Full Salaries to Workers during Lock-Down Period in view of MHA Order and Petitions pending before Hon’ble Supreme Court: Balance between Industries and Workers is need of the Hour

China, on 31.12.2019, reported pneumonia of unknown cause, detected in the city of Wuhan, to Word Health Organization (“WHO” for brevity), wherein WHO on 22.01.2020 issued statement regarding human to human transmission of Novel Coronavirus in Wuhan. The WHO, on 30.01.2020, declared this outbreak as Public Health Emergency of International Concern (PHEIC), and it has declared the Coronavirus Disease as COVID-19 on 11.02.2020, subsequently, WHO declared Covid-19 as Pandemic. The Corona Virus Disease is hereinafter referred as “Covid-2019”.

The Ministry of Home Affairs (“MHA” for brevity) on 14.03.2020 notified Covid-2019 as notified disaster. Thereafter, the Ministry of Health and Family Welfare issued advisory on social distancing measures. The Ministry of Labour and Employment, on 20.03.2020, issued a letter to the authorities to issue the advisory to employers/owners of establishment not to terminate/reduce the wages of employees. The country observed “Janta Curfew” on 22.03.2020.

That the Department of Expenditure, Ministry of Finance, on 23.03.2020, ordered that if any contractual, casual and outsourced staff of Ministries/Department and other organizations of Government of India is required to stay at home due to lock down period till 30.04.2020, it shall be treated as “on duty” and necessary wages shall be paid to be paid to any such employees. The Ministry of Labour and Employment, on 23.03.2020, issued the direction to issue an advisory to all public/private employer/owner of establishment to extend their coordination by not terminating employees, particularly casual or contractual, from their jobs and reduce their wages.

The National Management Disaster Authority informed, vide its order dated 24.03.2020, that it has satisfied that the country is threatened with the spread of Covid-2019 and directed the Government to issue guidelines in terms of section 10(2)(l) of the Disaster Management Act, 2005 (“DMA” for brevity). Accordingly, Home Secretary, MHA, acting as a Chairperson of National Executive Committee issued the order of lock down from 25.03.2020 to 14.04.2020 and issued guidelines in respect of same, which was extended till 03.05.2020 with some relaxations.

Interestingly, the MHA vide its order dated 29.03.2020 (“subject order” for brevity) directed the state and union territory governments to take, inter alia, following additional measures:

i. State/Union Territory Governments shall ensure adequate arrangements of temporary shelters, and provision of food etc. for the poor and needy people, including migrant labourers, stranded due to lockdown measures in their respective areas,

ii. The migrant people, who have moved out to reach their home states/home towns, must be kept in the nearest shelter by the respective state/union territory government quarantine facilities after proper screening for a minimum period of 14 days as per standard health protocol.

iii. All the employers, be it in the industry or in the shops and commercial establishments, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishments are under closure during the lockdown.

iv. Where ever the workers, including the migrants, are living in rented accommodation, the landlords of those properties shall not demand payment of rent for a period of one month.

v. If any landlord is forcing labourers and students to vacate their premises, they will be liable for action under the Act.

It was also mentioned in the subject order that necessary action will be taken in respect of violation of any of condition of subject order. The Ministry of Labour and Employment, on 30.03.2020, issued an advisory to all the Regional Labour Commissioner that all employees/workers may be deemed to be on duty in case place of employment is made non-operational due to lock-down. All public and private enterprises were advised not to terminate their employees from jobs, including the casual and employee of contractual, and not to deduct their wages.

The Employers are aggrieved by the subject order on the following grounds:

i) Due to lock-down, Employers have less or zero revenue, and incurring, due to fixed costs, huge losses,

ii) Employers are not in a position, financially, to pay the salary/wages,

iii) If the employers are forced to make the 100% salary/wages during the period of lock-down, it may lead to closure of many MSMEs, which will ultimately lead to permanent unemployment,

iv) Government cannot force the employer to pay for NO WORK,

v) Welfare of citizen is the duty of state, and government should take appropriate action for these workers during the period of lock-down. The huge amount, contributed by the employers and employees in relation to their employment, in the form of EPF and ESI and their respective interest is lying with the government, and the government should utilize the same, at this crisis situation, for the welfare of employees/workers and industries,

vi) Government has not given any general waiver/relaxation as far as liability of employers are concerned except giving some deferment of payment,

vii) There is a provision under the Industrial Disputes Act, 1947 to deal with employees under the situation of natural calamity, and therefore, any action by invoking DMA is unwarranted,

