Employee transfer in Kenya can be complex during business restructuring. Know your legal rights. Book our team today for expert guidance on compliant transfers.
In Kenya, it is common for businesses to undergo restructuring, mergers, or create partnerships that result in the transfer of employees to a new company or related entity. But what happens to employment contracts in such scenarios? Do they continue, or must employees start afresh under new terms? The Employment Act, 2007 and various court decisions provide crucial guidance on this matter.
Understanding Employee Transfer in Kenya
When a company relinquishes its employees to a new partner, affiliate, or related entity, the legal implications depend on how the transfer is executed. This often happens during mergers, acquisitions, outsourcing, or internal restructuring. In many cases, the new entity takes over operations and workforce. However, the critical issue is whether the employees’ existing rights and terms of employment are preserved.
What the Employment Act, 2007 Provides For
The Employment Act, 2007 is the principal legislation governing employment in Kenya. Section 10(5) of the Act specifically provides for the continuation of contracts in the event of a transfer of business:
“Where there is a change in the name of the employer, or a transfer of an undertaking or part thereof, every contract of service shall continue in force as if no such change or transfer had occurred.”
This means that if there is a transfer of business or a restructuring that affects the workforce, the employees’ contracts do not terminate. Instead, the new employer inherits the employees on existing terms, including years of service, accrued leave days, and benefits.
Key Court Decisions on Employee Transfers
Several Kenyan court decisions have reinforced the position that employee rights must be protected during transfers.
In Kenya Airways Limited v Aviation & Allied Workers Union Kenya [2014] eKLR, the court ruled that the outsourcing of staff must preserve all existing terms and benefits. The court emphasized that an employee should not suffer any loss during such transitions.
Similarly, in Petrosal Company Limited v Anne Wairimu Njihia [2018] eKLR, the court found that a transfer between related companies under a group of entities must uphold the continuity of employment.
However, if the transfer involves termination followed by a fresh contract, as in the G4S Security Services case, the employer must pay all terminal dues, and the employee must voluntarily consent to the new terms. Facing unfair termination of employment or unfair employee transfer in Kenya? Contact today our team of top employment lawyers in Kenya for customized legal assistance.
Employee Consent and Fair Labour Practices
Under Article 41 of the Kenyan Constitution, employees are entitled to fair labour practices. Forced transfers or restructuring exercises that result in loss of benefits or job insecurity can be challenged in court. For this reason, employers are advised to seek employee consent, communicate clearly, and ensure that no employment rights are lost during the transition.
Conclusion
In Kenya, when a company transfers employees to a new or related entity, the Employment Act mandates the continuity of employment contracts unless terminated with consent and full settlement. Employers must act transparently and lawfully to avoid disputes. Employees, on the other hand, should understand their rights to ensure they are not disadvantaged during business transitions. For a customized legal advisory in Kenya, do contact our team of top lawyers at F.M Muteti & Co. Advocates