This Article is a study on the labour issues vis-à-vis the pandemic. The article attempts at a deep dive into the analysing the policies of the administration and its implications & repercussions faced by both, the employer & employee. The paramount issue being the payment of wages under the direction of the Government. The article, analyses various strategies which can be adopted by employer to mitigate its liability and the same time adhere to the government policies and moral obligations
The Article relevant to every stakeholder of business, viz. employers, key management personnel, consultants, human/industrial relations personnel etc. to understand the obligations and legal implications under the labour policies of the Government in response to the lockdown. The article is divided into 6 parts, Part I-Background gives a basic insight on the actions taken by the administration in curbing the pandemic by imposing a lockdown and the repercussions under labour laws. Part II-The Order directing payment of wages, is the action taken by the administration to ensure there is no movement of migrant workmen and payment of wages to all workmen; this Order is the epicentre of the Labour issues. Part III- Analysis of the Order, elaborates on the ambit of the order and the lacunae in interpreting the language of the order to achieve its intentions. Part IV- Non-adherence to the Order, discusses the legal implications on the employers and organisation on account of not following the directions of the administration. Part V- Challenges before the employers, attempts at analysing the feasibility & non feasibility of various structures of payments so as to ensure there is no conflict with the Order. Part VI- Way forward is an epilogue, which provides a suggestion to the government to find a balance in their policies so as to ensure a win-win situation.
During the last quarter of 2019 the City of Wuhan, China was the first to report cases of a serious contagious-respiratory disease, which in the days that followed, exponentially spread, resulting into a pandemic and changing the status quo of the world.
On 25th January, 2020 the Ministry of Health and Family Welfare issued Guidelines for Infection Prevention and Control in Healthcare Facilities which prescribed certain procedures and practices to be adopted for prevention and control of infections.
However, daily life and commerce continued and on 20-21st of March, 2020 the Ministry of Health advised to invoke the provision of section 2 of the Epidemic Diseases Act, 1897. Subsequently, on 24th March, the Hon’ble Prime Minister, Shri Narendra Modi declared a 21-day Nationwide lockdown. Consequently, most of the activities of trade and commerce which required the employees to be present at the workplace came to a halt.
Further, the National Disaster Management Authority assessing the situation across the globe and in the country passed an Order No. 1-29/2020-PP (Pt II) dated 24th March 2020 invoking section 6 (2) (i) of the Disaster Management Act, 2005 (‘DM Act’) thereby directing Ministries & Departments of the Central Government and State Authorities to make measures to ensure social distancing. This order was issued in light of World Health Organization declaring the COVID 19 as a pandemic, and a threat posed to India. The lockdown was further extended vide Order dated 14th April, 2020 bearing No. 40-3/2020-DM-I(A) until 3rd May, 2020. Further, the Ministry of Home Affaris vide Order of even dated 1st May, 2020 bearing No. 40-3/2020-DM-I(A) further extended the lockdown for a period of two weeks.
The Labour issue that arose on account these orders are with respect to payment of wages to the employees during the period of lockdown. As business operations have not resumed, the employers are also faced with a cash crunch. On the other hand, laborers and workmen who live hand to mouth require some amount for their livelihood. Subsequently, a lot of migrant workmen decided to move back to their respective home-towns.
II. The Order Directing Payment of Wages
With all industries in various sector shut due to lockdown, a large number of workmen had no option but to leave for their hometown which in turn led to inter-state and intra-state migration. In order to mitigate the economic hardship and to ensure strict implementation of lockdown measure, further addendum was issued vide Order No.40-3/2020-DM-I(A) dated 29th March 20201 (‘the Order’). The Order directs the Governments and State authorities to issue order to their respective District Magistrate/Deputy Commissioner and Senior Superintendent of Police on the certain measures for payment of wages. Relevant portion of the order is usefully extracted as under:
“Whereas, to deal with the situation, and for effective implementation of lockdown measures, and to mitigate the economic hardships of the migrant workers… to take the following additional measures.’
‘III. All the employees, be it in the Industry or in the shops and commercials establishment, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishment are under closure during the lockdown.”
It is imperative to note that the order granting wages has been extended to include all workers i.e. migrant workers, factory workers, workers of shops & establishment etc. The lack of clarity of in the order has resulted in to ambiguity and unnecessary confusion for which no further clarifications have been made until date.
III. Analysis of The Order
It is necessary to peruse through the Order for better understanding of its implications on the employers and the industries. It is a fact that due to lockdown most industries are shut and thus no work is being carried on by any of the workers. An exception is made for the workmen, who are in the employed under essential goods manufacturing or service-related industries.
