Introduction

At the heart of every workplace lies the intricate bond between an employer and an employee. This relationship forms the cornerstone of organizational dynamics, shaping the culture, productivity, and overall success of any given organization. Central to this dynamic relationship is the question of what determines the existence and legitimacy of an employer/employee relationship. To answer the above question, it is imperative to consider the definitions of what constitutes the make-up of both an employer and an employee. 

Definitions 

According to Kenyan law, an employee refers to an individual who is employed for wages or salary and includes an apprentice or indentured learner. More elaborately, an employee is anyone who comes into the employ of another either under an express or implied contract under which the employer has a right to control the details of work performance. On the other hand, an employer is described to be individual, body or institution that enters into a contract of service to employ an individual.  Such union is formalized through either written or oral contracts. Under such contract, the employee undertakes for a limited time or indeterminate period of time to do work for remuneration according to the instructions and under the direction or control of another person, the employer. 

Contract of Service vis-à-vis Contract for Service

Use of the term contract of service is an essential ingredient in the definition of an employer. Borrowing from the provisions of the Employment Act of 2007, a contract of service, refers to agreement, whether oral or written and whether expressed or implied, to employ or to serve as an employee for a period of time and includes a contract of apprenticeship and indentured learner. 

On the other hand, a contract for service can be said to be a contract by which a person, contractor or service provider makes a commitment to another person, the client, to carry out material or intellectual work or to provide a service for a price or fee. Its characteristic being that the contractor is free to choose the means of performing the contract and no relationship of subordination exists between the contractor or the provider of service and the client in respect of such performance. 

Employer-Employee Relationship

For the positive determination of the existence of an employer-employee relationship, the following elements should be present: 

1. Selection and engagement of the employee i.e hire after either a restricted or open interview process. 
2. Proof of payment of wages. 
3. Power of dismissal. 
4. Power to control employees conduct at the workplace. 
5. In a number of cited authorities, several tests have been applied to further establish how an employment relationship can be determined between the relevant parties.  

These include: 

1. Control test – this test as provided by common law dictates that an employer has the right to tell an employee what to do in terms of their job description, when to do their job, how and where the same should be done.  
2. Integration test – in assessing whether or not persons are employees, this test takes into account the extent to which an individual (employee) is integrated into the business of the employer. Under any form of employment, an individual is an employee if they are considered to be part of the business and any work that is undertaken by the said employee would be integral to the business. 
3. Test of economic/business reality – this test considers whether an employee is economically dependent on the business to which they render services or is as a matter of economic reality in business for themselves. 
4. Mutuality of obligations – this test prescribes that parties make commitments to maintain the employment relationship over a period of time. Further the following the employment relationship would entail; service in return for wages, and secondly, mutual promises for future performance. This form of arrangement creates a sense of stability between the parties.  

From the above analysis, the determination of the existence of an employer-employee relationship is primarily guided by the degree of control exercised over an employee, whether one was integrated into the enterprise, any obligation to only work for the employer and mutuality of obligations.  

It is important to note that the tests are not to be seen exclusively by themselves as they only serve to act as a guide on a case-by-case basis. 

For more information and queries regarding employment and labour relations, please visit Netsheria International LLP or reach out to us through email to get assistance from our specialized advocates. 

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4 Key Tips for negotiating an Unsecured Loan Agreement.

An unsecured loan can simply be defined as a loan where the borrower does not put any collateral or security in exchange of the loan sum advancement. The loan in most cases is advanced by the creditor on the strength of the individual’s/entity’s creditworthiness. Examples of unsecured personal loans include; credit cards, mobile lending apps or student loans.

Unsecured personal loans can offer much needed alternative to the rigorous bureaucratic procedures of obtaining secured loans from banks and offer credit lines to low-income households, but due to their nature borrowers have to be alert to various issues before entering into unsecured loan agreements.

High Interest Rates.

Unsecured loans are characterized by exorbitant interest rates. The desperation of most borrowers looking for quick advancements invites lenders to charge such interests rates. Accordingly, borrowers should enquire from various unsecured lenders and seek to engage the lenders with the lowest rates.

Precomputed interest rates vs Simple interest rates.

Precomputed interest basically calculates your interest using the original payment schedule, regardless of how much of the loan you have really paid off. While simple interest calculates the  interest from the loan amount due at the particular time.

Evidently, borrowers should be inclined to engage with lenders charging simple interest vis a vis precomputed interest rates.

 Respite period.

Borrowers should insist on the lender granting an adequate respite period before mandating repayment. Such a period would allow the borrower enough time from the date of disbursement to allow for consistent pay offs of the loaned sum.

Engage legal professionals.

Borrowers should engage legal professionals with expertise on the subject to ensure the potential risks or loopholes in the terms and conditions are apparent and disclosed prior to entering the agreement.

In conclusion while unsecured loan agreements serve as a resourceful way of obtaining credit borrowers ought to be aware of the risks associated with unsecured loans before entering into them.

How can we assist you?

At Netsheria International, we have an experienced team of lawyers who can offer you legal assistance in capital raising for your business. We provide you with the largest collection of business documents and agreements at affordable costs. Please contact us for our services via email  or visit our website for more information.

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