What Employers in Kenya Must Know After the New Casual Contract Ruling: The End of Rolling Short-Term Contracts?

The era of disguising permanent jobs as "casual" employment is steadily coming to an end in Kenya. In a landmark judgment delivered on 24 July 2026, the Court of Appeal sitting in Nyeri delivered a seismic ruling that will reshape how employers across Kenya structure employment contracts, engage casual workers, and manage fixed-term arrangements.

In Kenya County Government Workers Union v Embu County Government & Another (Civil Appeal No. 178 of 2020) [2026] KECA 1481 (KLR), the Court of Appeal held that where employees are continuously engaged for long periods under rolling short-term contracts — or are described as casual employees while performing work of a permanent nature — the court will look beyond the contractual label to the true substance of the employment relationship. Such employees acquire statutory protection under Section 37 of the Employment Act, 2007 and Article 41 of the Constitution of Kenya, 2010, and the employer cannot rely on artificial contractual arrangements to deny permanent employment rights.

For employers in Kenya, this ruling is a wake-up call. If your workforce includes workers on repeated three-month, six-month, or one-year contracts who have been performing permanent duties for years, your employment practices may now be unlawful. This article examines the judgment in detail, explains what it means for employers and employees under Kenyan labour law, and offers practical guidance on compliance, risk mitigation, and employment dispute resolution.

1. Background: The Embu County Health Workers Case

The dispute involved 256 health workers employed by Embu County Government in various public health facilities across the county. These workers had originally been engaged by the National Government through the Ministry of Health and Hospital Management Boards before the promulgation of the Constitution of Kenya, 2010. Following devolution in 2011, health functions together with the staff, contracts, and liabilities were transferred to Embu County Government.

Despite performing continuous, permanent duties for periods ranging from several years to over two decades, the workers remained on contracts of three months, six months, or one year. Their contracts were repeatedly renewed, but they were never absorbed into permanent and pensionable terms. They were denied benefits such as annual leave, pension contributions, medical cover, and job security. Some appointment letters even described them as "casual employees" despite the fact that they earned monthly salaries and performed duties that were clearly permanent in nature.

In 2019, the Kenya County Government Workers Union filed a constitutional petition before the Employment and Labour Relations Court (ELRC), seeking declarations that the County Government had violated the workers' rights to fair labour practices under Article 41 of the Constitution and Section 5 of the Employment Act, 2007. The Union also sought orders converting the workers' employment status from casual to permanent and pensionable, and restraining the County from terminating their services without due process.

In a surprising turn, the ELRC dismissed the petition in June 2020, holding that the dispute should have been pursued through industrial relations mechanisms (shop-floor representatives) rather than through constitutional litigation, and finding that the union had failed to prove discrimination. The trial judge went so far as to describe the petition as "a complete waste of judicial resources."

The Union appealed. On 24 July 2026, the Court of Appeal comprising Justices S. Ole Kantai, J. Lesiit, and Abida Ali-Aroni overturned the ELRC decision in its entirety, delivering a judgment that is now the leading authority on casual employment, fixed-term contracts, and permanent employment rights in Kenya.

2. The Court of Appeal Ruling: Substance Over Form

2.1 The Core Principle: Labels Do Not Determine Employment Status

The Court of Appeal's central holding is that the label attached to an employment contract is not decisive. What matters is the substance of the relationship the nature of the work performed, the length of continuous service, and the reality of the engagement on the ground.

"Where an employee works continuously and performs work of a permanent nature, and where the label attached by the employer is not decisive, the court must look at the substance of the relationship."

The Court found that some workers had appointment letters describing them as "casual" or "temporary" employees, yet they worked continuously for years, earned monthly salaries, and performed duties that were permanent in nature. Others had fixed-term contracts that were renewed repeatedly for years — in some cases for over 20 years — while they continued to perform the same permanent functions. The Court held that this pattern amounted to a deliberate circumvention of labour protections.

