Employment Law in times of COVID 19--Socialistic leanings Published on: 07 Aug, 2021


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It is a well-known fact that COVID-19 has put a great financial strain on not just the Indian economy but also the global economy. The Hon’ble Prime Minister of India announced a nationwide lockdown on March 24, 2020, which was to run from March 25, 2020 till April 14, 2020, and has been subsequently extended till May 03, 2020. The financial strain of the lockdown has been faced by the manufacturing and service sectors alike. The key question faced by large, medium and small enterprises, businessmen and professionals is the legal obligation of payment of full salaries to their workers/employees when their own sources of income have dried up due to the implementation of the lockdown which in effect has forced the said workers/employees to stay away from the work place. So far, all communications issued by the Central Government except for one communication dated March 29, 2020, issued by the Ministry of Home Affairs (“MHA”) have been in the nature of advisories, and therefore, without the force of law. On March 20, 2020, the Ministry of Labour issued an advisory to all Employers Associations, Chairman of Public Enterprises and Chief Secretaries of all States, stating that, “….Employers of Public/Private Establishments are advised not to terminate their employees, particularly casual or contractual workers from job or reduce their wages.” On March 29, 2020, an order was passed by MHA (“MHA Order”) wherein the Home Secretary in his capacity as Chairperson, National Executive Committee (“Chairperson”) had directed that certain measures be taken to mitigate the hardships faced by migrant workers. The MHA Order has the force of law since it was passed by the Chairperson, in exercise of the powers conferred upon him under section 10(2)(I) of the Disaster Management Act, 2005 (“DM Act”). It is relevant to note that paragraph 2 and 3 of the MHA Order, make references to ‘migrant workers’. The paragraph 3 of the MHA Order, reads as follows: “… Whereas, to deal with the situation and for effective implementation of the lockdown measures, and to mitigate the economic hardship of the migrant workers, in exercise of the powers, conferred upon Section 10(2)(I) of the Disaster Management Act 2005, the undersigned, in his capacity as Chairperson, National Executive Committee hereby directs the State/Union Territory Governments and State/Union Territory Authorities to take necessary action to issue necessary orders to their District Magistrate/Deputy Commissioner and Senior Superintendent of Police/Superintendent of Police/Deputy Commissioner of Police, to take the following measures: … 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;…” It is evident from the above that, only one binding order i.e. MHA Order has been issued under section 10(2)(I) of the DM Act. The MHA Order has been challenged by way of Special Leave Petitions (“SLPs”) by a number of petitioners such as Ludhiana Hand Tools Association, Ficus Pax Private Limited and Nagreeka Exports Limited (“Petitioners”). The primary grounds raised by the Petitioners for challenging the legality of the MHA Order are as follows: a) Neither National Disaster Management Authority nor National Executive Committee constituted under the DM Act have power under section 7 or 10 to direct employers to make payment to their workers without deduction, during the period of lockdown. Further, the orders are passed beyond the legislative competence of the MHA and therefore, are ultra viresthe DM Act; b) The Orders are violative of Article 14 and Article 19(1)(g) of the Constitution of India. The Supreme Court has issued notice and 2 weeks’ time has been granted to the Central Government to respond to the SLPs. Trade Unions have also impleaded themselves as parties and are taking the stand that livelihood of workers would be at stake if full salaries are not paid. It may be noted that the MHA Order makes a reference in paragraph 2 to ‘migrants’ and in paragraph 3 to ‘migrant workers’ and hence use of different terms at different paragraphs leaves it vague. The intent appears to be to protect ‘migrant workers’. In the directions covered in paragraph 3, it is stated that all employers would make payments to their 'workers' without deduction. Therefore, the MHA Order dated 29.03.2020 is vague in its wording since it has used the terms migrant workers/workers at different places and therefore, enterprises can take a stand that the MHA Order dated 29.03.2020 would be applicable to only those staff/employees who fall under the definition of ‘workman’ as defined under section 2(s) of the Industrial Disputes Act, 1947 (“Industrial Disputes Act”). Pay Cuts during the lockdown: One may argue that the Petitioners have merit in their legal argument, however, one may also need to take into account that the Indian Courts in past have taken a sympathetic view taking into consideration hardship faced by economically weaker section of society i.e. daily wagers/employees/workers and have not confined itself to the strict interpretation of the law. Therefore, till such time as the Supreme Court decides the legality of MHA Order it would be prudent to abide by it. It would be practical for enterprises to negotiate with their employees/workers to reach an amicable solution with respect to voluntary pay cuts/extent of salary deductions. The enterprises can impress upon the employees/workers that the financial health of the organization is important for the continued gainful employment of the employees/workers. Some organizations are using a combination of pay cuts and salary deferment. The portion withheld would be paid to the employees after the financial health of the organization has improved. However, it may be noted that the deferred portion would become payable at the time of the full and final settlement if that precedes the improvement in the financial health of the organization. Pay Cuts post lockdown: There would be no legal restrictions on pay cuts post lockdown as long as the minimum wages in accordance with law are paid and all contractual obligations between the parties are adhered to. Termination during lockdown: One of us (Advocate, Shlok Chandra) had the opportunity to appear in the case Narendra Singh & Ors. V. St. Stephens Hospital & Ors., WP (C) 2961/2020, on April 13, 2020, via web-conference before the Hon’ble Delhi High Court on behalf of the Delhi Government. In this petition, a group of pharmacists challenged their retrenchment by the hospital under the Industrial Disputes Act. The Central Government and State Government supported the stand of the pharmacists that at a time like this when the country was already facing pandemic of COVID-19, services of persons engaged in health care services ought not to be terminated. Finally, a consent order was passed where the hospital agreed to pay the salaries for the month of March and April and the matter has been listed before the roster bench on May 04, 2020. It has been clarified that no observations on the merits of the case have been made and further, that any acceptance of any amounts by the pharmacists, in terms of the order would be without prejudice to their rights and contentions under the petition. Therefore, it appears likely that the Indian Courts would direct that services of personnel engaged in essential services are not terminated during the period of national lockdown. The order can be found at http://delhihighcourt.nic.in/dhcqrydisp_o.asp?pn=71338&yr=2020. The above is indicative of the fact that the Indian Courts are likely to tilt towards equity and encourage entities to keep their termination orders in abeyance during the national lockdown. This would be even more applicable in cases of workers/employees engaged in essential services . It may be stated that in purely legal terms, there is no restriction on entities terminating their workers/employees during the national lockdown since only advisories have been issued by the Central Government encouraging entities not to terminate their workers. Termination Beyond national Lock-down: There would be no restriction on entities terminating the employment of their employees/workers as long as statutory dues payable under the Industrial Disputes Act and/or contractual obligations inter aliain terms of termination notice or pay in lieu of termination notice are adhered to. To conclude, the Supreme Court decision would decide the fate of the MHA Order, and in the interim, it would be prudent to resolve issues between the employers and employees amicably using innovative methodologies of not reducing salaries but reducing other ancillary benefits, salary deferment, voluntary pay cuts etc. The best solutions are often those where there is something on the table for all parties. Written by Shlok Chandra and Utpal Kant


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