In a landmark ruling that has redefined the financial liability for corporate governance failures in Kenya, the Employment and Labour Relations Court (ELRC) has ordered the Kenya Hospital Association, on behalf of The Nairobi Hospital, to pay its former CEO, Dr. Allan Pamba, over Ksh. 196 million for unlawful termination.
The judgment, delivered by Justice Nzioki wa Makau, stems from the case of Pamba v The Kenya Hospital Association & another [2025] KEELRC 1776 (KLR). While the Employment Act caps compensation for unfair dismissal at 12 months’ salary, the bulk of Dr. Pamba’s award came from enforcing his three-year contract.
The compensation awarded was as follows:
| Head of Claim | Amount Awarded (Ksh.) | Rationale |
| Salary for the balance of the contract | 117,000,000/- | Full salary for the unexpired 3-year term. |
| 12 months’ salary compensation | 36,000,000/- | Maximum statutory compensation for unfair dismissal. |
| Contractual Benefits (Car, Medical, Security, Leave) | 40,200,000/- | Benefits due for the remainder of the contract. |
| Damages for Defamation | 10,000,000/- | Awarded against the 2nd Respondent for malicious conduct. |
| Total Monetary Award | 196,350,000/- | (Plus Costs and Interest) |
Dr. Pamba was on a six-month probationary period. The court’s finding of “unlawful termination” hinged on the employer’s failure to act within the mandatory time frame.
Justice Makau found that the probationary period expired on September 8, 2020. However, the Board’s decision to extend the probation or terminate the contract was not formally made and communicated until a Special Meeting on October 2, 2020.
The ruling established that by failing to communicate an adverse decision before the statutory period ended, Dr. Pamba was automatically confirmed into his position as CEO for the entire three-year term. The employer’s subsequent attempt at termination was therefore no longer a termination of a probationary contract, but an outright dismissal of a confirmed executive.
This automatically triggered the stringent requirements of the Employment Act for substantive and procedural fairness, including the right to a show-cause notice and a fair hearing, none of which were accorded to Dr. Pamba.
The court went further than simply penalizing procedural error. It made a significant finding that the Chairman of the Board (the 2nd Respondent) acted in bad faith and with malice while conducting the end-of-probation evaluation and recommending the termination.
This finding resulted in a separate award of Ksh. 10 million in general damages for defamation, intended to compensate Dr. Pamba for the professional embarrassment and diminished standing caused by the malicious termination process. It serves as a strong reminder that senior agents of an employer can be held individually liable for their intentional misconduct.
The Pamba judgment sets a powerful precedent, particularly for employers of senior staff on fixed-term contracts:
- An unlawful termination of a fixed-term contract entitles the employee to full compensation for the unexpired term, a liability far greater than the statutory ceiling for unfair dismissal alone.
- Employers must meticulously adhere to the time limits of probationary periods, as even a brief delay can lead to automatic confirmation and full liability for the subsequent termination.
- The findings of bad faith demonstrate the court’s scrutiny of internal corporate and board processes, highlighting the necessity of clean, documented, and unbiased decision-making in human resource matters.
Read the full judgement here: kenyalaw.org/judgment//2025/1776.