Legal Implications of Zero-Hour Contracts in Kenya’s Retail and Hospitality Sectors
Quote from Lawyer on August 15, 2025, 9:30 amZero-hour contracts are employment agreements where the employer does not guarantee a minimum number of working hours, and the employee is not obligated to accept any work offered. These contracts provide flexibility, allowing employers to schedule workers on an as-needed basis, often to meet fluctuating demands. In Kenya’s retail and hospitality sectors, zero-hour contracts are prevalent due to the industries’ seasonal and unpredictable workloads. Workers may be called in for shifts during peak times, such as holidays or weekends, but left without work during slower periods. While this arrangement suits the dynamic needs of retail stores, hotels, and restaurants, it raises significant legal and ethical concerns, particularly regarding worker exploitation and compliance with Kenya’s Employment Act, 2007.
Legal Framework Governing Zero-Hour Contracts
The Employment Act, 2007, is the cornerstone of Kenya’s labor law, establishing minimum standards for employment relationships. While the Act does not explicitly mention zero-hour contracts, it defines a “casual employee” as someone paid at the end of each day and not engaged for more than 24 hours at a time. Zero-hour contracts often fall under this casual employment framework, as workers are typically hired for short, irregular shifts without guaranteed hours. However, the Act imposes protections to prevent exploitation, and misclassification of workers under zero-hour arrangements can lead to legal consequences.
The Act mandates that any employment lasting longer than three months requires a written contract detailing terms such as wages, working hours, and job description. If a worker under a zero-hour contract works continuously for one month or performs tasks expected to last three months or more, their contract automatically converts to a term contract. This conversion entitles them to statutory benefits, including annual leave, notice periods, and protections against unfair termination. Employers in the retail and hospitality sectors often overlook this provision, leading to disputes when workers claim their rightful benefits.
Additionally, the Constitution of Kenya, 2010, under Article 41, guarantees fair labor practices, including reasonable working conditions and protection from discrimination. The Occupational Safety and Health Act, 2007, further mandates safe workplaces, while the Work Injury Benefits Act, 2007, ensures compensation for workplace injuries. These laws apply to all workers, including those on zero-hour contracts, reinforcing their right to fair treatment.
Risks and Challenges of Zero-Hour Contracts
Zero-hour contracts pose significant risks for both employers and employees in Kenya’s retail and hospitality sectors. For workers, the primary challenge is income instability. Without guaranteed hours, employees struggle to predict earnings, making financial planning difficult. This is particularly problematic in retail and hospitality, where low wages and irregular shifts are common. Workers may also lack access to benefits like paid leave, health insurance, or pension contributions, as employers often misclassify them as casual to avoid these obligations.
Exploitation is another concern. The power imbalance in zero-hour contracts allows employers to exert significant control, as workers may feel pressured to accept shifts to secure future work. This dynamic can lead to excessive working hours, inadequate rest periods, or unsafe conditions, particularly in fast-paced environments like restaurants or retail stores. Female workers, who make up a significant portion of the hospitality workforce, may face additional vulnerabilities, such as gender-based discrimination or harassment, with limited recourse due to their precarious employment status.
For employers, the risks lie in non-compliance with the Employment Act. Failing to provide written contracts for workers engaged beyond three months or neglecting statutory benefits can result in legal disputes. Courts may award compensation for unpaid benefits, unfair termination, or failure to adhere to minimum wage laws. Additionally, employers face reputational damage if perceived as exploitative, which can affect customer loyalty and staff retention in competitive sectors like retail and hospitality.
Minimum Wage Compliance
The Employment Act, 2007, mandates compliance with minimum wage regulations, which are set by the Ministry of Labour and Social Protection and vary by sector and region. As of 2022, the minimum wage for general laborers in urban areas was approximately KES 13,500 per month, though this figure is subject to periodic adjustments. For retail and hospitality workers on zero-hour contracts, employers must ensure that daily or hourly wages meet or exceed the prorated minimum wage for the hours worked. Failure to comply can lead to penalties from the Kenya Revenue Authority and claims for backdated wages.
Enforcing minimum wage compliance is challenging in the informal economy, where many retail and hospitality workers operate. Oral contracts, common in zero-hour arrangements, make it difficult to prove wage violations. Workers may also hesitate to report non-compliance due to fear of losing work. To address this, employers should maintain accurate pay records and issue payslips, even for casual workers, to demonstrate compliance with wage laws.
