Constructive Dismissal under the Kenyan Employment and Labor Law

Introduction

Constructive dismissal, or constructive discharge or termination, refers to situations where an employee is forced to resign due to the employer’s conduct that makes working conditions intolerable and extremely difficult for the employee to continue working, leaving the employee with no option but to resign. The Employment Act of 2007 does not explicitly mention constructive dismissal in Kenya. However, Section 45 of the Act provides the foundation by protecting employees from unfair termination resulting from breaches of fundamental employment terms by the employer. Constructive dismissal has been recognized and developed through judicial interpretations and key court decisions.

What is Constructive Dismissal?

Constructive dismissal occurs when an employer’s conduct leaves the employee with no reasonable alternative but to resign. Resignation is regarded as constructive dismissal if the employer’s conduct is a significant breach of the contract of employment and if the conduct shows the employer is no longer interested in being bound by the terms of the contract. This may be due to breaches such as unilateral changes to the terms of employment, failure to pay salaries, or creating a hostile working environment or discriminating against the employee, thus making the working environment considerably difficult for the employee to continue working. The resignation is, therefore, not voluntary but is regarded as forced by the employer’s actions.

In Kenya, constructive dismissal is considered an unfair termination under Section 45 of the Employment Act, 2007, which provides protection against terminations without just cause or due process. Unlike in the other forms of termination, where the onus of justifying that the termination was fair lies with the employer, in constructive dismissal, the burden of demonstrating that the resignation was justified and was a result of the employer’s repudiatory breach of the employment contract lies with the employee. The employee needs to prove that if it were not for the intolerable conduct of the employer that they believed wouldn’t be abandoned, they would still be working.

Lord Denning, MR, in the case of Western Excavating (ECC) Ltd v. Sharp (1978) ICR 222, stated thus: –

“If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment or which shows that the employer no longer intends to be bound by one or more of the essentials of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, he terminates the contract because of the employer’s conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave instantly without giving any notice and say that he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once.”

Examples of Constructive Dismissal

Examples of constructive dismissal in Kenya typically involve situations where the employer’s conduct fundamentally breaches the employment contract, making it impossible for the employee to continue working. Common examples include unilateral changes to employment terms, such as reducing an employee’s salary without consent, demotion without a valid reason, or significantly altering the employee’s duties and responsibilities. Constructive dismissal may also arise when an employer fails to provide a safe working environment, engages in sustained discriminatory practices or harassment, or suspends an employee indefinitely without pay. In such cases, employees may feel forced to resign as they can no longer reasonably fulfill their duties under the hostile conditions created by the employer.

Vital Elements of Constructive Dismissal

For an employee to successfully claim constructive dismissal, the following elements, as was discussed in the authority case of Coca-Cola,  must be established:

1. Intolerable Working Conditions

The employer must have created or allowed intolerable working conditions that make it impossible for the employee to continue working. These conditions may include harassment, failure to provide necessary tools for work, discriminating against the employee, or forcing the employee into unethical actions. An objective test is applied to determine whether a reasonable person would have resigned under the same circumstances. In such circumstances, the unreasonable test is applied, where the employer’s conduct is assessed to determine if it was unreasonable and, thus, the employee could not be expected to stay. Accordingly, a constructive dismissal must be construed; there must be resignation. Resignation is viewed as communication of the intolerability of the employer’s conduct. In the absence of resignation, it is safe to draw an inference that the employee has consented to the employer’s intolerable conduct.

In Coca-Cola, the Court of Appeal emphasized that the working conditions must be severe enough to justify resignation. The Court of Appeal laid down the following legal principles in determining cases of constructive dismissal including:

1. What are the fundamental or essential terms of the contract of employment?
2. Is there a repudiatory breach of the fundamental terms of the contract through the conduct of the employer?
3. The conduct of the employer must be a fundamental or significant breach going to the root of the contract of employment or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract.
4. An objective test is to be applied to evaluate the employer’s conduct.
5. There must be a causal link between the employer’s conduct and the reason for employee terminating the contract i.e. causation must be proved.
6. An employee may leave with or without notice so long as the employer’s conduct is the effective reason for termination.
7. The employee must not have accepted, waived, acquiesced or conducted himself to be estopped from asserting the repudiatory breach; the employee must within a reasonable time terminate the employment relationship pursuant to the breach.
8. The burden to prove repudiatory breach or constructive dismissal is on the employee.”
9. Facts giving rise to repudiatory breach or constructive dismissal are varied.

 

2. Breach of Contract

The employer must have fundamentally breached a term of the employment contract, making it considerably difficult for the employee to continue working. This breach could be explicit, such as non-payment of wages, or implicit, like the employer undermining the relationship of trust. Examples of such breaches include unilateral salary reduction, constant and unjustified harassment demotion, a toxic working environment, or a significant change in duties without the employee’s consent.

The Employment and Labour Relations Court sitting in Kisumu in Kenya Union of Sugarcane Plantation and Allied Workers v Othira (Appeal E005 of 2023) [2024] KEELRC 843 reaffirmed that the breach must go to the root of the employment contract.

3. Causal Link Between Breach and Resignation

There must be a clear connection between the employer’s conduct and the employee’s decision to resign. The resignation must be a direct consequence of the employer’s actions, as highlighted in Coca-Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR. The employee must resign in response to the breach and not for unrelated reasons.

4. Resignation as a Last Resort

Constructive dismissal requires that the resignation be a last resort. Courts expect employees to attempt to resolve issues through internal grievance mechanisms before resigning unless the employer’s conduct makes it clear that any such attempts would be futile. The employee must also resign within a reasonable period after the breach.

Reliefs for Constructive Dismissal

Employees who successfully prove constructive dismissal are entitled to various remedies under Section 49 of the Employment Act, 2007. The primary remedies include:

1. Compensation for Unfair Termination: Depending on the circumstances of the case, courts can award up to 12 months’ salary as compensation for unfair termination. This award is discretionary.
2. Payment of Dues: The employee is entitled to any unpaid wages, accrued leave days, and other benefits due at the time of resignation.
3. Damages for Breach of Contract: The employee may also be awarded damages for the employer’s breach of the employment contract.
4. Reinstatement or Re-engagement: In some cases, courts might order reinstatement if it is deemed appropriate and feasible

Relevant Case Law

1. Coca-Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR

This case is the leading authority on constructive dismissal in Kenya. The Court of Appeal held that constructive dismissal occurs when the employer’s actions make it impossible for the employee to continue working, and the resignation is deemed a forced response. The court established an objective test to determine whether the working conditions were intolerable and whether a reasonable person would have resigned under similar circumstances.

Conclusion

Constructive dismissal is a crucial protection for employees in Kenya who are forced to resign due to their employer’s unreasonable conduct. While the Employment Act does not explicitly outline the concept, it has been shaped by court decisions, with clear principles emerging from cases like Coca-Cola East & Central Africa Limited v Maria Kagai Ligaga [2015] eKLR. Employees who find themselves in such situations should act promptly, document any breaches of contract, and seek legal redress through the courts. If an employee wishes to sue, they must do so within a reasonable time after the employer’s breach; otherwise, they may be taken to have waived their right to assert constructive dismissal.  On the other hand, employers must be mindful of their actions to avoid creating conditions that could lead to constructive dismissal claims.