By Nick Weru

In the intricate dance of employer-employee relationships, including arbitration clauses in employment contracts has become increasingly prevalent. This strategic move aims to steer clear of the courtroom drama and embrace alternative dispute resolution. Arbitration is covered under the Constitutional umbrella of Article 159 in Kenya, which provides that Courts shall promote alternative dispute resolution mechanisms, including arbitration, while exercising judicial authority.

Arbitration is an alternative dispute resolution mechanism in which an independent third party, the arbitrator, makes a binding decision on the dispute. While reminiscent of a courtroom setting, arbitration is a more informal process, with arbitrators often possessing specialized expertise in their field.

The arbitration clause is a provision in a contract, in this case in the employment contract, that provides that disputes arising from the employer-employee relationship, including interpretation, application, and termination of the agreement, are to be decided through arbitration. This core provision lays the groundwork; however, parties are encouraged to embellish it with specifics such as dispute resolution activation, arbitrator appointment, cost implications, and resolution timelines. This confidential process ensures that the proceedings and outcomes remain shielded from public scrutiny, a tantalizing prospect for disputes involving high-ranking figures within an organization. This, however, does not mean that either party to the proceedings cannot speak publicly about it unless expressly prohibited by the clause.

Arbitration offers a swifter resolution compared to the often-protracted court processes without compromising on the binding and enforceable nature of the decision, which is almost equal to a court judgment.

Yet, like any coin, arbitration has its flip side. The process tends to be more expensive, as arbitrators, unlike judges, require compensation commensurate with their expertise. Critics argue that within the realm of employment disputes, arbitration may dilute the robust protections offered to employees under the Employment Act. The socio-economic implications of fair labour practices, enshrined as a fundamental right under Article 41 of the Kenyan Constitution, necessitate a delicate balance in dispute resolution that arbitration may sometimes not consider.

Adding another layer to the discussion is the power imbalance inherent in employment relationships, where employees are often presented with standard form agreements, leaving them with little room for negotiation. This inequality is why Kenyan employment legislation places a heavier burden on employers to level the playing field.

Legislatively, Section 15 of the Employment and Labour Relations Court Act allows the Employment and Labour Relations Court to stay proceedings and refer disputes to arbitration when it becomes apparent to the Court that the matter should have gone through Alternative Dispute Resolution. The Labour Relations Act further empowers parties in collective bargaining agreements to include arbitration clauses, complete with appeal mechanisms in case of arbitration (Section 58).

Court precedents in Kenya tend to favour arbitration clauses, with the Employment and Labour Relations Court upholding them as the agreed-upon avenue for dispute resolution. The case of Paul Chemunda Nalyanya v I. Messina Kenya Limited [2015] is one example where the court emphasized the importance of parties adhering to valid arbitration clauses and refraining from rushing to court for adjudication.

While the court rarely deviates from supporting arbitration clauses, there are exceptions. In cases such as David Kamau Ngure v Total Kenya Limited (2021), eKLR has seen the court scrutinize specific circumstances of a dispute to determine whether arbitration is the appropriate route.

In conclusion, including arbitration clauses in employment contracts is a nuanced decision. For senior management staff, the benefits of a private and confidential resolution process often outweigh the costs associated with arbitration. However, employers should exercise caution and draft clauses judiciously, allowing discretion to decide whether to pursue arbitration, particularly when dealing with lower cadres of employees. In this delicate dance between privacy and protection, the strategic use of arbitration clauses can be a powerful tool for resolving employment disputes in a manner that serves the interests of both parties.