2.2 Section 37 of the Employment Act, 2007: The Automatic Conversion Trigger

Section 37 of the Employment Act, 2007 is the statutory engine that drives the conversion of casual employment into permanent employment. It provides that a casual employee's contract shall be deemed converted to a term contract where:

1. the casual employee works for a period or number of continuous working days amounting in the aggregate to the equivalent of not less than one month; or
2. the casual employee performs work which cannot reasonably be expected to be completed within a period, or a number of working days amounting in the aggregate to the equivalent of three months or more.

Once either threshold is crossed, the contract is automatically converted. The employee becomes entitled to terms and conditions of service consistent with the Act — including leave, notice periods, and ultimately, permanent and pensionable status if the engagement continues for two months or more from the date of casual employment.

The Court of Appeal applied Section 37 robustly. It held that workers who had been described as casuals but had worked continuously for years, earning monthly salaries, had their contracts converted by operation of law. The County Government could not rely on the "casual" label to deny them statutory protections.

2.3 Fixed-Term Contracts Cannot Be Renewed Indefinitely

The Court also addressed workers who were on fixed-term contracts (three months, six months, or one year) that were repeatedly renewed over many years. Relying on its own earlier decision in

Kenyatta University v Maina

“the Court held that "the signing of contracts of 3 months which were renewed on expiry is a roundabout way of avoiding the provisions of the law on casual employment."

The Court found that the County Government had engaged these workers for long periods and extended their contracts at its whim. The long and continuous service entitled the workers to statutory protection. The Employment Act, the Court emphasized, "was precisely put in place to protect employees who often have no voice against the 'big brother' from unfair and poor labour practices."

2.4 Violation of Article 41: Fair Labour Practices

Article 41 of the Constitution of Kenya, 2010 guarantees every person the right to fair labour practices, and every worker the right to fair remuneration, reasonable working conditions, and job security. The Court found that Embu County Government's conduct of keeping workers in prolonged insecure employment despite years of continuous service, denying them leave, pension, and clarity about their status constituted a clear violation of Article 41.

• "The respondent's action cannot but be condemned in the strongest terms, particularly because the appellant's members were in the employ of the government, which is expected to protect its citizens and to work within the law."

2.5 Discrimination Claim Rejected

The Court of Appeal declined to uphold the union's claim of unequal pay and discrimination under Article 27 of the Constitution and Section 5(5) of the Employment Act. While the union alleged that workers performing similar duties received lower salaries and fewer benefits than permanent colleagues, and that newer workers recruited under the Economic Stimulus Programme had been absorbed into permanent terms while older workers were left on temporary contracts, the Court found that the union had not produced sufficient documentary evidence to prove discriminatory treatment. This serves as an important reminder: allegations of discrimination must be supported by cogent, specific evidence.

3. The Orders: What the Court Directed

The Court of Appeal allowed the appeal, set aside the ELRC judgment, and entered judgment in favour of the union's members. The specific orders were:

1. A declaration that Embu County Government and the Embu County Public Service Board violated the workers' rights to fair labour practices;
2. A declaration that the employment relationship between the workers and the County Government is not casual or temporary but is permanent and pensionable;
3. A directive and order to the County Government to regularize the workers' employment terms and conditions of service to accord with fair labour practices under the Constitution and the Employment Act, forthwith;
4. Costs of the petition and the appeal awarded to the union.

4. Five Critical Takeaways for Employers in Kenya

The Embu County ruling is not an isolated decision. It is part of a clear judicial trend in Kenya that prioritizes the protection of workers over the convenience of employers. Here are the five critical takeaways every employer must internalize:

4.1 Takeaway 1: Calling Someone a "Casual" Employee Does Not Make Them One

Under Section 2 of the Employment Act, a casual employee is defined as "a person the terms of whose engagement provide for his payment at the end of each day and who is not engaged for a longer period than twenty-four hours at a time." If your worker earns a monthly salary, works regular hours, performs continuous duties, and has done so for more than one month, they are not a casual employee regardless of what their appointment letter says. The contractual label is irrelevant. The Court will examine the substance.

