (Thika)** **THIKA COFFEE MILLS LIMITED APPELLANT** *VERSUS* **DAVID NGUGI MWANGI RESPONDENT** **[Being an appeal from the judgment of Hon. V. Asiyo delivered on 30 May 2024 in Thika CMELRC No. 16 of 2020]** **JUDGMENT** The appeal arises from the judgment delivered on 30 May 2024 in Thika CMELRC No. 19 of 2020. The appellant, aggrieved by the judgment, has filed two (2) grounds of appeal that: 1. *The trial court erred in fact and law in holding that the appellant had unfairly and unlawfully terminated the respondent’s employment.* 2. *The trial court erred in law and fact in holding that the respondent had discharged the appellant from any liability out of his termination of employment by signing the Discharge Certificate dated 22 December 2017, acknowledging that he had no further claim against the appellant.* The appellant is thus seeking that the judgment of the trial court be set aside or varied, especially the finding that the appellant had discharged the respondent from any claim arising from the termination of his employment, and hence the claim by the appellant was dismissed. The appellant is allowed with costs. The background to the appeal is a claim filed by the respondent against the appellant. His case was that he was employed by the National Pencil Company Limited, a sister company of the Appellant, in June 1994 as a driver, and was then transferred to the Appellant in October 1998. Upon the transfer, the respondent was paid Ksh. 26,981 per month. Upon the transfer, the National Pencil Company Limited did not pay the terminal dues due, including service pay and accrued leave days. His case was that on 4 November 2017, the Appellant issued him a notice terminating his employment, with payment of one month in lieu thereof. The respondent alleged that the respondent had contravened the Employment Act. On 15 December 2017, the Appellant wrote a letter of recommendation stating that the respondent retired upon reaching the mandatory retirement age. At the time of his termination of employment, he was 58 years old and had not reached retirement age. While employed by the National Pencil Company Limited, he was not paid accrued leave days and service pay, and thus claimed the following: 1. Rest days for 18 years Ksh. 2,449,042.80. 2. Overtime pay Ksh. 2,306,940.48 3. Accrued leave days for 5 years Ksh. 134,905. 4. Service pay for 24 years Ksh. 373,582.80 5. Public holidays Ksh. 498,110.40 6. Damages for 12 months Ksh. 323,772. 7. Certificate of service, 8. Costs of the suit. In response, the appellant admitted the employment relationship but denied the claims made. The Appellant denied any transfer of employment between the National Pencil Company Limited, as alleged, or any payment of wages of Ksh. 26,981 per month, and hence the respondent is not owed any accrued leave days, service pay or any terminal dues as alleged. In any case, the claims against the National Pencil Company Limited are time-barred and made contrary to section 90 of the Employment Act, where the alleged employment ceased in October 1998, hence 23 years ago. The case by the Respondent was that he was issued with a disciplinary warning on 7 June 2001, 8 August 2013 and 14 December 2013 for ignoring work instructions. The respondent caused an accident on 9 October 2017 that damaged the staff bus and was issued with a notice to show cause on 10 October 2017. His employment was terminated after a disciplinary hearing. In a letter dated 15 December 2017, the Appellant issued the respondent with a Certificate of Service and did not indicate the reason for terminating the employment, save to state that the respondent had resigned. He claims that the claims made are time-barred. The respondent signed a discharge dated 22 December 2017, admitting full payment of his terminal dues, and was thus estopped from making any claims against the Appellant. The learned magistrate heard the parties and held that the respondent was appointed by the Appellant through a letter dated 25 February 2000, and there was no transfer of employment as alleged. The claims against the National Pencil Company Limited were time-barred and filed contrary to section 90 of the Employment Act. The reliefs sought against the National Pencil Company Limited were time-barred. The claims between the appellants were not separated, and the trial court could not tabulate what was due in annual leave, rest days, public holidays, service pay or overtime. With regard to alleged unfair and wrongful termination of employment, the learned magistrate held that the Appellant did not adhere to the provisions of section 41 of the Employment Act in serving a show cause notice before the termination of employment. There was no evidence of a disciplinary hearing being undertaken. There was no proof of reasons leading to the termination of employment, and hence, compensation was awarded at 12 months' Ksh. 323,772 for unfair dismissal. On appeal, the appellant submitted that there was a justified reason for the termination of employment. The Respondent had an accident, a notice to show cause was issued, and a disciplinary hearing was held. At the time, he was 65 years old, having been born in 1952, as noted in the Certificate of Service. The trial court's finding that there was an unfair and unlawful termination of employment was in error. In evidence, the appellant called Titus Machanga, who confirmed that employment commenced on 25 February 2000 and that a letter of appointment was issued by the Appellant. Any earlier employment by the National Pencil Company Limited and the claims thereof are time barred. While driving, vehicle registration No. KBE 051V he caused an accident and did not deny such fact. Such was a valid reason for terminating employment. The award of damages as compensation was not justified, as held in **National Bank of Kenya Ltd v Pipeplastic Samklit (K) Ltd & another [2001] KECA**. The appellant submitted