“In determining the existence of an employment relationship, the Court is expected to go beyond mere terminologies by the parties either in their pleadings or in their testimony. The Court is called upon to inquire into the entire spectrum of facts and circumstances to establish whether an employer/employee relationship as defined in the Employment Act, 2007 actually exists.” – Ndolo J, in Adhiambo v Eidu Education Limited [2025]
Introduction
In Kenya, the consultancy agreement has frequently been utilized as a strategic means to bypass the stringent obligations of the Employment Act, 2007. Organizations often engage individuals under the guise of independent contracting paying fixed fees and exercising direct supervision only to terminate the engagement without the procedural fairness required by law. However, two landmark judgments, Adhiambo v Eidu Education Limited [2025] and Mathenge v Tokea Solutions Limited & another [2026], have sent a definitive message: the legal character of a relationship is a conclusion of law drawn from facts, not a label chosen by the parties.
The Diagnostic Framework: Substance Over Form
The distinction between a contract of service (employment) and a contract for services (independent contracting) is fundamental, as only the former grants statutory protections like notice pay and leave entitlements. To distinguish between the two, Kenyan courts now apply a rigorous multi-factor analysis:
- The Control Test: This examines whether the employer dictates not just what is done, but how, when, and where it is performed. High levels of supervision and reporting lines strongly indicate employment.
- The Integration Test: This assesses whether the individual is embedded in the organization’s daily operations (e.g., holding a management title) or remains peripheral as a specialist.
- The Economic Reality Test: This looks at financial risk and remuneration. A fixed monthly payment, regardless of output, mirrors a salary rather than a professional fee.
- Subsidiary Indicators: Factors such as the provision of medical cover, the absence of withholding tax, and the supply of tools/infrastructure by the company further tip the scales toward an employment relationship.
Case Analysis: Adhiambo (2025) and Mathenge (2026)
In Adhiambo v Eidu Education Limited, a Product Manager was converted from an employee to a consultant within two weeks of hiring. Despite the new label, her title, Kshs. 140,000 salary, and weekly supervision remained identical. The Court held this conversion was cosmetic and awarded her Kshs. 641,667 for unfair termination, noting she was never a consultant in any meaningful sense.
In Mathenge v Tokea Solutions Limited, the Court addressed a permanent consultant earning Kshs. 450,000 per month. The employer challenged the Court’s jurisdiction, claiming the matter was a commercial dispute. However, the Court assumed jurisdiction because the contract itself betrayed its nature: the claimant was entitled to medical cover for his family and was referred to as an employee in the address section. These features are characteristic of employment, not independent contracting.
Practical Takeaways
These decisions confirm that a consultancy label is legally ineffective if the substantive features of employment remain. To manage risk, organizations must conduct an urgent audit of their engagements:
- Avoid Cosmetic Conversions: Transitioning an employee to a consultant while maintaining the same reporting lines and hours does not shield an employer from the Employment Act.
- Scrutinize Contractual Language: Inconsistent terminology such as providing medical cover to a consultant serves as powerful evidence of a disguised employment relationship.
- Jurisdictional Realities: Preliminary objections regarding the Court’s jurisdiction will fail if the factual reality points toward employment.
- Termination Protocols: Regardless of the label, if the relationship is found to be one of employment, termination must comply with Sections 41, 43, and 45 of the Act regarding valid reasons and fair hearings.
Conclusion: The Primacy of Reality
The era of using consultancy agreements to circumvent statutory duties is closing. As reaffirmed in Adhiambo and Mathenge, the Kenyan courts will look past the instrument to the relationship, and past the title to the reality. For organizations, a failure to align operational reality with contractual form exposes the entity to significant liabilities, including back-dated statutory entitlements and damages for unfair dismissal.
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About the author
Caxstone specializes in civil, employment and labour disputes, constitutional law, family law and succession, and environment and land matters. He has amassed a wealth of knowledge and experience in litigation which is evident in the successes obtained for clients. He is an active member of the Employment and Labour Relations Court Bar-Bench committee.
Frankline M. Otieno is a dispute resolution associate, recommended professional and committed to offering sustainable client-centred solutions to legal issues.Frankline is astute in commercial litigation, securities law, banking law, intellectual property litigation, public procurement, land law litigation, Judicial Review and Administrative law litigation, sports law, tax litigation, administrative law, consumer protection law, competition law and constitutional litigation.
Denis Mutugi specializes in Commercial Litigation and Alternative Dispute Resolution.
Denis graduated with a Bachelor of Laws, LLB (Hons) from The University of Nairobi in 2021 and was admitted to the Roll of Advocates of the High Court of Kenya in the year 2023.
Denis has amassed a considerable wealth of experience in conducting legal research on various complex legal matters touching on Commercial, Insurance, Employment and Insolvency law and bankruptcy.
