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Place of Arbitration Clauses In Employment Contracts

Arbitration clauses have become a common fixture in commercial contracts, as contracting parties favour arbitration for the various advantages it offers, which include, speedy resolution of disputes and an element of privacy.
It is for these very advantages that employers are increasingly drawn towards including arbitration provisions in employment contracts, thereby avoiding litigation before the courts.
However, there are conflicting views as to the enforceability of arbitration clauses in employment contracts.
There is the debate as to whether employment contracts are in certain aspects treated distinctly from general commercial contracts. This contention is in part fueled by the constitutional imperative to observe fair labour practices which arguably introduces the considerations of fairness in construing employment contracts.
Additionally, some features of arbitration clauses may be deemed inimical to employees. These include, amongst others:

1. Finality - where the award of the arbitrator is final with no further recourse to the courts thereby curtailing the employee’s access to justice through the specifically constituted Employment and Labor Relations Court;
2. Costs – arbitration costs can be substantial and therefore a deterrent to an employee pursuing claims;
3. Privity of contract - the arbitration clauses may prevent an employee from engaging in class actions such as those brought through a union; and
4. Jurisdiction – the seat of arbitration may be in a location inconvenient to the employee, raising the question of access to justice.

Ultimately where an arbitration clause is challenged by an employee, for whatsoever reason, the court will be called to consider aspects of fair labour practice as well as unconscionability – taking into account the negotiating / bargaining power of the parties.
In the Kenyan context we recommend that employers carefully consider and obtain legal advice on the context, scope and wording of arbitration clauses in employment agreements.

 For further legal advice with respect to this alert, please contact:
Samson Mac’Oduol at Mac’[email protected]