In Adhiambo v Eidu Education Limited [2025] KEELRC 2276 (KLR), the Court examined the distinction between an employment relationship and a consultancy agreement. The Claimant was initially engaged by the Respondent as an employee, but her engagement was subsequently reclassified under a consultancy agreement. On 20th June 2019, she received a letter terminating her services with effect from the following day. She later filed a claim for unlawful termination.
The Respondent contended that the Claimant was a consultant, not an employee, and therefore the protections under the Employment Act—including the requirements for substantive justification and procedural fairness—did not apply.
In determining the nature of the relationship, the Court analyzed Section 2 of the Employment Act, which defines both "employer" and "employee." It also examined the terms of the consultancy agreement, noting features such as:
- a defined consultancy period;
- a specific role;
- fixed working hours (8 hours per day);
- a monthly consultancy fee payable at the end of each month; and
- supervision and oversight by the County Director.
The Court held that, despite being labeled a consultancy, the agreement exhibited elements characteristic of a contract of service. As such, it concluded that the relationship was that of employer and employee, rather than an independent consultancy.
Accordingly, the termination—having been effected without substantive justification or due process—was deemed unfair.
Legal Analysis/Argument:
1. Nature of the Relationship: Substance Over Form
The central issue in Adhiambo v Eidu Education Limited was whether the Claimant was an employee or an independent consultant at the time of termination. While the Respondent relied on the consultancy agreement to argue that the Claimant was not entitled to protections under the Employment Act, the Court emphasized that the true nature of a working relationship must be determined by its substance rather than its form.
In line with established jurisprudence, the Court reiterated that mere labeling of an agreement as a consultancy does not oust the jurisdiction of the Employment and Labour Relations Court nor does it negate an employment relationship if the factual matrix suggests otherwise.
2. Statutory Definitions Under the Employment Act
The Court referred to Section 2 of the Employment Act, which defines:
- an employee as a person employed for wages or salary and subject to the control of the employer;
- an employer as any person employing one or more employees.
Applying this test, the Court found that the Claimant's engagement met the statutory criteria of an employment relationship, given her supervision by the County Director, fixed working hours, and monthly remuneration—all of which demonstrated control, integration, and economic dependency consistent with employment.
3. Indicators of a Contract of Service
The Court highlighted several features of the agreement that were indicative of a contract of service, despite its “consultancy” label:
- A defined role and responsibilities, akin to a job description;
- Fixed working hours (8 hours per day), contrary to the autonomy typically associated with consultancy;
- Regular monthly payment, similar to a salary, rather than payment upon completion of deliverables;
- Direct oversight and supervision, inconsistent with the independent discretion expected of a consultant.
These features mirror the multi-factor test commonly used to distinguish between a contract of service and a contract for services, including control, integration, mutuality of obligation, and exclusivity.
4. Procedural and Substantive Fairness
Having determined that an employment relationship existed, the Court held that the Claimant was entitled to the protections under the Employment Act, including the requirement for:
- Substantive justification for termination (Section 43); and
- Procedural fairness (Section 41), including the right to be heard and given reasons for termination.
The Respondent failed to comply with these mandatory provisions. The Claimant was summarily terminated via letter on 20th June 2019, effective the next day, without being afforded a hearing or any form of due process.
5. Conclusion
The Court rightly found that the purported consultancy arrangement was a sham, used to disguise what was in fact an employment relationship. As such, the termination without cause and without following the procedures prescribed by law was held to be unfair and unlawful.
This decision underscores the principle that employers cannot contract out of statutory obligations by reclassifying employees as consultants, particularly where the practical realities of the engagement point to a contract of service.
