Remedies for Employers After an Employee’s Breach of Contract

Remedies for Employers After an Employee’s Breach of Contract

When an employee breaches an employment contract, the employer is far from helpless. While it is a common misconception that Kenyan labour law only protects workers, the Employment Act, 2007 and established common law principles provide employers with a robust suite of remedies. These range from immediate internal disciplinary actions to aggressive court-backed claims for financial damages, asset protection, and the enforcement of post-employment restrictions.

The Legal Framework: Contracts as Mutual Obligations

An employment contract is a two-way legal street. Both parties owe each other non-negotiable legal duties. When an employee breaches an express written clause or an implied common law duty, the employer can seek remedies under:

  1. The Employment Act, 2007 (specifically regarding gross misconduct and summary dismissal).
  2. The Law of Contract Act (Cap 23) and general civil procedure rules.
  3. The Common Law Doctrines of Equity (governing injunctions and trust relationships).

Common Types of Employee Breaches

  1. Gross Misconduct (Section 44): Serious actions that instantly destroy the employment relationship, including workplace theft, fraud, blatant insubordination, unexcused absenteeism, or committing a crime against company property.
  2. Breach of Fiduciary Duty: Senior employees (such as directors, finance managers, or C-suite executives) owe an implied duty of absolute loyalty, good faith, and full disclosure. Secretly operating a side business that diverts company clients or opportunities is a severe breach.
  3. Breach of Restrictive Covenants: Violating signed post-employment restrictions, such as non-compete clauses (working for a direct competitor) or non-solicitation clauses (stealing company staff or client lists). Note: These are fully enforceable in Kenya provided they are strictly reasonable in their duration, geographical area, and scope of business protection.
  4. Breach of Confidentiality Clauses: Exposing or utilizing sensitive company trade secrets, proprietary software, data registries, or internal corporate strategies without permission.

Core Remedies Available to the Employer

1. Summary Dismissal (The Internal Statutory Remedy)

Where an employee commits an act of gross misconduct under Section 44, the employer holds the right to terminate their contract immediately without paying notice. However, this is not an unchecked management right. The employer must strictly comply with the Section 41 disciplinary track Skipping these steps makes the summary dismissal illegal, turning a valid firing into a costly unfair dismissal lawsuit.

2. Claims for General & Special Damages

If an employee abruptly walks out without serving their contractual notice period, or commits a breach that causes direct financial loss to the business (such as damaging machinery or mismanaging funds), the employer can file a lawsuit for Damages in the Employment and Labour Relations Court (ELRC).

3. Urgent Injunctive Relief

An injunction is a powerful court order used to protect a business from immediate, irreparable harm. Employers can move for:

  • Prohibitory Injunctions: To stop a former employee from revealing trade secrets to the public, or to bar them from working for a direct competitor in violation of a valid non-compete clause.
  • Mandatory Injunctions: To compel a departed employee to return company property, laptops, or secure cryptographic access tokens.

4. Recovery of Training Costs (Clawback Bonds)

Corporate training bonds are a fully legitimate tool to recover investment costs if an employee leaves the company shortly after receiving specialized, expensive external training. While enforceable under general contract law, the ELRC subjects these bonds to a strict proportionality test. The clawback amount must reflect the actual, documented cost of the training and must be reduced proportionally based on the length of time the employee served the company after graduating from the program.

5. Accounting of Profits

If a senior executive or manager breaches their fiduciary duty by secretly running a parallel competing business or diverting a corporate contract to their private firm, the employer can ask the court for an Accounting of Profits. This forces the unfaithful employee to surrender every shilling of profit they secretly made using the employer’s time, resources, or business connections.

Conclusion

Kenyan labor law provides a highly balanced, robust toolkit designed to insulate corporate entities from employee bad faith and contractual breaches. While summary dismissal remains your primary tool for internal misconduct, protecting your intellectual property, client databases, and training investments requires professionally drafted contracts backed by strategic litigation when a breach occurs.

Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal advice. Prior results do not guarantee a similar outcome. Reading or relying on the contents of this article does not create an advocate-client relationship with our firm. For advice regarding your specific situation, please contact us to obtain professional legal advice with respect to your particular legal matter.

By Ivy Ndirangu