Question 1

Board Training and Structured Induction as Pillars of Effective Corporate Governance

Accepted Answer

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Date: 27th January 2026
Board Training and Structured Induction as Pillars of Effective Corporate Governance
Authored by Dr. Seth Wekesa & Annette Guto
																														
Introduction
In today’s complex and rapidly evolving business environment, effective corporate governance is a cornerstone of organisational success. Boards of directors are tasked with overseeing strategy, managing risks, ensuring accountability, and safeguarding stakeholder interests. To meet these responsibilities, it is imperative that board members possess the necessary knowledge, skills, and understanding of governance principles. This is where structured board training and induction programs play a pivotal role.
Board training and structured induction are indispensable pillars of effective corporate governance. They not only prepare directors to fulfil their legal and ethical obligations but also position organisations for long-term success by fostering informed decision-making, strategic clarity, and a commitment to governance excellence. As the demands on board continue to grow, investing in these programs is not just the best practice; it is a strategic imperative.
Drawing on our experience in conducting governance audits, the following best practices are recommended to strengthen board effectiveness and promote sound corporate governance.
Best Practices in Board Training and Induction

Formal Board Induction Policy or Manual

Develop a standardised Board induction policy or manual to ensure consistent onboarding for new directors. This policy serves as a framework to equip all directors with a systematic understanding of their roles, governance standards, and fiduciary responsibilities, fostering consistency and clarity from the outset.

Annual Training Calendar and Budget

Establish an annual training calendar that outlines planned Board development activities, along with a dedicated budget. This approach ensures structured, forward-looking training that effectively prioritises resources, enables planning, and fosters accountability, thereby enhancing Board effectiveness.

Comprehensive Board Induction Pack

Provide new Board members with an induction pack containing key documents, including governing laws, Board and Committee Charters, audited financial statements and annual reports for the last three years, the strategic plan, and relevant policies. This consolidated information supports rapid understanding of the organisation’s operations, governance framework, and strategic priorities.

Standardised Induction Programme

Conduct a comprehensive, standardised induction programme covering key aspects including the organisation’s strategy, governance framework, financial performance, risk profile, and legal and regulatory obligations. Where possible, incorporate organisational site visits (e.g., branch tours) to provide Directors with practical insights that deepen their understanding of the organisation’s mandate and operations.

Engagement with Senior Management

Facilitate briefing sessions between the Board and senior management to enhance Directors’ understanding of operational realities and assurance mechanisms. This engagement promotes transparency and strengthens the Board’s oversight function.

Regular Skills Assessment

Conduct periodic assessments of board skills and competencies to identify gaps and inform induction content, training priorities, and succession planning. Such assessments help boards remain responsive to emerging governance challenges, including cybersecurity risks, Artificial Intelligence (AI), and Environmental, Social and Governance (ESG) considerations, all of which are attracting heightened regulatory and stakeholder scrutiny.

Tailored Training Opportunities

Encourage Board members to participate in local and international training programmes relevant to the organisation’s sector and strategic needs. Exposure to best practices, regulatory developments, and global perspectives enhances their capacity for informed decision-making, risk management, and leadership.

Knowledge Sharing and Management

Adopt a practice in which directors and senior managers who attend external training or conferences prepare concise briefing notes or presentations summarising key learnings for the full board. This promotes collective learning, disseminates key insights, and ensures that emerging risks and governance trends are considered at the board level.

Continuous Professional Development (CPD)

Directors should maintain ongoing professional development within their respective fields to ensure their expertise remains current and relevant. To support this, organisations should implement an annual CPD declaration process for directors who are members of professional bodies, providing evidence of compliance with professional requirements and reinforcing a culture of continuous learning.
Conclusion
Board training and structured induction are not optional niceties; they are essential governance mechanisms that convert statutory authority into effective oversight. A well-designed induction ensures new directors understand the organisation’s strategy, risks, regulatory context and governance framework from day one, while ongoing, targeted training keeps the board’s collective skillset aligned with evolving strategic, regulatory and operational demands. Together, they raise the quality of decision-making, strengthen risk and compliance controls, improve board dynamics and enhance stakeholder confidence.
To maximise impact, these initiatives must be deliberate, structured, and measurable. Induction programmes should be standardised yet tailored to individual needs, while training should be periodic, needs-based, and supported by clear accountability through management ownership, adequate resourcing, and board-level oversight. Integrating learning outcomes into director evaluations and succession planning ensures that capability gaps are addressed proactively, strengthening board effectiveness and sustaining high standards of corporate governance over the long term

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Disclaimer: This publication is for general information only. It should not be relied upon as legal advice. The sharing of this information will not establish a client relationship with the recipient unless MMK is or has been formally engaged to provide legal services.
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Question 2

Kenya’s Virtual Asset Service Providers Act, 2025: What You Need to Know

Accepted Answer

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Date: 4th December 2025
Kenya’s Virtual Asset Service Providers Act, 2025: What You Need to Know
Authored by James Tugee, FCIArb and Dr. Nelson Otieno
																														
A. Summary of the lawThe Virtual Asset Service Providers Act, which received Presidential assent on 15th October 2025 and came into force on 4th November 2025, sets out the regulatory framework for the activities of virtual asset service providers (VASPs) in and from Kenya. It provides for licensing requirements, expands the scope of regulated virtual asset activities, and integrates anti-money laundering provisions to enhance consumer protection and integrity of virtual asset transactions.
B. Who is affected?The legislation impacts the following actors: 
1. Registered businesses which plan to enter or are entering the virtual asset market in Kenya.2. Virtual asset service providers whose activities are regulated and are subject to the licensing and operational requirements in the Act.3. Persons engaging in the following types of virtual asset activities:
1. Virtual asset exchanges.2. Virtual asset wallet provider.3. Virtual asset payment processor.4. Virtual asset broker.5. Virtual asset investment advisor.6. Virtual asset manager.7. Virtual asset offering promoter.
C. Required actionsThe Act outlines the following concrete compliance steps:
1. Licensing: Virtual asset service providers must apply for and obtain licensing from regulatory authorities (such as the Central Bank of Kenya and Capital Markets Authority)2. Engagement only in permissible business activities. Licensed businesses must only engage in permitted virtual asset activities.3. Enhanced procedures which enable licensed providers to establish enhanced anti-money laundering and Know Your Customer (KYC) procedures tailored to the relevant virtual asset transactions.4. Compliance with various regulatory requirements. The Act provides robust institutional mechanisms which ensure licensed businesses meet prescribed reporting obligations (including financial reporting), ensure compliance with prior-approval processes under the law; ensure operational competence; and implement prescribed standards of solvency, insurance, data protection, cybersecurity, integrity, and prudence.5. Adjustment of internal business policies to reflect prohibitions on mixer or tumbler services as well as anonymity-enhancing services.6. Monitoring the provisions of the new law to ensure existing virtual asset service providers comply with the requirements within one year from the date of commencement. 
D. Practical impactThe law represents a change in the legal landscape in that: 
1. It is the first framework for regulating a wide range of virtual asset activities in Kenya.
2. It sets requirements and procedures for licensing virtual asset service providers, as well as approval of virtual asset offerings in Kenya. 
3. It designates the Capital Markets Authority and the Central Bank of Kenya as primary regulatory authorities which licence, monitor, and enforce the standards set by it. The authorities regulate different activities as specified in the First Schedule to the Act.
4. It sets applicable standards for regulating illicit financial flows which could potentially emanate from virtual asset transactions. It does this by setting stringent authorization requirements and controls.
5. It introduces consequential amendments to some existing laws. It specifically amends sections of The Proceeds of Crime and Anti-Money Laundering Act, The Capital Markets Act, The Central Bank of Kenya Act, and The National Payment System Act. 
&#8220;Kenya steps boldly into the future of financial technology with new rules and standards for regulating the virtual asset ecosystem.&#8221;
E. Effective dates and next steps 
1. CommencementThe Act received Presidential assent on 15th October 2025. The official commencement date was 4th November 2025.
2. Waiting periodExisting virtual asset providers have a one-year grace period to meet the licensing and operational requirements introduced by the Act.
3. Transitional provisions to take note ofBesides the one-year grace period, there are no other transitional provisions to note.
4. Phased compliance requirements, if anyEnforcement is expected to apply uniformly from 4th November 2025 for new entrants into Kenya’s virtual asset market.

