Employment contracts are a frequent subject of dispute in employment law. In particular, questions surrounding the legality of termination when the employer decides not to renew a fixed-term contract often arise. Many employees, after working for a period under renewable contracts, may have a reasonable expectation of contract renewal. However, under Kenyan employment law, the mere non-renewal of a fixed-term contract does not automatically lead to a finding of unfair or unlawful termination.
Key Provisions of the Employment Act, 2007
The Employment Act, 2007 of Kenya lays down clear guidelines on termination of employment, including the termination of fixed-term and renewable contracts. The Act highlights two primary concerns: the requirement for notice of termination and the validity of the reasons for termination.
- Section 35 of the Employment Act governs notice of termination. It provides that a contract of service with a salary interval of one month or more requires the employer to issue at least one month’s notice before terminating the employment.
- Section 43 requires the employer to prove the reason for termination, which must be valid, while Section 45 provides that any termination found to be unfair, such as being without a valid reason or failing to adhere to due process, will be deemed unlawful.
- Section 41 mandates procedural fairness during termination, particularly where the termination arises from misconduct, redundancy, or poor performance. However, for fixed-term contracts, the expiry of the contract itself may render such procedural safeguards unnecessary.
Termination of Renewable Fixed-Term Contracts
A renewable fixed-term contract is distinct in that its continuation beyond the agreed-upon term depends on certain conditions such as the availability of funding or the employer’s discretion. The contract may include an explicit clause granting the employer the right not to renew the contract. In such a scenario, the key issue is whether the non-renewal is lawful under the contract’s terms and the law.
The expiry of a fixed-term contract does not automatically equate to unfair termination. The courts in Kenya have consistently upheld that the natural expiry of a fixed-term contract, whether renewable or not, does not amount to unlawful termination. This principle was reaffirmed in several court decisions, including Samuel Chacha Mwita v. Kenya Medical Research Institute [2014] e-KLR and Margaret A. Ochieng’ v. National Water & Pipeline Corporation [2014] e-KLR, where the Industrial Court held that the end of a fixed-term contract simply marks the conclusion of the employment relationship, and no further renewal is owed unless there are specific circumstances.
In Rajab Barasa & Others v. Kenya Meat Commission, the Employment and Labour Relations court emphasized that the existence of a renewal clause in a fixed-term contract does not imply an automatic right to renewal. The employer’s discretion in renewing such contracts is upheld, provided there are no unlawful motives or statutory violations.
The principles governing fixed-term contracts have been clearly spelled out by the Court of Appeal in several decisions. In National Water Conservation & Pipeline Corporation v. Jayne Kanini Mwanza, Civil Appeal No. 178 of 2014, the Court of Appeal stated as follows:
“The general principle, as we understand it, is that a fixed-term contract will terminate on the sunset date unless it is extended in terms stated in the contract. A court cannot rewrite the terms of a contract freely entered into between the parties. Once there is a written contract, the court will seek to give meaning to such contract, giving ordinary meaning to its terms in determining any issue that may arise.”
The court further stated:
“A general principle that a fixed-term contract will continue if not terminated would be a contradiction to the very definition of a fixed term. There is a definite start date and end date. The contract would logically and automatically terminate; otherwise, it would no longer be a fixed-term contract…”
Can the Non-Renewal be Challenged?
While employers retain discretion over whether to renew a fixed-term contract, this discretion can be challenged in specific circumstances. A claim for legitimate expectation of renewal arises when the employee reasonably believes that their contract will be renewed due to the employer’s conduct. This expectation must be supported by clear and consistent actions or promises from the employer, which lead the employee to believe that renewal will occur.
In Ruth Gathoni Ngotho-Kariuki vs. Presbytery Church of East Africa [2012] e-KLR, the Industrial court of Kenya at Nairobi found that an employee could have a legitimate expectation of renewal when the employer failed to provide the agreed-upon notice of non-renewal. Similarly, in John Ogutu Ragana v. Bandari Sacco Limited [2017] e-KLR, the Employment and Labour Relations Court observed that the employee had continued working beyond the contract’s expiry date, leading to an expectation that the contract would be renewed.
In the case of Daniel Kabira v Kenya Conference of Catholic Bishops (Cause 1203 of 2017) [2022] KEELRC 12804 (KLR), the Respondent through its advocates, Muma & Kanjama Advocates argued that they neither expressly nor by conduct assured renewal of Claimant’s contract of employment. The Employment and Labour Relations Court while dismissing Claimant’s claim of legitimate expectation stated that the Claimant’s contract had expired by effluxion of time and that there existed no legitimate expectation.
Similarly, the Employment and Labour Relations Court (Rika J.) in Teresa Carlo Omondi v Transparency International Kenya (2017) eKLR, while considering the issue of legitimate expectation stated as follows:
“The burden of proof, in legitimate expectation claims is always on the employee. It must be shown 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 founded on the larger principles of reasonableness and fair dealing between employers and employees. The employee must demonstrate some rational and objective reason for her expectation. The representation underlying the expectation must be clear and unambiguous. The expectation must be induced by the decision maker. The decision maker must have authority to renew. Repeated renewals, extended service beyond the period provided for in the fixed term contract and promise of renewal are some of the elements that would amount to objective reasons underlying expectation of renewal. The presence of these elements however, is not to be taken as conclusive proof of legitimate expectation.”
In view of the foregoing therefore, it suffices to say, in the absence of a clear, consistent, and repeated pattern of renewal or promises by the employer, employees cannot easily assert a legitimate expectation. The central issue is whether the employee’s expectation was reasonable based on the employer’s actions and communications and whether any failure to renew was grounded in improper motives or circumvention of the agreed-upon procedures.
Implications for Employers and Employees
For employers, it is crucial to adhere strictly to the terms outlined in the employment contract and ensure that the non-renewal of a fixed-term contract is based on legitimate reasons. Employers should also ensure that proper notice is given in accordance with Section 35 of the Employment Act.
For employees, understanding the nature of their fixed-term contract and the specific conditions under which it can be terminated or renewed is essential. Employees claiming a legitimate expectation of renewal must be able to demonstrate that the employer’s actions or communications supported such an expectation.
Conclusion
In conclusion, the termination of a renewable fixed-term contract does not automatically constitute unlawful termination under Kenyan law, as long as the non-renewal is done in accordance with the contract’s terms and statutory obligations. If an employer follows the proper notice requirements and the decision to not renew the contract is based on valid and agreed-upon reasons, the termination will generally be lawful.