4.2 Takeaway 2: Rolling Short-Term Contracts Are a Red Flag

If you have workers on three-month, six-month, or one-year contracts that have been renewed repeatedly for years, you are sitting on a ticking time bomb. The Court of Appeal has now held, in multiple decisions, that this practice is a "roundabout way of avoiding the provisions of the law on casual employment." Employers must either convert such workers to permanent and pensionable terms or demonstrate a genuine, justifiable reason for fixed-term engagement that is not a sham.

4.3 Takeaway 3: Long Service Creates Legitimate Expectations and Legal Rights

The longer a worker serves under repeated short-term contracts, the stronger their claim to permanent employment becomes. The Court in Embu County found that some workers had served for over 20 years under temporary terms. That length of service, combined with the permanent nature of their duties, created an irrebuttable inference that their employment was permanent and pensionable. Employers should conduct an audit of all workers engaged on non-permanent terms for more than one year and assess their exposure.

4.4 Takeaway 4: Government and Public Sector Employers Are Held to a Higher Standard

The Court of Appeal was scathing in its criticism of Embu County Government, stating that government employers are "expected to protect its citizens and to work within the law." Public sector employers including county governments, State corporations, ministries, and agencies cannot hide behind budget constraints or procurement rules to deny workers their constitutional rights. The judgment sends a clear message that public sector casualization will not be tolerated by the courts.

4.5 Takeaway 5: Discrimination Claims Require Evidence, But the Risk Is Real

While the discrimination claim failed in this case due to lack of evidence, the Court left the door wide open for future claims. If an employer absorbs some workers into permanent terms while leaving others who perform identical duties on temporary contracts, that is prima facie discriminatory. Employers must ensure consistency in employment terms and document the objective criteria used to differentiate between workers. Failure to do so exposes the employer to claims under Article 27 and Section 5 of the Employment Act.

5. What This Ruling Means for Employees in Kenya

For workers who have been trapped in casual or temporary employment for years, the Embu County ruling is a powerful weapon. Here is what employees need to know:

If you have worked continuously for the same employer for more than one month under what is described as a "casual" contract, your employment may have been automatically converted to a term contract under Section 37 of the Employment Act. You are entitled to annual leave, notice before termination, and other statutory benefits. If you have worked for two months or more from the date of your casual employment, you are entitled to terms and conditions consistent with permanent employment.

If you are on a fixed-term contract that has been renewed repeatedly while you perform permanent duties, you may have a strong claim for regularization to permanent and pensionable terms. You do not need to wait for your union to act. Individual workers can file complaints with the labour officer under Section 86 of the Employment Act, or approach the Employment and Labour Relations Court directly for declaratory orders and regularization.

However, employees must be prepared to prove their case. Gather your appointment letters, pay slips, contracts, bank statements showing salary deposits, and any correspondence with your employer. Document the nature of your duties, the length of your service, and any renewals of your contracts. The burden of proving the nature of the employment relationship lies with the employee, and the quality of your evidence will determine the outcome.

6. Practical Compliance Guide for HR Departments and Legal Teams

6.1 Conduct an Immediate Workforce Audit

Every employer in Kenya should immediately audit their workforce to identify:

• • Workers described as "casual" who earn monthly salaries or have worked for more than one month;
  • Workers on fixed-term contracts that have been renewed more than twice;
  • Workers performing permanent, ongoing duties under temporary labels;
  • Disparities in terms of service between workers performing identical duties.

6.2 Regularize or Justify

For workers who fall into the above categories, employers have two options: regularize their employment to permanent and pensionable terms, or demonstrate a genuine, objective justification for fixed-term engagement. Justifiable reasons for fixed-term contracts include: project-specific work with a definite end date; replacement of an employee on maternity or sick leave; seasonal work; or genuinely temporary assignments. "Budget constraints" or "administrative preference" are not valid justifications.

6.3 Review Contract Templates

Employers must review all employment contract templates to ensure they accurately reflect the nature of the engagement. Remove boilerplate "casual" clauses from contracts for workers who are not paid daily and who perform continuous duties. Ensure fixed-term contracts specify the objective reason for the fixed term and include a clear end date tied to a specific event or project. Avoid open-ended renewal clauses.

