Can arbitration and courts work together to ease labour disputes?

Workplace disputes are rising as businesses struggle with economic uncertainty and an increasingly rights-aware workforce. Arbitration was meant to be the solution, offering an expedient way to resolve conflicts. Instead, it has become a source of tension.

The courts are split. Some judges enforce arbitration clauses as binding contract terms, while others reject them, especially for discrimination and constitutional rights claims. The result? Pure confusion.

Employers cannot predict if their arbitration clauses will stick, employees don’t know if they’re signing away court rights and companies hoping to avoid litigation might end up paying for court and arbitration anyway.

What started as a simple contract clause has become an unexpected legal liability.

This lack of clarity is playing out in real cases. In Atandi versus African Medical and Research Foundation Flying Doctors (2023) eKLR, an employee claimed unfair termination based on religious discrimination. The court sided with the staff, ruling that constitutional violations cannot be resolved through arbitration.

Yet in Chamsou and Jorin versus Boeing International Corporation PLC (2022) eKLR, the court took the opposite approach. While this avoided an immediate legal battle, it still leaves open the larger question, when should arbitration apply and when should courts step in?

The Supreme Court has tried to answer this. In Bia Tosha Distributors versus Kenya Breweries, the court clarified that arbitration cannot be used to decide constitutional matters. However, disputes over termination benefits, contract breaches or performance-related dismissals can be arbitrated.

Read: The hidden cost of arbitration clause

For arbitration to work, employers must draft better arbitration clauses.

Many employment contracts use generic arbitration clauses that fail to specify which disputes should go to arbitration and which should remain in court. At the same time, the cost of arbitration must be addressed. Stakeholders should explore ways to make arbitration more affordable.

The choice is clear. Kenya can either maintain a system where arbitration and courts work at cross-purposes or adopt a structured jurisdictional test that respects constitutional rights and arbitration’s efficiency. The solution isn’t about choosing between courts and arbitration.

It’s about making them work together through clear structures. Kenya’s business competitiveness demands this certainty, and it demands it now.

In theory, this provides a framework. In practice, it creates more questions than answers.

The reality is that many disputes are not just contractual or constitutional, they are both. Take an employee who claims unfair termination.

The company might argue that the dismissal was lawful under their contract and should go to arbitration.

The employee might claim that the termination was discriminatory, making it a constitutional issue that belongs in court.

If courts refuse to separate the claims, does this mean the entire case must go to court? Or should one part be arbitrated while the other is litigated? The law does not provide a clear answer and this is why businesses and employees are often forced into long legal battles before even addressing the actual dispute.

Courts should adopt a structured jurisdictional test for intertwined claims. The first step is identifying if constitutional rights are at stake.

Following Bia Tosha, these claims must go to court. For remaining issues, if they can be separated from the constitutional questions, courts should examine their nature. Pure contractual matters like performance metrics or benefit calculations can proceed to arbitration.

When the issues are inseparable, courts should retain jurisdiction to ensure constitutional rights are protected.

Read: Trends and opportunities in commercial arbitration

This approach would provide clear direction from the start. It respects both the Supreme Court's guidance on constitutional matters and the efficiency of arbitration where appropriate.

It would allow courts to cut through competing claims while ensuring fundamental rights remain under judicial protection.

Kenya can learn from other jurisdictions. Singapore's system draws a clear line: contract disputes go to arbitration, while discrimination and rights-based claims stay in court.

The UK reviews arbitration clauses to ensure fairness, particularly where bargaining power is unequal. Hong Kong requires proof that employees understood arbitration terms and keeps costs proportionate to claims.

We can learn from these systems. The current approach, where some Judges enforce arbitration clauses and others reject them, creates uncertainty that benefits no one.

Instead of treating arbitration and litigation as opposing forces, we should create a structured framework that defines when arbitration should be used and when courts should intervene.

The writer is a Partner and Head of Dispute Resolution, Maina and Onsare Partners Advocates