In Kenya’s dynamic corporate landscape, employment relationships, especially at the senior management level, are increasingly being resolved through mutual separation agreements. This approach offers a dignified and strategic exit for executives whose tenure is no longer tenable, often due to loss of confidence by the board of directors, rather than misconduct or poor performance.
What Is Mutual Separation?
Mutual separation in employment refers to a formal agreement between the employer and employee to amicably end their employment relationship on mutually agreed terms, even when statutory grounds for dismissal (like redundancy, misconduct, or poor performance under Sections 40 and 41 of the Employment Act, 2007) may not strictly apply.
It is typically accompanied by negotiated terms such as compensation, confidentiality clauses, and non-disparagement undertakings.
Unlike unilateral termination, mutual separation is consensual, avoiding protracted disputes and promoting a smooth exit process.
In Kenya, although the Employment Act, 2007, does not explicitly mention mutual separation agreements (MSAs), Kenyan courts have upheld their legality provided they comply with contractual and labor law principles.
In Godfrey Allan Tolo v Tobias O. Otieno [2022], the Court affirmed that termination by mutual agreement is legally permissible. The Court held the following:
“It is an established principle of law of contract that parties to a contract, including a contract of employment, can terminate their relationship voluntarily through mutual agreement. It means therefore that what the parties can voluntarily enter into mutually, they can also walk out of the same voluntarily by consent and upon agreed terms.”
This form of separation is increasingly popular as a strategic and amicable alternative to dismissal or resignation as it allows parties to part ways amicably, preserving reputations and avoiding protracted legal battles.
Legal Framework Under Kenyan Employment Law
Kenya’s Employment Act, 2007, outlines specific grounds for lawful termination:
- Section 40 – Redundancy: Employers can terminate contracts on grounds of redundancy only after following specific procedures, such as issuing notice to the employee or union, consulting the employee, and paying statutory dues, including severance pay calculated at a minimum of 15 days’ pay per year of service.
- Section 41 – Misconduct, Poor Performance, Physical Incapacity: Termination on these grounds requires the employer to notify and explain the intended termination to the employee, allowing representation. Failure to give a fair hearing and a valid reason renders termination unlawful.
However, these provisions require procedural fairness and substantive justification. For C-suite executives, CEOs, CFOs, COOs, and other senior leaders, termination is rarely based on these grounds. Instead, it often stems from loss of confidence by the board, which is not explicitly recognized as a lawful reason under the Act. This legal gap makes mutual separation the most practical and legally sound option for executive exits.
Why Mutual Separation is Best for Senior Management in Kenya
Senior management typically serves at the pleasure of the board of directors and may not easily fit into statutory termination frameworks due to the nature of their contracts and roles. In Kenya, termination for senior managers often arises from a lack of confidence by the board rather than outright misconduct or redundancy.
This poses different challenges, including: Strict procedural and evidential requirements under sections 40 and 41 of the Employment Act may be difficult to meet conclusively for senior management.
Senior executives serve at the pleasure of the board, and their continued employment hinges on trust, alignment with strategic vision, and interpersonal dynamics. When confidence erodes, due to shifting business models, internal politics, or perceived leadership gaps, the board may seek separation without triggering statutory termination grounds. This results in the mutual separation, which has the following advantages to the involved parties:
- A mutual separation agreement provides a dignified, confidential, and negotiated exit that avoids public legal disputes or reputational damage.
- It protects both the employer and the manager by setting clear terms on severance and future claims, preserving goodwill, especially when the exit is due to loss of board confidence rather than poor performance or misconduct.
- Mutual separation also prevents the executive from having to explain a dismissal to future employers, as it is characterized by mutual consent rather than firing.
Therefore, mutual separation offers a practical, legally sound, and strategic solution for senior management exits in Kenya, balancing employer interests and managerial dignity.
How to Negotiate a Great Mutual Separation
Negotiating a successful mutual separation requires strategic foresight and legal precision. Here’s how executives and employers can approach it:
For Executives:
- Know your leverage: If the employer lacks valid termination grounds, you’re in a strong position to negotiate.
- Prioritize dignity: Seek terms that protect your professional reputation, such as neutral public statements and reference letters.
- Secure compensation: Negotiate for severance pay, accrued benefits, and anticipatory damages for potential unfair termination claims.
- Include legal safeguards: Ensure the agreement includes non-disparagement, confidentiality, and waiver of future claims.
For Employers:
- Budget for the exit: Treat separation costs as a business expense, including legal fees and compensation.
- Avoid litigation: A well-negotiated separation is cheaper and less disruptive than a court battle.
- Control the narrative: Agree on public communication to avoid speculation and protect brand integrity.
- Ensure compliance: Draft the agreement in line with Kenyan contract law and employment principles.
- Legal grounds: Having fallback legal grounds (e.g., redundancy or misconduct proceedings) can enhance bargaining position.
Conclusion
In Kenya, where employment law does not yet recognize loss of confidence as a standalone ground for termination, mutual separation emerges as the most pragmatic and protective solution for both parties. It allows senior executives to exit with grace and employers to maintain operational continuity and legal compliance.
For executives, the mantra is simple: “A bad settlement is better than a good judgment.” Litigation may offer vindication, but mutual separation offers speed, dignity, and a clean slate.
At Njaga & Co. Advocates LLP, we provide specialized advisory and negotiation support for both employers and senior management:
- For Employers & Boards: We design airtight mutual separation agreements that safeguard organizational interests, reduce reputational exposure, and ensure compliance with Kenyan employment law.
- For C-Suite Executives: We negotiate favorable exit packages, protect contractual and reputational rights, and secure post-exit confidentiality and non-disparagement safeguards.
Whether you’re a board seeking a dignified exit strategy for senior leadership or a C-suite executive navigating a sensitive departure, our team understands that executive transitions require more than legal compliance; they demand discretion, strategy, and empathy.
Contact us today to discuss your mutual separation needs and let us help you achieve a balanced, professional, and legally enforceable outcome.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified advocate for personalized legal guidance.