The relevant question is whether it would be fair and legal to impose such a liability upon the employer. The definition of ‘Wages’ as laid down in the Payment of Wages Act, 1936 is usefully extracted as under:
“2. (h) (vi) “wages” means all remuneration (whether by way of salary, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes-
(a) any remuneration payable under any award or settlement between the parties or order of a Court;
(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;
(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);
(d) any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum, whether with or without deductions but does not provide for the time within which the payment is to be made;
(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include–
(1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a Court
(2) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of 14 [appropriate Government];
(3) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
(4) any travelling allowance or the value of any travelling concession;
(5) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or
(6) any gratuity payable on the termination of employment in cases other than those specified in sub-clause (d).]
That, the above definition is an inclusive definition and a liability to pay wages can cast upon an employer as envisaged under Section 2 (h) (vii) (e) of the Payment of Wages Act, 1936 only in lieu of a Scheme. However, no such scheme has been framed. Therefore, without a scheme in place, the employer cannot be expected to make a payment of wages as per the Payment of Wages Act, 1936.
Further, an advisory to all workers and Employers’ organizations was issued by the Ministry of Labour & Employment dated March 19, 2020 bearing No. D.O. No. M- 11011 /08/2020- Media inter alia suggesting that during the period of non-operation to deem the workmen to be on duty. This being in the nature of advisory, it raises the question as to whether the payment made to an employee is a moral obligation or a legal one.
The Ministry of Corporate Affairs in its FAQ dated 10th April 20202 stated that payment of wages during lockdown is a moral obligation of the employers and hence such payment shall not qualify as admissible Corporate social responsibility (CSR) expenditure.
Apart from the above there exists other lacunae in the order. There exists a confusion with respect to payment of the wages as per minimum wages applicable or the last drawn wages of the workmen? The only aiding interpretation provided is that wages is to be paid without any deduction. Expecting an employer to make payment as per the last drawn wages, in the absence of any economic activity would cast a huge economic burden on the employer. Most of the employers under any circumstances would not be able to bear such huge cash outflow.
IV. Non-Adherence to The Order
As per the said Orders, if the employers fail to adhere to the same it would attract the relevant provisions of the DM Act.
The provisions of the DM Act in respect of the contraventions are as under:
“57. Penalty for contravention of any order regarding requisitioning.—If any person contravenes any order made under section 65, he shall be punishable with imprisonment for a term which may extend to one year or with fine or with both.”
Further, Section 58 of the DM Act is usefully extracted as under:
Offence by companies.—
(1) Where an offence under this Act has been committed by a company or body corporate, every person who at the time the offence was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he exercised due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company, and it is proved that the offence was committed with the consent or connivance of or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also, be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.— For the purpose of this section—
(a) “company” means any body corporate and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.”
As per the Consolidated Guidelines issued by the Ministry of Home Affairs dated March 28, 2020, any person violating these containment measures will be liable to be proceeded against as per the provisions of Section 51 to 60 of the DM Act, besides legal action under Section 188 of the Indian Penal Code, 1860 (‘IPC’).
Offence under Section 188 of the IPC is a cognizable and a bailable offence. Therefore, on violation of the above order/guidelines, the police have to first register a case/file a First Information Report (FIR) against the accused or the Enforcement Officer file a complaint directly before the Ld. Magistrate Court. However, the offence being bailable, the accused will be granted bail by the Ld. Magistrate Court.
V. Challenges before The Employers
It needs to be understood that a fine balance must be established between the employer and employees with respect to payment of wages. There is no victory where payments are made to the employees and subsequently, the business goes down. The employees need to realize that in the event the business goes down, they will also go down with it, it will be extremely difficult or virtually impossible to find new employment opportunities post lifting of the lockdown.
Some of the practical challenges faced by the employers in payment of wages are as under:
Adjustment of salary against leave: Although the employer cannot compel its employers to adjust their leave privileged. A suggestion can be made to the employees to utilize their annual leave privileges.
As per Rule 18 of the Industrial Employment (Standing Rules) Central Rules, 1946, the employer may, at any time, in the event of an epidemic or other cause beyond his control, stop any section or sections of the establishment, wholly or partially for any period or periods without notice.
Further, as per the said rules in case where workmen are laid off for short periods on account of failure of plant or a temporary curtailment of production, the period of unemployment shall be treated as compulsory leave either with or without pay, as the case may be.
Therefore, a settlement can be arrived under section 2 (p) of Industrial Disputes Act, 1948 (‘ID Act’) between the workmen and the employer consenting to such an arrangement.
Layoff, termination or retrenchment: Although the ID Act under section 2(kkk) does allow ‘lay-off’ if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason.
However, this conflicts with the Order dated March 29, 2020. As the Order is issued under the DM Act, a special statute, the principle of Generalia specialibus non derogant and Generalibus specialia i.e. Special law over rides general law, will apply. Therefore. The DM Act will prevail on the ID Act.
