Netfund to pay ex-CEO Sh5 million for wrongful dismissal

Employment and Labour Relations Court has ordered the National Environmental Trust Fund (Netfund) to pay its former CEO Catherine Gakii Sh5.5 million for terminating her contract.

Gakii said she was employed in November 2006 for a five-year term that was renewed and ended in October 2016.

She told Justice Jacob Gakeri that after her term ended, she signed a three-year contract that was terminated on September 30, 2018, yet it was due to expire on October 31, 2019.

Gakii said she left because Netfund Board of Trustees formed the view that the CEO needed to have financial qualifications.

The two parties entered into a mutual separation agreement on February 28, 2018.

According to the agreement Gakii was supposed to get one-year gross salary, three months basic pay and gratuity as per her contract.

When she filed the case in October 2019, she said that she was yet to receive her dues.

But Netfund denied entering into a separation agreement alleging that if it existed then it was illegal, fraudulent and void since it did not have approval from the Treasury Cabinet Secretary, as Gakii had not served for 12 years.

Netfund said that the employment contract had provided for the dues Gakii would get in the event it was terminated.

According to the agency, the agreement in question was entered in contravention of the law and existing guidelines and it allegedly intended to defraud the government.

In defence, Gakii said that her contract did not envisage a situation where she would be let go in that manner.

She admitted that the board of trustees gave her an exit plan and a separation deed which she accepted and all trustees were present in the meeting.

Gakii told Justice Gakeri that the separation agreement was drafted by Netfund’s lawyer and she signed it because the board asked her to leave before her contract expired in October 2019.

Netfund Head of Finance in 2018 testified that he was unaware of the agreement but admitted that there was a mutual separation agreement signed by the board of trustees.

He said that the board sought a legal opinion from the Attorney General and he did not have any evidence of fraud or undue influence by Gakii.

Gakii’s counsel wondered why Netfund was contesting the validity of the agreement yet they had paid gratuity for two years.

The lawyer told court that Netfund did not table evidence to prove that the agreement required signatories from the Treasury, its parent ministry.

The Attorney General  Justin Muturi said that Gakii was not eligible for a third term as CEO as it was contrary to the provisions of the State Corporation Act and Mwongozo.

According to the AG, she ought to refund the money paid to her since the employment contract was null and an employee cannot draw benefits from an illegal contract.

AG said the agreement was invalid since the Treasury was not represented.

Muturi argued that the agreement was signed in secrecy and even if it was valid, it had a termination clause at the instance of either party.

Justice Gakeri faulted Netfund for raising the issue of the three-year contract signed in October 2016 in their submission in April 2024.

According to the Judge, the corporation did not plead that the three-year employment contract was unlawful or illegal.

He noted that the contract contained a clause that either party could terminate it via notice and this meant that the termination did not require acceptance or discussion.

Justice Gakeri said that the Netfund did not provide evidence that Gakii initiated or influenced the separation or that she played any role in drafting it.

According to the judge, Netfund faulted the agreement saying that it was not approved by the Treasury, the State Corporations Advisory Committee SCAC) or the Salaries and Remuneration Commission (SRC).

He said that Netfund did not attach evidence to show that such an agreement required approval by the Treasury, SCAC and SRC.

“Neither the National Treasury nor the SRC or SCAC is involved in the hiring or termination of heads of parastatals unless the law or constitutive documents of the Parastatal so provide,” he said.

Justice Gakeri also faulted the AG for saying that representatives from the Treasury were not aware of the agreement yet he did not call them to testify.

“It is intriguing that neither the Attorney General nor the respondent could prevail on any former or current member of the Board of Trustees to give evidence on the circumstances leading to and actualization of the Separation agreement on record which is a legally binding contractual relationship,” he said.