The Court of Appeal sitting in Nakuru have finally put this matter to rest in the case of Rift Valley Water Services Board & 3 Others v Geoffrey Asanyo & 2 Others in the Judgment delivered on 10th June 2022.
Background
The 1st Respondent to the above matter was appointed to serve as a board member in a supervisory role in the Nakuru Water and Sanitation Services Company, a public limited Company established under Section 77 of the Water Act. Their nomination was to be in accordance to the Company’s Memorandum and Article of Association.
Their Function was One of a supervisory in nature attending; quarterly board meetings and other meetings scheduled as and when necessary. Section 79 of the said Act requires that the directors be nominated in accordance with the company memorandum and Articles of Association.
In March 2014 through an extra ordinary resolution and by the operation of the law, the 1st Respondent was terminated as the Memorandum and Articles of Association needed to be amended to conform with the Constitution. When the board was later reconstituted he was later not re-appointed. He filed a petition to the effect at the Industrial Court at Nakuru seeking, orders that the filling of the position was in contravention of Articles 41 and 47 of the Constitution of Kenya. He claimed to be an employee and his term was to end in December 2015, and faulted the dismissal from employment.
The Appellants objected the Respondents assumption that he is an executive director he was an employee in accordance to section 2 of the Employment Act. They submitted that the conduct of the board of directors did not emanate from the Employment Act but from the Company Memorandum and Articles of Association.
The Bench ruled that Section 2 of the Employment Act, Revised 2021 (2007) defines an “employee” in no uncertain terms as “a person employed for wages or a salary, and includes an apprentice and indentured learner”. The Bench ruled that the 1st respondent was not employed by the 2nd respondent “… for wages or a salary.” Neither was he an apprentice or indentured learner. There was no evidence that the 2nd respondent had entered into a contract of service to employ the 1st respondent as its employee within the meaning of the Act. Accordingly, the Employment Act did not apply to him.
The nature of the relationship between Asanyo and the Nakuru Water and Sanitation Services through the appointments was only governed by the Companies Act and the MEMARTS and not the Employment Act.
The court relied on the case of Mc Millan v Guest (1942) AC which held that director is an office holder and isn’t an employee. As per the case of Parsons v Albert J. Parsons and Sons Ltd (1979) ICR, a presumption that a director is an employee must not be made in absentia of the Contract of Service on the engagement terms of the director as an employee of the Company.
Outcome
Directors who do not have Contract of Service agreements with Companies are not classified as employees. Those who have might be considered as such. Non-executive directors are not employees but rather play supervisory roles.
This article is provided free of charge for information purposes only; it does not constitute legal advice and should be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary as set in the article should be held without seeking specific legal advice on the subject matter.
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