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Disclaimer: This publication is for general information only. It should not be relied upon as legal advice. The sharing of this information will not establish a client relationship with the recipient unless MMK is or has been formally engaged to provide legal services.
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Board Training and Structured Induction as Pillars of Effective Corporate Governance

Question 3

Reflections on Decisions of the Courts in 2025 on Key Aspects of Employment & Labour Relations

Accepted Answer

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Date: 3rd December 2025
REFLECTIONS ON DECISIONS OF THE COURTS IN 2025 ON KEY ASPECTS OF EMPLOYMENT & LABOUR RELATIONS.
Authored by Irene Kashindi,FCIArb and Mellap Wataka
																														
As we draw to the close of the year, we reflect on some of the key decisions that have been made by the Court of Appeal and the Employment & Labour Relations Court in the course of 2025 touching on various aspects of employment and labour relations.
These decisions are important as they continue to shape the land- scape of how employers engage with different categories of employ- ees and organize their operations in that regard.
These are highlighted below.
Gogni Rajope Construction Company Limited & an- other v Omondi (Civil Appeal 321 of 2019) [2025] KECA 161 (KLR) (7 February 2025) (Judgment) 
The Employment Act is seen as a reformist document that moved away from the common law position that deemed the employer/employee relationship to be on an equal pedestal, to a more realistic position, where one party (the employer) would set the terms and conditions. Employees employed for less than 13 months (and by ex- tension those on probation) are entitled to a fair hearing before dismissal from employment.
Judicial Service Commission v Muraya & 4 others (Civil Appeal E002 of 2024) [2024] KECA 1599 (KLR) (8 November 2024) (Judgment) 
An employee’s right to a fair hearing before dismissal from employment is in- alienable even in situations where the employee’s conduct smacks of guilt and they have a hopeless defence.
Unilever Tea Kenya Limited v Kenya Plantation & Agricultural Workers Union (Civil Appeal E015 of 2020) [2025] KECA 830 (KLR) (9 May 2025) (Judgment) 
Victims of sexual harassment do not have to testify in person. It is sufficient if they provide detailed witness statements. This was affirmed by the ELRC in TOO v Weza Care Solutions (Cause E086 of 2024)  [2025]  KECA  1789 (KLR) (30 October 2025) (Judgment)
Chege v Timsales Limited (Civil Appeal 29 of 2020) [2025]  KECA  1660  (KLR) (21 October 2025) (Judgment) 
A resignation by an employee with immediate effect issued to avoid a disciplinary process is not valid.
Opiyo v AAR Healthcare Kenya Limited (Civil Appeal E126 of 2021) [2025] KECA 1408 (KLR) (31 July 2025) (Judgment) 
Financial damages to an employer are not confined to actual monetary loss and ex- tends to reputational risks that affect an employer’s credibility.
Abdulahi Firimbi t/a Sinai Hotel v Imungu (Appeal E131 of 2024) [2025] KEELRC 1283 (KLR)
Where an employee absconds from duty despite being requested to return, this constitutes a constructive resignation from employment.
Fuchingo v Robinson Security Group, also known as Robinson Investment Limited [2025] KEELRC 3130 (KLR) 
Both employer and employee have a duty to maintain  the  employment relationship by communicating with each other. An employer who absconds from duty and avoids contact with the employer effectively terminates the employment relationship by conduct.
Mercy (Kenya) Mater Misericordiae Hospital (Cause 650 of 2020) [2025] KEELRC1454 (KLR)
Pre-redundancy consultations must be meaningful and not merely a charade to tick a procedural box. It is not simply about giving an employee an opportunity to comment on a redundancy decision that has already been made. It should involve taking employees’ views, giving them due consideration  and  exploring  alternatives to redundancy.
Gatobu v Tullow Oil Kenya Limited (Cause E964 of 2021) [2025] KEELRC 1786 (KLR) (18 June 2025) (Judgment) 
 A mutual separation agreement is only valid if it has all the elements of a valid contract (offer, acceptance and consideration) for it to be binding and enforceable.
Kenyatta University v Thomas & 25 others (Civil Appeal E494 of 2022) [2025] KECA  1014  (KLR)  (30  May2025) (Judgment) 
Continuous engagement of ‘casual’ employees for an extended period automatically converts their employment to open-ended terms small breaks between the periods of engagement not- withstanding.
Ondieki v Nyamosongo Cooperative Society Ltd [2025] KEELRC 3132 (KLR) –
Consultations under Section 10 (5) of the Employment Act relating to variation of employment terms do not necessarily have to result in express consent by the employee.

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Question 4

Kenya Tightens Digital Controls: What The Computer Misuse And Cybercrimes (Amendment) Act, 2025 Means For Actors In The Digital Ecosystemv

Accepted Answer

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Date:6th November 2025
KENYA TIGHTENS DIGITAL CONTROLS: WHAT THE COMPUTER MISUSE AND CYBERCRIMES (AMENDMENT) ACT, 2025 MEANS FOR ACTORS IN THE DIGITAL ECOSYSTEM
Authored by Irene Kashindi,FCIArb, George Kashindi, Nelson Otieno and Stellah Nekesa
																														
Summary of the law
The Computer Misuse and Cybercrimes (Amendment) Act, 2025 (Amendment law) introduces targeted updates to Kenya’s Computer Misuse and Cybercrimes Act, 2018 (Principal Act).
The updates are aimed at addressing evolving digital threats and aligning enforcement mechanisms with current technological realities. The Amendment law expands categories of regulated assets to cover digital assets and introduces a definition for virtual accounts. It also empowers authorities to block unlawful or extremist online content and empowers courts to order takedowns of harmful digital material.
Who is affected
The changes in the law impact a wide spectrum of actors in the digital ecosystem. The actors include:

a) Online platforms, website owners and app developers who may be subject to takedown orders where content promotes unlawful activity, terrorism, cultism, religious extremism or inappropriate sexual content involving minors.
b) Telecommunications operators and internet service providers who may receive directives to render specified websites or applications inaccessible.
c) Financial service providers and virtual asset platforms who are now covered by the principal Act owing to expanded/new definitions of “asset” and “virtual account.”
d) Law enforcement officers and regulators who have broader authority to seek court orders for removal of digital content.
e) Individuals and organizations, particularly those engaging in online communications since provisions on cyber harassment now include emails and calls.

Required actions 
The new law necessitates the following concrete compliance steps by the various actors:

Compliance gap assessment: Entities should initiate a compliance gap assessment to identify and prioritize procedures, protocols and mechanisms to be aligned with the new law.
Policy updates: Update internal cybersecurity and data governance policies and user engagement protocols to account for new definitions such as virtual account, cybercrime and computer misuse as well as the expanded definition of cyber harassment, which now covers conduct including through email and SMS that detrimentally affects a person or is likely to cause another person to commit suicide.
Content moderation protocols: Implement rapid review and response mechanisms for unlawful, inappropriate, or extremist content on a website or application.
Incident response enhancement: Put in place or enhance existing takedown and reporting mechanisms to align with potential Court orders for removal of content, closure, or deactivation of website or digital device or National Computer and Cybercrimes Co-ordination Committee’s directive rendering a website or application inaccessible.
Employee and stakeholder awareness: Undertake policy and other measures to sensitize staff and stakeholders on the expanded scope of liability for online activities, especially relating to unlawful content, phishing, cyber harassment and identity theft.
Legal readiness: Take appropriate contractual measures and prepare for potential court applications or orders requiring content removal or account deactivation.

Practical impact 
The law represents a change in the legal landscape in that:

It empowers Courts, upon application, to issue takedown or deactivation orders for content linked to terrorism, religious extremism, cultism, as well as sexual content of a minor.
It empowers the National Computer and Cybercrimes Co-ordination Committee to make a directive rendering a website or an application inaccessible.
It elevates compliance obligations, especially for platforms hosting user-generated content, in alignment with best practice on online safety.
It bridges regulatory gaps in the oversight of virtual accounts and digital platforms.
It enhances accountability for content by online intermediaries and digital service providers.

Through this law, therefore, Kenya is looking at tightening its regulatory grip on digital spaces with a view to safeguarding users, protecting minors and reinforcing national cyber resilience.
Effective dates and next steps 
i. When the law comes into effect
The Computer Misuse and Cybercrimes (Amendment) Act, 2025 was assented to by the President of Kenya on 15th October 2025 and was set to come into operation on 4th November 2025.
ii. Waiting periodSeveral petitions challenging constitutionality of the Amendment law have been filed in Court.
Consequently, implementation of specific provisions of the law has been temporarily halted by the High Court. The High Court specifically issued conservatory orders suspending the enforcement, implementation and operation of the provisions relating to:

The expanded definition of cyber harassment; and
The expanded powers of the National Computer and Cybercrimes Co-ordination Committee to make a directive rendering a website or an application inaccessible.

As at the date of publication of this alert, the suspensions are active. The government has also applied to Court requesting it to lift the suspensions.
iii. Transitional provisions to take note ofThe Amendment law does not contain express transitional clauses. Accordingly, all amendments, save for the suspended provisions, take effect immediately upon commencement on 4th November 2025.
iv. Phased compliance requirements, if anyThe Amendment law does not provide for phased implementation. Enforcement is expected to apply uniformly from 4th November 2025, except for the provisions which have been suspended

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Question 5

Addressing Artificial Intelligence (AI) and Emerging Technologies in the Workplace

Accepted Answer

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Date: 14th October 2025
TRANSFORMING EMPLOYMENT LAW: ADDRESSING ARTIFICIAL INTELLIGENCE (AI) AND EMERGING TECHNOLOGIES IN THE WORKPLACE
Authored by Irene Kashindi,FCIArb, Nelson Otieno 
																														
IntroductionThe concept of work has evolved over time. Presently, workplace environments are undergoing rapid changes due to globalization, technological advancements, and shifts in employment patterns. The rise of automation and artificial intelligence (AI) in the workplace has reduced the need for traditional physical labour. However, it has also raised concerns about job loss and new types of work-related stress. In this alert, we present the paradigm shift of intersection of AI and work, its benefits, associated risks, employer obligations, and recommendations for governance of the changing dynamics of work in the digital age.
Touted Benefits of AIAI is being implemented in various sectors, including language translation, public services, healthcare, and agriculture. In the employment context, the confluence of technology and AI with employment dynamics presents remarkable opportunities for:

Catalyzing job creation, particularly in emerging industries
Promoting inclusivity at the workplace
Verifying employee identity
Enhancing safety and security at the workplace
Ensuring efficiency of business process
Realizing individual employee benefits from persistent memory, follow-up prompts, and automation of repetitive tasks

Shifting paradigmsIntersection of AI and work is crucial to envisioning a future where human potential and technological advancement coexist harmoniously. However, adapting to this transformation presents significant risks that demand a fundamental shift in employment law and systems as follows:
Understanding the Key Risks associated with the use of AI applications at the workplace include:

Violation of data privacy when employers are unable to establish a legal basis for processing personal data when using AI.
Job automation which could jeopardize economic security and add to growing inequality, particularly among low-income communities.
Non-transparent algorithms and decision-making that threaten fairness, transparency, and workers’ rights, income stability, and job security.
Risk of negative impacts on workers’ health as AI-driven monitoring and measurement of productivity may undermine self-determination and raise employees’ anxiety levels.
Risk of reinforcement of structures that deny employee labour rights such as social security and collective bargaining.

