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Human Resource (HR) Managers participate in the identification and development of the organization’s strategies. Participating in the organization planning allows them to gain profound understanding of the organizational activities needed to aid in sustainable growth of the company.

The obligations of HR managers in a company are as below: –

1. Develop and implement HR strategies and initiatives aligned with the overall business strategy.

HR managers are tasked with creation of goals to help meet key business objectives. They are involved in determining the organization’s long-term objectives and establishing the goals necessary to achieve them. They conduct in-depth analysis of current and anticipated conditions that may affect the company’s ability to achieve its mission.

2. Oversee the recruitment, selection and hiring process

HR managers who monitor the recruitment process of the company. They are tasked with hiring responsible employees who can invest their skills and abilities in the overall development of the company. It is essential to have a knowledgeable and responsible HR manager because without resourceful manpower the company cannot move in the right direction of success.

HR managers also draw up, negotiate, and administer labor contracts that cover issues such as grievances, wages, benefits, and union and management practices.

HR managers defining roles in the organization or assisting their client define roles in their business to avoid duplication of duties. Defining roles helps in accountability and performance evaluation.

3. Bridge management and employee relations by addressing demands, grievances or other issues

HR managers handle labor complaints between employees and management, and they coordinate grievance procedures.

4. Training and training programs

Employee training and development includes new hire orientation, leadership training and professional development. HR managers conduct periodic needs assessments to determine when training is necessary, and the type of training necessary to improve performance and productivity. They examine employee performance records to identify areas where employees could improve through job skills training or employee development, such as seminars or workshops on leadership techniques.

They also play an integral role in implementing employee development strategy and succession planning based on training and professional development. Succession planning draws on the manager’s knowledge of employee development, training and future business needs to devise career tracks for employees who demonstrate the aptitude and desire for upward mobility.

5. Organization structure and performance

HR managers are tasked with building organizational structure. They help in laying the foundation for the organization. They participate to form different pillars in an organization that is responsible for its development. They develop different strategies to meet the goals of the organization and contribute their support to all the departments of their company. HR managers should dedicate their existence by developing ideas to improve the company’s performance.

6. Formulation and implementation of policies

HR managers develop and update policies to govern the work environment. They keep track of whether the implemented policies are effective, and if not, take necessary action to ensure they are efficient. The policies they develop include HR policy and code of conduct, sexual harassment policy, anti-corruption and bribery policy, data protection policy, maternity and paternity policy among others.

7. Rewards and Recognition

It is a human resource manager’s key task to recognize their employees and reward them for their performance and contribution to the organization. According to their grading or rating, they will collect the information from the department managers and recognize the employees as per their performance. They make sure that this process underlies with organizational policies.

8. Employee support and Welfare

It is the duty of HR managers to ensure that there is a conducive work environment for the employees. They should nurture a positive work environment. HR managers act as a medium of communication between the management and employees. They should inform employees of their rights. They should conduct regular surveys on employee satisfaction and improve on areas pointed out by employees.

In a unionized organization, HR managers may be tasked with negotiating collective bargaining agreements, developing management response to union organizing campaigns and interpretation of labour union contract issues.

9. Effective Employee Relations

HR managers have the ultimate responsibility for preserving the employer-employee relationship through effective employee relations strategies. An effective employee relations strategy contains specific steps for ensuring the overall well-being of employees. It also ensures that employees have a safe working environment, free from discrimination and harassment.

10. Ensuring statutory and regulatory compliance

HR managers are tasked with ensuring that a company has complied with the set statutory and regulatory requirements. To this end, they should keep abreast with laws, regulations and policies that govern the operation of the company. They can seek the assistance of professionals such as financial and legal experts.

11. Adherence to work ethics and professionalism

HR managers are required to observe strict adherence to work ethics and code of conduct. They should avoid negative work practices such as discrimination, bias in decision making, nepotism and tribalism in discharge of their professional functions.

HR managers should not participate in activities that put them in conflict with the interests company and the business of the company. They should also not engage in activities that are contrary to those that they are registered as human resource professionals.

12. Custodian for company documents

HR managers are the custodians of extremely crucial company documents such as registration documents, contracts, strategies, financial documents and employee information. They should keep the documents confidential during and after their subsistence in the company, unless authorised or required to disclose the information by the company and the law.

 

1. To repeal the Employment Act Cap 226, declare and define the fundamental rights of employees;
2. To provide for basic conditions of employment of employees;
3. To regulate employment of children and to provide for matters connected thereto.

Employment Relationship & Contracts

All Contracts of Service are to be governed by the Employment Act, 2007 (Section 7). Provisions of the Act apply to both oral and written contracts (Section 8).

Contracts to be in writing if: –

• It is for a period of, or that amounts to, three (3) or more months;
• It provides for the performance of specified work which cannot be accomplished within a period of, or that amounts to, three or more months;

It is the duty of employer to reduce the contract into writing. Signification by the employee of acceptance of contract is by signing or imprint of finger and witnessed by another person other than the employer (Section 9).

Employment Contracts Particulars (Section 10)

The details required include: –

• The name, age, sex and permanent address of the employee;
• Name of employer, job description, commencement date, place of work and hours of work;
• Form and duration of the contract;
• Remuneration scale and rate including calculation method and payment intervals;
• Other particulars include; leave entitlement, public holidays, sick leave, pensions and pension schemes, length of notice and any existing CBA which affect the employee;
• Any assignment outside Kenya for more than one month –the terms, currency of benefits and terms on return.

