Understanding Redundancy Under Kenyan Law
Redundancy means losing your job because of factors beyond your control. It does not happen due to poor performance or misconduct. Instead, it may result from business restructuring, economic struggles, new technologies, or company closure.
Under Section 2 of the Employment Act, 2007, redundancy is defined as an involuntary job loss caused by external factors. It is a business decision and not a reflection of the employee’s skills or behavior.
Redundancy is a no-fault process. Employers must not use it as an excuse to terminate employees for disciplinary issues. The process must remain separate and transparent. If not handled properly, the employer may face legal claims for unfair dismissal and be required to pay compensation.
This article explains the key legal steps employers must follow under Kenyan law, drawing from recent court decisions—especially the 2025 case of Macharia v. Mater Hospital.
Legal Framework: Constitution and Labour Laws
Constitutional Rights
Article 41 of the Constitution of Kenya, 2010 guarantees the right to fair labour practices. This includes fair treatment during redundancy.
Definition in Labour Law
Section 2 of the Labour Relations Act defines redundancy as the employer-initiated loss of employment when a role becomes unnecessary. This often occurs when a position is abolished or duties are no longer needed.
Mandatory Steps Under Section 40
Section 40 of the Employment Act, 2007 outlines key steps for a lawful redundancy:
1. Notification
The employer must give written notice at least one month in advance. Who receives the notice depends on the employee’s union status:
- Unionized employees: The employee, the trade union, and the local labour officer.
- Non-unionized employees: The employee and the labour officer.
The notice must explain why and how many roles are affected.
2. Fair Selection Criteria
Employers must use objective criteria when choosing employees for redundancy. These may include:
- Seniority
- Skill and ability
- Reliability
Discrimination based on trade union membership is not allowed.
3. Payment Obligations
Employers must:
- Pay for any outstanding leave in cash.
- Provide at least one month’s notice or pay one month’s wages instead.
- Offer severance pay equal to 15 days’ salary for every year of service.
Importance of Clear and Early Notices
In Wekesa v. Mount Kenya University [2024], the court emphasized that employers must send out clear, timely notices before ending contracts due to redundancy. The term “intended redundancy” in Section 40 shows that the employer should consult first, not act after deciding.
Notices help both sides prepare and discuss options, and they must include reasons and the expected date of termination.
What Makes a Redundancy Valid?
A valid redundancy must have real and justifiable reasons.
In Lebo & 331 Others v. Kenya Power & Lighting Co Ltd [2023], the court supported KPLC’s decision. A long drought had hurt power production, and cost-cutting became necessary.
However, in Kamau v. Cleanshelf Supermarket Limited [2024], the court found that the employer tried to disguise a disciplinary dismissal as redundancy. The employer first warned and suspended the employee, then suddenly claimed redundancy. The court ruled this unlawful.
Using Objective Criteria: Not Just LIFO
In Kenya Airways Limited v. Aviation & Allied Workers Union [2014], the court said that even with real financial challenges, redundancy selection must be objective. Relying only on “Last In, First Out” (LIFO) is not enough. Employers should balance LIFO with other factors to protect succession and continuity.
The Need for Meaningful Consultation
Consultations must be serious and honest, not just a formality.
In the same Kenya Airways case, the court ruled that employers must give employees and unions a real chance to suggest alternatives.
Likewise, in Nzioki v. Polytanks & Containers Kenya Limited [2024], the court faulted the employer for making a final decision before involving the employee or labour office.
Settling Terminal Dues
Employers must fully pay all terminal benefits, including:
- Unused leave
- Notice pay or payment in lieu
- Severance pay (minimum 15 days per year of service)
Failing to do this can result in court orders for payment and further compensation for unfair dismissal.
Landmark Judgment: SM v. MH [2025]
Case Summary
The claimant, represented by Wanjiku Maina & Company Advocates, worked as Senior Executive at the company. In 2020, he reported serious issues at the organisation and was taken through an incomplete disciplinary process. After this, he was informed that his position had been abolished and declared redundant.
Court Findings
The court ruled that the redundancy was a cover-up for a failed disciplinary process. The employer violated Section 40 of the Employment Act. The court found the termination unfair, unlawful, and unconstitutional, and awarded the claimant compensation.
Final Thoughts
Redundancy must be handled with care, transparency, and fairness. Employers must:
- Give proper notice
- Show valid reasons
- Use fair and objective selection criteria
- Hold genuine consultations
- Pay all required dues
Failure to follow the law can lead to serious legal and financial penalties.
Need Legal Advice?
If you are dealing with a redundancy, employment dispute, or believe your termination was unfair, contact Wanjiku Maina & Co. Advocates for expert help and guidance.
