Oh Dwarves most certainly have knees, how else would they sit with their legs hanging comically off the side of a chair. You may be thinking of Gimli played by John Rhys-Davies who had to play the character kneeling on his knees as he’s 6ft tall. That would give the appearance of having no knees.
What Dwarves do have is an unusually shaped body, with shoulders far more broad than a regular human they would have trouble fitting regular clothing, too short for adult clothing, too wide for children’s.