Employment Changes

All changes to contracts of service must be in writing. The employment records are to be maintained for 5 years after termination of employment. The burden of proving or disproving an alleged term of employment stipulated in the contract shall be on the employer.

Disciplinary Policy (Section 12)

Where an employer employs at least 50 employees, the employer must provide written disciplinary policy and procedure.

• Employer to set out an appeal system;
• Avail rules or make accessible the Collective Bargaining Agreement;
• Display statement of employee’s rights.

Exclusion from Application of the Employment Act, 2007 (Section 3)

• Armed Forces or Reserve
• Kenya Police, Kenya Prisons Service, Administrative Police
• National Youth Service
• An employer and employer’s dependants if the latter are the only employees in a family undertaking

Any persons excluded by the Minister after consultation with the National Labour Board, taking into account international instruments.

Any persons excluded by the Minister because their employment terms and conditions are governed by special arrangements which are similar or better than the Act’s provisions.

 

The Employment Act, the Labour Institutions Act 2007 and Wage Regulations constitute minimum statutory standards. An Employer cannot offer, and an Employee cannot legally accept, and be bound by an offer, of terms and conditions of service, below the statutory minimum standards.

Section 26 of the Employment Act provides that where the terms and conditions of a contract of service are regulated by any regulations, as agreed in any collective agreement or contract between the parties or enacted by any other written law, decreed by any judgment award or order of the Industrial Court are more favourable to an employee than the terms provided in Part V and Part VI of the Act, then such favourable terms and conditions of service shall apply.

• Working hours

Section 27 of the Employment Act provides that an employer shall regulate the working hours of each employee in accordance with the provisions of the Act and any other written law. Notwithstanding the foregoing an employee shall be entitled to at least one rest day in every period of seven days.

The Employment Act does not specifically set out a maximum limit on working hours. Limits on working hours are instead regulated on an industry-by-industry basis (i.e. general workers, agricultural etc.), and are set out in the various regulation of wages orders (the Wage Orders). A number of wages orders have been gazetted that regulate different working hour requirements for different industries. Flexible arrangements on working hours are possible provided the maximum number of hours is not surpassed.

Order 5 (1) (2) of the Regulation of Wages (General) Order (the General Order), which regulates general workers (who are a majority of the workforce), provides that the normal working hours should not be more than 52 hours spread over six days a week, and not more than 60 hours of work per week for a person employed on night work.

Order 5 (3) of the General Order further provides that no person under the age of 16 years is required to work for more than six hours in any day. Additionally, persons under the age of 18 years can only work as interns for training purposes. Where an employee works for more than the maximum number of hours, payment of overtime is required to be made.

Order 7 of the General Order provides that every employee shall be entitled to one whole rest day in each week. An employer and his employee may, by mutual consent, agree to the deferment of the employee’s rest day and the rest day so deferred may be taken by the employee on a subsequent day or may, subject to a maximum accumulation of fourteen such rest days at any one time, be accumulated and taken, as leave with full pay in addition to the employee’s entitlement to annual leave with full pay.

The weekly rest day of a person under the age of sixteen years shall not be so deferred.

There are no specific working hours or other terms specifically required for part-time workers. Other than their hours of work, all other rights and obligations of the employee that apply to full-time contracts apply to them.

• Overtime

Overtime is regulated in the same way that the maximum number of hours is regulated: on an industry-by-industry basis. Order 5 (1) (2) of the General Order limits normal working hours to 52 hours per week for day workers and 60 hours a week for night workers, meaning that any time worked beyond these limits will amount to overtime. There is, however, a limit to overtime. Overtime worked, together with the normal working hours per week, should not exceed 144 hours for employees engaged in night work. Overtime for all other adult employees in any period of two consecutive weeks should not exceed 116 hours.

Order 6 (1) (a) (b) of the General Order provides that overtime is payable at the following rates: for time worked in excess of the normal number of hours per week, 1.5 times the normal hourly rate, and for time worked on the employee’s normal rest day or public holiday, twice the normal hourly rate.

The Order provides that in calculating payments for overtime, the basic hourly rate shall, where the employees are not employed by the hour, be deemed to be not less than 1/225 of the employee’s basic minimum monthly wage.

• Keeping records

Section 48(1) as read with section 53(1) of the Labour Institutions Act require employers to keep records for 3 years after the date of last entry thereof with respect to minimum rates of remuneration or conditions of employment established in a wages order.

• Remuneration

Section 48(1)(b) of the Labour Institutions Act states where a contract of employment provides for less remuneration than the statutory minimum remuneration, remuneration and conditions of employment established by the Wages Order shall be inserted in the contract, in substitution of those terms.

• Allowances

Order 10 provides for Acting allowance where an employee is required to work for a period of not less than one month in an occupation or grade for which the basic minimum wage prescribed under paragraph 3 is higher than the basic wage normally earned by the employee. The employee shall be paid an acting allowance at a rate not less than the difference between that higher basic minimum wage and his basic wage.

Order 14 provides for Safari allowance for an employee who is required to work away from his principal area of employment. The subsistence and accommodation allowance payable shall cease to be payable to an employee after thirty consecutive days’ absence on duty from his principal area of employment and thereafter the employee shall be treated as permanently transferred.

