The Employment and Labour Relations Court in Kisumu has delivered a landmark ruling maintaining that employers cannot stop paying workers’ salaries simply because their businesses are facing financial difficulties.
In a judgment delivered on June 23, Justice Nzioki wa Makau ruled that an employer’s cash flow problems do not suspend an employee’s right to receive a salary, saying workers cannot be expected to shoulder the risks of running a business.
The decision arose from a dispute between Pride Kings Ltd and former employee Innocent Onyango, a security guard who resigned after going four consecutive months without receiving his salary.
Employer’s Cashflow Problems Are No Excuse for Delaying Salaries, Court Rules
The court upheld an earlier finding that Onyango had been constructively dismissed, meaning he was effectively forced to resign because of his employer’s conduct.
“It is not the responsibility of a worker to figure out how the employer will pay his wages,” Justice Nzioki said in one of the most significant passages of the judgment.
Court documents show that Onyango was employed by the company in August 2019 as a security guard earning a monthly salary of Ksh12,500.
He told the court that between July and October 2023, the company stopped paying his salary, leaving him unable to provide for his wife and three children.
According to Onyango, the prolonged non-payment of wages pushed him into financial hardship and left him with no option but to resign.
He further argued that the salary stoppage was effected without any notice or communication on when the payments would be made.
In addition to the unpaid salaries, he claimed he had been consistently underpaid, denied annual leave, and that deductions made towards the National Social Security Fund (NSSF) had not been remitted.
He therefore sued the company, arguing that he had been unlawfully and unfairly dismissed.
Also Read: Court Delivers Landmark Ruling on Time Limits for Employment Claims
Employer Blames Financial Difficulties
Pride Kings Ltd admitted before the court that it had experienced financial difficulties affecting its ability to pay its employees their salaries.
The company said workers had been informed about the situation and argued that the outstanding salaries were eventually paid.
It further maintained that Onyango should have waited for the business to stabilize instead of resigning.
However, Justice Nzioki rejected that argument.
“The Appellant created a situation that led to the unfair and unlawful termination of employment,” the judge ruled.
The court held that an employee cannot be expected to continue reporting to work indefinitely without pay simply because the employer is experiencing financial challenges.
Court Upholds Constructive Dismissal
The judge agreed with the trial court that the failure to pay wages for several months constituted a fundamental breach of the employment contract.
As a result, the court upheld the findings that Onyango had been constructively dismissed and was entitled to salary arrears, notice pay, service pay and compensation for unlawful termination.
The court also maintained that he should receive a certificate of service.
“No employer should ever decline to issue a certificate of service,” Justice Nzioki said.
Also Read: Court of Appeal Faults Judge Over ‘Googling’ Evidence in KenGen Billions Case
Some Awards Reduced
Although the court upheld the finding on unlawful termination, it reduced some of the monetary awards.
Justice Nzioki explained that claims such as underpayments, house allowance and accrued leave are subject to statutory limitation periods under the Employment Act.
As a result, the award for underpayments was reduced from Ksh135,035 to Ksh45,011.66, house allowance from Ksh121,284 to Ksh40,611.66 and accrued leave from Ksh49,114 to Ksh16,371.33.
The court, however, upheld the award of four months’ salary arrears, one month’s salary in lieu of notice, four years’ service pay and compensation for unlawful termination.
Follow our WhatsApp Channel and X Account for real-time news updates