These risks may be amplified in Africa where high prevalence of informality often locks workers into traps characterized by low pay and minimal rights protection.
Key Considerations for EmployersAs work evolves, employers should address the key risks by:

Striking a balance between harnessing AI for enhanced productivity and ensuring employee autonomy.
Training its personnel to ensure that they satisfy legal and moral necessities of AI deployment and use at the workplace.
Investing in upskilling and reskilling schemes to prepare workers and develop their capacity    for    emerging AI-facilitated job competencies and possibilities.
Mapping and prioritizing regulatory  requirements  and
standards under existing and emerging AI-specific regulations.
Being open to consultation with trade unions or employee representatives with a view to arriving at a balanced approach to introduction of AI at the workplace.
Reimagining collective bargaining mechanisms for AI work.
Providing safeguards against biased firing and intrusive monitoring or surveillance.
Integrating fairness and accountability into algorithmic systems.
Ensuring employee welfare by minimizing technostress, anxiety, and job insecurity.
Performing AI impact assessment to uncover and mitigate threats to jobs, human rights, and employees’   mental   health.

Key Considerations for Other Stakeholders

A balanced approach to introducing AI in the workplace requires action from multiple stakeholders.
Beyond employers, other key players have complementary roles in promoting ethical AI use at workplace as follows:
Lawmakers must update labour laws to reflect the realities of risks from work automation and AI use at the workplace.
Regulatory bodies should embed ethical governance principles in AI oversight to ensure systems adopted at the workplace are transparent, fair, and inclusive.
Workers should prioritize lifelong learning and reskilling programs to develop both technical and soft skills that are essential for thriving in the AI era.

ConclusionAI is transforming the concept of work, its nature, how it is performed, and managed within business processes. The ongoing effects of this change are influencing economic structures as well as social and legal institutions within societies, both nationally and globally. This is not just a temporary change. For the rapidly changing dynamics of work, reliance on hybrid human-machine systems will continue to shape how work is carried out.
As lawmakers and policymakers step in to regulate AI use, employers must position themselves by proactively leveraging the potential of AI while safeguarding workers from displacement, inequality, and exploitation.
In our outlook, and like many others, we believe that the future requires employers and stakeholders to ensure AI applications in the workplace benefit humanity (rather than replace it), focus on ethical considerations, and maintain ongoing dialogue that includes diverse perspectives.

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Question 6

Casual Engagement or Regular/Open Ended Employment – An Analysis of the Decision of the Court of Appeal in Kenyatta University v Thomas & 25 others (Civil Appeal E494 of 2022) [2025] KECA 1014 (KLR

Accepted Answer

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Date: 22nd September 2025
Casual Engagement or Regular/Open Ended Employment &#8211; An Analysis of the Decision of the Court of Appeal in Kenyatta University v Thomas & 25 others (Civil Appeal E494 of 2022) [2025] KECA 1014 (KLR)
		Authored by Irene Kashindi, FCIArb and Mellap Wataka
																														
Introduction
Many employers in Kenya grapple with the issue of structuring their employment contract to match the unique needs of their operations. Some employers will opt to engage employees on a casual basis where the work they are required to do is not long term or is dependent on several variable factors such as availability of funding. 
Definition of terms and Court Decisions
Section 2 of the Employment Act defines a casual employee as one whose engagement provides for payment at the end of the day and who is not engaged for more than 24 hours at a time. The Act contains other provisions from which the characteristics of a casual employee per se can be inferred as follows:

Wages of a casual employee are due at the end of the day – Section 18 (2) (a)
An employer is not obligated to provide an itemized pay statement (pay slip) to a casual employee – Section 20 (3).

Perhaps anticipating that business realities may require variation of the terms of a casual engagement, the law makers included Section 37 (1) of the Act which provides for conversion of casual engagement to regular/open ended employment in the following circumstances:

Where the casual employee works for a continuous number of days which aggregate to at least 1 month at which point the converted employees are entitled to be paid wages monthly and issued with at least one month’s notice of termination of employment 
Where the casual employee is engaged for work that cannot reasonably be expected to be completed within an aggregate period of 3 months, at which point they are fully converted to regular employes

The Court of Appeal in Kenyatta University v Thomas & 25 others (Civil Appeal E494 of 2022) [2025] KECA 1014 (KLR) dealt with the issue of engagement of employees on a casual basis and the circumstances in which casual employment may be converted into regular/open ended employment under Section 37 of the Act. 
In the Kenyatta University Case, the court considered the facts including that the University had engaged several employees including the 26 that had filed the suit in court on a casual basis. The University argued that this had been done as part of austerity measures to ensure prudent spending of the public funds that are used to run its operations. Therefore, the University opted to engage employees that did not perform core functions (teaching and administration) on casual basis. This included the 26 employees who were engaged as electricians, masons, painters, carpenters etc. 
The Court, however, noted that the employees had been engaged for several years at a time and tax returns produced by them showed that in 2017 they had been engaged continuously for aggregate periods ranging between 9 to 11 months at a time albeit with some short breaks. This arrangement by the University had been in place with the 26 employees for several years, with some going up to 20 years. The Court was of the view that this certainly converted casual employment to regular/open ended terms of employment under the Act and was of the view that the short breaks in between the periods of engagement were immaterial. In making this finding the court held that:
Short breaks between the engagements would not change the fact that the University engaged the respondents on casual basis for considerable long periods of time, and any short breaks in between would not change the true character of the arrangement. To hold otherwise would encourage crafty employers to simply impose artificial breaks in this type of arrangement so as to go round the rigours and reality of section 37 of the Act.
While appreciating the core needs of the University did not allow for engagement of the employees on ‘permanent and pensionable’ terms, the Court noted that the University could have structured the contracts in a different manner that is compliant with the provisions of the Act and approved the finding of the trial court that “ nothing stopped the respondents (now the appellant) from issuing the petitioners with written terms of employment for fixed term contract or seasonal contracts, place work contracts or as the case demanded’’.
The foregoing meant that the Court of Appeal agreed with the findings of the Employment and Labour Relations Court on the conversion of the contracts of the 26 employees from casual terms to regular/open ended employment and the University’s appeal failed to that extent. 
Nevertheless, the University was partially successful in the appeal as the Court held that the conversion could only apply to the 26 employees that were parties to the litigation and not to other staff as the case was not a representative one and no orders for conversion in rem had been sought. 
Regarding a claim for overtime pay for the duration of the engagement with the employees (spanning 11 to 20 years), the Court relied on the provisions of Section 53 of the Labour Institutions Act and Section 74 of the Employment Act in limiting the grant of the order for payment of these claims to 3 years before the suit was filed. 
Conclusion
This decision of the Court of Appeal, which is binding on the Employment & Labour Relations Court, sheds new light on the engagement of employees on a casual basis and on conversion of such engagements to regular terms. Employers must therefore be careful to ensure proper and legally compliant structuring of their contracts of employment depending on their individual business concerns. 
For more information on this please contact us on nairobi@mmkadv.co.ke

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Disclaimer: This publication is for general information only. It should not be relied upon as legal advice. The sharing of this information will not establish a client relationship with the recipient unless MMK is or has been formally engaged to provide legal services.
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Question 7

What amounts to Fair Termination of Employment for Poor performance? Key ELRC insights in Mwaura v Safaricom PLC

Accepted Answer

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Date: 19th September 2025
WHAT AMOUNTS TO FAIR TERMINATION FOR POOR PERFORMANCE? KEY ELRC INSIGHTS IN MWAURA V SAFARICOM LIMITED [2025] KEELRC 2431 (KLR)
Authored by Irene Kashindi,FCIArb and Faith Wang’ongu
																														
We successfully acted for Safaricom PLC, the Respondent in Mwaura v Safaricom Limited [2025] KEELRC 2431 (KLR) where the Employment and Labour Relations Court (ELRC) affirmed the legal principles for terminating employment on account of poor performance and found that Safaricom had complied with both substantive and procedural requirements.
The Claimant challenged his dismissal which was on account of poor performance, alleging it was unfair. The Court dismissed the claim and upheld the dismissal, finding that it was lawful, reasonable, and fairly executed in accordance with the Employment Act and judicial precedent.
Key takeaways from the judgment

Fair termination for poor performance requires a structured processThe Court restated the principles laid out in Jane Samba Mukala v Ol Tukai Lodge Ltd [2013] KEELRC 794 (KLR):
An employer must have a policy for assessing good and poor performance
There must be a support mechanism (like a PIP) to help a poorly performing employee improve
The employee must be given a hearing before termination of employment.
The Court found that Safaricom complied with all these steps. It set clear performance targets, conducted evaluations, placed the employee on a PIP, and finally afforded him a chance to be heard before termination.

