Court of Appeal Ruling On Fixed-Term Contract Vs. Unfair Termination

The Court of Appeal, in a case between Transparency International-Kenya and Teresa Carlo Omondi, recently determined that a fixed-term employment contract doesn’t create an automatic expectation of renewal of the contract and that the non-renewal of a fixed-term employment contract does not amount to unfair termination of employment that warrants compensation.

This was after the Employment and Labour Relations Court decided that the lack of renewal of a fixed-term contract amounted to unfair termination because, as per the contract, it created an expectation for renewal.

Teresa was under a fixed-term contract for two years. Her employment contract stated that the employer would renew her contract upon satisfactory performance.

She argued that the contract provided an extension of employment based on a satisfactory performance that she had fulfilled. She also asserted that she was entitled to know why the employer would not renew her contract.

On the other hand, the employer argued that the contract had a start and end date; thus, there was no basis for the employee to expect an automatic renewal of her contract, and the decision to extend the contract was dependent on the employer’s decision to extend the contract based on the employee’s satisfactory performance.

The issue to be determined was whether the employer’s non-renewal of the fixed-term employment contract violated the employee’s legitimate expectation once its duration was over.

The court overruled the judgment of the ELRC and determined that a fixed-term employment contract does not create an expectation of renewal. Besides, the employer had not promised the employee that they would renew her contract.

Furthermore, once the indicated time in the contract elapses, the employer is not obligated to give reasons for the contract termination. The employer is only obligated to renew the contract if the agreement provides automatic renewal or the employer agrees to restore it.

This decision by the court lifts the need for employers to give their reasons for termination in a fixed-term contract, as the given timeline will have elapsed without creating a right of legitimate expectation of renewal.

Additionally, it is good to remember to have employment contracts worded clearly, especially in the terms and duration clauses in a fixed-term employment contract. However, courtesy demands you inform the employee that the contract has lapsed.

Here at Corporate Staffing, we are Kenyan Labor Laws Experts. We will ensure that all your employment contracts comply with employment law.

Whether you want a new contract or want to review your existing contracts, we are here to help. Please reply to this email for a free consultative meeting where we will seek to understand your needs and develop solutions customized to your business