Naushad Trading Company Loses Unfair Dismissal Appeal in Landmark ‘Sogi’ Employment Case

The Employment and Labour Relations Court in Mombasa has delivered a landmark ruling clarifying when workers hired through Kenya’s informal “sogi” labour system qualify as employees, upholding the unfair dismissal of a Mombasa loader while substantially reducing the compensation he was awarded.

The decision, delivered by Justice Ocharo Kebira, partly allowed an appeal by Naushad Trading Company Limited against a lower court judgement that had awarded former loader Charles Kaunda Munywoki KSh418,200 after finding he had been unfairly dismissed.

While the judge agreed that Munywoki was indeed an employee whose termination violated the Employment Act, he found the trial court had wrongly calculated the damages, reducing the award to KSh168,304.14.

Beyond the figures, the ruling offers one of the clearest judicial examinations yet of Kenya’s long-standing “sogi” system, under which companies source manual labour through gang leaders instead of hiring workers directly.

The judgement is likely to influence future employment disputes involving thousands of loaders, warehouse workers and casual labourers across the country.

The dispute stemmed from Munywoki’s claim that he had worked as a loader for Naushad Trading from 2005 until January 2021.

He told the court that after returning from annual leave, he was denied entry into the company’s premises and informed by a security guard that his services had been terminated and replaced with casual workers.

He maintained that he had received neither a warning letter nor a disciplinary hearing before losing his job.

Naushad Trading disputed virtually every aspect of that account.

The company insisted Munywoki had never been its employee, arguing instead that he belonged to a pool of dock workers commonly known as “sogis”.

According to the company, work was allocated only when available through a gang leader, Christopher Enock, who assembled labourers for loading assignments and distributed payments made on a per-task basis.

Judge Faults Trial Court

The lower court had found that Munywoki’s long service and years of National Social Security Fund (NSSF) contributions demonstrated an employment relationship.

It relied on Section 37 of the Employment Act to convert what appeared to be casual employment into permanent monthly employment before awarding notice pay, house allowance and compensation for unfair termination.

Justice Kebira agreed with the ultimate conclusion but firmly rejected the legal path used to reach it.

“The trial court’s invocation of Section 37 was, with respect, misdirected,” the judge observed, noting that neither party had argued the case on the basis that casual employment had matured into permanent employment.

Munywoki insisted he had always been a permanent employee, while the company maintained he had never been an employee at all.

Courts, the judge emphasised, cannot determine disputes using legal theories that neither party pleaded nor argued.

Even so, Justice Kebira concluded that the evidence independently established an employment relationship.

Contradictions Expose Employer’s Defence

A central weakness in Naushad Trading’s defence, the court found, was its shifting description of Munywoki’s status.

At different stages, the company portrayed him as an independent contractor, a piece-rate worker and a gang worker.

“These are not interchangeable labels,” the judge wrote, adding that the company had left “its own case in a state of unresolved ambiguity”.

The court also delivered an important clarification on Kenya’s informal labour system.

Justice Kebira acknowledged that gang leaders remain common in Mombasa’s warehouses and cargo-handling sector, where they recruit workers for companies requiring manual labour.

However, he rejected the notion that using a gang leader automatically shields companies from employment obligations.

Instead, he held that the gang arrangement merely describes how workers are recruited and supervised.

Whether an employment relationship exists depends on the substance of the relationship, including control over the worker, integration into the business and the overall conduct of the parties.

NSSF Records Bolster Evidence

The judgement also provides important guidance on the evidential value of statutory deductions.

Justice Kebira agreed with earlier court decisions that NSSF contributions alone do not conclusively prove employment.

However, he stressed that such records become highly persuasive when viewed alongside the surrounding facts.

In Munywoki’s case, the company had remitted NSSF contributions in his name for nearly a decade.

It had also acknowledged in correspondence with NSSF that it began making those remittances after receiving directions from the fund in 2011.

Crucially, Naushad Trading failed to produce payroll records demonstrating that those contributions merely represented deductions from workers’ own earnings.

One of its own witnesses even conceded there was “no way we can remit for them without appearing under the tag employer.”

Taken together, the judge found, those facts strongly supported the existence of an employment relationship despite the company’s insistence that Munywoki remained outside its workforce.

The court also upheld the finding of unfair dismissal, observing that once Munywoki showed he had reported to work and been turned away, the burden shifted to the employer to justify the termination.

The company produced no dismissal letter, disciplinary records or witness explaining why his engagement had ended.

Damages Cut

Although Munywoki won on liability, he lost substantially on compensation.

Justice Kebira found there was no documentary proof supporting the claimed monthly salary of KSh25,500.

No payslips, bank statements or mobile-money records were produced, while the company’s payment records reflected widely fluctuating daily earnings.

Rather than accept an unproven figure, the judge adopted the statutory minimum monthly wage for a general labourer in Mombasa in 2021 (KSh13,572.90) as the fairest basis for calculating damages.

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The court consequently reduced notice pay, house allowance and compensation for unfair termination, while also lowering the compensation period from ten months’ salary to six months after finding the earlier award insufficiently justified.

The final compensation dropped by almost 60 per cent, from KSh418,200 to KSh168,304.14.

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