Workers sent into early retirement cannot claim income they would have earned up to their mandatory retirement age.
The Supreme Court has ruled that workers sent into early retirement cannot claim the salaries and allowances they would have earned up to their mandatory retirement age.
The court said such payments, especially in the public service, have no basis in law and offend public policy since claims for future salary earnings lack a statutory foundation.
It ruled that permanent and pensionable employment does not guarantee service or salary income until retirement age. The court held that employees are only entitled to notice pay, accrued benefits and pension, even where the retirement is found to be unlawful.
The landmark decision arose from a case involving three former senior managers of Kenya Posts and Telecommunications Corporation (KP&TC), the predecessor of Telkom Kenya and Posta.
The claimants were retired in October 1991 in the public interest after being placed on compulsory leave due to claims of persistent laxity in their duties.
At the time, they were 41, 43 and 50 years old. Their careers at the State Corporation had been marked by promotions and commendations, and none had received prior warnings about their performance.
They received their gratuity and pension but disputed the grounds of their removal. They later sued, arguing that they had been sent home unfairly and without a hearing. They asked the High Court to award them the income they would have earned up to age 55.
The court agreed. In a judgment dated December 20, 2013 it ruled their retirement unlawful, citing denial of the right to defend themselves, and awarded them anticipatory income totaling Sh29.4 million (Sh14.9 million, Sh12.7 million, and Sh1.8 million respectively).
The court found KP&TC violated its own Regulation 4(b), which mandated employee notification and representation before public-interest retirements.
However, the Court of Appeal overturned the award in July 2024, labelling the anticipatory salaries "speculative" and "unjust enrichment."
It noted that neither the repealed nor current Employment Act provides for such payments, adding that employment may end prematurely due to redundancy, dismissal, or death. The appellate court affirmed that the claimants had received lawful dues—notice pay, gratuity, and pension—and dismissed their case.
The former employees escalated the matter to the Supreme Court, which agreed to hear it the matter as it raised a question of general public importance. That question was whether public officers retired prematurely in the public interest had a legal or contractual right to anticipatory salaries and allowances.
The Supreme Court answered with a resounding no. The top judges’ bench led by Chief Justice Martha Koome underscored that "permanent and pensionable" employment does not equate to tenure until retirement age.
Contracts remain terminable if employers follow due process. The court rejected the appellants’ argument of a "legitimate expectation" to serve until 55, stating that employment may end through various lawful means.
Anticipatory salaries
It noted that employment contracts can end through many lawful processes. “The designation of employment as permanent and pensionable does not guarantee tenure until retirement age,” it said.
Critically, the Supreme Court stressed that anticipatory salaries lack legal grounding under Kenya’s employment laws.
"Courts must avoid awards that unjustly enrich employees and offend public policy," the judgment stated, clarifying that salaries are paid for services rendered—not unworked future periods.
"The designation of employment as permanent and pensionable does not guarantee tenure until retirement age," the judgment affirmed.
“The court cannot grant anticipatory salaries and allowances for a period during which the employee did not render any service,” said the court, adding that awarding such sums would contradict the nature of employment contracts.
While agreeing with the High Court that KPTC unlawfully denied the trio a fair hearing—given their exemplary records and lack of prior warnings—the Supreme Court held that even unlawful retirements cannot warrant future earnings.
Remedies are strictly limited to notice pay and terminal benefits, which Telkom Kenya had fully settled.
“The general measure of damages does not extend to salaries for the unexpired period to retirement age. Remedies for wrongful dismissal or unlawful termination of employment are confined to notice pay, payment in lieu of notice, and contractual terminal benefits,” said the court.
It emphasized that even where a retirement is unlawful, the remedy cannot include payment of future earnings. It held that the law limits the remedy to notice pay and terminal dues.
The court found that Telkom Kenya had paid those dues in full. The court therefore upheld the Court of Appeal’s decision, dismissed the appeal and ordered each party to bear its own costs and directed that the Sh6,000 security deposit be refunded.