The Employment and Labour Relations Court  derives its jurisdiction from the Constitution and the provisions of the Employment and Labour Relations Court  Act, which gives the Court   exclusive original and appellate jurisdiction to hear and determine all disputes referred to it in accordance with Article 162(2) of the constitution or any other written law which extends jurisdiction to the Employment Court relating to employment and labour relations and  including disputes relating to or arising out of: –

• employment between an employer and an employee;
• trade unions and their members, employer organizations, federations, disputes concerning the registration and election of trade union officials; and
• disputes relating to the registration and enforcement of collective agreements.

The Court also has jurisdiction to hear and determine appeals arising from: –

• decisions of the Registrar of Trade Unions; and
• decisions of any other local tribunal or commission as may be prescribed under any written law.

The exclusive jurisdiction given to the Employment Courts with regards to all matters relating to Employment and Labour Relations disputes includes the power of the court to interpret the constitution and enforce fundamental rights and freedoms in disputes arising in the context of employment and labour relations.

Geographical Jurisdiction

Globalization allows for the operation of foreign and multinational companies, and with that the issue of multiple jurisdiction results.

In finding whether the Kenyan Employment and Labour Relations Court is the proper forum to redress employment issues in cases that involve multinational and foreign companies, the Court in Kenya has held that certain connecting factors may preponderantly favour the Kenyan Courts as the proper place for trial.

Therefore, the court employs prescriptive jurisdiction in favour of corporate separation, especially where there are sufficient factors connecting the parties to Kenya. The interest of the parties is best served by the Kenyan Jurisdiction, an example being where the principal witnesses who give evidence are resident in Kenya.

Temporal Jurisdiction/Limitation of Time

The Employment Act[1] places a statute limitation of three years from the time a course of action arises, within which a litigant can bring the matter before the court. The time can only be extended for 12 more months where there is a continuing injury or damage, after the lapse of the years. The section is coached in a mandatory term, meaning that the court may not have the jurisdiction to extend the period for bringing an action where the same has lapsed.

[1] Section 90

In today’s ever changing employment market, it is important to distinguish between employees and other labour relationships. New and emerging forms of ‘non-standard’ employment are coming to dominate young people’s early labour market experiences. Amongst these, internships are increasingly becoming an integral part of the school-to-work transition

The employment act defines an employee as “a person employed for wages or a salary and includes an apprentice and indentured learner;”

An internship as defined by the International Labour Organisation, Employment Policy Department Working Paper No. 240 of 2018 as “any arrangement for the profit of work within a business or organisation, a primary purpose of which is to gain experience, skills, and/or contacts that will assist the worker to gain employment and or other work opportunities in the future.”

On a narrow view, the willingness of a person to work without pay maybe treated as an indication that they are volunteering their services with no intention to enter an employment contract. But it is also possible that a contract may be inferred whenever an intern makes a commitment to undertake productive work that benefits the organisation hosting them in the return for opportunity to gain experience and enhance their employability.

In order to identify whether an intern can be termed as an employee, it is first necessary to identify the factors that are taken into consideration when the courts are looking to establish a contract of employment. The case of Christine Adot Lopeyio v Wycliffe Mwathi Pere [2013] eKLR established the different criteria that need to be taken into consideration.

• The control test whereby a servant is a person who is subject to the command of the master as to the manner in which he or she shall do the work.
• The integration test in which the worker is subjected to the rules and procedures of the employer rather than personal command.  The employee is part of the business and his or her work is primarily part of the business.
• The test of economic or business reality which takes into account whether the worker is in business on his or her own account, as an entrepreneur, or works for another person, the employer, who takes the ultimate risk of loss or chance of profit.
• Mutuality of obligation in which the parties make commitments to maintain the employment relationship over a period of time.  That a contract of service entails service in return for wages, and, secondly, mutual promises for future performance.  The arrangement creates a sense of stability between the parties.  The challenge is that where there is absence of mutual promises for stable future performance, the worker thereby ceases to be classified as an employee as may be the case for casual workers.

The courts in the Case of Bernard Wanjohi Muriuki v Kirinyaga Water And Sanitation Company Limited & another [2012] eKLR consolidated the criteria to form a “four – fold test and established the “The Multi-factor test combines aspects of the first two tests: it considers the power of control of the employee with regard to the means and methods of work; and the underlying economic realities of the activity or relationship.”

The courts have recognised that these tests are insufficient to establish an employment relationship and held in the case of Everret Aviation Limited V Kenya Revenue Authority (Through The Commissioner of Domestic Taxes) [2013] Eklr which quote the “Halsbury’s Laws of England Vol I 26, 4^th edition paragraph 3”  as instructive:

There is no single test for determining whether a person is an employee, the test that used to be considered sufficient, that is to say the control test, can no longer be considered sufficient, especially in the case of the employment of highly skilled individuals, and is now only one of the particular factors which may assist a court or tribunal in deciding the point. The question whether the person was integrated into the enterprise or remained apart from and independent of it has been suggested as an appropriate test, but is likewise only one of the relevant factors, for the modern approach is to balance all of those factors in deciding on the overall classification of the individual. The factors relevant in a particular case may include, in addition to control and integration: the method of payment; any obligation to work only for that employer, stipulations as to hours; overtime, holidays etc; arrangements for payment of income tax and national insurance contribution; how the contract may be terminated; whether the individual may delegate work; who provides tools and equipment; and who, ultimately, bears the risk of loss and the chance of profit. In some cases the nature of the work itself may be an important consideration”.

