Preliminary

In today’s rapidly evolving business environment, organizations across Kenya are undertaking structural reviews, operational realignments and efficiency-driven restructuring exercises. While these moves can be legitimate strategic responses to economic realities, they have also sparked an increasing number of redundancy notices being issued to employees. In this context, it is critical for Human Resource (HR) professionals, business leaders, legal practitioners and employees to clearly understand the redundancy process under Kenyan law, the standards of procedural fairness and the judicial interventions that have shaped the current jurisprudence.

This article unpacks the statutory requirements under Section 40 of the Employment Act, 2007, synthesizes the key procedural safeguards and highlights notable case law developments, equipping stakeholders with an informed and practical perspective.

What Is Redundancy Under Kenyan Law?

Under Kenyan law, redundancy refers to the termination of a contract of service on account of operational needs where the services of an employee are no longer required through no fault of the employee themselves. Causes of redundancy may include:

• Business restructuring and reorganisation;

• Technological changes or automation;

• Reduced operational requirements;

• Mergers, acquisitions or rationalization of functions and;

• Financial constraints or economic downturns, among others.

Importantly, redundancy is not a discretionary right vested in employers; it is a legally regulated ground for termination that must comply with mandatory statutory procedures, failing which an employee may successfully challenge the termination as unfair or unlawful.

Section 40 of the Employment Act, 2007: Core Requirements

The primary legal framework for redundancy in Kenya, is the Employment Act, 2007 and specifically Section 40 of the Act which sets out a detailed list of procedural conditions that an employer must comply with before terminating an employee on redundancy grounds. These include the following:

a.  Notification

If the employee is unionised, the employer must notify both the union and the Labour Officer in writing at least one month before the intended redundancy.

If the employee is not unionised, the employer must notify the employee personally in writing and the Labour Officer.

In Karani -versus- ISL Kenya Ltd (Employment & Labour Relations Appeal 005 of 2020) (2025) KLR

The Employment and Labour Relations Court at Machakos held that the wording of Section 40 is in mandatory terms and that an employer SHALL comply with the provisions thereof before declaring an employee redundant.

The Appellant herein was not notified of the intention to declare him redundant at least one month before the redundancy. The notice to the Labour Officer was issued on the same date that the Appellant was declared redundant without being notified of the reason for the same. Additionally, he was not paid his terminal dues at the time of redundancy, thus in contravention with the provisions of Section 40(1) of the Act.

b.   Fair Selection Criteria

Employers must apply objective and non-discriminatory criteria in selecting employees for redundancy, such as seniority, skill, ability and reliability. arbitrary or subjective selection can render the process unfair.

In Kimathi -versus- Ericsson Kenya Limited (Civil Appeal No. E601 of 2019) (2023) KLR

The Court of Appeal at Nairobi pronounced itself on the issue of redundancy that was challenged in this case as a pretext for discrimination. The Appellant vide his submissions argued that only one employee (that is the Appellant, a woman who had just delivered a baby and resumed work from maternity leave) was out of 216 employees of the Respondent was declared redundant. The Court scrutinized whether the selection criteria were fair and whether the employer’s (the Respondent) motives intersected with unfavorable treatment. The case underscores that redundancy processes must be transparent and equitable.

Consequently, in Odhiambo -versus- SGS Kenya Limited (ELRC No. 256 of 2020) (2025) KLR,

The Employment and Labour Relations Court its it findings held that the Respondent did not adhere to the provisions of Section 40(1) ( c) of the Employment Act which reads as follows:-

Section 40. (1)An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions –(c)the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy.

The court awarded the claimant 12 months’ salary as compensation, concluding that the redundancy was unlawful because the process lacked meaningful consultation and objective selection.

c.   Union Membership Considerations

Redundancy must not disadvantage employees based on trade union membership.

d.  Leave and Pay Entitlements

1. Employers must pay out accrued leave in cash.

2. Employees must be given at least one month’s notice or one month’s wages in lieu of notice.

3. Severance pay of at least 15 days’ salary for each completed year of service must be paid.

e.   Certificate of Service

Although not explicitly mentioned in Section 40, employers must provide a certificate of service pursuant to Section 51 of the Employment Act, 2007 upon termination (supported by general employment practice).

Collectively, these requirements aim to ensure substantive and procedural fairness in redundancy exercises, protecting employees from arbitrary or disguised dismissals.

f.   Right to Appeal

Employees who believe that the redundancy process was unfair or did not follow legal procedures have the right to appeal. They may file a complaint with the Employment and Labour Relations Court or with the Magistrates’ Court for appropriate redress.

The Procedural Fairness: The Essence of Compliance

Kenyan courts have repeatedly emphasized that redundancy is not just about the economic rationale for retrenchment, the procedure by which employees are consulted and informed is equally critical. Two core elements of fairness are:

a) Meaningful Consultation: Employers must engage employees or trade unions meaningfully before terminating contracts. Simply issuing a termination letter without prior discussion is insufficient.

b) Objective Selection Criteria: Employers must demonstrate that decisions were based on fair and documented criteria, considering factors such as seniority, skills and reliability. Courts have cautioned against arbitrary selection disguised as redundancy.

Failure on either front can result in a finding that the redundancy was procedurally unfair, rendering the termination unlawful.

Practical Takeaways for Employers and HR Practitioners:

Based on statutory requirements and current jurisprudence:

• Start Early and Consult Meaningfully - Don’t wait until after decisions are made to communicate with employees or unions. Engage in open discussions, document meetings, and address concerns proactively.

• Apply Objective Criteria - Develop clear, evidence-based selection criteria aligned with the law (seniority, skill, ability, etc.), and ensure documentation.

• Comply with Notices - Provide written notifications within statutory timelines, including notices to the Labour Officer in order to protect against claims of unfair procedure.

• Pay Statutory Benefits - Ensure timely payment of severance, leave, notice pay and issue certificates of service to avoid additional legal liabilities.

• Seek Legal Guidance in Complex Situations - Where restructuring affects multiple roles or involves unionized employees, legal advice early in the process can prevent disputes and costly litigation.

Conclusion

In Kenya, termination on redundancy grounds is heavily regulated by Section 40 of the Employment Act, 2007 and supported by a growing body of judicial decisions. While businesses may legitimately restructure in response to changing market conditions, compliance with statutory requirements and procedural fairness is non-negotiable.

In practice, employers that respect the law, engage transparently and treat affected employees with fairness and dignity not only protect themselves from litigation; they also sustain organizational morale and reputation in the long term.