An employee’s self-appraisal is not conclusiveThe Claimant relied on his own rating of 132% during a PIP cycle to argue that he had met the targets. However, the Court held that an employee’s self-assessment must be validated by the line manager. In this case, the line manager had revised the score to 60 percent, and the Court accepted that this downward revision was valid and consistent with the Company’s policy.
Participation in PIP goal setting does not require necessarily require an employees’ full concurrence.
Court found that the Claimant was consulted during the setting of PIP objectives, as demonstrated by email exchanges. While he may have expressed reluctance to endorse the goals, the Court held that his involvement in discussions satisfied the requirement for consultation.
This finding suggests that an employee&#8217;s participation does not require their full concurrence for the process to be deemed fair.

Standard of proof is balance of probabilities, not certaintyThe Court reiterated that the employer is not required to prove poor performance to a criminal law standard. It cited Kenya Revenue Authority v Reuwel Waithaka Gitahi & 2 others [2019] eKLR, confirming that an employer may terminate employment if they genuinely believe, based on sufficient data, that poor performance exists. The standard is on a balance of probabilities, not beyond reasonable doubt. The Court found that the performance data held by Safaricom was sufficient to support such belief and declared the termination lawful and procedurally fair.

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Mutual Separation Agreements under Kenyan Employment Law

Question 8

Mutual Separation Agreements Under Kenyan Employment Law: Validity, Enforcement, and Judicial Interpretation

Accepted Answer

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Date: 2nd July 2025
MUTUAL SEPARATION AGREEMENTS UNDER KENYAN EMPLOYMENT LAW: VALIDITY, ENFORCEMENT, AND JUDICIAL INTERPRETATION
Authored by Irene Kashindi,FCIArb and Mellap Wataka
																														
Ending an employment relationship can be an onerous task for an employer who is required to comply with the stringent requirements of the law before dismissing an employee from employment. Under section 47(5) of the Employment Act, an employee bears the initial burden of proving that termination occurred, after which the heavier burden shifts to the employer to demonstrate that the termination was both procedurally and substantively fair. The implication is that any process for termination of employment termination poses a potential legal risk for the employer. 
However due to the varied circumstances leading up to termination of employment, including urgency, sensitivity, profile, expediency, confidentiality and other nuanced business considerations, some employers and employees agree to mutually terminate the employment relationship.
There is no provision for mutual separation in the Employment Act and parties to such arrangements are left to their own devices subject to compliance with the normal requirements of a valid contract and principles set out in case law.
The judgment of the Employment & Labour Relations Court (ELRC) in confirming that an employment relationship can be ended by mutual termination in Alfred Nzomo Kithusi v Hillcrest Investments Limited [2021] eKLR stated in part that “employment is not a marriage and as such it can be dissolved by consent of the parties to an employment contract through mutual agreement on the basis of mutual undertaking between them for example waiver of claims, confidentiality, future cooperation among others.” 
Justice Nzioki wa Makau in his book “ Labour Law & Industrial Relations in Kenya” 2021 states at page 130 regarding termination of employment contracts by mutual consent that:
“Either party to an employment contract can initiate the termination of an employment contract. Under this from of termination, no grounds are required. The termination involves the act of two contracting parties wishing to end their contract on their own terms and without an external assessment of the legitimacy of the reasons thereof by an administrative body”
Kenyan courts have on various occasions interpreted mutual separation agreements in claims filed by employees whose employment was terminated through mutual separation agreements. The ELRC has repeatedly held that the courts will enforce the terms of a mutual separation agreement provided it has all the ingredients of a valid contract being offer, acceptance and consideration and that the agreement was made freely without any misrepresentation, duress or coercion.
This position was stated in Zaidi v Lake Turkana Wind Power Limited (Cause  E321  of  2022)  [2023] KEELRC 3414 (KLR) where the court held that:
“It is not uncommon that a contract of service can be ended through a mutual separation agreement between the parties. The agreement could set out the terms and conditions of the separation. The same being a contract between the parties must possess the ingredients of a valid contract, absence of the ingredients shall render its validity assailable in a court of law or any other appropriate forum.”
The claimant in Mboya v AIG Kenya Insurance Co. Ltd [2023] KEELRC 2261 (KLR) contended that a mutual separation agreement leading to termination of the contract of employment could not be enforced by the court as the contract of employment did not specifically provide for this mode of termination.
The ELRC in dismissing the claim held that “the fact that the parties did not specifically state in the contract that they could mutually close the contract did not take away their power to mutually close the contract.”
In Wokabi v British American Tobacco Kenya Limited [2022] KEELRC 12694 (KLR) the claimant filed suit against the respondent for constructive dismissal which amounts to unfair termination on the basis that the mutual separation agreement signed leading to the end of the employment relationship was signed under duress and coercion. However, the claimant confirmed receipt of a payment of Kshs.10 Million in respect of the mutual termination. The court considered the terms of the agreement. The court in dismissing the claimant’s claim held that:
It was agreed that payment was in full and final settlement of all and any claims or rights of action that the claimant.
The mutual agreement is comprehensive and left the claimant no room to wriggle out.
The claimant initiated the agreement through his letter of resignation and was given the opportunity to seek legal and non-legal advice, before execution of the agreement.
Allowing the claim would allow the claimant to be unįustly enriched.
Where a valid mutual separation agreement has been entered into by the parties, it will be binding on both the employee and the employer. Any payments due to the employee by the employer under such an agreement will be enforced by the court. This was the case in Ndegwa v National Environmental Trust Fund [2024] KEELRC 1288 (KLR) where the ELRC ordered the respondent to make the payments that were due to the claimant under the mutual separation agreement held that “It is trite that a contract comes into existence when an offer by one party is unconditionally accepted by the other and the parties must have intended to create a legally binding agreement, some consideration must pass.”
The ELRC has, however, also held that a mutual separation agreement, as expressed in its name, must be mutual and entered into voluntarily. In Pauline Waigumo Muthiga v Diamond Trust Bank Ltd [2021] eKLR the ELRC set out the principles applicable in considering the validity and enforceability of such agreements including the following:
As a general principle a pretrial settlement operates as a contract between the parties.
It is to be considered as generally binding on the parties unless it is assailed on the usual grounds that will vitiate a contract.
In order to determine whether the pretrial settlement operates as a bar to further claims by the parties to it, a trial court or other arbiter must consider: the import of the settlement; whether the parties executed the agreement freely; and whether they had relevant information and knowledge regarding the settlement.
The decision of the ELRC in Gatobu v Tullow Oil Kenya Limited [2025] KEELRC 1786 (KLR) emphasizes the need for mutuality in such agreements. In that case the court found that the claimant had been offered a mutual separation agreement by the respondent after some strain in the employment relationship and the claimant refused to sign this. Afterwards, the respondent initiated a disciplinary process that culminated in the termination of the claimant’s employment for alleged breach of the respondent’s policies. The court held that such termination was unfair and awarded 12 months’ salary.
From the decisions of the courts discussed above, it is clear that mutual separation agreements are a valid and enforceable way of terminating employment agreements provided they meet the legal requirement of a valid contract. It is incumbent upon employers to ensure that these requirements are met to avoid any claims to vitiate mutual separation agreements and that once signed, the obligations of the parties are met.

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Question 9

ILO’s Fundamental Principles and Rights at Work: Basic Insights for employers

Accepted Answer

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Date: 16th June 2025
ILO’s Fundamental Principles and Rights at Work: Basic Insights for employers
Authored by Irene Kashindi, FCIArb 
																														
Understanding workplace rights is not just a legal obligation it is good business practice. They represent the baseline standards that every workplace should uphold and apply to all employers, regardless of whether their country has ratified the related ILO Conventions.
As a law firm that advises employers across sectors, we believe it is essential to understand how these principles translate into real workplace obligations, particularly in how you structure contracts, develop policies, and manage people.

Freedom of association and collective bargainingEmployees have the right to join trade unions and to seek collective bargaining. Under Kenyan law, the recognition of a trade union for purposes of collective bargaining is subject to specific thresholds and procedures.
Elimination of forced or compulsory labouNo person should be made to work under threat, coercion, or deception. This includes modern forms of forced labour such as human trafficking and debt bondage. Employers must vet labour providers and implement ethical hiring practices
Abolition of child labourChildren should not be engaged in work that is mentally, physically, socially, or morally dangerous, or that interferes with their education. Employers must comply with minimum age legislation, carry out age verification where necessary, and monitor supply chains for hidden risks of child labour.
Elimination of discrimination in employment and occupationEmployment decisions must be fair and free from bias. Discrimination based on gender, ethnicity, religion, disability, race or other prohibited grounds is unlawful. Employers must embed non-discrimination principles into their HR policies, grievance mechanisms, and organizational culture.
A safe and healthy working environmentThis was recognized in 2022 as a Fundamental Principle and Right at Work, following a landmark decision by the ILO’s International Labour Conference. The decision reflected a global consensus reinforced by the COVID-19 pandemic that occupational safety and health are central to decent work and sustainable business operations. Health and safety is now a core right not just a compliance issue.

