Whether employees can waive statutory rights in their employment contracts

Introduction

Waiver is the process by which one party grants a concession to the other party by relinquishing a right or a privilege by not insisting upon it. It includes a conscious, voluntary and intentional relinquishing or abandonment of a known existing legal right, advantage, benefit, claim or privilege, which except for such waiver the party would have enjoyed. When one party voluntarily accedes to the request of the other party that he should not insist on the precise mode of performance fixed by the contract, he is said to have waived his right to insist the performance of the contract in its original tenor.

Waiver of statutory rights in employment agreements in India

The doctrine of waiver is recognised under the Indian Contract Act 1872. The general principle of waiver is that a law made specifically for the benefit and protection of an individual, can be waived by him in his private capacity, without infringing any public right or policy. If the general welfare of the society is involved, it is difficult to put an estoppel on such relinquishment. However, if only the right of the party is affected, then such right is capable of being abnegated by way of an agreement in writing or conduct. Therefore, a party for whom certain statutory rights are granted, such party can waive those rights if no public interest is involved. The burden of proof lies on the party pleading the waiver, to show that an agreement waiving the right in consideration of some compromise came into existence.

As regards the waiver of rights in employment agreements is concerned, it is permissible for an employee to waive off contractual rights to potential employment claims. However, an employee is not permitted to waive off statutory rights by way of a contractual agreement with an employer. There are specific provisions in the labour legislations in India which state that the provisions of the respective legislation shall supersede and have an overriding effect over anything contained in any instrument or contract which is inconsistent with provisions of such legislation. The relevant provisions of such labour legislations are set out below:

1. Section 14 of the Payment of Gratuity Act 1972 states that “the provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.”

2. Section 27(1) of the Maternity Benefit Act 1961 states that “the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law or in the terms of any award, agreement or contract of service..”

3. Section 30 of the Contract Labour (Regulation and Abolition) Act 1970 states that “the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law or in the terms of any agreement or contract of service, or in any standing orders applicable to the establishment…”

4. Section 34-A of the Payment of Bonus 1965 states that “…the provisions of this Act, shall have effect notwithstanding anything inconsistent therewith contained any other law for the time being in force or in the terms of any award, agreement, settlement or contract of service.”

The courts in India have held that any agreement whereby an employee relinquishes any statutory right, including the right to receive gratuity, statutory bonus, maternity benefit, overtime, such a waiver would be void.

The main drawback of employment agreements in India is that there exists a vast disparity in the bargaining positions of the employer and the employee. The employer has a considerably higher bargaining power and therefore an employment agreement which waives the statutory rights of the employee may be considered as voidable on the grounds that the consent of the employees, for such waiver, was obtained by way of coercion.

Conclusion

Employment agreements may be prone to allegations of abuse of dominant position by the employer. The courts in India have time and again held that incorporating unfair clauses in the employment agreement would be arbitrary, unreasonable and opposed to public policy. As seen above, due to the existence of the unequal bargaining position of the employer and the employee, any waiver against statutory entitlements of an employee is unlikely to be enforceable under Indian laws. However, a generic waiver of contractual rights may be enforceable, depending upon the facts and circumstances of the case.