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.
- 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.
- 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.
- 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:
- “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.
- 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.