Why the Principles and Rights should matter to employers:
These five principles are not just about legal compliance. They are central to building ethical, productive and sustainable workplaces. They shape:

Employment contracts and workplace policies
Internal grievance and disciplinary frameworks
Risk assessments, safety standards and ESG audits
Observance of basic and minimum rights at work
Alignment with the principles of decent work and fair labour practices
Long-term sustainability in business operations and workforce relations

Understanding and applying these principles helps employers mitigate risk, enhance reputation and foster a stable, rights-respecting work environment.
Whether you lead HR, compliance, or legal functions, understanding these five principles is essential to managing risk, maintaining workforce trust, and upholding your obligations under national and international law.
Learn more: https://www.ilo.org/projects-and-partnerships/projects/fundamental-principles-and-rights-work

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Question 10

Examining the right to life in an employment context: Faith Kaburuku & 2 others v. NBK

Accepted Answer

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Date: 11th June 2025
EXAMINING THE RIGHT TO LIFE IN AN EMPLOYMENT CONTEXT: FAITH KABURUKU & 2 OTHERS VERSUS NATIONAL BANK OF KENYA (PETITION E030 OF 2021)
Authored by Irene Kashindi,FCIArb and Winnie Songok 
																														
What is the right to life in an employment context? We successfully defended the Bank in this petition which raised a novel point by creating an intersection between employer liability for workplace safety in ‘high-risk’ environments and the constitutional right to life. While the Work Injury Benefit Act would have been suited to address the issue had it happened in the work-place, the petitioners alleged that the employer had breached an employee’s right to life under Article 25 of the Constitution of Kenya.
Background
The first petitioner filed the petition on her behalf and as the administrator of the estate of Benard Waweru (the deceased) and a next friend to the second petitioner, her child with the deceased.
The deceased was an employee of the respondent who was serving at the Garissa branch. He tragically lost his life in an attack while leaving a restaurant after working hours. The petitioner contended that the decision to transfer the deceased to the Garissa branch without taking into consideration the high-risk environment was a violation of the deceased’s constitutional right to life and an unfair labour practice.
Alleged breach of right to life 
The petitioner argued that the respondent ought to have known and appreciated that Garissa was a danger zone and put in place adequate measures to ensure a safe work environment for the deceased. The issue was whether by being transferred to Garissa, the respondent was jeopardizing the enjoyment of the right to life by the deceased. 
The court held that in the absence of reports, advisories or evidence from formal security sources such as the Kenya Police Service the status of security in Garissa town, there was no proof to show the respondent was complicit in the loss of life of the deceased. In addition, the deceased was not at the place of work when he tragically lost his life.
Claim that transfer to Garissa amounted to an unfair labour practice
The petitioners argued that the respondent did not favorably consider the concerns on security raised by the deceased about the transfer to Garissa and that the respondent breached the claimant’s right to fair labour practice. The court found that an employer reserves the discretion to decide the workstation for an employee and that the petitioners had not shown that the respondent was in breach of any statute or policies in stationing the deceased in Garissa.
Conclusion
The court found that the petitioner failed to prove that the respondent had violated the right to life and fair labour practice and dismissed the petition. You can access the full judgment here: https://new.keny- alaw.org/akn/ke/judgment/keel-rc/2024/13513/eng@2024-12-19

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Question 11

Extension of the Registration Deadline for NGOs Under PBO Act

Accepted Answer

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Date: 20th May 2025
Extension of the Registration Deadline for NGOs Under PBO Act
		Authored by Irene Kashindi, FCIArb and Mellap Wataka
																														
Introduction
On 16th May 2025, the Kenyan government published a notice in the gazette indicating that the transition period under Regulation 5(1) of the Fifth Schedule to the Public Benefit Organizations (PBO) Act had been extended for a period of 1 year until 13th May 2026.
History of the Act and its Implementation
To appreciate the import of this extension it is necessary to understand the history of the PBO Act. The Act was passed and assented to on 14th January 2013. However, the Act remained dormant for over a decade until 14th May 2024 when it was operationalized through Legal Notice No.78 of 2024. In the intervening period, the predecessor statute &#8211; The Non-Governmental Organizations Co-ordination Act, 1990 – remained in force with the NGO Coordination Board as the sector regulator.
From the time the PBO Act was operationalized on 14th May 2024, Section 7 of the Act made it mandatory for all existing NGOs and INGOs previously registered under the now repealed NGO Coordination Act to register afresh under the provisions of the PBO Act.
This fresh registration is to be effected by the PBO Regulatory Authority. Nevertheless, and to allow existing organizations to continue to operate while Regulations are being developed, Regulation 5(1) of the Fifth Schedule to the Act provides that
Every non-governmental organization which on the appointed day [14th May 2024] is registered under the Non-Governmental Organizations Act (now repealed) shall, be deemed to be registered as a public benefit organization under this Act have up to one (1) year from the appointed day to seek the formal registration as a public benefit organization under this Act.
Therefore, existing NGOs including INGOs were required to formally apply for registration under the PBO Act within 1 year ending 14th May 2025. This requirement is enforceable under Regulation 5(2) of the Fifth Schedule which provides that an existing organization that fails to seek formal registration within the 1-year period and after receiving notice from the Authority to effect such registration, will cease to have PBO status.
Despite the foregoing, so far it has not been possible for registration as provided for in the PBO Act to be implemented. This is because the PBO Regulations which are expected to contain additional provisions on the modalities of registration -such as prescription of the forms, fees and other requirements for registration- have not yet been passed. Section 69 (4) of the Act requires that before the Regulations are passed, a draft should be published and circulated for comment by relevant stakeholders.
Conclusion 
Given the complexities and nuances of the new dispensation under the PBO Act, the process of preparing the draft Regulations that will give full effect to the Act is still underway. It is in light of this that the 1-year extension (until 13th May 2026) has been issued by the government. It is anticipated that the PBO Regulations will be passed in that time.
In the meantime, existing NGOs/INGOs can continue to operate under their existing registration issued under the NGO Coordination Act.
We will continue to monitor the situation and provide additional updates as they become available. 
For more information on this please contact us on nairobi@mmkadv.co.ke.

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Question 12

Automatic Expiry of Statutory Instruments under Section 21 of the Statutory Instruments Act, 2013 in Kenya

Accepted Answer

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Date:27th February 2025
AUTOMATIC EXPIRY OF STATUTORY INSTRUMENTS UNDER SECTION 21 OF THE STATUTORY INSTRUMENTS ACT, 2013 IN KENYA
Authored by: Dr. Seth Wekesa
																														