Protections Against Exploitation
The Employment Act provides several protections to safeguard workers on zero-hour contracts from exploitation. Section 35 mandates notice periods for terminating casual workers employed for a month or more, preventing arbitrary dismissals. Section 37 ensures that workers with regular employment patterns can claim benefits like annual leave (minimum 21 working days after 12 months), sick leave (7 days full pay, 7 days half pay), and maternity leave (3 months full pay). These provisions aim to bridge the gap between casual and permanent employment, ensuring fair treatment.
The Constitution’s anti-discrimination provisions and the Occupational Safety and Health Act further protect workers from unsafe conditions or unfair treatment based on gender, race, or employment status. Employers must provide protective equipment, training, and safe workplaces, even for short-term workers. The Work Injury Benefits Act ensures compensation for injuries sustained on the job, which is critical in hospitality settings where workers face risks like burns or slips.
Despite these protections, enforcement remains a challenge. Many workers in Kenya’s informal economy lack awareness of their rights or access to legal resources. Labor inspections are often underfunded, and disputes may take years to resolve in court. Advocacy for mandatory registration of casual workers with the National Social Security Fund and National Hospital Insurance Fund could improve traceability and ensure access to benefits.
Recent Judicial Trends on Casual Labour
Kenyan courts have increasingly addressed the misclassification of casual workers, particularly in cases involving zero-hour contracts. In Okello & 4 others v University of Nairobi (Civil Appeal E185 of 2022), the court ruled that workers employed as casuals for extended periods (1 to 12 years) should have been classified as term employees. The court awarded compensation for unfair termination and unpaid benefits, emphasizing that prolonged casual employment does not exempt employers from statutory obligations. This precedent is relevant to retail and hospitality, where workers may be retained on zero-hour contracts for years to avoid providing benefits.
In Mary Wambui v XYZ Enterprises (2018), the Employment and Labour Relations Court reclassified a casual worker with regular shifts as a term employee, granting her annual leave entitlements. Similarly, in John Kamau v ABC Ltd (2015), the court upheld an oral contract based on consistent wage payments, demonstrating that oral agreements in zero-hour contracts are enforceable with sufficient evidence. These rulings highlight judicial efforts to protect vulnerable workers and deter exploitative practices.
Courts have also emphasized procedural fairness in terminations. Employers must provide written notice, a chance to be heard, and valid reasons for dismissal, even for casual workers. Failure to follow due process can result in compensation awards equivalent to up to 12 months’ salary. These trends signal a shift toward greater accountability for employers in Kenya’s informal economy.
Guidance for Employers and Employees
For Employers
Draft Compliant Contracts: Provide written contracts for workers engaged beyond three months, detailing wages, hours, and benefits to comply with the Employment Act.
Monitor Employment Duration: Track casual workers’ tenure to avoid automatic conversion to term contracts, which triggers statutory obligations.
Ensure Minimum Wage Compliance: Pay wages that meet or exceed the prorated minimum wage and maintain accurate pay records.
Provide Safe Workplaces: Comply with the Occupational Safety and Health Act by offering training and protective equipment, especially in high-risk hospitality roles.
Engage Legal Counsel: Consult employment lawyers to review contracts and policies, minimizing the risk of disputes or penalties.
Implement Fair Termination Procedures: Provide notice and valid reasons for termination to avoid unfair dismissal claims.
For Employees
Understand Your Rights: Familiarize yourself with the Employment Act’s provisions on minimum wage, leave, and termination protections.
Document Work Patterns: Keep records of hours worked, payments received, and communications with employers to support potential claims.
Seek Legal Advice: If you suspect exploitation or unfair treatment, consult a lawyer or labor officer to explore your options.
Join Trade Unions: Union membership can provide collective bargaining power and support in disputes, particularly in unionized sectors like hospitality.
Report Violations: File complaints with labor officers or the Employment and Labour Relations Court for issues like wage underpayment or unsafe conditions.
Conclusion
Zero-hour contracts offer flexibility in Kenya’s retail and hospitality sectors but come with significant legal risks. The Employment Act, 2007, establishes protections against exploitation, ensuring minimum wage compliance, statutory benefits, and fair termination procedures. Recent judicial trends underscore the importance of proper worker classification and adherence to labor laws, holding employers accountable for misusing casual contracts. By understanding their rights and obligations, employers and employees can navigate the challenges of zero-hour contracts, fostering fair and productive workplaces. For expert guidance, contact us at +254 716 808 104 or info@lawguide.co.ke to ensure compliance and protect your interests in Kenya’s dynamic labor market.
