Kenya's Employment and Labour Relations Court has a well-earned reputation for scrutinising employers with forensic intensity. The procedural bar for a lawful termination is high. The documentation requirements for a valid redundancy are exacting. And the courts have consistently demonstrated that they will award significant compensation where an employer — however commercially justified in their underlying decision — fails to follow the precise procedural steps the law demands.
The result is a landscape where multinational corporations, fast-growing local enterprises, and family businesses alike routinely find themselves on the losing end of employment claims — not because their decisions were wrong, but because the process was flawed.
If you manage people in Kenya, understanding where these exposures lie is not optional. It is one of the most direct ways you can protect your business from unbudgeted financial liability.
The Legal Framework You Are Working Within
Employment in Kenya is governed principally by the Employment Act, 2007, which prescribes the standards for contract terms, termination, redundancy, and disciplinary procedures. The framework has been updated by the Employment (Amendment) Act, 2021, and most recently by the Persons with Disabilities (PWD) Act, 2025 — which introduces direct financial incentives for employers who reserve a minimum of 5% of their workforce positions for persons with accredited disabilities, including tax deductions on applicable salaries and accessibility modification costs.
For dismissals, Section 41 of the Employment Act requires both substantive and procedural fairness — meaning the reason for termination must be valid, and the process followed must be demonstrably correct. For redundancies, Section 40 imposes a separate and equally demanding set of obligations: notice to trade unions, notification of the relevant labour officer, an objective selection process, and the payment of statutory severance calculated at a minimum of 15 days' basic wages for every completed year of continuous service.
These are not guidelines. They are mandatory requirements, and deviation from any one of them is sufficient to render an otherwise justifiable termination unlawful.
Three Employment Law Traps Kenyan Employers Keep Falling Into
1. The constructive dismissal trap
Constructive dismissal is what happens when an employer does not formally terminate an employee — but makes the working environment so intolerable, or unilaterally changes the employment terms so fundamentally, that the employee is effectively forced to resign. The law treats that resignation as a dismissal and the employer as fully liable.
The most common trigger is a unilateral change to remuneration or reporting structure — typically executed during a corporate restructuring without the employee's written consent. Courts consistently interpret such changes as a fundamental repudiation of the employment contract. Critically, recent rulings have also clarified that the grievance must have a direct, contemporaneous link to the resignation. An employee who submits a normal resignation letter and subsequently raises grievances cannot successfully claim constructive dismissal — the chain of causation is broken. But an employer who assumes this provides broad protection is taking a significant risk.
2. The redundancy process failure
Redundancy is the area where employers most frequently incur massive, entirely avoidable liabilities. The statutory process under Section 40 is not complicated — but it is unforgiving. Employers must notify the relevant trade union and the local labour officer at least one month in advance. They must apply an objective selection process based on documented criteria such as skill, performance, reliability, and length of service. And they must pay the correct severance.
The courts have recently made clear that mere administrative assertions of organisational change are not sufficient justification. If you are conducting a redundancy, you need concrete, documented evidence of the financial or structural necessity driving it. You cannot use redundancy as a convenient mechanism to remove underperforming employees who should instead be subject to a performance management process.
3. Allowing a disciplinary process to be escaped by resignation
This is a trap that catches employers off-guard. An employee facing a gross misconduct investigation who resigns before the process concludes cannot simply walk away with a clean record. Recent Court of Appeal authority confirms that where a formal show-cause notice has already been issued, the disciplinary process continues regardless of the resignation. The employer retains the right to conclude the investigation and, where misconduct is established, to record the outcome.
The practical implication is immediate: when a disciplinary situation arises, the show-cause letter must be issued promptly and formally. Do not allow the situation to drift while you consider your options — a strategic resignation in that window could derail the entire process.
What Good Employment Law Practice Actually Looks Like
The employers who consistently avoid costly employment claims are the ones who have built the right systems before they need them.
At W Mwaniki & Associates, we work with employers across sectors to do exactly that. We draft employment contracts and HR policies that are both commercially functional and legally robust. We build disciplinary procedures and redundancy frameworks that are documented, objective, and designed to withstand judicial scrutiny. And when employment disputes do arise — whether before the Labour Relations Court or in negotiated settlement — we represent employer interests with precision and commercial pragmatism.
We also advise on the PWD Act, 2025 incentives, helping employers structure their hiring frameworks to access the available tax benefits whilst building genuinely inclusive workplaces.
The cost of a well-drafted employment policy is a fraction of the cost of a single successful unfair dismissal or constructive dismissal claim. If your employment documentation has not been reviewed recently, the time to address that is now — before a dispute forces your hand.
Contact W Mwaniki & Associates to schedule a confidential employment law review for your business.