The Statutory Instruments Act (SIA) 2013 provides for the making, scrutinizing, publishing, operating and enforcing statutory instruments or otherwise subsidiary legislations that establish and govern state corporations and entities. These instruments are vital in governing the conduct of the over 200 state corporations and agencies in Kenya by providing for their legal framework, operational guidelines and compliance requirements
These statutory instruments are issued under their enabling Acts of Parliament, and they encompass rules, orders, regulations and other directives that define the parameters of state corporation’s powers, duties, responsibilities, administrative functions and procedures of operations
Further to making statutory instruments, Parliament is mandated to ensure oversight through the periodical review of statutory instruments.
This includes repealing instruments that no longer serve a continuing purpose and ensuring that these instruments are for- ward-thinking, adaptable and reflect the current societal needs. Section 21 of the Statutory Instruments Act of 2013, in effect, sets a time limit for how long statutory instruments can remain in operation. The section provides that:
“(1) Subject to subsection (3), a statutory instrument is by virtue of this section revoked on the day which is ten years after the making of the statutory instrument unless a. It is sooner repealed or expires; or b. A regulation is made exempting it from expiry.
(2) The Cabinet Secretary responsible may, in consultation with the Committee, make a regulation under this Act extending the operation of a statutory role that would otherwise be revoked by virtue of this section for a period as is specified in the regulation not exceeding twelve months.
(3) Only one extension of the operation of a statutory rule can be made under subsection (2).”
This section explicitly mandates the automatic expiry of statutory instruments after 10 years unless they are repealed, expire or are exempted from expiry by regulation. Further, in consultation with the Committee on Delegated Legislations, the Cabinet Secretary may request Parliament to pass a special regulation extending the validity of the expired statutory instruments for a maximum period of twelve months. This extension can only be done once. 
Thereafter, a new instrument is expected to be created to facilitate the continuity of the lifeline of the various state agencies.
This article analyses the status of section 21 of SIA, considering the proposal to amend it through the Finance Bill 2023 and pronouncements of the High Court, Court of Appeal, and Supreme Court of Kenya on the section. It explores the legal reasoning behind these judicial interventions and their broader implications for legislative oversight, specifically the intro- duction of amendments to SIA in Parliament through a Finance Bill, which is a Money Bill. It also con- siders the broader impacts on constitutional compliance and the rule of law in Kenya.
The Conundrum in Section 21
In January 2023, Parliament exercised its authority under Section 21(2) of SIA.
As a result, the Statutory Instruments (Exemption from Expiry) Regulations 22 was enacted. This granted an emergency 12 &#8211; month extension to the more than 1,764 statutory instruments enacted under the various 400 Acts of Parliament. This extension was to buy time for state corporations, entities, and agencies, allowing them to re-publish their subsidiary legislation while ensuring conformity with constitutional dictates such as respect for fundamental human rights and freedoms.
In April 2023, the National Assembly, through the Finance Bill 2023, sought to extend the lifeline of the expired statutory instruments. The introduction of sections 88 & 89 in the Finance Bill 2023 aimed to delete Part V of the Statutory Instruments Act by introducing a new heading, “Purpose for Review of Statutory Instruments&#8221;, and repealing Section 21 altogether.
However, the passage of the Finance Bill into law sparked intense legal battles, with scrutiny on the introduction of sections 88 & 89 and the primary purpose of the Finance Bill as a money bill.
This move triggered a wave of litigation, challenging the legality of the Finance Act 2023 at various levels of the judiciary.
At the High Court
After enacting the Finance Act, 2023, litigation ensued in the case of Okoiti & 6 others v Cabinet Secretary for the National Treasury and Planning & 3 others; Commissioner-General, Kenya Revenue Authority & 3 others. The petitioners challenged the inclusion of sections 88 and 89 in the Finance Act, 2023, which repealed section 21 of SIA. They argued that this repeal watered down the purpose of the Finance Bill, 2023, in whole as a Money Bill, therefore amounting to a nullity as the inclusion was unconstitutional, null, and void
Additionally, they contended that the repeal of section 21 without the input of the Senate was procedurally flawed because SIA directly impacted the operations and conduct of county governments
Conversely, the respondents de- fended the repeal, asserting that the repeal of section 21 fell within the legitimate meaning of a Finance Bill, including amending laws on taxation and incidental duties. They justified the repeal of the SIA via sections 88 & 89 of the Finance Bill 2023, arguing that it was informed by the need to &#8211;
“…save the statutory instruments by extending the lifespan of subsidiary legislation providing a stable, consistent and predictable regulatory framework for the financial sector and to avoid the tedious and complex, time-consuming and expensive process of reviewing a host of regulations”.
In addition, the respondents maintained that the repeal of section 21 did not warrant the input and approvals of the Senate as it did not affect the functions or powers of county governments. The making of the Statutory Instruments Act was a reserve of the National Assembly and the national government as provided for under Article 119 of the Constitution.
The High Court, in its analysis and determination, first considered whether the Finance Bill 2023 was a Money Bill in terms of Article 114 of the Constitution of Kenya 2010 and whether it contained matters outside the scope of a &#8220;money Bill&#8221;, including the introduction of sections 88 & 89. The Court, relying on the pith and substance test established in the case of Pevans East Africa Limited & another v Chairman Betting Control and Licensing Board & 7 others [2017] eKLR, observed that the Finance Bill 2023 was a Money Bill.
Majanja J (as he was then), Meoli J and Mugambi J aptly observed that &#8211;
“…. we are satisfied applying the pith and substance test that the Finance Bill is a money Bill within the meaning of article 114 of the Constitution. However, it contains certain matters other than those listed in the definition of a money Bill in Article 114(3). To the extent that those matters are extraneous to a money Bill, they are unconstitutional.”
The Court held that introducing sections 88 & 89 in the Finance Bill to repeal Section 21 of SIA was unconstitutional, null and void. As discerned by the Preamble to the Finance Bill, the Finance Bill was an Act of Parliament specifically designed and intended to amend the law relating to various taxes and duties and multiple taxes and duties. 
Further, Article 114 of the Constitution of Kenya was categorical as to what amounts to a money Bill. Introducing matters that do not fall within the purview or sub- stance of what amounts to the meaning of a money Bill was illegal and unconstitutional.
Furthermore, the respondent&#8217;s assertion that the repeal clauses were included to save them from imminent expiry was also dis- missed. The court emphasized that the purpose of section 21 was simply to subject subsidiary legislation to periodical review through public engagement, bringing it into conformity with changing circumstances.
Moreover, the Court observed that some of the statutory instruments might directly impact the powers and functions of county governments; hence, it was para- mount to seek the input of the Senate in the amendments.
In conclusion, the Court observed that: &#8211;
“The specific extraneous matters identified by the Court pertain to the amendment made to the ….. Repeal section 21 of the Statutory Instruments Act by sections 88 and 89 of the Finance Act, 2023. These amendments are extraneous to a money Bill and are there- fore unconstitutional.”
This position affirmed that a Finance Bill must strictly adhere to its intended objectives and cannot be used as a vehicle for unrelated legislative changes.
At the Court of Appeal
Unhappy with the High Court’s decision, the National Assembly, the Cabinet Secretary for Treasury and Planning, and other respondents appealed the decision to the Court of Appeal vide National Assembly & another v Okoiti & 55 others
The appellants argued that the Finance Act 2023 was procedurally debated and passed by the National Assembly in accordance with the Constitution. The Act was constitutional, with its amendments notwithstanding. They argued that the learned judges got it wrong in declaring sections 88 and 89 unconstitutional.
They contended that a proper reading of Article 114 on what amounts to a money Bill revealed that the Finance Bill was not limit- ed to provisions directly related to taxes or incidental to taxation measures under the Act. They also asserted that the expiry of the statutory instruments directly impacted revenue collection, further justifying their inclusion in the Finance Act.
Immediately after the High Court judgment, the National Assembly introduced the (Statutory Amendment) Bill 2024, seeking to repeal section 21 properly
However, this move became a basis of the respondent’s arguments that the introduction of the amendment bill had rendered the appeal on sections 88 & 89 of the Finance Act 2023 irrelevant, leaving no basis for argumentation. They argued that by initiating new legislative amendments to address the issue of statutory instruments, the appellants had effectively accepted the High Court&#8217;s ruling and taken steps to implement it. Therefore, they could not, in good faith, continue to challenge the declaration of unconstitutionality before the Court of Appeal.
The Court was tasked to determine whether the repeal of Section 21 of SIA had been rendered moot (a legal issue or question that no longer requires a resolution or decision because the circumstances have changed, making the issue irrelevant) by introducing a Bill to amend SIA, particularly Section 21. 
The Statutory Instruments (Amendment) Bill 2024 had already undergone its first reading on 14 February 2024 in the National Assembly. In its analysis, the Court of Appeal held that the issue of sections 88 & 89 of the Finance Act had indeed lost its practical significance, hence moot and irrelevant. The Court observed as follows: &#8211;
“Similarly, by tabling a Bill in Parliament which seeks to address the shortcomings identified by the High Court in nullifying sections 88 and 89 of the impugned Act, the appellants have not only accepted the court’s decision, but they also have taken decisive steps in complying with the decision.”
These sentiments, in effect, affirmed Sections 88 and 89 as un- constitutional, null and void.
Beyond striking down sections 88 & 89, the Court of Appeal went even further to declare the entire Finance Act 2023 unconstitutional due to lack of adequate public participation in post-amendment changes and failure to follow the proper legislative procedure during its enactment.
At the Supreme Court
The National Assembly (along with other appellants) were dissatisfied with the Court of Appeal’s decision. The Court had declared the whole of the Finance Act 2023 unconstitutional due to inadequate public participation. It also cited the presence of provisions unrelated to the substance of the meaning of a money bill. As a result, the appellants escalated the matter to the Supreme Court in the case of Cabinet Secretary for the National Treasury and Planning and 4 others v Okoiti and 52 others.
Among the key issues that were determined were whether the Finance Act was unconstitutional and whether there was adequate public participation. The Court reversed the Court of Appeal decisions. It affirmed that the Finance Act was constitutional and that due process, including public participation, was followed in enacting it. In its reasoning, the Court stated that; &#8211;
“It is common ground that the Court of Appeal, unlike the High Court, declared the entire Act un- constitutional because the legislative process that led to its enactment was fundamentally flawed and in violation of the Constitution. However, based on this Court’s findings in the eight (8) issues herein above, we find conversely that the legislative process (public participation and concurrence) was in accordance with the constitutional edicts. In particular, we find that the Bill underwent the concurrence process under Article 110 (3) of the Constitution; the Bill being a money Bill did not require consideration by the Senate; and the Bill was subjected to public participation which was adequate and satisfactory taking into account the circumstances of enacting a Finance Act. To that extent, we find there was no basis to declare the entire Act unconstitutional.&#8221;
While the Supreme Court reinstated the Finance Act 2023, it affirmed the finding that sections 88 and 89 of the Finance Act 2023 intended to amend section 21 of the SIA were irrelevant due to the introduction of the Statutory (Amendment) Bill 2024 in the National Assembly. The Court observed as follows; &#8211;
&#8220;Consequently, the order that commends itself is an order set- ting aside the Court of Appeal’s judgment save for the finding that the questions relating to Sections 84 (Affordable Housing Levy) 88 and 89 (Statutory Instruments Act) of the Act were moot&#8230;&#8221; 
Conclusion
The legal controversy surrounding Section 21 of the Statutory Instruments Act high- lights the delicate balance between legis- lative authority and constitutional safe- guards. The High Court declared the amendment of Section 21 through Sections 88 & 89 of the Finance Bill 2023 as unconstitutional, null and void as they fell outside the meaning of a money bill under Article 114 of the Constitution. 
The Court of Appeal and the Supreme Court affirmed that the actions of Parliament to introduce an amendment bill to repeal Section 21 after the High Court judgement was moot, as the issue had been overtaken by circumstances. These decisions under- scored the principle that statutory amendments must align with constitutional frameworks and legislative intent, ensuring that statutory instruments remain subject to periodic review. Any need to repeal the Statutory Instrument Act must follow the proper procedural channels.
The enactment of the Statutory Instruments (Amendment) Bill 2024 into law will provide a lifeline to more than 1,000 subsidiary legislations that expired in January 2023. Clause 7 of the Bill seeks to amend and/or repeal Section 21 of the Act to remove the mandatory requirement for reviewing subsidiary legislation and the automatic expiry of statutory instruments after ten years
On 5 April 2024, the Statutory Instruments (Amendment) Bill 2024 was passed by the National Assembly and consequently forwarded to the Senate for consideration.
Section 21 of SIA remains in force. This means the existing statutory instruments will expire automatically after 10 years with a one-year extension. The only option is for Parliament to expedite the passage of the Statutory Instruments (Amendment) Bill 2024 to solve the legal controversy where state corporations and agencies are operating illegally with outdated statutory instruments, exposing them to potential legal disputes that could have huge financial implications on their operations. Where- as the repeal of Section 21 may provide some form of stability for state agencies and corporations, it can, in the long run, lead to outdated or ineffective regulations without the necessary and timely revisions to align with the evolving legal and socio-economic contexts.
Parliament must develop and establish a structured review mechanism of statutory instruments without necessarily causing a legal vacuum. This may include a transitioned framework that allows statutory instruments to remain in force for a limited time, pending review and re-enactment

