Unfair Termination and Wrongful Dismissal: The Legal Mines of Ending an Employment Relationship

The decision to end an employment relationship may appear to be a routine and defensible exercise of managerial prerogative. However, if it is not handled in strict accordance with the law, it can quickly morph into a devastating financial liability.

An employer cannot justify the termination or dismissal of an employee merely on the basis that they deemed it necessary. The employer must demonstrate absolute compliance with the mandatory provisions of the Employment Act together with existing contractual terms and workplace policies. Where an employer fails to comply with these strict requirements, they open the door to costly litigation for unfair termination or wrongful dismissal.

I. The Mechanics of Separation: Termination vs. Summary Dismissal

An employer may unilaterally bring an employment relationship to an end in one of two distinct ways:

• Termination: This brings the employment relationship to an end upon giving the employee the required contractual notice or, alternatively, payment of salary in lieu of notice.
• Summary Dismissal: This brings the employment relationship to an immediate end without notice, or with less notice than the employee is contractually entitled to, on account of gross misconduct. The legal grounds for this are anchored under Section 44(4) of the Employment Act.

While the terms “unfair termination” and “wrongful dismissal” are frequently used interchangeably by the public, the legal fraternity recognizes them as distinct concepts. The Court of Appeal in CMC Aviation Limited v Mohammed Noor [2015] KECA 775 (KLR) definitively drew this line:

• Unfair Termination: Arises primarily from a breach of statutory law. It occurs where an employer fails to comply with the mandatory statutory requirements governing termination or summary dismissal under the Employment Act.
• Wrongful Dismissal: Arises from a breach of the employment contract. Such a claim is strictly founded on the specific terms agreed upon in the contract of employment or any applicable human resource policies incorporated into the employment relationship.

II. The Two Golden Questions Every Employer Must Answer

Before proceeding with separation, management must address two fundamental questions to insulate the organization from legal exposure:

1. Was There a Substantive, Valid, and Fair Reason?

The Employment Act requires an employer to justify the reason for termination or dismissal. The reason must be one that the employer genuinely and reasonably believed to exist at the time of separation. Crucially, mere suspicion of wrongdoing, however strong, does not constitute a valid reason.

The employer must provide material, verifiable evidence demonstrating that their belief was reasonably founded. As recently underscored by the Employment and Labour Relations Court (ELRC) in Nyamolo v One-Acre Fund [2026] KEELRC 2318 (KLR), a decision to terminate must be backed by concrete proof, not conjecture:

• For Gross Misconduct: The employer must retain objective records, witness statements, and forensic evidence supporting the allegation.
• For Poor Performance: The employer must meticulously document the expected performance standards, the specific performance deficiencies, prior warnings, and proof of the reasonable opportunity or support given to the employee to improve.
• For Redundancy: The employer must thoroughly document the operational or financial reasons for the redundancy, the objective selection criteria applied, the requisite statutory notices sent to the labor officer, and strict compliance with the statutory severance guidelines.

2. Was a Mathematically Flawless Procedure Followed?

Even if an employer has an ironclad, valid reason for termination, procedural failure is fatal. Section 41 of the Employment Act mandates a strict, non-negotiable process before separation.

In the landmark decision of Postal Corporation of Kenya v Tanui [2019] KECA 489 (KLR), the Court of Appeal identified the four essential, mandatory elements of procedural fairness:

• i) Explaining the precise grounds for the contemplated termination in a language the employee fully understands;
• ii) Issuing a formal notice stating the clear reasons why the employer is considering termination;
• iii) Explicitly informing the employee of their right to be accompanied to the disciplinary hearing by another employee or a union representative of their choice; and
• iv) Genuinely hearing and considering the employee's representations before making a final decision.

III. The Bottom Line

An employer may have a flawless, genuine reason for ending an employment relationship, yet still incur severe legal and financial liability simply for failing to follow the prescribed procedural steps. Conversely, a beautifully executed disciplinary process cannot cure the complete absence of a valid, substantive reason. Substantive justification and procedural fairness must exist concurrently.

Employers must treat termination or dismissal not as an impulsive reaction, but as the final step of a fair, transparent, and properly documented process. This protects the employee’s constitutional right to be heard, promotes sound corporate decision-making, and completely reduces the company’s exposure to expensive damages in the ELRC.