Zero-hour contracts are employment agreements where the employer does not guarantee a minimum number of working hours, and the employee is not obligated to accept any work offered. These contracts provide flexibility, allowing employers to schedule workers on an as-needed basis, often to meet fluctuating demands. In Kenya’s retail and hospitality sectors, zero-hour contracts are prevalent due to the industries’ seasonal and unpredictable workloads. Workers may be called in for shifts during peak times, such as holidays or weekends, but left without work during slower periods. While this arrangement suits the dynamic needs of retail stores, hotels, and restaurants, it raises significant legal and ethical concerns, particularly regarding worker exploitation and compliance with Kenya’s Employment Act, 2007.
Legal Framework Governing Zero-Hour Contracts
The Employment Act, 2007, is the cornerstone of Kenya’s labor law, establishing minimum standards for employment relationships. While the Act does not explicitly mention zero-hour contracts, it defines a “casual employee” as someone paid at the end of each day and not engaged for more than 24 hours at a time. Zero-hour contracts often fall under this casual employment framework, as workers are typically hired for short, irregular shifts without guaranteed hours. However, the Act imposes protections to prevent exploitation, and misclassification of workers under zero-hour arrangements can lead to legal consequences.
The Act mandates that any employment lasting longer than three months requires a written contract detailing terms such as wages, working hours, and job description. If a worker under a zero-hour contract works continuously for one month or performs tasks expected to last three months or more, their contract automatically converts to a term contract. This conversion entitles them to statutory benefits, including annual leave, notice periods, and protections against unfair termination. Employers in the retail and hospitality sectors often overlook this provision, leading to disputes when workers claim their rightful benefits.
Additionally, the Constitution of Kenya, 2010, under Article 41, guarantees fair labor practices, including reasonable working conditions and protection from discrimination. The Occupational Safety and Health Act, 2007, further mandates safe workplaces, while the Work Injury Benefits Act, 2007, ensures compensation for workplace injuries. These laws apply to all workers, including those on zero-hour contracts, reinforcing their right to fair treatment.
Risks and Challenges of Zero-Hour Contracts
Zero-hour contracts pose significant risks for both employers and employees in Kenya’s retail and hospitality sectors. For workers, the primary challenge is income instability. Without guaranteed hours, employees struggle to predict earnings, making financial planning difficult. This is particularly problematic in retail and hospitality, where low wages and irregular shifts are common. Workers may also lack access to benefits like paid leave, health insurance, or pension contributions, as employers often misclassify them as casual to avoid these obligations.
Exploitation is another concern. The power imbalance in zero-hour contracts allows employers to exert significant control, as workers may feel pressured to accept shifts to secure future work. This dynamic can lead to excessive working hours, inadequate rest periods, or unsafe conditions, particularly in fast-paced environments like restaurants or retail stores. Female workers, who make up a significant portion of the hospitality workforce, may face additional vulnerabilities, such as gender-based discrimination or harassment, with limited recourse due to their precarious employment status.
For employers, the risks lie in non-compliance with the Employment Act. Failing to provide written contracts for workers engaged beyond three months or neglecting statutory benefits can result in legal disputes. Courts may award compensation for unpaid benefits, unfair termination, or failure to adhere to minimum wage laws. Additionally, employers face reputational damage if perceived as exploitative, which can affect customer loyalty and staff retention in competitive sectors like retail and hospitality.
Minimum Wage Compliance
The Employment Act, 2007, mandates compliance with minimum wage regulations, which are set by the Ministry of Labour and Social Protection and vary by sector and region. As of 2022, the minimum wage for general laborers in urban areas was approximately KES 13,500 per month, though this figure is subject to periodic adjustments. For retail and hospitality workers on zero-hour contracts, employers must ensure that daily or hourly wages meet or exceed the prorated minimum wage for the hours worked. Failure to comply can lead to penalties from the Kenya Revenue Authority and claims for backdated wages.
Enforcing minimum wage compliance is challenging in the informal economy, where many retail and hospitality workers operate. Oral contracts, common in zero-hour arrangements, make it difficult to prove wage violations. Workers may also hesitate to report non-compliance due to fear of losing work. To address this, employers should maintain accurate pay records and issue payslips, even for casual workers, to demonstrate compliance with wage laws.
