Never mind. I found the answer. I was missing Selectable() on the child grid.
<script id="template" type="text/kendo-tmpl">
@(Html.Kendo().Grid<Kendo.Mvc.Examples.Models.OrderViewModel>()
.Name("grid_#=EmployeeID#")
.Columns(columns =>
{
columns.Bound(o => o.OrderID).Width(70);
columns.Bound(o => o.ShipCountry).Width(110);
columns.Bound(o => o.ShipAddress);
columns.Bound(o => o.ShipName).Width(200);
})
.DataSource(dataSource => dataSource
.Ajax()
.PageSize(5)
.Read(read => read.Action("HierarchyBinding_Orders", "Grid", new { employeeID = "#=EmployeeID#" }))
)
.Pageable()
.Sortable()
.Selectable()
.ToClientTemplate()
)