James Onduko v Computer For School Kenya [2014] eKLR, the court  after defining what an employee is in accordance with S2 of the Employment Act ruled as follows:

An intern, being either an apprentice or indentured learner, is by definition an employee.  The Claimant was therefore an employee from the time he started earning wages or salary.”

This was further reiterated in the decision in Mary Wanjiru Ndwiga & 913 Others v Principal Secretary, Ministry Of Health & another [2015] Eklr

The drafters of the Employment Act addressed such a scenario under section 2 of the Employment Act and indeed Parliament passed it with approval when an ‘employee’ was defined to include such an intern, learner, bonded or a salaried person;

 Such a definition did not stop at a person who receives ‘wages or a salary’ this is expanded to include those in apprenticeship and indentured learners. Such are persons in training, preparation or assist in the means of production or assist in the business development and earn a wage, a salary, allowance or token as they are indentured or bonded and in agreement that upon completion of such internship they full acquire full status of qualification and receive confirmation in their profession. Such is the case for all professionals in the health sector, legal sector and fiancé sectors just to list a few. Learners in apprentice and indenture are thus placed at a high responsibility to prove their worth by undertaking such duties under the tutelage of mentors or peers before the regulatory body approval and confirmation to the required status. For the role their play, such Interns such as the Petitioners were, they enjoy rights and benefits as they serve their master, employer or as the case might be.

From the foregoing it can also be said that highly skilled professionals will almost always be held to be employees irrespective of being termed as interns.

Questions with regards to an explicit Employment Contract may also arise. Under Kenyan Law, the onus to formulate a contract of employment lies on the employer. “An employer who is a party to a written contract of service shall be responsible for causing the contract to be drawn up stating particulars of employment and that the contract is consented to by the employee”

However, The case of Agnes Wanjiku &10; others v Chief Registrar of the Judiciary & another [2014] Eklr held that “The relationship between the parties, howsoever described or defined – attachment, clerk, student clerk, secretary, casual, intern, archive clerk et al does not to me amount to a relationship of employment. This is because ordinarily, employment relationships are established by mutuality of agreement inter-parties. This incorporates the agreement of terms and conditions of service. The law, vide section 9 of the Employment Act, 2007 requires that this be in writing whereas section 10 of the Employment Act mandates the employer to reduce this into writing. However, this need not necessary be the case in real life. Courts have inferred, interpreted and discerned employment even in the absence of written contracts of employment.”

According to the ILO Employment Policy Department Working Paper No. 240 of 2018,  It also depends on whether internships are paid or unpaid as well as whether internships are real productive work or limited mostly to observation or mock tasks. An internship is a paid internship if the intern receives financial compensation. This can be in the form of a wage or a stipend though not if they have a very limited range of expenses such as travel costs being reimbursed. There may be little concern with internships that involve remuneration that atleast makes the minimum wage that would otherwise apply to employees performing the same work. It’s quite likely that in this situation the interns will be treated as employees.

 

• Independent Contractor

An employee is engaged under a “contract of service” while an independent contractor or consultant is engaged under a “contract for service”.

An employee is a person employed for wages or a salary and includes an apprentice and indentured learner.

An independent contractor is a person who exercises an independent employment and contracts to do specific work according to his own judgment and methods, and without being subject to the control of his employer except as to the results of the work. An independent contractor also has the right to employ and direct the action of the workmen, independently of such employer and freed from any superior authority in him to say how the specified work shall be done, or what the laborers shall do as it progresses.

• What is the difference between an Independent Contractor and an Employee?

The difference turns on the degree of control exercised. Courts have developed the test to determine whether one is an employee or an independent contractor. The court in the case of Stanley Mungai Muchai Vs National Oil Corporation [2012] eKLR discusses the tests for determining employee and independent contractor. This include;

• Control Test – An employee is subject to the command of the employer as to the manner in which he or she shall do the work. An independent contractor has the discretion to determine the manner in which the work is done.
• Integration Test – Am employee is subjected to the rules and procedures of the employer rather than personal command. The employee is part of the business and his or her work is primarily part of the business. However, an independent contractor is not part of the business.
• The test of economic or business reality – which takes into account whether the worker is in business on his or her own account, as an entrepreneur, or works for another person, the employer, who takes the ultimate risk of loss or chance of profit.
• Mutuality of obligation – in which the parties make commitments to maintain the employment relationship over a period of time. That a contract of service entails service in return for wages, and, secondly, mutual promises for future performance. The arrangement creates a sense of stability between the parties.

In addition, an independent contractor will have his own tools to perform the work and will not rely on the employer to provide the equipment. An independent contractor is not entitled to the rights and benefits that an employee is entitled to. For example, an employee is entitled to statutory protection that applies to employees under the Employment Act, the employers’ liabilities for acts committed by employees, compensation for work injury damages, right to join trade unions, minimum wages, annual leave, paternity/maternity leave, and redundancy payments.

The payment to an independent contractor is not subject to statutory deductions such as PAYE, NSSF and NHIF. An independent contractor pays their own taxes and are responsible for actions in tort.