Protections Against Exploitation
The Employment Act provides several protections to safeguard workers on zero-hour contracts from exploitation. Section 35 mandates notice periods for terminating casual workers employed for a month or more, preventing arbitrary dismissals. Section 37 ensures that workers with regular employment patterns can claim benefits like annual leave (minimum 21 working days after 12 months), sick leave (7 days full pay, 7 days half pay), and maternity leave (3 months full pay). These provisions aim to bridge the gap between casual and permanent employment, ensuring fair treatment.
The Constitution’s anti-discrimination provisions and the Occupational Safety and Health Act further protect workers from unsafe conditions or unfair treatment based on gender, race, or employment status. Employers must provide protective equipment, training, and safe workplaces, even for short-term workers. The Work Injury Benefits Act ensures compensation for injuries sustained on the job, which is critical in hospitality settings where workers face risks like burns or slips.
Despite these protections, enforcement remains a challenge. Many workers in Kenya’s informal economy lack awareness of their rights or access to legal resources. Labor inspections are often underfunded, and disputes may take years to resolve in court. Advocacy for mandatory registration of casual workers with the National Social Security Fund and National Hospital Insurance Fund could improve traceability and ensure access to benefits.
Recent Judicial Trends on Casual Labour
Kenyan courts have increasingly addressed the misclassification of casual workers, particularly in cases involving zero-hour contracts. In Okello & 4 others v University of Nairobi (Civil Appeal E185 of 2022), the court ruled that workers employed as casuals for extended periods (1 to 12 years) should have been classified as term employees. The court awarded compensation for unfair termination and unpaid benefits, emphasizing that prolonged casual employment does not exempt employers from statutory obligations. This precedent is relevant to retail and hospitality, where workers may be retained on zero-hour contracts for years to avoid providing benefits.
In Mary Wambui v XYZ Enterprises (2018), the Employment and Labour Relations Court reclassified a casual worker with regular shifts as a term employee, granting her annual leave entitlements. Similarly, in John Kamau v ABC Ltd (2015), the court upheld an oral contract based on consistent wage payments, demonstrating that oral agreements in zero-hour contracts are enforceable with sufficient evidence. These rulings highlight judicial efforts to protect vulnerable workers and deter exploitative practices.
Courts have also emphasized procedural fairness in terminations. Employers must provide written notice, a chance to be heard, and valid reasons for dismissal, even for casual workers. Failure to follow due process can result in compensation awards equivalent to up to 12 months’ salary. These trends signal a shift toward greater accountability for employers in Kenya’s informal economy.
Guidance for Employers and Employees
For Employers
-
Draft Compliant Contracts: Provide written contracts for workers engaged beyond three months, detailing wages, hours, and benefits to comply with the Employment Act.
-
Monitor Employment Duration: Track casual workers’ tenure to avoid automatic conversion to term contracts, which triggers statutory obligations.
-
Ensure Minimum Wage Compliance: Pay wages that meet or exceed the prorated minimum wage and maintain accurate pay records.
-
Provide Safe Workplaces: Comply with the Occupational Safety and Health Act by offering training and protective equipment, especially in high-risk hospitality roles.
-
Engage Legal Counsel: Consult employment lawyers to review contracts and policies, minimizing the risk of disputes or penalties.
-
Implement Fair Termination Procedures: Provide notice and valid reasons for termination to avoid unfair dismissal claims.
For Employees
-
Understand Your Rights: Familiarize yourself with the Employment Act’s provisions on minimum wage, leave, and termination protections.
-
Document Work Patterns: Keep records of hours worked, payments received, and communications with employers to support potential claims.
-
Seek Legal Advice: If you suspect exploitation or unfair treatment, consult a lawyer or labor officer to explore your options.
-
Join Trade Unions: Union membership can provide collective bargaining power and support in disputes, particularly in unionized sectors like hospitality.
-
Report Violations: File complaints with labor officers or the Employment and Labour Relations Court for issues like wage underpayment or unsafe conditions.
Conclusion
Zero-hour contracts offer flexibility in Kenya’s retail and hospitality sectors but come with significant legal risks. The Employment Act, 2007, establishes protections against exploitation, ensuring minimum wage compliance, statutory benefits, and fair termination procedures. Recent judicial trends underscore the importance of proper worker classification and adherence to labor laws, holding employers accountable for misusing casual contracts. By understanding their rights and obligations, employers and employees can navigate the challenges of zero-hour contracts, fostering fair and productive workplaces. For expert guidance, contact us at +254 716 808 104 or info@lawguide.co.ke to ensure compliance and protect your interests in Kenya’s dynamic labor market.