6.4 Document Employment Decisions

If an employer chooses not to regularize a long-serving temporary worker, the decision must be documented with clear, objective reasons. This documentation will be critical if the worker challenges the decision in court. Similarly, if an employer absorbs some temporary workers into permanent terms but not others, the criteria for selection must be transparent, non-discriminatory, and well-documented.

6.5 Budget for Regularization Costs

Regularizing workers to permanent and pensionable terms carries financial implications: pension contributions (NSSF, occupational schemes), medical insurance, annual leave, sick leave, maternity/paternity leave, and severance pay obligations. Employers should budget for these costs and factor them into workforce planning. The cost of non-compliance far exceeds the cost of regularization.

7. The Broader Legal Landscape: Related Decisions and Trends

The Embu County ruling did not emerge in a vacuum. It is the culmination of a consistent judicial trend in Kenyan employment law:

In:

Chemelil Sugar Company v Ebrahim Ochieng Otuon & 2 Others [2015] KECA 202 (KLR)

The Court of Appeal held that casual employees who worked for between one and fifteen years had their contracts automatically converted to term contracts by operation of Section 37.

In

Kenyatta University v Maina [2022] KECA 1201 (KLR)

The Court condemned the practice of renewing three-month contracts indefinitely, calling it a "roundabout way of avoiding the provisions of the law on casual employment."

In

Nanyuki Water & Sewage Company Limited v Benson Mwiti Ntiritu & 4 Others [2018] KECA 196 (KLR)

The Court held that where an employee works continuously and performs work of a permanent nature, the label attached by the employer is not decisive, and the court must look at the substance of the relationship.

These decisions, read together with the Embu County ruling, establish an unambiguous legal position: Kenyan courts will no longer permit employers to use contractual labels to defeat statutory and constitutional employment protections. The substance of the relationship and not the form of the contract governs.

8. Frequently Asked Questions (FAQ)

Q1: What is the definition of a casual employee under Kenyan law?

A: Under Section 2 of the Employment Act, 2007, a casual employee is defined as "a person the terms of whose engagement provide for his payment at the end of each day and who is not engaged for a longer period than twenty-four hours at a time." If a worker is paid monthly, works regular hours, and performs continuous duties, they do not meet this definition — regardless of what their appointment letter says. The Court of Appeal in the Embu County case reaffirmed that the label "casual" cannot override the reality of the employment relationship.

Q2: Can an employer keep renewing a fixed-term contract indefinitely?

A: No. The Court of Appeal has held repeatedly that repeatedly renewing short-term contracts for workers who perform permanent duties is a "roundabout way of avoiding the provisions of the law on casual employment." Where a worker has served continuously for years under successive fixed-term contracts while performing permanent work, the court will treat the employment as permanent and pensionable. Employers must either convert such workers or demonstrate a genuine, time-bound reason for the fixed-term arrangement.

Q3: What triggers automatic conversion of casual employment under Section 37?

A: Section 37 of the Employment Act provides two triggers for automatic conversion: (a) where a casual employee works continuously for a period or number of working days amounting to not less than one month; or (b) where the casual employee performs work that cannot reasonably be expected to be completed within three months. Once converted, the employee is entitled to all terms and conditions of service under the Act, including leave, notice, and benefits. If the employee works continuously for two months or more from the date of casual employment, they are entitled to terms consistent with permanent employment.

Q4: Can a worker on a fixed-term contract claim permanent employment?

A: Yes, if the fixed-term contract has been renewed repeatedly over a long period and the worker performs duties of a permanent nature. The Court of Appeal in the Embu County case held that the substance of the relationship — not the contract label — determines employment status. Workers who have been on rolling short-term contracts for years while performing permanent duties have a strong claim for regularization to permanent and pensionable terms under Section 37 and Article 41 of the Constitution.

Q5: What should an employer do if they have workers on long-term temporary contracts?

A: Employers should immediately conduct a workforce audit to identify all workers on casual or fixed-term contracts who have served continuously for more than one year. For each such worker, the employer must either: (i) regularize their employment to permanent and pensionable terms; or (ii) document a genuine, objective justification for the fixed-term arrangement tied to a specific project, event, or temporary need. Employers should also review all contract templates, remove misleading "casual" labels, and ensure HR policies comply with the Employment Act and the Constitution.