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Early Termination of Commercial Leases Without a Breakout Clause: An Analysis of The Decision of The Supreme Court in Petition No. E001 Of 2024 Kwanza Estates Limited Vs. JKUAT

Question 13

Early Termination of Commercial Leases Without a Breakout Clause: An Analysis of The Decision of The Supreme Court in Petition No. E001 Of 2024 Kwanza Estates Limited Vs. JKUAT

Accepted Answer

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Date: 31st January 2025
EARLY TERMINATION OF COMMERCIAL LEASES WITHOUT A BREAKOUT CLAUSE: AN ANALYSIS OF THE DECISION OF THE SUPREME COURT IN PETITION NO.E001 OF 2024 KWANZA ESTATES LIMITED V JKUAT
Authored by: James Tugee, FCIArb and Mellap Wataka
																														
Introduction
On 6th December 2024, the Supreme Court rendered a seminal judgment that will undeniably affect how commercial leases in Kenya are drafted and enforced. The decision of the apex court should be considered in the context of the Landlord and Tenants (Shops, Hotels and Catering Establishments) Act (the Act).
Despite  the  changing economic land-scape and significant increase in business premises in the country, the Act has survived repeal or drastic overhaul since it was initially enacted in 1965. It has been amended only five times, between 1968 and 2015, which pales in comparison to other statues affecting Kenyan commerce.
The Act is important as it was intended to protect business owners from capricious landlords that would arbitrarily evict them or increase their rents. This protection was provided by the creation of protected tenancies within certain parameters. The history of litigation on protected tenancies shows that such tenancies were extremely difficult to vary or terminate and generally considered by landlords to be unfairly advantageous to tenants of business premises.
As a reaction to this and in adapting to changing economic times, the drafters of commercial leases representing landlords attempted to seal legal loopholes for conversion of commercial leases to protected tenancies by providing for terms longer than 5 years and excluding the notorious breakout clause.
This quickly became the touch- stone for commercial leases in the country, which meant tenants could not break out of their leases before the specified term expired.
Early termination became extremely difficult, and the courts would consistently issue steep penalties against tenants that violated this standard provision by requiring them to pay the rent due for the remainder of the term. This engrained practice retitled the scales heavily in favour of land- lords.
In this article, we analyze the decision of the Supreme Court which has now disturbed the previous order of things and attempted to strike a balance in the protection of both landlords and tenants in commercial leases.
Summary of the Case
In this case JKUAT (referred to herein as the Tenant) signed a lease for a business premises owned by Kwanza Estates Limited (referred to as the Landlord) for a period of 6 years set to expire in April 2022. However, in July 2020 the Tenant gave the Landlord 3 months’ notice of its intention to terminate the lease and vacate the premises. At the lapse of the notice period when the Tenant was in the process of vacating the premises, the Landlord restrained them from forcing so by placing security guards and goons at the entry and exit points of the premises.
The Landlord also demanded rent for the subsequent quarter during which rent was payable. The Tenant failed to pay the rent, and the Landlord levied distress by attaching the Tenant’s property as is typically provided in commercial leases as a remedy for default in payment of rent.
The Tenant eventually vacated the premises in January 2021.
Proceedings in the Environment and Land Court
Against this backdrop the Tenant instituted legal proceedings in the Environment & Land Court (ELC) seeking orders that the commercial lease be declared as terminated on account of frustration. The Tenant detailed various issues that had caused it financial hardship that made it impossible for it to continue meeting its obligations under the terms of the lease key among these being the attendant effects of the COVID-19 pandemic. The Tenant argued that the pan- demic had forced it to close its doors to students in obedience to government directives which had severely impacted its finances. As such the premises could not be used for several months and the purpose for which the lease was entered into could not be fulfilled.
A consent was recorded in the ELC for the Tenant to pay to the Landlord a staggering Kshs.40 Million for restoration of the premises to its original condition as a condition for the Tenant to vacate the premises in January 2021. In the end however, the ELC took the view that the lease having no break clause as is wont of commercial leases, was binding to the parties for the entirety of the lease period ending in 2022. The ELC awarded the Landlord the balance of the rent payable up to the agreed end date totaling over Kshs.71 Million making the total liability of the Tenant to the Land- lord a whooping Kshs.111 Million.
Appeal to the Court of Appeal
The Tenant was dissatisfied with the decision of the ELC and lodged an appeal to the Court of Appeal.
The Tenant argued that the phrase ‘or sooner determination’ contained in the lease meant that the parties envisaged a scenario where the lease could be deter- mined before the end of the specified term. The Court of Appeal rejected this argument on the basis that this issue of interpretation of the lease had not been raised before the ELC and could therefore not be raised for the first time in the appeal.
The Court of Appeal, however, agreed with the Tenant on frustration of the performance of the lease noting that the COVID-19 pandemic and decreased government funding had adversely affected the Tenant’s ability to continue to use the premises and pay rent under the lease. The court criticized the Landlord’s action of restraining the Tenant from vacating the premises in 2020 and later on demanding rent from the Tenant.
The court held this conduct to be “absurd, unfair and unjust” and had the Landlord allowed the Tenant an early exit, it could have entered into a fresh lease with another tenant. Consequently, the court set aside the award of rent for the remainder of the term of the lease and only upheld the award of Kshs.40 Million for restoring the premises to its original condition providing some reprieve to the Tenant.
Proceedings in the Supreme Court
The Landlord was dissatisfied with the decision of the Court of Appeal and moved to the Supreme Court. In the Supreme Court the Landlord argued that the Court of Appeal had erroneously interpreted the effects of the COVID-19 pandemic on the Tenant’s business as frustration of the lease instead of as a force majeure event.
According to the Landlord a force majeure event such as COVID-19 could only be relied upon if the contract between the parties -in this case the lease – provided for it. Additionally, according to the Landlord, the Tenant took up alternative premises after vacating the subject premises only as a means of unlawfully avoiding its obligations under the lease and not as a result of the alleged frustration. The Tenant maintained that the lease was frustrated by supervening events that radically changed what the parties had contemplated under the lease.
Frustration vis-à-vis Force Majeure
In view of these arguments, the Supreme Court accordingly delved into the distinction between force majeure and frustration. The court held that the decision of the High Court in Pankaj Transport PVT Limited v Transnami Kenya Limited [2017] eKLR is persuasive on the application of the doctrine of force majeure and held that:
“The doctrine of force majeure has expanded to include events caused by both human actions and natural occurrences, defining situations beyond the control of parties that prevent them from meeting contractual obligations. Further, the interpretation the courts give is dependent on the choice of wording and events de- lineated by the parties in their contract”
According to the apex court, the key distinction between force majeure and frustration is that force majeure must be recorded in the contract between the parties and frustration is implied into every contract and discharges parties from further performance of their respective obligations due to an unforeseen event making it impossible to carry out the purpose for which they contracted.
In other words, these events alter the circumstances such that performance is no longer possible or logical. The Supreme Court further held that the doctrine of frustration is not absolute and the party alleging it must prove that “the frustrating event occurred without their fault or contribution” to successfully rely on it.
Applying this principle to the facts of the case, the court noted that there was no provision for force majeure in the lease between the Landlord and the Tenant and it was therefore inapplicable. In the court’s view, the tenant had consistently raised the issue of frustration.
Was the Pandemic a Frustrating Event?
The next issue therefore became whether the COVID-19 pandemic and its effect of the Tenant’s business amounted to frustration of the lease.
The court took judicial notice of the effects of the pandemic on all aspects of life and commerce, including on business premises.
The court noted that as a result of the pandemic, government directives were issued on closing down of institutions of learning such as the Tenant which was forced to halt operations. However, such closure was temporary, and any financial hardship caused was transient noting that the Tenant eventually took up alternative premises from which to continue its operations. As such the court held that the effects of the pandemic and the attendant financial hardship occasioned to the Tenant did not constitute an event capable of frustrating the lease.
No Breakout Clause – Breach of Contract by Tenant
The apex court also held that the lease that was the subject of the litigation between the parties did not contain an early exit clause.
The court recognized that such a clause would have converted it to a protected lease under the terms of the Act, which modern leases tend to avoid. In view of this finding, the court held that the Tenant was in error by issuing an early termination notice and therefore in breach of the terms of the lease agreement between the parties.
Balancing Act – Early Termination & Reliefs Available
Nevertheless, and in what seems to be a final twist, the court was of the view that the absence of an early termination clause notwithstanding, it would be unconscionable for a commercial landlord to compel a tenant to remain in occupation of premises the tenant no longer wishes to occupy.
The court further held that requiring a tenant under a commercial lease to pay the rent for the remainder of the lease period is also unreasonable.
According to the learned judges, the remedy available to a landlord whose tenant has exited a commercial premises before the expiry of the term is rent up to the date of vacating and damages for breach of contract which must be specifically pleaded and proven by  the landlord.
The court emphasized that in applying the reasoning set out above, it must balance the interests of both the Landlord and the Tenant in the circumstances of the case. As such, the court was of the view that it would be unreasonable to award the rent for the remainder of the lease (14 months) reckoned from the date the Tenant vacated.
It also noted that the Landlord held a security deposit. In the end, the  court directed the Tenant to pay to the Landlord 3 months’ rent of about Kshs.13.8 Million less the security deposit of Kshs.11.3 Million culminating in a net award of Kshs.2.4 Million.
This is certainly a landmark decision by the Supreme Court that will likely impact dealings between landlords and tenants under commercial leases. The following key lessons can be identified from the decision:
It is likely that commercial leases will retain the provisions requiring them to run for a period of more than 5 years without a breakout clause to avoid conversion of the lease to a protected tenancy under the Act. However, should there be a need for an early breakout, an award of rent for the remainder of the lease period, especially where this is a long period of time, will not be made.
The absence of an early breakout clause in a commercial lease does not prevent a tenant from vacating the premises before the expiry of the term of the lease.
The only remedy available to a landlord for an early termination of a commercial lease without a breakout clause is rent up to last date of occupation and special damages for breach of contract.
The doctrine of force majeure is distinguishable from the doctrine of frustration in that force majeure must be expressly provided for in contract while frustration is implied in every contract.
A party seeking to be discharged from their contractual obligations due to frustration must prove that the supervening event was unforeseen and occurred through no fault of their own.

