This is a really good question and in fact they do. Bees do have segmented legs, consisting of parts called a coax, a trochanter, a femur, a tibia and a tarsus. The jointw between which must be considered to be 'knees'.

There's been some discussion on the Naked Scientists' forum about this and Turnipsock suggests that perhaps the expression "The Bee's Knees" comes from the fact that they store pollen in these hairy baskets on their knees. They have hairs on their knees which are used to collect a big build-up of pollen. So, this could look like something very big and spectacular, hence the expression.