For the past decade in Kenya, there has been a drastic uptake of alternative dispute resolution (ADR) with disputants preferring ADR over court process. Employers have historically entered into arbitration agreements with their employees, effectively agreeing to forgo litigation and submit their labour disputes, should they arise, to private dispute resolution. The parties to an arbitration agreement may customise such agreements to their liking, by detailing with whom they will arbitrate, the disputes capable of referral to arbitration, the rules that bind them in the arbitral process etc. As a general rule, Kenyan Courts would give effect to the intention of parties, by preliminarily referring disputes filed in Court to arbitration – if the employment contracts contain an arbitration agreement.
Okeyo -Vs.- Board of Directors, HHI Management Services Limited & Another – Disrupting the Norm
Recently, the Labour Court in ELRC Cause E970 of 2023: Steve Okeyo -Vs.- Board of Directors HHI Management Service Limited & Another eKLR [2024] refused to grant an order sought by the employer to compel arbitration – despite the employment contract containing an arbitration agreement. Hon. Justice Dr. Jacob Gakeri, who was seized of the matter, ruled that the Labour Court has exclusive jurisdiction to hear labour matters and while arbitration could be suitable to settle commercial disputes, it is not effective for employment disputes.
The rationale applied by the Court in rendering its decision was that employees rarely enjoy “equal bargaining power” with employers when entering into arbitration agreements. Often than not, the employee will characteristically have little bargaining power, noting that they are keen to secure employment and arbitration provisions are usually already pre-installed in their contracts. To the mind of the Court, arbitration agreements routinely deny employees effective reliefs against their employers, because employees submit to arbitration on a take it or leave it basis at the commencement of their employment.
How can employers ensure their arbitration agreements are enforceable?
Noting that arbitration is strictly a matter of consent, employers may ensure enforcement of arbitration agreements by actively negotiating the terms of such agreements with the employee, to ensure the said employee gives informed consent. Informed consent may be acquired by the employer requiring that the employee takes legal advice on the agreement before executing it.
This alert serves the purpose of general guidance and is not intended to constitute specific legal advice. For legal advice concerning this alert, please contact our Partners George.Muchiri@CMS-DI.com and Grace.Kinyanjui@CMS-DI.com.
*Contributors
Zeus Ombeva, Principal Associate
Lucy Mwaura, Associate