under the Discharge voucher, and the appellant was discharged by the respondent from liability arising out of the termination of employment by signing the Certificate of Discharge dated 22 December 2017. The application was cleared, and he acknowledged payment of Ksh. 87,456.56. he is thus not entitled to any further payment as held in **Coastal Bottlers Limited v Kimathi Mithika [2018] eKLR** and the appeal should be allowed and the trial court judgment set aside. The respondent submitted that the judgment of the trial court should be affirmed and the appeal dismissed with costs. The employer should invite the employee for a hearing before termination of employment under section 41 of the Employment Act (the Act), as held in **Oloo v Kisumu County Assembly Service Board & another O.C.S. Kisumu Central Police Station & 2 others (Interested parties) [2025] KECA**. Under section 47(5) of the Act, the employee bears the burden of proving that the termination of employment was unfair, a burden the respondent discharged. However, the appellant failed to discharge the burden under section 43 of the act. There was no proof of the reasons leading to the termination of employment. The respondent was involved in a traffic accident. The appellant presented no evidence that the respondent lied about the accident. There was no valid reason leading to the termination of employment. The discharge voucher signed by the respondent did not remove liability from the appellant as held in **Thomas De La Rue (K) Ltd v Omutelema Civil Appeal No. 65 of 2012.** Such a discharge voucher did not absolve the appellant from liability, and the respondent was entitled to claim for unlawful termination of employment. The appeal should be dismissed with costs. **Determination** This is a first appeal. The court is allowed to review the record, reassess the findings, and reach a conclusion. However, consider that the trial court had the chance to see the witnesses testify and observe their demeanour. The twin issues for determination in this appeal are whether the findings that there was an unfair and unlawful termination of employment had a good basis, and whether the discharge voucher signed by the respondent absolved the appellant of liability. The nature of employment is not challenged in this appeal. The Appellant was the employer at the time employment ceased. The letter of appointment, dating back to 2000, was by the Appellant. Claims going back to the National Pencil Company Limited are indeed time-barred pursuant to section 89 of the Act. The learned magistrate analysed these facts and applied the law correctly. On 4 November 2017, the Appellant issued notice terminating the respondent’s employment on reasons that following an accident that occurred while he was driving the staff bus registration KBE 051V, his explanation was that the vehicle had been hit from the rear back when he had taken it for fueling at Kihenia Farm. The Appellant conducted an investigation and established that the accident occurred elsewhere. The Appellant thus issued the respondent with 3 days' notice, effective from 4 November 2017, that his employment would be terminated. On 15 December 2017, the Appellant issued the respondent a letter indicating that he had retired from the company upon reaching the mandatory retirement age. On 19 December 2017, the respondent signed the Certificate of Discharge from Employment and was paid through cheque the sum of Ksh. 87,456.86 in terminal dues. The employer has the right to terminate employment for misconduct or gross misconduct, pursuant to sections 41 and 44 of the Act. However, the employer must adhere to the due process outlined under section 41(2) of the Act: ***(2) Notwithstanding any other provision of this Part, an employer shall, before terminating the employment of an employee or summarily dismissing an employee under section 44(3) or (4) hear and consider any representations which the employee may on the grounds of misconduct or poor performance, and the person, if any, chosen by the employee within subsection (1), make.*** Even where the employee has committed gross misconduct, the due process of law must be observed. Issuance of notice or payment thereof is not sufficient cause to terminate employment. Valid and justified reasons must exist leading to termination of employment as required under section 43 of the Act, as held in **H Young Company (EA) Limited v Kenya Building, Construction, Timber & Furniture Industries Employees Union [2026] KECA 1020 (KLR)**. The employer must have a valid reason for terminating employment. Having a termination clause under the employment contract or letter is no longer a sufficient cause. In **Nyandiko v Kenya Commercial Bank Limited (Civil Appeal 305 of 2014) [2017] KECA 798 (KLR),** the court held that under Section 45 of the Act, termination of employment is deemed to be unfair if the employer fails to prove that the reason for the termination was valid, reasonable and justified. see **Irangi v Teachers Service Commission [2026] KECA 1087 (KLR).