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Kenya: Legitimate expectation does not arise in a fixed term contract and non-renewal of a fixed term contract cannot constitute unfair termination

27 February 2023
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The Court of Appeal in Civil Appeal No. 18 of 2018 Transparency International Kenya v Teresa Carlo Omondi [2023] has held that a fixed-term employment contract does not create a legitimate expectation of renewal. Further, the non-renewal of fixed-term employment does not amount to unfair termination of employment warranting compensation.

Background

The appeal emanated from the Employment and Labour Relations Court (the ELRC) decision where the ELRC had held that lack of renewal of a fixed-term contract amounted to unfair termination, because the contract as worded, created a legitimate expectation for renewal. The employee was employed under a fixed-term contract for a term of two (2) years. The employment contract provided that the contract would be subject to renewal upon satisfactory performance by the employee.

The employer argued that the employment contract had a definite commencement date and termination date, and as such there was no legitimate expectation of the renewal of the contract. Additionally, the specific expiry date was pegged on the employer’s decision to extend the contract based on the satisfactory performance of the employee.

On the other hand, the employee’s argument was that the contractual clause provided for an extension of employment based on satisfactory performance which the employee had fulfilled. The employee was also entitled to reasons as to why the employer was not going to renew the contract.

The Court of Appeal’s determination

The primary issue for determination was whether the employer’s non-renewal of the fixed-term contract of employment violated the employee’s legitimate expectation, once its duration had lapsed.

The court, in setting aside the judgment of the ELRC, held that a fixed-term contract of employment does not create a legitimate expectation of renewal. The employer had not made any representation or any promise that the employment contract would be renewed to be relied upon by the employee.

Further, once a fixed-term contract comes to an end, the employer has no obligation to justify the termination of the contract, as the contract terminates automatically by effluxion of time.

What this means for employers

The decision lifts the obligation on employers to explain reasons for termination in fixed-term contracts as the fixed-term contracts would lapse by effluxion of time without creating a right of legitimate expectation of renewal.

Employers must however ensure that the term/duration clauses in fixed-term employment contracts are worded clearly to avoid ambiguity.