Q6: What remedies are available to workers trapped in casual employment?

A: Workers have several remedies available under Kenyan labour law: (i) filing a complaint with the labour officer under Section 86 of the Employment Act; (ii) approaching the Employment and Labour Relations Court for declaratory orders that their employment is permanent and pensionable; (iii) seeking orders for regularization of terms and conditions; (iv) claiming back-pay for benefits denied (leave, medical cover, pension contributions); and (v) in cases of unfair termination, claiming compensation under Section 49 of the Employment Act. The Court of Appeal in the Embu County case also awarded costs to the successful union, meaning the employer may be ordered to pay the worker's legal costs.

Q7: Does this ruling apply only to county governments and public sector employers?

A: No. While the Embu County case involved a county government, the legal principles apply with equal force to private sector employers, State corporations, NGOs, and international organizations operating in Kenya. Section 37 of the Employment Act and Article 41 of the Constitution apply to all employers. The Court of Appeal's emphasis on substance over form, and its condemnation of rolling short-term contracts, is a universal standard that all employers must now observe. Private sector employers in construction, manufacturing, hospitality, security, and domestic service are particularly exposed.

Q8: What evidence does a worker need to prove permanent employment status?

A: Workers should gather: appointment letters and contracts (even if labelled "casual" or "temporary"); pay slips and bank statements showing regular monthly salary deposits; correspondence with the employer regarding renewals or employment status; witness statements from colleagues or supervisors; job descriptions showing permanent duties; and records of length of service. The burden of proof lies with the employee, but the Court of Appeal has shown willingness to draw inferences from the employer's own documents and admissions.

Q9: Can an employer retrench casual workers to avoid regularization?

A: Retrenching workers to avoid regularization is extremely risky and likely to be challenged as an unfair labour practice. Under Section 40 of the Employment Act, any termination of employment must be for a valid and fair reason and must follow due process. If an employer terminates workers shortly after they assert their rights under Section 37, the termination may be deemed unfair and motivated by the worker's claim for regularization. The employer could face orders for reinstatement, compensation, and payment of all denied benefits.

Q10: How can Anyega Osiemo & Co. Advocates help with employment law matters?

A: At Anyega Osiemo & Co. Advocates, we provide comprehensive employment and labour law services to both employers and employees across Kenya. For employers, we offer workforce audits, contract review and drafting, HR policy development, compliance training, and representation in employment disputes before the ELRC and Court of Appeal. For employees and trade unions, we provide advice on employment rights, representation in regularization claims, unfair termination cases, discrimination claims, and collective bargaining negotiations. Contact us for a confidential consultation on your employment law needs.

9. Conclusion: The End of Casualization by Contract?

The Court of Appeal's ruling in Kenya County Government Workers Union v Embu County Government & Another [2026] KECA 1481 is a watershed moment in Kenyan employment law. It confirms that employers cannot use contractual labels like "casual," "temporary," "fixed-term" to deny workers the statutory and constitutional protections they have earned through years of continuous service. The era of disguising permanent jobs as casual employment is, as legal commentators have noted, steadily coming to an end.

For employers, the message is urgent and unambiguous: audit your workforce, review your contracts, regularize your long-serving temporary workers, and ensure your employment practices comply with Section 37 of the Employment Act and Article 41 of the Constitution. The cost of compliance is far less than the cost of litigation, back-pay, reputational damage, and the loss of workforce morale.

For employees, the ruling is a powerful affirmation that the law protects those who have been exploited through artificial contractual arrangements. If you have worked continuously for years under temporary terms, you may have a legal right to permanent and pensionable status. Do not accept the employer's label as the final word on your employment rights.

At Anyega Osiemo & Co. Advocates, we are committed to helping employers and employees navigate the evolving landscape of Kenyan labour law. Whether you need a workforce compliance audit, contract review, representation in the Employment and Labour Relations Court, or advice on regularization claims, our experienced employment law team is ready to assist. Contact us today for a confidential consultation.