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Question 14

An analysis of the Court of Appeal's decision in Samasource EPZ Ltd v Meta Platforms and Others, on mandatory interlocutory injunctions

Accepted Answer

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Date:  31st January 2025
An analysis of the Court of Appeal&#8217;s decision in Samasource EPZ Ltd v Meta Platforms and Others, on mandatory interlocutory injunctions
		Authored by Irene Kashindi, FCIArb and Mellap Wataka
																														
Introduction 
The Court of Appeal in Samasource EPZ Limited t/a Sama v Meta Platforms, Incorporated & 186 others; Kenya Human Rights Commission & 8 others (Interested Parties) (Civil Appeal E595 of 2023) [2024] KECA 1152 (KLR) delivered on 20th September 2024, set aside orders that had been issued by the Employment and Labour Relations Court (ELRC). 
The ELRC had granted several orders at an interlocutory stage, some of which included mandatory injunctive orders.
“Unlike a prohibitory injunction, which preserves the status quo, a mandatory injunction goes well beyond simply maintaining the status quo pendente lite and is particularly disfavoured. A mandatory injunction is seen as upsetting the status quo and is subjected to a heightened preliminary standard.” Court of Appeal in Samasoure EPZ Ltd v Meta Platforms and Others.
Summary of the Case
The dispute arose when content moderators, employed by Samasource EPZ Limited (Sama) to moderate content on behalf of Meta Platforms (Meta) on Facebook app, alleged violations of constitutional and labour rights. 
These claims centred around the moderators&#8217; alleged exposure to harmful working conditions and the termination of employment through what they claimed to be a purportedly unlawful redundancy exercise.
The content moderators&#8217; claims in the ELRC included:

Unlawful redundancy: They argued that the redundancy notices issued by Sama lacked genuine justification, failed to comply with procedural requirements under Section 40 of the Employment Act, and were retaliatory following a previous lawsuit, Daniel Motaung v Sama & Meta Platforms.

Unhealthy working environment: The moderators alleged significant psychological harm due to exposure to disturbing content, inadequate mental health support, and exploitative

Lack of consultation: The moderators claimed they were not adequately consulted on the redundancy, and no reasonable efforts were made to redeploy affected employees.
Employer control and employment relationship: They asserted that Meta’s direct control over their work, including policies, tools, and performance evaluation—created a de facto employment relationship between Meta and the moderators, making Meta liable as their employer.

The moderators sought several remedies at the ELRC, including:

Declarations of employment relationships between the moderators and Meta Platforms.
Extensions of employment contracts pending resolution of the case.
Prohibitory orders preventing Meta and Sama from hiring replacements or retaliating against moderators.

Orders compelling Meta and Sama to provide medical and psychological support.
Regularization of immigration statuses for foreign moderators to enable them to remain in Kenya while pursuing the case.

The ELRC granted several interlocutory orders and made various findings, including:

A finding that an employment relationship existed between the moderators and Meta.
A mandatory order to extend the moderators&#8217; employment contracts pending the resolution of the main petition.
A prohibition against Sama and Meta from recruiting new moderators to replace the petitioners.
An order requiring Sama and Meta to provide medical, psychiatric, and psychological support to the moderators.
An order compelling Sama and Meta to regularize the immigration status of foreign moderators to enable them to remain in Kenya.
An order restraining Sama and Meta from retaliating against the moderators for instituting the legal action.

The appeal to the Court of Appeal 
Sama as supported by Meta Plat forms, contested the ELRC’s orders at the Court of Appeal, arguing that:

The ELRC improperly determined contested facts, such as the employment relationship, at the interlocutory stage.
The mandatory injunctions disrupted the status quo and exceeded the scope of interim relief. 
The ELRC failed to apply the proper legal threshold for mandatory injunctions.
The orders effectively pre-empted the outcome of the main trial, causing undue prejudice to the appellants.

The Court of Appeal&#8217;s position on mandatory interlocutory injunctions 
The Court of Appeal held that mandatory interlocutory injunctions differ from prohibitory injunctions, which aim to preserve the status quo. The Court emphasized that mandatory injunctions require a heightened preliminary standard, as they often disrupt the existing status quo and may result in finality to disputes prematurely. Quoting the English case of Lo cabail International Finance Ltd vs Agroexport and Others [1986] 1 ALL ER 901, the Court reiterated: “A mandatory injunction ought not to be granted on an interlocutory application in the absence of special circumstances, and then only in clear cases&#8230;before granting such an injunction, the court had to feel a higher degree of assurance that at the trial it would appear that the injunction had rightly been granted.” 
The Court of Appeal outlined the guidelines for granting such relief as follows:

The plaintiff must establish a strong case for trial, exceeding the prima facie standard that applies in prohibitory injunctions. 
The relief must be necessary to prevent irreparable or serious injury that cannot be compensated monetarily. 
The balance of convenience must favour the party seeking the injunction

The Court of Appeal held that the ELRC delved into contested issues, such as the existence of an employment relationship between the moderators and Meta Plat forms and the interpretation of their contracts, effectively issuing findings akin to a final judgment. The Court of Appeal found no exceptional circumstances warranting the mandatory injunctions granted by the ELRC. The Court added that the issues raised by the ELRC were heavily contested and required determination on merit at trial. 
The orders issued risked resolving the main dispute prematurely, potentially rendering the ongoing trial moot. The Court added that consequences of such an order is that it can prejudice the yet to be resolved dispute and even place the dispute beyond the reach of the law because some consequences of a court order may be irreversible. 
In the final analysis, the Court of Appeal set aside the orders granted by the ELRC.
Conclusion 
The decisions, both at the ELRC and the Court of Appeal, attracted significant attention due to the nature of the case. The finding by the ELRC that Meta Platforms was the moderators’ employer particularly drew scrutiny. The ELRC had reached this conclusion based on Meta’s control over key aspects of the moderators’ work, including tools, policies, and performance metrics. This ELRC ruling (which has now been set aside by the Court of Appeal) raised critical questions about the viability of outsourcing and business process outsourcing (BPO) as a strategy for organizations. Furthermore, this case is among the first to address workplace issues arising from digital platforms, possibly marking a wave of similar cases likely to emerge as digital platform work and BPOs expand.
It is important to note that the substantive petition is yet to be determined by the ELRC, leaving the issues raised unresolved as the Court of Appeal was handling an interlocutory appeal. The eventual decision of the ELRC on the main petition will undoubtedly have significant implications for the labour and digital economy landscape in Kenya.

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Disclaimer: This publication is for general information only. It should not be relied upon as legal advice. The sharing of this information will not establish a client relationship with the recipient unless MMK is or has been formally engaged to provide legal services.
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