The claimant, Patrick Njoroge Mwenda, was employed as a consulting director earning KES 150,000 per month. He alleged constructive dismissal and breach of contract after the employer failed to pay his full salary, remit statutory deductions and address his grievances. The former employee claimed he was forced to resign due to the employer’s failure to fulfil these obligations, describing the working conditions as intolerable.

The employer, argued that the employment relationship ended through a mutual separation agreement, effective 31 January 2018. However, no formal written agreement was presented to the court. Instead, the employer relied on email exchanges to show that computations for final dues had been made and a certificate of service had been issued. While the court ultimately dismissed the former employee’s claim of constructive dismissal, it emphasised that the absence of a formal mutual separation agreement created unnecessary ambiguity. The court concluded that the separation was likely mutual based on the available evidence but this finding was far from guaranteed. This decision was a narrow escape for the employer as the lack of a formal agreement could easily have led to a different outcome.

Documenting a clear agreement

This case highlights the critical importance of using clear and written agreements in mutual separations. A formal agreement outlines the terms of separation, including payment of final dues, statutory remittances and any additional benefits. This ensures clarity and finality for both parties. It also protects employers from disputes as it serves as evidence of mutual consent and reduces the risk of claims such as constructive dismissal or breach of contract. The lack of such an agreement in this case left the employer vulnerable to potential liability.

Additionally, a well drafted mutual separation agreement should include key clauses such as an “agreement not to sue” and a “non-disparagement” clause to mitigate significant risks. The agreement not to sue ensures that the employee waives their right to pursue legal claims against the employer offering finality and reducing the risk of costly and time-consuming litigation. Meanwhile the non-disparagement clause protects reputations and prevents either party from making harmful or negative statements about the other preserving professional relationships and fostering goodwill. Another key clause to include is a confidentiality clause which serves multiple purposes. Firstly, it protects sensitive company information such as trade secrets, business strategies and proprietary data from being disclosed or misused. Secondly, the confidentiality clause also ensures that the terms of the agreement including financial settlements or other negotiated benefits remain private. This is particularly important for employers as it prevents setting precedents that other employees may attempt to leverage and reduces the risk of reputational harm or unnecessary scrutiny. By incorporating these clauses employers can create agreements that are legally sound, clear and enforceable reducing the likelihood of disputes and fostering positive post-employment relations.

The Courts in Kenya have consistently upheld mutual separation agreements when they are properly executed and free from coercion, duress or misrepresentation.

Employers should therefore take proactive steps to avoid similar pitfalls. Drafting clear agreements that detail the terms of separation is essential. Engaging legal counsel to ensure compliance with Kenyan labour laws and best practices can provide an added layer of protection. Maintaining thorough documentation of all communications, agreements and payments related to the separation is also critical. Additionally, equipping HR teams with the skills to handle separations professionally can reduce the risk of disputes and ensure a smooth process.

This  case serves as a cautionary tale for employers. Although the court accepted that the separation was mutual despite the lack of a formal agreement, this outcome could have easily been different. Employers should never rely on informal arrangements as they leave room for disputes and ambiguity. Properly executed mutual separation agreements provide clarity, legal protection and peace of mind for all parties. Employers should prioritise formal agreements to safeguard their interests and foster positive employment relationships.