On 24 July 2026, three judges of the Court of Appeal sitting in Nyeri told Embu County that workers it had called "casual" for up to twenty years were, in law, permanent and pensionable staff, and had been for a long time. The county had renewed their three-month, six-month and one-year contracts over and over. The court said the paperwork did not matter; the work did. If that sounds like a public-sector problem, look at the rota in your own shop, restaurant, farm, warehouse or clinic before you decide.
This piece explains what the Court of Appeal decided in Kenya County Government Workers' Union v Embu County Government, what the Employment Act already said about casual workers long before this ruling, how much a misclassified "casual" can cost a small business, and what to change in your contracts and payroll now. It is written for owners and HR staff, not lawyers.
Key takeaways
- The Court of Appeal has confirmed that the label on a contract does not decide employment status; the substance of the work and the length of service do.
- Under section 37 of the Employment Act, a casual who works continuously for a month, or does work that cannot reasonably finish within three months, is deemed to be on a monthly term contract.
- Once converted, the worker is entitled to the same terms as comparable employees: leave, notice, and protection from unfair termination, with compensation of up to twelve months' wages.
- Rolling short-term contracts do not fix the problem; the ruling treated repeated renewals as a device to avoid statutory protection.
What the Court of Appeal ruled on casual workers in Kenya
The dispute began in 2019 when the Kenya County Government Workers' Union sued on behalf of health-facility workers in Embu, many of them hired by hospital management boards before devolution and later inherited by the county. According to coverage in Business Daily and the Kenya Times, some had served continuously for more than two decades on rolling contracts of three months, six months or a year, with no pension or annual leave. The Employment and Labour Relations Court dismissed the case in June 2020. The Court of Appeal reversed that decision on 24 July 2026 in Civil Appeal 178 of 2020.
The judges, Justices Ole Kantai, Lesiit and Ali-Aroni, held that where an employee works continuously and performs work of a permanent nature, a court must look at the substance of the relationship rather than the name given to it. They declared the relationship permanent and pensionable and ordered the county to regularise the workers' terms without delay. An analysis by Oraro & Company Advocates notes that the court described the successive renewals as an elaborate device designed to deny the employees statutory and constitutional protection. A separate pay-discrimination claim failed for lack of documentary evidence, a reminder that even strong cases turn on records.
Who is a casual employee under the Employment Act 2007
The Act's definition is narrower than most Kenyan businesses assume. A casual employee is someone whose terms provide for payment at the end of each day and who is not engaged for longer than twenty-four hours at a time. That is it. The moment you engage the same person tomorrow, and the day after, the arrangement starts drifting away from the statutory meaning of "casual", whatever the timesheet says. The Act also gives casuals at least one paid rest day after six consecutive days of work, a right many employers do not know exists.
Section 37: when casual employment converts to a contract
Section 37 is the provision that decides most of these cases, and it has been on the books since 2007. It deems a casual to be employed on a term contract, paid monthly, in two situations. The first is where the casual works for a period, or periods, that add up to at least one month. The second is where the work is of a kind that cannot reasonably be expected to be completed within three months. Either trigger is enough. Once converted, subsection (3) entitles the worker to the terms and conditions they would have had if they had never been hired as a casual: the same leave, notice and benefits as a comparable employee in your business.
A practical example: a Nairobi bakery takes on a "casual" packer in January, pays her daily, and keeps calling her back five days a week. By the end of February the aggregate-days test has been met. If the owner ends the arrangement in June with a text message, the bakery is not ending a casual engagement; it is terminating a monthly employee without notice or a hearing.
Why rolling short-term contracts do not solve the problem
Many employers responded to section 37 years ago by switching from "casual" to three-month written contracts, renewed on expiry. The Embu judgment matters precisely because that is what the county did. The court examined appointment letters that called people casual while paying monthly salaries for continuous work, and treated the chain of renewals as evidence of the true relationship rather than a defence against it. Fixed-term contracts remain lawful, and the court reaffirmed earlier precedent recognising freedom to contract, but a fixed term needs a real operational reason, such as a project with an end date or a seasonal peak. A term whose only purpose is to avoid permanence is the pattern the court struck down.
The cost of misclassifying casual workers
This is the mistake most small businesses make, and the bill compounds quietly. First, unfair termination: section 49 of the Employment Act allows compensation of up to twelve months' gross wages, on top of pay in lieu of notice. Second, accrued leave: a worker deemed permanent for five years is owed five years of annual leave that was never granted. Third, statutory contributions: a job label does not exempt pay from the deductions that apply to earnings of that size, so an employer who never registered "casuals" for NSSF or SHIF, or never operated PAYE on their wages, carries the arrears and any penalties. Rates and thresholds change, so confirm current figures with KRA, NSSF and the Social Health Authority. Fourth, in the Embu case the court awarded costs of both the petition and the appeal against the employer.
Put those together for a ten-person "casual" crew that has quietly worked three years, and the exposure can exceed a year of that crew's total payroll. Law firms advising on this area, including Njaga Advocates and CM Advocates, list the same items: unfair termination awards, backdated deductions, accrued leave, and damages for breach of constitutional labour rights.
How many Kenyan businesses this touches
The scale is larger than the Embu headline suggests. The KNBS Economic Survey 2026, as reported by the Kenyan Wall Street and The Star, counts roughly 18.1 million Kenyans working informally against about 3.3 million in formal employment, and more than eighty per cent of the new jobs created in 2025 were informal. Many of those roles sit inside registered businesses, and each is a person the Employment Act may already regard as a monthly employee.
What to change in your contracts and payroll now
Start with a headcount that includes everyone you pay, not just those on the formal payroll. For each casual, count the days worked in the last twelve months and note whether the work is recurring. Anyone past the one-month mark, or doing work with no natural end, should move to a written contract that reflects reality: monthly pay, a job title, leave entitlement and the statutory deductions that apply. For work that is truly short-term, write a fixed-term contract with the operational reason stated in it, and let it end when the work ends rather than renewing by habit. Keep attendance records for genuine day-rate workers, because the aggregate-days test is a counting exercise and the employer with no records loses it.
Frequently asked questions
Can I still hire casual workers in Kenya after this ruling?
Yes. The ruling did not abolish casual employment; it enforced the existing limits. A person paid daily for short, non-continuous work remains a casual. The risk arises when the same person keeps coming back, or when the job itself is ongoing, because section 37 then converts the engagement whether or not anyone signs anything.
Does a three-month contract protect me from a permanent-employment claim?
Not on its own. A fixed term is lawful when there is a real reason for the end date. A chain of identical three-month contracts covering years of continuous work is exactly what the Court of Appeal rejected in the Embu case. Document the reason for the term and stop renewing when it no longer applies.
Do casual workers pay PAYE, NSSF and SHIF?
Statutory deductions are keyed to what a person earns and how they are engaged, not to the word "casual" on a timesheet. Rather than assume an exemption, check the current rules with KRA, NSSF and SHA, and track day-rate earnings in a system that can apply the right treatment automatically; with a system like Force HRM, casual days and monthly contracts run through the same statutory engine, so the arrears do not build up unnoticed.
Casual worker compliance without the paperwork burden
The Embu ruling rewards employers who keep honest records and punishes those who rely on labels. Force HRM gives Kenyan SMEs a mobile-first payroll and HR platform that keeps PAYE, SHIF, NSSF and the Housing Levy current, holds contracts and attendance in one place, and can be operated through AI assistants over MCP. Manage casual and contract workers compliantly with Force HRM.