viii) The Government has no power to issue the subject order under the DMA,

ix) The subject order is violation of Article, 14, 19, 21, 265 and 300A of the Constitution of India,

x) The Ministry of Corporate Affairs has considered the payment of salary/wages to employees/workers as moral duty of the employer, and therefore, the employers may not be forced for their moral duty,

xi) There cannot be identical order for all kinds of employees,

On the other hand, the Labour Unions, representing employees/workers, are justifying the subject order on the following grounds:

i) The subject order is necessary for the Protection of the weaker section of the society,

ii) The subject order is necessary for sustenance and livelihood of weaker section of the society,

iii) Most of the workers cannot survive in such lock down without wages,

iv) The contract of service is subsist, even, during the lock down, and accordingly, the employer is duty bound to make the payment of wages/salary,

v) Cessation of Work is not due to any fault on the part of the workman, and accordingly, the same is recognized as continuous service in terms of Section 25B of the Industrial Disputes Act, 1947

vi) The workers have not denied to work, and they are ready to work,

vii) Reduction of wages requires due procedure in term of Section 9A of the Industrial Disputes Act, 1947

viii) The need, expenses and requirements of employees/workers have increased due to Covid-2019 as the prices of various essential goods have been increased, additional goods like sanitizer, mask and other equipments are required for personal protection, and therefore, the workers are in want of, even, increased wages,

ix) There is no change in basic fixed expenses of employees/workman, like school fee, rent, loan/borrowing repayment, etc. wherein most of them, having no savings, are depended on their monthly salary/wages only.

Whether the government has power under the DMA to pass any subject order directing the employer to pay full wages or constitutional validity of such provisions of DMA is Question of Law. Technically, the answer may be NO, however, as the subject matter is related to the Protection, sustenance and livelihood of the weaker section of the society, the court may take up the Mischief Rule of Interpretation to consider the order of government as measures taken by government in response to threatening situation of Covid-19. The said order of the government may consider as reason for successful/effective lock-down to contain the spread of lock down encouraging employees to follow the lock down on the assurance that government will protect their livelihood. The recent judgment of Hon’ble Supreme Court on free Covid-19 testing, benefit to poor was retained even after modification, is the example of same.

As far as Articles 14, 19 and 21 of the Constitution of India (“COI” for brevity) are concerned; both the parties may claim their respective rights under these articles for their own benefits. Article 300A of COI may not be applicable in this case as the direction is only in respect of employees and not others, and accordingly, the question of deprivation of property does not arise at all. Similarly, Article 265 of COI may not be relevant here, as it may not be termed as imposition of tax by government as the order is limited to the payment of wages at existing rates to existing employees by the employers. Again, the Court may consider the Article 14, 19 and 21of COI for the Protection, sustenance and livelihood of the weaker section of the society.

Ministry of Corporate Affairs (“MCA” for brevity), on 10.04.2020, issued FAQs in the context of inclusion of contribution made in “PM Cares Fund” qualifying as Corporate Social Responsibility (“CSR” for brevity) expenditure, wherein MCA had clarified that payment of wages to employees during the period of lock down cannot be considered as CSR expenditure on the ground that payment of wages during the normal condition is statutory responsibility of company, and during the lock down is moral duty of the company. Further, MCA has clarified, in another question, in same FAQs, related to casual/daily wage workers, that it is moral/humanitarian/contractual obligations of the company irrespective of their obligation to make CSR expenditure in accordance to section 135 of the Companies Act, 2013 and rules made there-under. Needless to say, these FAQs were issued by MCA for specific purpose, after the impugned order of MHA, and may not be helpful/binding/relevant/applicable in contending the issue of payment of salary/wages to employees/workman.

As far as actions taken by government for the reduction of salary of Members of Parliament, and the order of government not disbursing the increased amount of Dearness Allowances till July, 2021 cannot be compared with no payment or reduced payment to employees/workers. As per available information, government has not taken any action for reduction of wages of any of its Class-IV employees. I don’t think, the Hon’ble Court would consider the same as ground for supporting the reduction of salary/wages to employees/workers.

