The Employment and Labour Relations Court (ELRC) has recently delivered a noteworthy decision that underscores two fundamental principles of Kenyan employment law: first, that employers must strictly comply with the procedural safeguards governing termination of employment; and second, that an employee’s successful claim for unfair termination does not shield them from liability for losses occasioned by their own misconduct or negligence.
In Kenneth Mwangi v Multigraph Machinery (K) Ltd (ELRC Cause No. E1088 of 2023), the Court was called upon to determine both the lawfulness of an employee’s dismissal and the employer’s counterclaim for losses allegedly arising from the employee’s poor workmanship. The outcome is striking. While the employee succeeded in proving that his dismissal was unfair and was awarded compensation, the employer simultaneously succeeded in its counterclaim and obtained judgment for over KES. 1.45 million in damages against the employee.
The decision serves as an important reminder that an unfair termination claim and an employer’s claim for damages are distinct causes of action, each determined on its own evidence and legal principles.
The employer dismissed the claimant, an engineer, on the basis of poor performance. It alleged that he repeatedly misdiagnosed faults in sophisticated printing machinery, recommended unnecessary replacement parts, and failed to competently undertake repairs, resulting in substantial financial losses and disruption to its operations. The Court acknowledged that an employer is entitled to terminate employment on grounds of poor performance where there is a valid basis for doing so. However, it reiterated that poor performance cannot be established merely by asserting that an employee’s work fell below expectations.
Sections 41, 43 and 45 of the Employment Act impose mandatory obligations on employers before terminating an employee for poor performance. An employer must identify the areas in which performance is deficient, communicate clear and measurable performance expectations, afford the employee adequate support and an opportunity to improve, and conduct a fair hearing before making the decision to terminate.
In practice, this ordinarily requires a structured performance management process. Employers should establish objective performance indicators, regularly assess performance against those indicators, provide coaching or training where necessary, implement a Performance Improvement Plan (PIP) with defined timelines, and document each stage of the process. Only where the employee fails to improve after being afforded a reasonable opportunity should termination be considered.
The employer in this case had genuine concerns regarding the claimant’s work. However, it did not demonstrate that it had undertaken any structured performance management process before terminating his employment. There was no evidence of measurable performance targets, periodic evaluations, a Performance Improvement Plan, or a performance hearing.
Consequently, the Court held that the dismissal was procedurally unfair and awarded the claimant KES. 241,668 as compensation for unfair termination. The more significant aspect of the judgment, however, lies in the Court’s treatment of the employer’s counterclaim. The employer sought KES. 1,452,112.12, alleging that the claimant’s negligent workmanship had caused extensive losses. According to the evidence, the claimant repeatedly misdiagnosed machinery faults, recommended unnecessary spare parts, damaged equipment during repairs, and ultimately necessitated the engagement of specialist engineers from India to rectify the defects. The employer produced documentary evidence in support of the expenditure it had incurred.
Although the claimant denied these allegations in his pleadings, he failed to testify or adduce evidence to challenge the counterclaim during trial. As a result, the employer’s evidence remained uncontroverted.
The Court therefore accepted the employer’s evidence as proved and entered judgment for the full amount claimed. The outcome illustrates an important procedural principle. Pleadings alone do not constitute evidence. Once a matter proceeds to trial, each party bears the burden of proving its case through admissible evidence. A mere denial in a statement of defence or reply to defence is insufficient where the opposing party produces credible evidence that goes unanswered.
At first glance, the judgment may appear inconsistent. How can an employee be found to have been unfairly dismissed, yet still be ordered to compensate the employer for losses exceeding one million shillings? The answer lies in the distinction between the legality of the termination process and the employee’s civil liability.
The Court did not find that the employee was competent or that the employer’s concerns lacked merit. Rather, it found that the employer failed to comply with the statutory procedure prescribed by the Employment Act before terminating his employment. Procedural fairness is a mandatory legal requirement that exists independently of whether the employer’s concerns are ultimately justified.
Conversely, the counterclaim required the Court to determine whether the employer had proved that it suffered quantifiable losses attributable to the employee’s negligence. Having found that the employer discharged that burden of proof, and in the absence of any evidence to the contrary, the Court entered judgment accordingly. The two findings therefore address different legal questions and are capable of coexisting.
The decision reinforces several important lessons for employers. First, genuine dissatisfaction with an employee’s performance does not dispense with the procedural requirements under the Employment Act. Employers should ensure that robust performance management systems are in place and that each stage of the process is properly documented.
Secondly, where an employer suffers actual financial loss attributable to an employee’s negligence or breach of duty, it should consider pursuing an appropriate counterclaim where supported by evidence. The Employment Court has demonstrated that it will entertain such claims where they are properly pleaded and proved.
Finally, employers should recognise that procedural compliance and recovery of losses are not mutually exclusive. An employer may succeed in recovering damages from an employee while still being found liable for unfair termination if the dismissal process failed to meet the statutory threshold.
The decision is a timely reminder that employment disputes are rarely one-dimensional. Compliance with fair procedure remains indispensable, but employees should equally appreciate that a successful unfair termination claim does not immunise them from accountability where their actions have caused demonstrable loss to their employer. Ultimately, both employers and employees stand to benefit from approaching workplace disputes with a clear appreciation of their respective rights, obligations and evidential burdens.
