Employees’ rights to livelihood must prevail over employers’ interests

 

In India companies have started charging training fees from type rated pilots joining airlines. This training is not adding any skill or experience but they are statutory courses or DGCA mandated courses like the Operator's Conversion Course. The OPC is not a specialised course imparted by the employer and the employee has not been done a special favour.

Employers know that hiring new workers is only one challenging piece of the human resources puzzle. Equally vexing, especially now, is the effort to retain the employees they have — particularly those with skills and training — and prevent competitors from poaching them with better offers or bigger bonuses. Once employers get past “Why work here?” they need to constantly answer the question: “Why stay here?”

Some airlines are trying short-term incentives such as signing bonuses, but that method has limited utility. Sure, these offers may get folks to sign that first contract. But a successful retention strategy requires smart investments across organizations — in wages, training, 
technology, and community engagement — to make a more appealing career, and to create a future that employees can aspire to.

Bombay High Court Judgement extract :

"Earlier the plaintiffs had quite merrily and successfully poached 16 pilots from Sahara Airlines. Now 8 pilots left Jet Airways and joined Sahara Airlines. Prima facie, it appears that the conduct of the plaintiffs was such that the defendants had little choice but to seek employment elsewhere. It is a hallowed principle of law, that those who seek equity must do equity."

Restrictive covenants refer to clauses that limit an employee's actions post-employment, usually to protect an employer's business interests. Common examples are non-compete, non-solicitation, and non-disclosure agreements. 

In general, courts scrutinize restrictive covenants to ensure they are reasonable and no broader than necessary to protect an employer's legitimate interests. An unreasonable restriction on an employee's livelihood is typically unenforceable.

To determine validity, courts review factors like:

• Does the employer have a protectable interest? Trade secrets, confidential information, and customer relationships are viewed as protectable.
• Is the covenant reasonable in scope, duration, and geography? Overly broad restrictions are struck down.
• Does the covenant impose an undue hardship on the employee?
• Does the covenant harm the public interest?

• Reasonableness is assessed on a case-by-case basis. Courts may "blue pencil" an unreasonable restriction to make it enforceable rather than striking it down entirely.

Ultimately, an employer must have a legitimate business interest to be protected, and the restrictive covenant must be drafted narrowly to protect that interest without unduly burdening the employee. Each situation is unique and fact-specific when it comes to enforceability.

1 year notice period for Captains mandated by DGCA India is a restrictive covenant which aids the employers to exploit the employees and put additional stress in their workspace. The Indian Aircraft Act 1934 empowers the DGCA to make rules in the interest of public safety. However the DGCA has extended this mandate to make rules in Public Interest which entails anything to do with the public. The objective of the Civil Aviation Requirement (CAR) as given in the first CAR is to :
a) fulfil the duties and obligations of India as a Contracting State under the convention relating to International Civil Aviation signed at Chicago on the 7th day of December, 1944.
b) standardize and harmonize the requirements taking into account the rules and regulations of other regulatory authorities.
c) implement the recommendations of the Courts of Inquiry or any other committee constituted by the Central Government/ Director General.

Question: Does the notice period of pilots fall under the listed objectives and responsibilities of DGCA's as a regulator?

Finally in accordance with rule 133A of the Aircraft Rules, 1937, the Director General may issue, interalia, Civil Aviation Requirements not inconsistent with the Aircraft Act, 1934 and the rules made thereunder.

Courts have generally held that employees’ rights to livelihood must prevail over employers’ interests, notwithstanding a pre-existing agreement between the two. For instance, in the 2009 case of Desiccant Rotors International (P) Ltd v Bappaditya Sarkar, the Delhi High Court observed that in instances of conflict between employers’ attempts to protect themselves from competition and the right of employees to seek employment wherever they choose,“it is clear that the right of livelihood of the latter must prevail”. 

Employment Bonds in the Cases of Specialized Training Provided by the Company – Conditions for Their Validity

Indian courts, however, have unequivocally held contracts containing restrictive covenants to be valid if the organization has spent significant resources on personnel training or skills enhancement of the employee. This proposition, however, comes with various caveats.

After the perusal of various Supreme Court judgments, the Madras High Court in Toshnial Brothers (Pvt) Ltd v E Eswarprasad & Ors held that the existence of a legal injury accruing as a consequence of breach is a pre-requisite for claiming liquidated damages in accordance with section 74 of the Indian Contract Act, 1872. In other words, the employer must show a legal injury automatically resulting from the breach of the commitment to serve for a minimum period.

According to the Court, a presumption of legal injury arises incases“where the employer or the management concerned was shown to have either incurred any expenditure or involved itself into financial commitments to either give any special training either within the country or abroad or in having conferred any special benefit or favour to the detriment of the claimant in favour of the violator involving monetary commitments.” The inevitable conclusion from the foregoing decision is that the employer must prove that the employee was the beneficiary of special favour or training or concession at the expense of the employer. Otherwise, actual injury accruing as a result of the breach would have to be proved.

It is clear that employment bonds are unequivocally enforceable if following requirements are satisfied:The employer has actually spent money on the employee,

1. The said expenditure is in lieu of a promise from the employee that he or she would not leave the employment for duration specified in the contract,
2. The employee has breached the contract and left the employment before the stipulated period,
3. On account of the breach, the employer has suffered loss.

The contract must not be too heavily one-sided such that it loses the character of a contract promoting trade and attains the character of a contract in restraint of trade. The one year notice period imposed by DGCA is heavily one sided since it takes 90 days for an efficient airlines to train a Co-Pilot to a Commander flying online. Those hired type rated have not gained anything from the training provided by the airline and are not bound to prove the breach of contract by an employer who is armed with a battery of lawyers. The training especially the DGCA mandated training should not be used as a weapon to hold the employees back.

Sources:

India Kanoon website

The Forbes magazine

India Corp Law by Apoorv Madan