An independent contractor is a person who is self-employed and agrees to offer services to another for a fixed price while an employee is a person employed for wages or a salary and includes an apprentice and indentured learner.

• Conclusion

An independent contractor is, therefore, someone who is a registered tax payer, runs his own business, determines his own working hours, employs his own tools and invoices for work done.

In order to determine whether a person is an employee or an independent contractor the courts will consider the substance of the agreement, the facts which show the manner in which the employer and the employee or independent contractor have been operating. The courts are generally of the view that the tests are to be considered jointly and are not to be used exclusively by themselves as they only serve as guides based on the facts of each case.

Generally, termination of an employment contract must be preceded by a notice which is specified in the particular contract or otherwise determined by the period after which a salary is paid. In certain instances, however, an employer may terminate an employee summarily, that is, termination without notice or with less notice than that to which the employee is entitled by any statutory provision or contractual term. Summary dismissal is usually defined to mean an action or inaction which constitutes a fundamental breach of the contract of employment and which fundamentally destroys the relationship between employer and employee.

Section 44(4) of the Employment Act provides in part that:

Any of the following matters may amount to gross misconduct so as to justify the summary dismissal of an employee for lawful cause, but the enumeration of such matters or the decision of an employer to dismiss an employee summarily under subsection (3) shall not preclude an employer or an employee from respectively alleging or disputing whether the facts giving rise to the same, or whether any other matters not mentioned in this section, constitute justifiable or lawful grounds for the dismissal if—

• without leave or other lawful cause, an employee absents himself from the place appointed for the performance of his work;
• during working hours, by becoming or being intoxicated, an employee renders himself unwilling or incapable to perform his work properly;
• an employee willfully neglects to perform any work which it was his duty to perform, or if he carelessly and improperly performs any work which from its nature it was his duty, under his contract, to have performed carefully and properly;
• an employee uses abusive or insulting language, or behaves in a manner insulting, to his employer or to a person placed in authority over him by his employer;
• an employee knowingly fails, or refuses, to obey a lawful and proper command which it was within the scope of his duty to obey, issued by his employer or a person placed in authority over him by his employer;
• in the lawful exercise of any power of arrest given by or under any written law, an employee is arrested for a cognizable offence punishable by imprisonment and is not within fourteen days either released on bail or on bond or otherwise lawfully set at liberty; or
• an employee commits, or on reasonable and sufficient grounds is suspected of having committed, a criminal offence against or to the substantial detriment of his employer or his employer’s property.

Although an employer is entitled to summarily dismiss an employee where such an employee grossly misconducts himself, the employer must avail to the affected employee a chance to answer the allegations set against him in an environment that adheres to the principles of natural justice. An employer must follow the procedure set out in Section 41 of the Employment Act to the letter:

• Notification to employee

Other than in the case of probationary contracts, an employer shall, before terminating the employment of an employee, on the grounds of misconduct, poor performance or physical incapacity explain to the employee, in a language the employee understands, the reason for which the employer is considering termination and the employee shall be entitled to have another employee or a union representative of his choice present during this explanation.

• Conduct a fair hearing

Before terminating the employment of an employee or summarily dismissing an employee, the employer shall hear and consider any representations which the employee or his chosen representative may make on the grounds of misconduct or poor performance.

The Court of Appeal in the case of Standard Group Limited -v- Jenny Luesby[1] held that:

“There are no exceptional circumstances that have been established by the respondent that the case against the claimant was so severe that she could not be accorded the basic minimum. That is, a notice and a hearing made before the summary dismissal. That hearing is as important as the law made it mandatory even in the worst case scenario where an employee grossly misconducts oneself. The right to hearing is what amounts to meeting the true tenets of natural justice. Such a hearing in an employment relationship should be conducted in the presence of the affected employee together with another employee of her choice as this is the true meaning of a fair hearing. However senior an employee is, where the case is that of misconduct, the seniority is not justification for failure to meet the mandatory provisions of the law. It remains a sacrosanct duty for an employer to uphold. This was denied of the claimant and I find this to be an unfair labour practice”.

The employer must therefore pay keen attention to the procedure laid out in law when it comes to addressing cases of gross misconduct or otherwise risk exposing themselves to a claim of unfair termination under the Employment Act.

 

[1] [2018] eKLR

The employer – employee relationship is based on a contract of service between the parties where the employer offers to employ the employee to perform certain tasks in consideration of payment of a remuneration and the employee accepts the offer and performs the task as directed by the employer.

A contract of service is defined in the Employment Act as an agreement, whether oral or in writing, and whether expressed or implied, to employ or to serve as an employee for a period of time.

Types of Employment Contracts

A contract of Service should be for a period of time. Where the period is more than 3 months, the contract should be in writing. It is the obligation of the employer to draw-up the contract to be signed by the employee. The contract should state the form and duration of the contract.

Generally, there are various types of employment contracts. It can be either probationary contract, fixed-term contract or open-ended contract.

1. Probationary Contract

The Employment Act defines probationary contract as a contract of employment, which is of not more than twelve months duration or part thereof, is in writing and expressly states that it is for a probationary period.

A probationary contract is one that;

• is of not more than 12 months;
• is in writing; and
• expressly states that it is for a probationary period.

The Probation period is the time at the start of an employment when an employer evaluates and assesses the ability, competence and suitability of the employee for the role. Probation also provides a coaching or training opportunity where the new recruit learns the new job.

