Resolving an employment dispute in an amicable way seems to be beneficial for both parties: the employer and the employee. The Polish Labor Code includes special provisions regulating the conciliation procedure that may be conducted before the employee files the formal court claim. Labor courts often encourage parties to attempt to reach a settlement, in particular, by using the special mediation system. Settlements may also be reached outside the court. Even though it appears straightforward to reach settlements, there are a number of restrictions under Polish employment law which need to be taken into consideration.
The most important restriction is contained in Article 84 of the Labor Code, which states that an employee may not waive the right to remuneration or transfer that right to another person. This means it is impossible for the employee to effectively waive the right to remuneration or any part of it by any declaration, act in law or even by way of a settlement. This absolute prohibition also applies to other benefits which are considered to perform a similar function to remuneration and are covered by the same scope of legal protection. Pursuant to case law and doctrine these benefits are, in particular: monetary compensation for unused vacation leave, performance bonuses, statutory severance pay and social security contributions. These conclusions are expressed very clearly in the doctrine and case law (numerous court decisions), although they raise quite a lot of doubts among practitioners.
The concept of a settlement under Polish law is based on mutual concessions by the parties in order to avoid uncertainty as to the claims arising from their legal relationship or to avert a dispute now or in the future. In matters regarding employee remuneration or benefits, the employee’s ability to make concessions is severely restricted.
The court may consider a settlement inadmissible where it is against the law or social norms, justified interest of an employee or if it intends to circumvent the law. The employee’s protection goes even further than that. The courts state that an employee cannot waive any and all claims against the employer regarding remuneration or other benefits. What seems to be a standard clause in many settlements will void the settlement on the basis of Polish labor law. Moreover, even if a voluntary settlement is signed, the employee may pursue further claims relating to his or her remuneration or other benefits in the future.
A number of practitioners claim however, that such action taken by the employee, or former employee in some cases, may be deemed an abuse of right and a violation of trust and loyalty to the employer. When an employee signs a settlement in bad faith, knowing that he/she will be pursuing further claims in the future, the employer may argue that the settlement was valid and the employee’s claim is unjustified. The majority of the jurisprudence however, is convinced that these circumstances do not matter and the employee’s right to remuneration cannot be limited in any way regardless of the consequences.
Polish employment law on many occasions may seem to be rigid and inflexible. According to case law, the only settlements that are allowed in matters relating to remuneration or benefits are settlements under which the employee receives the claim in the full amount. This will not only be unfavorable for employers and employees, but also will practically deprive them of the possibility of negotiating in order to reach some compromise. At issue here is also the very broad definition of remuneration, which severely curtails the options the employer and the employee have in reaching an agreement. It should be noted that this interpretation of the law in some situations may even be contrary to the legitimate interests of the employee.
The question is how to assess the justified interest of an employee. One could say that it is the employee’s right to decide what is best for him/her. The prohibition against waiving the right to remuneration is absolute, but there is no guarantee that in judicial proceedings the whole claim might be enforced. This concerns, in particular, overtime pay or performance bonuses, when the amount is very often disputable. Therefore it seems like immediate gratification, even at the expense of waiver of a part of the reported claim, may be far more beneficial for the employee than a time-consuming and costly lawsuit. It is also important to note that the employee's claim is often unclear and needs to be proven in court. In light of the above, it appears far more favorable to the employee and the employer to settle.
The main point of the prohibition against waiving the right to remuneration is to protect the employee. The wide scope of protection results from the desire to prevent abuse of power by the employer. It should be noted though that settlements regarding overtime or benefits (which are the most popular) are often entered into between the employer and the former employee and therefore it cannot be said that the employer’s position has any influence on the employee’s decisions. It would seem that in such circumstances a settlement that is mutually beneficial (a quick solution to the dispute and avoiding litigation costs and associated risks) should be considered as just satisfaction of the interests of the employee.
Employers must exercise extreme caution when entering into settlements with employees on remuneration or remuneration components. Employers should also take into account that labor courts tend to treat protection of employee’s rights very seriously, which sometimes can lead to unexpected results. The case law in this area clearly indicates that labor courts share a contentious view regarding settlements on remuneration matters, which must be considered before deciding on negotiating a settlement—and that should also have an impact on the content of the settlement.