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ELRCDismissedNot stated in the judgment· [2024] KEELRC 1006 (KLR)

Okeyo v Board of Directors HHI Management Service Ltd & another (Cause E970 of 2023) [2024] KEELRC 1006 (KLR)

Employment and Labour Relations Court of Kenya
6 May 2024
2,895 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled that an arbitration clause in an employment contract cannot force an employee out of court and into arbitration.

What this practically means

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Executive summary

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The 2nd respondent, the claimant's former employer, moved by chamber summons dated November 27, 2023 under section 6(1) of the Arbitration Act, 1995 seeking a stay of the employment claim and referral to arbitration pursuant to clause 6.2 of the employment contract dated May 30, 2021, which required mediation and then arbitration before any right of action. The claimant, formerly the Group CEO, opposed the application, arguing that the arbitration clause could not oust the court's jurisdiction, that the Employment Act permits the court to override less favourable contractual terms, that arbitration would be expensive for him, and that the respondent had acted in bad faith. The sole issue was whether the application was merited, specifically whether section 6(1) of the Arbitration Act ousted the court's jurisdiction. The court held it did not: its exclusive jurisdiction over employment disputes flows from article 162(2)(a) of the Constitution and section 12 of the ELRC Act; the arbitral law was principally intended for commercial disputes; section 15(1) of the ELRC Act deliberately omits arbitration as an ADR mechanism; and arbitral clauses in employment contracts reflect unequal bargaining power and are imposed by employers. Applying section 26 of the Employment Act and section 6(3) of the Arbitration Act, and adopting the reasoning in Sammy Onyango Ochieng, Wanguhu and Dr Kennedy Amuhaya Wanyonyi, the court found the application unmerited and dismissed it with no orders as to costs on May 6, 2024.

Key legal issues

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01

Whether an arbitration clause in an employment contract mandates a stay of proceedings under section 6(1) of the Arbitration Act

Holding

No. The court declined to stay the employment claim and refer it to arbitration, holding the Arbitration Act was principally intended for commercial disputes and that the ELRC's exclusive jurisdiction under article 162(2)(a) and section 12 of the ELRC Act is not ousted by an arbitral clause.

Reasoning

The court traced its exclusive jurisdiction to article 162(2)(a) of the Constitution and section 12 of the ELRC Act. It noted section 15 of the ELRC Act, which governs referral to ADR, is silent on arbitration - a deliberate legislative omission. It relied on the Supreme Court's guidance in Synergy Industrial Credit v Cape Holdings and Maureen Onyango J's decision in the AMREF case. It found arbitral clauses are imposed on employees due to unequal bargaining power, and that arbitration is not more favourable to the employee than litigation under the Employment Act, whose minimum conditions apply via section 26.

p. 7
02

Effect of section 6(3) of the Arbitration Act where a stay is declined

Holding

Where the court declines a stay, any provision making an arbitral award a condition precedent to litigation is of no effect in those proceedings.

Reasoning

The court observed that although section 6(1) is couched in mandatory tone, section 6(3) addresses instances where a stay is not granted, neutralising condition-precedent clauses in the arbitration agreement. This reinforced the court's power to proceed with the employment claim notwithstanding clause 6.2 of the contract.

p. 7

Legal principles established

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  • The ELRC retains exclusive original jurisdiction over employment disputes notwithstanding an arbitration clause in the employment contract
  • Section 15(1) of the ELRC Act deliberately omits arbitration as an ADR mechanism, so referral to arbitration requires consent of both parties
  • Arbitral clauses in employment contracts are atypical and reflect unequal bargaining power between employer and employee

Court orders

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  1. 1.The 2nd respondent's chamber summons dated November 27, 2023 is dismissed
  2. 2.No orders as to costs
Jurisdiction invoked
Article 162(2)(a) of the Constitution of Kenya, 2010 read with section 12 of the Employment and Labour Relations Court Act, 2011

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Okeyo v Board of Directors HHI Management Service Ltd & another (Cause E970 of 2023) [2024] KEELRC 1006 (KLR)", Case Analysis (2024). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1006/eng@2024-05-06

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.