A ruling that shook Kenya’s labour and pension sector has been thrown out by the Court of Appeal after judges discovered they had issued a decision on the wrong application, a mistake that sparked uncertainty over enhanced NSSF deductions and prompted conflicting directions to employers across the country.
The three-judge bench withdrew its May 29 ruling after finding that the matter it had determined was not pending before the court at the time. The judges said the decision had been made without hearing parties on the application in question, raising concerns about fairness and confidence in the justice system.
The now-withdrawn ruling had rejected an application seeking to stop the implementation of a 2022 judgment by the Employment and Labour Relations Court, which had declared sections of the NSSF Act, 2013 unconstitutional.
Following that decision, confusion emerged over whether employers should continue remitting the enhanced NSSF deductions, with key institutions taking different positions on the matter.
NSSF, the Federation of Kenya Employers (FKE) and the Central Organisation of Trade Unions (COTU) advised employers to continue making the deductions. The Law Society of Kenya (LSK), however, maintained that the appellate court's ruling meant there was “no judicial basis supporting the continued enforcement of the enhanced contribution framework.”
In recalling the ruling, the judges underscored the importance of ensuring that all parties are heard before a court reaches a decision that affects their rights and interests.
“It is a constitutional imperative that parties should be given the opportunity to be heard before any decision is made affecting their rights or interests,” said the judges.
At stake is a dispute that affects millions of employees, thousands of employers and the management of the Sh715 billion state pension scheme.
The case centres on the NSSF Act, 2013, which introduced a gradual earnings-based contribution model to replace the previous fixed monthly contribution of Sh200. Under the current structure, employees contribute between Sh1,500 and Sh6,480 every month, with employers required to match those contributions.
The revised contribution rates were introduced to strengthen retirement savings and broaden access to social security benefits.
According to the court, the error occurred when judges delivered a ruling on an application that had ceased to be active instead of another application that had already been heard and was awaiting determination.
The issue was first brought to the court's attention through a letter dated June 2 from Senior Counsel Fred Ngatia, who represents NSSF. In the letter addressed to the Registrar of the Court of Appeal, Ngatia described the mistake as a “monumental error” that had unsettled workers, employers, labour organisations and stakeholders in the pension sector.
The Attorney General later filed a formal application asking the court to recall and nullify the ruling, arguing that judges had inadvertently dealt with the wrong application.
“Upon receipt of the communication, the court set this appeal for mention, and explained to the parties the circumstances leading to the error, which was occasioned by the multiplicity of pending applications before the court, an error which the Court regretted,” the bench said.
After considering the application, the court agreed that the ruling had been issued in relation to “an application which was not live before the court.”
“We therefore find that the ruling erroneously delivered by this Court on May 29, 2026, is amenable to being set aside in the interests of justice, and we accordingly set aside the said ruling in its entirety,” the judges ruled.
The bench noted that the move was not intended to revisit the substance of the earlier decision but to correct a clear procedural mistake and safeguard the integrity of court proceedings.
The dispute traces its roots to a lengthy legal battle over the validity of the NSSF Act, 2013.
The legislation replaced the previous flat-rate contribution system with a phased model tied to workers’ earnings, resulting in progressively higher deductions from both employees and employers.
In September 2022, the Employment and Labour Relations Court found parts of the law unconstitutional after a petition filed by the Kenya Tea Growers Association and other parties.
That decision was later overturned by the Court of Appeal in February 2023 on grounds relating to jurisdiction.
The matter then moved to the Supreme Court, which in February 2024 restored the Labour Court’s jurisdiction and directed that the substantive issues be considered afresh by the Court of Appeal.
The application that led to Friday’s ruling arose after the Attorney General informed the court that the May 29 decision had mistakenly dealt with an application for stay of execution filed in October 2022.
According to the judges, that application had effectively lost relevance after the Court of Appeal concluded the substantive appeal in February 2023, before the Supreme Court later sent the dispute back for fresh consideration.