Probation should initially be for a period of not more than six months and may be extended for a further period of not more than six months with the agreement of the employee.

A probationary contract may terminated by giving not less than seven days’ notice of termination, or by payment of seven days’ wages in lieu of notice. The employer does not have to give reasons for the termination.

2. Fixed-Term Contract

A fixed-term contract is one that is for a specified period of time.

It is the end-point or expiry of the contract which is the defining feature of a fixed term contract. Section 10(3)(c) of the Employment Act requires that where the contract is for a fixed term, the contract should state the date when it is to end.

Usually a fixed-term contract terminates on expiry of the term. However, a fixed term contract can also be determined by conditions such as completing a specific task or the occurrence of an event.

• Termination of a Fixed-Term Contract

A fixed term contract automatically terminates once the time lapses, the task is completed or the event occurs, depending on the wording of the contract. If the wording of the contract provides that the contract will automatically terminate once the time lapses, or if the task is completed or the event occurs then there will be no requirement to give notice of termination of the contract.

If the contract provides that the contract may be renewed subject to employee’s performance then the employer may notify the employee at the end of the term that the contract will not be renewed. The general rule, however, is that a fixed term contract carries no rights and obligations beyond their date of expiry. The employer has the discretion to renew or not to renew. A fixed term contract cannot be automatically renewed.

In the case of Rajab Barasa & 4 Others Vs Kenya Meat Commission (2016) eKLR, it was held that a fixed term contract will not be renewed automatically, even when there exists a clause allowing for renewal.  The Court held that the expectation of the employees that their fixed term contracts would be renewed, had no basis as there was no express, clear and unambiguous promise given by the Employer on renewal.  The employer retains the discretion, even where there is a clause allowing for renewal.

Where at the time of expiry of the term of a fixed term contract the employee is on a journey, Section 39 of the Employment Act provides that the employer may, for the purpose of the completion of the journey, extend the period of service for a sufficient period, but in any case not exceeding one month, to enable the employee to complete the journey.

• Renewal Based on Legitimate Expectation

The exception to the general rule that fixed term contracts cannot be automatically renewed is where the employee had a legitimate expectation that the contract will be renewed. Legitimate expectation may arise where:

• The employer makes an unambiguous promise to the employee that the contract will be renewed. For instance, where the employer promises the employee that the contract will be renewed if the employee performs satisfactorily and the employee performs to the satisfaction of the employer. In the case of Teresa Carlo Omondi Vs Transparency International Kenya (2017) eKLR, the court held that there was a legitimate expectation on the part of the employee where “there was a promise for renewal, subject to fulfilment of certain conditions. These conditions were fulfilled. The claimant performed satisfactorily. She was appointed as an Independent Consultant for a key partner. There is no doubt her services were still required by the respondent.”
• If the employer does any act or omits to do something which leads an employee to believe that the contract will be renewed. For instance, if the employer continues to give the employee work and pays the employee even after the expiry of the contract. In the case of Cleopatra Kama Mugyenyi Vs Aidspan (2019) eKLR, regarding the issue of legitimate expectation, the court held that there must have been an indication by act or omission from the employer to indicate renewal was forthcoming to wet the Claimants appetite that their contracts would be renewed and hence submit legitimate expectation.
• Where it is the employer’s practice to renew fixed term contracts. In the case of Teresa Carlo Omondi Vs Transparency International Kenya (2017) eKLR, on the issue of legitimate expectation, the court expressed itself as follows: It must be shown that the employer, through regular practice, or through an express promise, leads the employee to legitimately expect there would be renewal. The expectation becomes legally protected, and ought not to be ignored by the employer, when managerial prerogative on the subject is exercised. Legitimate expectation is not the same thing as anticipation, desire or hope. It is a principle based on a right, grounded on the larger principles of reasonableness and fair dealing between employers and employees.

3. Open-ended Contracts

An open-ended contract is one that does not have a definite period of time. They are commonly known as “permanent and pensionable” contract. However, like all contracts, they can be terminated by notice.

Section 35 of the Employment Act provides as follows:

1. “A contract of service not being a contract to perform specific work, without reference to time or to undertake a journey shall, if made to be performed in Kenya, be deemed to be—

• where the contract is to pay wages daily, a contract terminable by either party at the close of any day without notice;
• where the contract is to pay wages periodically at intervals of less than one month, a contract terminable by either party at the end of the period next following the giving of notice in writing; or
• where the contract is to pay wages or salary periodically at intervals of or exceeding one month, a contract terminable by either party at the end of the period of twenty-eight days next following the giving of notice in writing.

2. Subsection (1) shall not apply in the case of a contract of service whose terms provide for the giving of a period of notice of termination in writing greater than the period required by the provision of this subsection which would otherwise be applicable thereto.”

Open-ended contracts are more common than fixed-term contracts in Kenya.

The primary legislative provision governing dispute resolution under the Employment Act is Section 87 which provides as follows:

• Subject to the provisions of this Act whenever:

1. an employer or employee neglects or refuses to fulfill a contract of service; or
2. any question, difference or dispute arises as to the rights or liabilities of either party; or
3. touching any misconduct, neglect or ill-treatment of either party or any injury to the person or property of either party, under any contract of service,

the aggrieved party may complain to the labour officer or lodge a complaint or suit in the Industrial Court.

