A Director Is not an Employee of the Company

Rift Valley Water Services Board & 3 Others -Vs- Geoffrey Asanyo & 2 Others: Civil Appeal No. 60 Of 2015 

The appeal was lodged following a Ruling and Judgment by the Industrial Court of Kenya at Nakuru that held that Geoffrey Asanyo who was a Director in Nakuru Water & Sanitation Services Company was an employee of the company. The court was faced with the question as to whether the 1^st Respondent, Geoffrey Asanyo, being a director of the 2^nd Respondent, Nakuru Water & Sanitation Services Company, was at all material times an employee within the meaning of the Employment Act, 2014.

Section 2 of the Employment Act defines an ‘employee’ as “a person employed for wages or a salary and includes an apprentice and indentured learner.” Conversely, an ‘employer’ is defined as “any person, public body, firm, corporation or company who or which has entered into a contract of service to employ any individual and includes the agent, foreman, manager or factor of such person, public body, firm, corporation or company.” While a ‘contract of service’ is defined as “an agreement, whether oral or in writing, and whether express or implied, to employ or to serve as an employee for a period of time.”

The court observed that Section 79(1) of the Water Act mandates water services providers to establish a board of directors. The directors are to be nominated to serve on the board in accordance with the company’s memorandum and articles of association. Further, the court noted that there was nothing on record to reflect that the 1^st Respondent, Geoffrey Asanyo, and the 2^nd Respondent, Nakuru Water & Sanitation Services Company, had entered into a contract of service to employ the 1^st Respondent as an employee. His appointment as a director did not by any means constitute him an employee within the meaning of the Employment Act. His function as a director and the terms on which he was appointed were governed by the Companies Act and the Memorandum and Articles of Association.

The Court of Appeal concluded that a company director is an office -holder who is not an employee of the company. In the absence of a contract of service of which a director is engaged as a full-time employee of a company, it cannot be presumed that such a director is an employee of the company. This judgment thus sets it crystal clear that the directors of a company are not employees of the company and can only be held as such only when there is a contract of service between the company and the director engaging them as an employee.