Ex gratia payment under Se.2(p) Settlement: Another effective arrangement could be a settlement under section 2(p) of the ID Act, between the worker and employer for an ex gratia payment during the period of lockdown.
This would achieve the objectives of the government, employer and employee. Further it safeguards Article 19 (right to trade or business) and Article 21 (right to life).
Deferral or reduction of wages: The deferral or wages is not permitted under section 5 of Payment of Wages Act, 1936 (PW Act). The Hon’ble High Court of Kerala in the case of Kerala Vydyuthi Mazdoor Sangham vs. State of kerala and Ors. WP(C) TMP No. 182 of 2020 order dated April 28, 2020 held that deferment of salary during lockdown amounts to denial of property.
Petition before the Hon’ble Supreme Court: Both the Employers and Employees have approached the Hon’ble Supreme Court. The cases National Alliance of Journalist & Ors vs UOI Writ Petition bearing Diary No. 10948/2020/2020 and Ficus Pax Pvt. Ltd. Vs Union of India  SC W.P(c)Diary No. 10983/2020 are both sub judice before the Hon’ble Supreme Court
It is the contention of the Employers that, the wages have to be earned by the Workman or in lieu of a Scheme as explained earlier and any free payment or charity shall not fall within the definition of wages. During the lockdown, the workers are not carrying out job and in such circumstances, the Government has no right to direct the Employers to pay the wages and the said payment shall be construed as ex-gratia payment and not wages as such, there cannot be any criteria as to what amount to be paid to the Employees as ex-gratia
Secondly, the PW Act is applicable to a class of employees drawing wages up to ₹ 24,000/- per month as defined under section 1 (6) of the PW Act. Hence, the said notification/order of the Central Government should be limited to the employee drawing wages up to
₹ 24,000/- per month.
The third submissions made by the Employers Association is that ESI Corporation should pay 70% of the salary to eligible workmen from the corpus. The association stressed that the Government should tap funds lying with it as welfare corpus to pay wages to the Employees covered under the ESI Act. that, as per law, the workman who is not able to attend the work due to any sickness and who is covered under the ESI Scheme is entitled to get “Sickness Benefit” to the tune of 70% of his wages during the said period.
The fourth contention is it is incumbent upon the Government to look after the Public in the case of any epidemic or warlike situation as contemplated under the DM Act. It is the duty of the Government under section 46-48 of the DM Act to arrange National Disaster Fund. Instead of using the rightful resources, the Government has imposed the burden upon the Employers.
The Decision of the Hon’ble Supreme Court will provide much clarity in the issue of payment of wages to workmen.
VI. Way Forward
Reiterating, Section 72 of the DM Act provides overriding but any order or law cannot have draconian effect. Article 14 of the Constitution of India says that the States shall not deny to any person equality before law or the equal protection of the laws within the territory of India. Rule of Law embodied in Article 14 is the basic structure of the Constitution3. The attribute of “Rule of Law”, Prof A.V Dicey stated “equality before the law and equal subjection of all classes to the ordinary law of the land administered by the ordinary law courts.”4 That the employers of the establishments cannot be economically discriminated and be subjected to pay full wages/salary based on the presumption that they are not facing hardships. The employers are facing huge economic hardships at present as well in the coming future. The employers have to make payment towards various other resources in their production apart from human resources.
Article 19 of The Constitution of India, 1949 is extracted below:
“19. Protection of certain rights regarding freedom of speech etc.
(1) All citizens shall have the right
(g) to practice any profession, or to carry on any occupation, trade or business…”
Though under Article 19(6) of the Constitution provides for reasonable restrictions, can such imposition of payment be considered fair and proper. passing Order compelling the employers to pay full salary during the lockdown seems arbitrary and does not seem appropriate. No provision of the DM Act demands such payment.
The Order passed under the special statute for payment of full wages seems unfair and unjust. Though, Section 72 of the DM Act allows the Act to override all other statutes, it is necessary to ensure that the special statute is not unfair and ultra vires the Constitution.
Issuing order/advisories to not terminate workmen and make full payment towards their wages may not go hand in hand. It will have disastrous consequences and plummet the economy further. If both the directions are to be complied with, which would be with extreme difficulty, the establishments will soon have to close and retrench workmen causing further severe hardships to the workmen.
It is in the best interest of all the stakeholders to not impose such arbitrary order against the employer. A balance is required to be achieved between the hardships of the employer and employee, so that one is not favored over the other.
The Ministry of Home Affairs, Government of India, Order No. 40-3/2020-DM-I(A) dated 29th March 2020
Ministry of Corporate Affairs, Government of India, F. No. CSR-01/4/2020-CSR-MCA
Kesavananda Bharati and Ors vs State of Kerala, AIR 1973 SC 1461.
A V Dicey, The Law and the Constitution, 1915