• No court other than the Industrial Court shall determine any complaint or suit referred to in subsection (1).
• This section shall not apply in a suit where the dispute over a contract of service or any other matter referred to in subsection (1) is similar or secondary to the main issue in dispute.

The Industrial Court was reconstituted to the Employment and Labour Relations Court(ELRC). The ELRC, established under Employment and Labour Relations Court Act No. 20 of 2011 pursuant to Article 162(2) of the Constitution, has exclusive original and appellate jurisdiction to hear and determine all disputes referred to it in accordance with Article 162(2) of the Constitution and the provisions of the ELRC Act or any other written law which extends jurisdiction to the Court relating to employment and labour relations including:

• disputes relating to or arising out of employment between an employer and an employee;
• disputes between an employer and a trade union;
• disputes between an employers’ organisation and a trade union’s organisation;
• disputes between trade unions;
• disputes between employer organisations;
• disputes between an employers’ organisation and a trade union;
• disputes between a trade union and a member thereof;
• disputes between an employer’s organisation or a federation and a member thereof;
• disputes concerning the registration and election of trade union officials; and
• disputes relating to the registration and enforcement of collective agreements.

Rule 28 of the Employment (General) Rules, however, provides as follows:

 “An employee who is aggrieved by the actions of his employer may, if the grievance is not settled amicably by the employer, file a complaint in the Industrial Court”.

This Rule along with Article 159 of the Constitution which encourages the settlement of disputes through alternative modes such as reconciliation, mediation, arbitration and traditional dispute resolution mechanisms, encourages the use of alternative modes of dispute resolution so long as the same is not repugnant to justice and morality or inconsistent with any given laws.

Employers and employees are, due to the nature of their relationship and the desire in many instances to continue with the relationship, encouraged to resolve their disputes in the least acrimonious way possible. This may involve the use of internal processes that may be codified in a Human Resource Manual or external processes which involve third parties. In either case, the principles of fair hearing, natural justice and fair administrative action shall apply.

A sample dispute resolution clause that may be included in an employment contract is included below:

Should any dispute arise between the Parties hereto with regard to the interpretation, rights, obligations and/or implementation of any one or more of the provisions of this Employment Contract, the same shall be resolved in the manner set out in the Human Resource Manual.

OR

1. Should any dispute arise between the Parties hereto with regard to the interpretation, rights, obligations and/or implementation of any one or more of the provisions of this Employment Contract, the Parties to such dispute shall in the first instance attempt to resolve such dispute by amicable negotiation and in good faith in an attempt to reach a just and equitable solution satisfactory to both parties.
2. Should such negotiations fail, the parties may within Fifteen (15) days refer the case to mediation and appoint a single mediator as may be mutually agreed between the Parties. The mediation shall be conducted by a single mediator of not less than seven (7) years standing.
3. Should such negotiations fail to achieve a resolution within Thirty (30) days, either Party may declare a dispute by written notification to the other, whereupon such dispute shall be referred to arbitration under the following terms:

• such arbitration shall be resolved under provisions of the Kenyan Arbitration Act 1995 (as amended from time to time);
• the tribunal shall consist of one arbitrator to be agreed upon between the Parties failing which such arbitrator shall be appointed by the Chairman for the time being of the Chartered Institute of Arbitrators upon the application of any Party;
• the place and seat of arbitration shall be Nairobi and the language of arbitration shall be English;
• the award of the arbitration tribunal shall be final and binding upon the Parties to the extent permitted by law and any Party may apply to a court of competent jurisdiction for enforcement of such award. The award of the arbitration tribunal may take the form of an order to pay an amount or to perform or to prohibit certain activities.

1. Notwithstanding the above provisions of this clause, a Party is entitled to seek preliminary injunctive relief or interim or conservatory measures from any court of competent jurisdiction pending the final decision or award of the arbitrator.

When it comes to the use of internal processes, employers are encouraged to develop a human resource policy which should detail the manner to be followed in resolving disputes between employees as well as disputes between employers and employees.  The policy ought to lay out the process to be followed, the officers involved in the resolution process, classification of offences especially in disciplinary processes as well as a right to appeal or alternative recourse in case the employee is unhappy with the findings of the internal body/ office. Such a policy must be clear and understood by the employees for effective implementation of the same and to avoid any challenges that may arise from implementation of the process. The application of the policy should also be mentioned in the specific employment contracts to ensure that both parties are bound to observe the provisions of the policy.

When it comes to external processes, the most popular mode of alternative dispute resolution is arbitration. The age-old question has however been whether an arbitration clause in an Employment Agreement can oust the jurisdiction of the labour court. Some courts have held that the dispute resolution process laid out in the labour laws must be followed to protect the employees from any adverse provisions that may be contained in the employment contract. The court in Stephen Nyamweya & Another V Riley Services Limited[1] the judge observed the following:

