The Employment and Labor Relations Court in Kisumu has delivered a landmark ruling establishing that employers cannot halt workers’ salaries due to financial difficulties.
In a judgment delivered on June 23, Justice Nzioki wa Makau ruled that an employer’s cash-flow struggles do not suspend an employee’s right to earn a living, declaring that workers should not shoulder operational business risks.
The precedent-setting decision stems from a legal dispute between Pride Kings Ltd and its former security guard, Innocent Onyango. Onyango resigned from the company after going four consecutive months without pay. The court upheld an earlier finding that the firm constructively dismissed Onyango, ruling that the employer’s failure to pay effectively forced his resignation.
“It is not the responsibility of a worker to figure out how the employer will pay his wages,” Justice Nzioki said.
Court documents show that Onyango joined the company in August 2019 as a security guard earning a monthly salary of Ksh12,500. He told the court that the company stopped paying his salary between July and October 2023, leaving him unable to provide for his wife and three children. The prolonged lack of income pushed him into severe financial hardship, leaving him with no choice but to resign.
Onyango argued that management cut off his pay without any prior notice or communication regarding when he would receive his money. Beyond the unpaid wages, he claimed the company consistently underpaid him, denied him annual leave, and failed to remit his National Social Security Fund (NSSF) deductions. Consequently, he sued the firm, maintaining that the company unlawfully and unfairly dismissed him.
Pride Kings Ltd admitted to the court that it faced severe financial difficulties that disrupted its payroll. While management argued that they informed staff about the situation and eventually cleared the outstanding salaries, they maintained that Onyango should have waited for the business to stabilize rather than resigning.
Justice Nzioki firmly rejected the company’s defense, ruling that the firm’s failure to pay created an untenable environment for its staff. The court held that no employer can expect a worker to report to duty indefinitely without compensation just because the business is struggling.
“The Appellant created a situation that led to the unfair and unlawful termination of employment,” the judge ruled.
The judge agreed with the trial court that withholding wages for several months constitutes a fundamental breach of an employment contract. Consequently, the court upheld the decision that Pride Kings Ltd constructively dismissed Onyango, ruling that he is entitled to salary arrears, notice pay, service pay, and compensation for unlawful termination.
The court also ordered the company to issue him a certificate of service.
While the court sustained the unlawful termination verdict, Justice Nzioki reduced some of the financial awards. He explained that claims regarding underpayments, house allowances, and accrued leave fall under strict statutory limitation periods under the Employment Act.
As a result, the court slashed the underpayment award from Ksh135,035 to Ksh45,011.66, the house allowance from Ksh121,284 to Ksh40,611.66, and the accrued leave payout from Ksh49,114 to Ksh16,371.33.
The court did, however, fully uphold the awards for four months’ salary arrears, one month’s salary in lieu of notice, four years’ service pay, and the standard compensation for unlawful termination.
“No employer should ever decline to issue a certificate of service,” Justice Nzioki said.
