The Court of Appeal has upheld the dismissal of a senior cashier at Nairobi City Water and Sewerage Company (NCWSC) over the loss of Sh1.2 million in unbanked cash collection.
Emphasising that honesty is fundamental in employment, particularly in financial roles, the court ruled that misconduct eroding trust renders dismissal lawful.
"If the employee acts dishonestly in dealing with the finances, we do not find any difficulty in stating that the employer is within his rights to terminate the employment," the judges ruled.
They dismissed an appeal by Stephen Ndolo against NCWSC, upholding his termination as lawful and fair.
The case stemmed from events in August 2013, when Mr Ndolo, serving as Cashier Verification Supervisor, was responsible for collecting and depositing daily cash and cheque receipts.
An internal audit later revealed that Sh1.2 million collected by Mr Ndolo had not been banked for three months. The company summoned him from leave to account for the discrepancy.
He claimed he disbursed the funds as an I.O.U. ("I Owe You") imprest to two individuals, who claimed they were the company's employees sent by the managing director to collect funds for staff activities at Kasarani.
He stated that they presented an I.O.U warrant bearing what resembled the director’s signature and recorded the transaction before proceeding on leave.
NCWSC dismissed his explanation, alleging fraud. Investigations confirmed that the authorisation letter was forged, the recipients were unaffiliated with the company, and the transaction was not reflected in official records.
Additionally, Mr Ndolo failed to surrender the imprest or account for the funds before his leave and declined several requests to return and clarify the matter once the loss was discovered.
Following disciplinary proceedings, NCWSC dismissed him for gross misconduct. Mr Ndolo contested the termination in court, arguing it lacked justification and due process.
He applied for a declaration that the termination was unlawful and compensation of Sh11 million in the form of general damages for wrongful dismissal, allowances during suspension, service, and notice pay.
The Employment and Labour Relations Court ruled against him, finding he neglected his duty of care in handling finances and that termination procedures complied with legal requirements.
On appeal, Mr Ndolo attributed the loss to weak internal controls rather than dishonesty, noting he faced no criminal charges.
He said that crucial information had been suppressed, including the non-production of CCTV footage and other requested documents to shield broader institutional failures, so as to blame him for the loss.
He also cited the absence of formal I.O.U guidelines, stating that he was not the custodian of I.O.U. vouchers and that the cash office lacked specimen signatures of senior officers, making it impossible for him to verify the authenticity of the I.O.U. or signatures.
However, the Court of Appeal rejected these arguments, clarifying that civil cases require a lower standard of proof than criminal proceedings.
The bench highlighted Mr Ndolo’s senior role and duty to safeguard company funds, questioning whether he exercised due diligence given the substantial amount, unfamiliar recipients, and failure to verify authorisation.
Concluding he had not, the court cited the principle of mutual trust in employment, stressing that dishonesty in financial roles breaches this bond.
The court stated that in a situation where the employee is charged with handling and accounting of finances, "honesty is key.”
"The decisive factor is whether dishonest conduct destroys the employment relationship," the judges stated, finding Mr Ndolo’s actions fell short of his responsibilities and resulted in financial loss.
The court also upheld the fairness of the disciplinary process and noted Mr Ndolo’s failure to substantiate his claims.