• The law does however provide for an elaborate conciliation process in employment matters. In this case, the Respondent opted to include its own unique mechanism for dispute resolution. Unfortunately, by some strange coincidence the dispute resolution clause as drawn is incapable of implementation owing to certain absurdities contained therein.
• Counsel for the Respondent cited a host of authorities on interpretation of commercial contracts to give effect to the intention of the parties and asked the Court to adopt the principles contained in these authorities. I however take the view that employment contracts are distinct as against commercial contracts.
• First, employment contracts are drawn by the employer in a standard format to be applied to all employees, with minimal adjustments on job description and remuneration. Second, the employee has no opportunity to negotiate on standard clauses. That being the case, the employer owes the employee a duty of care to ensure that every clause is capable of implementation without too much trouble.
• One of the unique features of the Industrial Court is that parties can access justice expeditiously, at a minimal cost and without too may legal hurdles. While employers are encouraged to adopt ADR at the work place, they are expected to do it in a way that facilitates the quick resolution of disputes rather than cause delay.
• At any rate, if an employer attempts to halt or delay the jurisdiction of the Court, they must do so in a way that manifestly aids the cause of justice. To my mind, the Respondent had the capacity to eliminate the absurdities contained in the ADR clause in the Claimants’ contracts of employment which it now seeks to rely on to bar the Claimants from accessing justice before this Court.
• I therefore find the preliminary objection by the Respondent not well taken and hereby overrule it. I also strike out the said Clause 11.2 [arbitration clause] from the Claimants contracts of employment and direct that this case will proceed as if the said clause did not exist.

The court in James Heather – Hayes v African Medical and Research Foundation (AMREF)[2] however disagreed with the ruling in Stephen Nyamweya & Another V Riley Services Limited in upholding the arbitration clause in the employment contract. The judge noted that:

“Arbitration is a choice of the parties in so far as alternative dispute resolution is concerned.  One of is undisputed advantages is its granting of party autonomy whereby parties to an arbitration agreement are awarded the autonomy of choosing their own judge(s) and other facilities in dispute resolution.  This was so in the instant case and the parties contract and must be honoured…it is not the duty of this court to redraw agreements by parties.  The court can only come in to facilitate an interpretation and implementation of these contracts and no more.  I agree with the applicant/respondent that there is a subsisting contract that issues in dispute shall be referred to arbitration and I find as such”.

The judge went on to observe that the ruling in the Riley Services Case was only so because of the absurdity in the arbitration clause and that an employer and employee are free to contract and choose an alternative form of dispute resolution. However, seeing the rationale of the court in the Riley Services Case, it is important that when drawing a dispute resolution clause, the employer should ensure that the clause is clear, unambiguous and if necessary, explained to the employee at the time of executing the contract; and is devised to ease the process of dispute resolution as opposed to delaying the course of justice.

[1] [2013] eKLR

[2] [2014] eKLR

Being a director does not make a person an employee of the company as directorship is an office, not necessarily employment. If, however, the company enters into a Contract of Service with the director, with terms making the director an employee under the common law test, then the director becomes an employee. In these circumstances, relevant aspects of employment law including statutory protection as to unfair dismissal and redundancy apply in addition to the law relating to directors.

As an employee, the director will be bound by the provisions of their contract of service as well as by the implied terms in an employment relationship.  These include the implied terms of mutual trust and confidence, to act in good faith and not to disclose confidential information.

The salaries of directors who are also employees will be in accordance with the terms of their contracts of employment or service agreements.

Directors who are employees are usually mandated to carry out the tasks highlighted below.

1. Board Governance:

• Leading the company in a manner that aligns with the vision of the board.
• Communicate well, in a timely and accurate manner, all information necessary for the board to be able to carry out its functions.
• Provide strategic advice to the members of the board to keep them aware of developments within the industry.
• Ensure that the appropriate policies are developed to meet the company’s mission and objectives.
• Ensure statutory compliance.

2. Financial Responsibility:

• Develop resources that are sufficient enough to ensure the financial health of the organization.
• Fund raising and developing other sources of revenue.
• Preparation and submission a well-articulated fiscal report to the board including monthly budgets which reflect the true financial state of the company.
• Ensure maximum resource utilization, and works towards achieving economies of scale.

3. Organisation and Mission strategy:

• Work with board and staff to ensure that the company’s mission is fulfilled through implementation of programs, strategic planning and community outreach.
• Enhancement of the company’s image by being active and visible in the community and by working closely with other professionals, civic and private organizations.
• Preparation of corporate and annual business plans, and monitoring progress against these plans to ensure that the company attains its objectives cost effectively.

4. Organization Operations:

• Overseeing and implementation of appropriate resources to ensure that the operations of the organization are appropriate.
• Hiring and retention of competent, qualified staff.
• Direct and control the work of resources of the company to ensure the recruitment and retention of required numbers and types of well-motivated, trained and developed staff to ensure that it achieves its mission and objectives.
• Responsible for effective administration of operations.
• Responsible for signing all notes, agreements, and other instruments made and entered into and on behalf of the organization.
• Develop and maintain research and development programmes to ensure that the company remains at the forefront in the industry, applies the most cost-effective methods and approaches, provides leading-edge products and services and retains its competitive edge.
• Develop and maintain an effective marketing and public relations strategy to promote the products, services and image of the company in the wider community.

5. Liaison between organization and stakeholders:

• Appearing at official events.
• Liaison between the organization and external stakeholders.
• Develop and maintain relationships with not-for-profit organization leaders.
• Work closely with leaders of other companies to cultivate strong and long term strategic relationships to increase the company’s effectiveness.
• Establish professional contacts that can be of significant value to the company.
• Establish and maintain effective formal and informal links with major customers, relevant government departments and agencies, local authorities, key decision-makers and other stakeholders generally, to exchange information and views and to ensure that the company is providing the appropriate range and quality of services.