Court Orders Former Co-operative Bank Employee to Repay KSh2.58 Million Despite Unfair Dismissal

The Employment and Labour Relations Court upheld Stephen Mwaura Ndungu’s dismissal for poor performance but faulted the bank’s disciplinary process.

The judgement awards compensation while ordering him to repay KSh2.58 million in staff loans, with interest.

Co-operative Bank of Kenya has secured a KSh2.58 million judgement against a former employee whose dismissal was procedurally unfair.

In a judgement delivered on October 13, 2026, Justice David Marete upheld the bank’s reasons for terminating Stephen Mwaura Ndungu.

However, the judge found that the bank had failed to observe critical disciplinary safeguards.

The decision in Stephen Mwaura Ndungu v The Co-operative Bank of Kenya Limited, Cause No. 479 of 2019, produced a mixed outcome.

Ndungu established procedural unfairness but failed to overturn the substantive justification for his dismissal.

Meanwhile, the bank recovered four outstanding staff loans, including a residential property facility exceeding KSh2.27 million.

Both monetary awards attract interest at court rates from October 25, 2018, until payment.

The judgement also contains a significant discrepancy between the compensation discussed in its reasoning and the amount ordered.

Long Trail

Ndungu joined Co-operative Bank on September 11, 2008, as a graduate clerk.

He initially worked in the Custodial Services and Facilities Management Division before requesting a transfer in February 2017.

The bank granted his request, and he moved to another division.

Ndungu maintained that his performance improved, citing a satisfactory second-quarter appraisal in 2018.

He also argued that colleagues facing similar performance concerns received better treatment.

One employee, he told the court, received additional support instead of termination.

The bank offered a different account, tracing concerns about Ndungu’s performance back to 2010.

It said repeated warnings and improvement opportunities had failed to produce the required results.

According to the bank, Ndungu received several warning letters during 2017 and 2018.

It subsequently placed him on a Performance Improvement Plan in August 2018.

The bank scheduled a performance review meeting for September 5, 2018, before terminating his employment on September 25.

Ndungu challenged the dismissal through a claim filed on April 30, 2019.

He sought compensation for unfair termination and an injunction preventing recovery of his outstanding staff loans.

The bank denied liability and counterclaimed for the unpaid facilities.

Flawed Hearing

The judge accepted the bank’s evidence that Ndungu’s underperformance persisted despite repeated interventions.

The judgement described the evidence as demonstrating a “sustained pattern of underperformance”.

Justice Marete noted that Ndungu had been cautioned as early as 2010.

Multiple warnings between 2017 and 2018, alongside the improvement plan, strengthened the bank’s defence.

The court also considered the September 2018 meeting, where Ndungu could address performance concerns.

It concluded that the employer had proved a valid reason for termination.

The judge relied on Jane Samba Mukala v Ol Tukai Lodge Limited, a 2013 employment decision.

That precedent requires employers to identify performance shortcomings and provide reasonable opportunities for improvement.

Yet establishing poor performance did not excuse the bank from following employment law.

Section 41 of the Employment Act requires employers to explain proposed termination and respect representation rights.

The court found that the bank had not adequately explained beforehand that dismissal remained a possible outcome.

It also identified shortcomings concerning Ndungu’s right to representation during disciplinary proceedings.

“The termination was procedurally deficient in this respect,” the judge concluded.

That finding separated the bank’s legitimate concerns from its failure to conduct a fully compliant disciplinary process.

It also justified compensation despite the court accepting the underlying reason for dismissal.

Discrimination Fails

Ndungu’s discrimination claim failed because the evidence did not establish whether his colleagues were genuinely comparable.

The court found insufficient information about their performance concerns and disciplinary outcomes.

Without those details, the judge could not determine whether similarly situated employees received different treatment.

The ruling rejected the allegation because Ndungu had not sufficiently established his case.

It did not suggest that unequal treatment can never amount to workplace discrimination.

Several additional claims also failed. The court rejected his demands for twelve months’ compensation and general damages for unlawful termination.

His overtime claim was dismissed, while his service-pay claim failed because pension contributions had been made.

The bank’s evidence that it had paid one month’s salary instead of notice also remained uncontroverted.

The judge nevertheless considered compensation appropriate for the procedural failure.

He weighed Ndungu’s approximately ten years of service against the valid grounds for termination.

Here, however, the judgement introduces a significant discrepancy.

The court’s reasoning states that three months’ gross salary would provide “just and proportionate” compensation.

Using a monthly salary of KSh196,942, that calculation produces KSh590,826.

But the final orders award six months’ salary, amounting to KSh1,181,652.

The judgement provides no explanation for the difference between these figures.

The formal order expressly states the six-month award, making the discrepancy important for enforcement and any subsequent clarification.

Loans Prevail

The bank’s counterclaim succeeded after the court accepted its documentary evidence of outstanding staff facilities.

Justice Marete held that Section 12(1)(a) of the Employment and Labour Relations Court Act covered disputes arising from employment relationships.

The staff loans qualified because they had been advanced during Ndungu’s employment.

The personal loan stood at KSh243,988.20, while the residential property facility totalled KSh2,275,358.94.

The laptop loan amounted to KSh13,971.48, and the furniture loan stood at KSh51,061.03.

Together, the four facilities totalled KSh2,584,379.65.

The court found that the bank had supported these amounts with documents Ndungu had not effectively challenged.

The judge consequently entered judgement for the bank on the entire counterclaim. Ndungu’s request for an injunction against recovering the loans therefore failed.

Both monetary awards attract interest at court rates from October 25, 2018, until payment in full.

Each party must bear its own costs of the main claim, while Ndungu must pay the bank’s counterclaim costs.

READ ALSO: Court Upholds Sacking of Co-operative Bank Manager for Slapping Female Colleague’s Buttocks

The ruling underscores a fundamental distinction in Kenyan employment law: a valid reason cannot replace a fair disciplinary process.

Employers must establish poor performance while respecting statutory hearing and representation safeguards.

For Ndungu, the outcome combines compensation for procedural unfairness with substantial loan liability.

For the bank, the judgement validates its performance concerns while exposing a procedural lapse and an unresolved compensation discrepancy.

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