By: Dhruv Kaushal, Associate at Qui Prior Law Associates
Business has always operated with the principle of “No work, no pay”. However, the principle has been overruled during the COVID-19 crisis and the nationwide lockdown imposed subsequently. On 24th March 2020, the Ministry of Home Affairs, invoked the National Disaster Management Act, 2005 and the Epidemic Diseases Act, 1897 mandated closure of commercial, private and industrial establishments as well as all transport services, educational institutions with the only exemption for essential commodities and services. On 27th March 2020, the Ministry of Labour and Employment issued a circular, advising various industries/enterprises/companies to not to retrench or lay-off any employee and continue paying the wages. Thereafter on 29th March 2020, the Central Government issued a subsequent order under Section 10(2)(i) of the NDMA. The directions were issued requiring all State Governments and the Governments of Union Territories to issue orders/circulars, mandatorily requiring all the employers (including factory owners) in the industrial sector (including shops and commercial establishments) to pay wages to their workers at their workplaces on the due date without any deduction during their closure due to lockdown.
Existing Position- As per the existing law viz. the Industrial Disputes Act, 1947, the workmen of an establishment maybe laid-off in the event of a natural calamity by following the due process as laid down under the Act. A combined reading of Section 2(kkk) and Section 25-C reveals that, the laid-off workmen will be entitled to receive a compensation equal to 50% of the salaries, however if a workman is laid-off for more than 45 days (which is the scenario as a result of the lockdown), the employer shall not be liable to pay any compensation after the expiry of the first period of 45 days, if there is a mutual agreement to that effect between the workman and the employer.
Position post the Government Orders – A combined reading of the aforementioned orders and circulars issued by the government and its agencies, goes against the provisions of the Industrial Disputes Act, wherein a mandatory sanction is imposed on all employers to neither terminate nor deduct wages of any workman. Visibly, this has enraged the employers, as they do not have any orders, business or revenue, but have been obligated to pay wages to all their workman. Most startlingly, the workmen are not even available to claim wages as on date owing to departures to their respective villages and homes as a result of the lockdown. However, the directions issued by the government contravening the current law, have materially affected the interests and business continuity of the employers.
Two firms, Nagreeka Exports Ltd and Ficus Pax Private Limited, as well as a Ludhiana-based association of MSMEs have approached the Supreme Court of India, seeking directions to quash the Centre’s orders and circulars. The petition claims that the government and government agencies have violated Articles 14 (right to equality) and 19 (right to do business) of the Constitution. Interestingly, the government’s expectation requiring a ‘business-as-usual’ scenario from private corporates is inequitable and unfair, in a situation when the government itself is deferring payment of government officers during lockdown. It has also been claimed that the government orders violate Section 25C and 25M of the Industrial Disputes Act, 1947 as explained above. Moreover, strong-arming industrial players, already suffering as a result of the lockdown, will additionally imperil the recovery of the industries that will be crucial to restarting growth after the pandemic.
On 27th April 2020, the Supreme Court granted 2 weeks’ time to the Centre to respond to a batch of pleas challenging its decision obligating employers to pay full wages to their workmen during the lockdown imposed to contain spread of COVID-19.