The provisions for lay off, due to natural calamity, are available in the Industrial Disputes Act, 1947 (“IDA” for brevity), and accordingly, the employers should have the right to take action under Chapter VA or VB of IDA in case of natural calamity. However, as the subject order is passed under the DMA, wherein section 72 of DMA provides that the provisions of DMA shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than DMA. Therefore, provisions of IDA may not be relevant in the present situation and the provisions of DMA will prevail over the IDA. Even otherwise, the provisions of Chapter VA or VB of ID Act may not be applicable in many establishments. Further, court may consider that such provisions of IDA may not be effective in the present situation for the protection of weaker section of the society. This is pertinent to mention here that proper notice in terms of section 9A of IDA is required to be issued before making any change in the condition of service, including changes in wages, of workman. Accordingly, it may not be lawful for the employers to reduce the salary/wages, without complying the provisions of section 9A of IDA, even in the absence of subject order.

No doubt, the subject order may be considered as an order issued in haste and without considering its constitutional validity and financial ability of establishments to pay the full wages even during the lock-down. It may be because of the situation, wherein the primary duty of the government was to take all necessary measures to contain and curb the spread of Covid-2019 and to assure its citizen about the protection of their livelihood, which was necessary for effective lock-down.

Due to above grievances, the petitions are filed before the Hon’ble Supreme Court challenging the subject order on behalf of industries. Further, counter petition or intervening applications are also filed for the effective enforcement of subject order on behalf of workers. The Hon’ble Apex Court has issued notice in the matter on 27.04.2020 and granted Union of India two weeks time to file its response, however, no interim order is passed in the matter till date. Therefore, the subject order, as on date, is fully effective and have the force of law.

The Government should come up with some fresh guidelines in respect of same, so that it will be able to balance the affected industries and workers both. Needless to say, favorable atmosphere for industries is necessary for long term protection of weaker section of the society and overall development of economy. The Government should allow the companies to have their own arrangement and agreement with their employees for lock down period subject to the payment of minimum amount as salary/wages/consideration amount along with security of employment. Government should not interfere with the management decision about the executive level employees. Government should also consider suspending the provisions of minimum wages, EPF and ESI for some time with proper plan for the long term protection of employment of workers. However, any of these guidelines should be applicable exclusively to affected industries, and proper mechanism should be framed to ensure that no unaffected industry is taking undue advantage of these guidelines. The term affected industry should be clearly defined in the guidelines to include only those industries whose revenue during the lock down period is zero or minimal.

This is the need of the hour to protect the affected industries, especially affected MSMEs, at all costs. There cannot be a dispute that workers and employees are part and parcel of industries, and industry cannot exist without them. Therefore, a waiver of portion of salary/wages may consider better option as compare to the risk of Permanent Unemployment. However, the protection of sustenance and livelihood of workers and employees cannot be ignored, and therefore, the limited reasonable government interference is necessary for same.

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2 Comments

  1. Niranjan Sharma says:

    My name is Niranjan Sharma and I was working as a Branch Manager in Reliance nippon LIC Company but in the event of this lockdown, the company terminated me on 30 / Mar / 2020 without any notice. Also, the company does not hire termite employees of any other company. And I have also stopped my salary for the month of March. Today I have come under stress from the financial and economic perspective. What should I do for this ..?

    Thanks
    Niranjan Sharma.
    Bhilwara, Rajasthan.
    9672996008

    1. gpgssharma says:

      Dear Mr. Sharma
      As far as your position is concerned, you may not be considered as workman in terms of provisions of Industrial Dispute Act (“IDA” for brevity). Accordingly, Industrial Disputes Act may not be applicable in your case. However, the Hon’ble Apex Court, time to time, held that while deciding the status of an employee, it is not the designation which is decisive and it is only the nature of duties. Accordingly, your duties will determine your status for the purpose of IDA. This will also determine the applicability of aforesaid order dated 29.03.2020 in your case, as the word “workman” is mentioned in the aforesaid order. The salary for the month of March, assuming that you have worked in the month of March, is liability for the company and you have all the right to recover the same as outstanding debt. In any case, your employment will govern by your appointment letter and the condition of notice, if any incorporated therein. Therefore, the company is bound to comply with same. Otherwise, it will be considered as breach of agreement, and accordingly, you will be at liberty to take appropriate action in the matter for same.
      Having said that, please note that the above article is published only for academic knowledge, general information and discussion on the captioned matter. Accordingly, It will not be appropriate to consult or advice for specific case. Further, it is also not possible without knowing the complete facts of the case. Accordingly, I suggest you to consult your Advocate or legal advisor before taking any action in the matter on the basis of above article or this response. We disclaim all liability for actions based on any content of aforesaid article/blog or this response.

      Thanks

      Advocate Ghanshyam Sharma
      (LL.B., CS, B.Com)
      +91 9716662014

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