** In **CFC Stanbic Bank Limited v Danson Mwashako Mwakuwona [2015] eKLR**, the court emphasised that in considering whether termination of employment was fair or not, the court ought to examine whether the reasons for termination were valid and whether the procedure for dismissal was fair. In this case, the Appellant maintained that the respondent had caused an accident while using the vehicle registration KBE 015V. Upon investigations, the respondent was found to have lied. However, before the issuance of the notice dated 4 November 2017, there is no record of the Appellant adhering to the due process procedures under section 41 of the Act. Despite asserting in response that a notice to show cause why employment should not be terminated was issued, such notice is not filed. The Appellant also maintained that a disciplinary hearing was held. The record to confirm such a procedure is missing. The findings by the learned magistrate to this extent, and that there was an unlawful and unfair termination of employment, are correct. However, the allocation of compensation at 12 months is without reason. The court has maintained that before allocation of the maximum compensation, reasons and justification are imperative. In **Postal Corporation of Kenya v Tanui [2019] KECA 489 (KLR),** the court held: *“We are alive to the principle that this Court will not interfere with an award of damages unless the same was inordinately high or low or the judge proceeded on wrong principles. See International Planned Parenthood Federation vs Pamela Ebot Arrey Effiom [2016] eKLR. But this Court has in several previous decisions decried the awarding of maximum compensatory damages for wrongful or unfair termination without a firm factual and legal foundation for such awards.* *the trial court did not state why it opted to give the remedy provided under section 49 (1) (c) that is, twelve months gross salary, and not the other remedies under section 49 (1) (a) or (b). The court should have been guided by the provisions of section 49 (4) but the trial judge said nothing about the reasons that led him to exercise his discretion in the manner he did.”* Equally in **Ol Pejeta Ranching Limited v David Wanjau Muhoro [2017] eKLR**, the court in addressing the question of whether to grant the maximum compensation or not held: *The trial judge did not at all attempt to justify or explain why the respondent was entitled to the maximum award. Yes, the trial Judge may have been exercising discretion in making the award. However, such exercise should not be capricious or whimsical. It should be exercised on some sound judicial principles. We would have expected the Judge to exercise such discretion based on the aforesaid parameters. In the absence of any reasons justifying the maximum award, we are inclined to believe that the trial Judge in considering the award took into account irrelevant considerations and or failed to take into account relevant considerations, which act then invites our intervention.* In this case, the learned magistrate does not give reasons for holding that the respondent was entitled to the maximum award. This does not take into account his poor work record. Previously, he had written warnings. It is not contested that on 7 June 2001, 8 August 2013, and 14 December 2013, the Appellant issued warnings for misconduct. Under section 45(5) of the Act, when assessing the compensation due to the employee, such work records become necessary to consider. See **Broadways Logistics Limited v Abdulkadir [2025] KEELRC 2567 (KLR)** and the case of **Lilian W. Mbogo-Omollo v Cabinet Secretary Ministry of Public Service & Gender & another [2020] KEELRC 53 (KLR)** where the courts have held that despite the lapse in securing the due process, where the employee has a poor record in employment, under section 45(5) of the Act, the court should take the record into account in assessing compensation. In this regard, compensation of three months is deemed appropriate, taking into account that the respondent caused an accident that led to the termination of his employment and that he had previously received warnings. The respondent was earning Ksh. 26,968. The 3 months' compensation is Ksh. 80,904. The payment of compensation should also take into account the terminal dues already paid to the respondent at Ksh. 87,456.86. The paid dues shall be offset whichever is higher. Regarding the discharge voucher, indeed, this settles the payment of terminal dues. Upon execution of the discharge, the employer is not liable for making further payments as held in **Abdulrahman v Transafrica Motors Limited [2026] KECA 912 (KLR)** and **Gwiyanga v Simba Duty Free Limited [2026] KEELRC 1547 (KLR).** However, in employment and labour relations, the court is required to weigh the discharge voucher against the provisions of section 35(4) of the Act. The court must assess whether the claims made by an employee relate to the lawfully owed dues in employment or the fairness of the termination of employment: ***(4) Nothing in this section affects the right—*** 1. ***of an employee whose services have been terminated to dispute the lawfulness or fairness of the termination in accordance with*** ***the provisions of section 46; or*** 1. ***of an employer or an employee to terminate a contract of employment without notice for any cause recognised by law.*** Therefore, in **Bliss Healthcare Limited v Olale [2026] KEELRC 1495 (KLR)** and in **Coastal Bottlers Limited v Kimathi Mithika [2018] KECA 523 (KLR)** and **Trinity Prime Investment Limited v Lion of Kenya Insurance Company Limited [2015] eKLR**, the courts held that discharge vouchers are binding only if executed voluntarily and without fraud, coercion, or misrepresentation, but subject to section 35(4) of the Act. In this regard, the learned magistrate well addressed the issue of the discharge voucher. The court finds no reason to disturb these findings. On costs, the appeal partially succeeds. On this basis, it is necessary that each party should bear its costs for the trial court and the appeal. **Accordingly, the appeal is partially successful. Judgment in Thika CMELRC NO. 19 of 2020 is hereby reviewed in the following terms:** 1. **There was an unlawful and unfair termination of the respondent’s employment.** 2. **3 months' compensation for Ksh. 80,904.** 3. **The award of compensation shall take into account the terminal dues already paid to the respondent at Ksh. 87,456.86.** 4. **The paid dues shall be offset by whichever is higher.** 5. **Each party to bear its costs for the trial court and appeal.** **Delivered in open court at Nairobi, this 29th day of June 2026.** **M. MBARŨ** **JUDGE** **In the presence of:** **Court Assistant: Samuel Maruga** **………………………………….……. and ……………………………………..**