COVID-19: IMPACT ON WAGE PAYMENT OBLIGATIONS OF WORKERS

Authors: Akangsha Majumdar, Presidency University

Padmalaya Kanumgo, SLS, Hyderabad

Shrey Kumar Sinha, FOL, DU


Editor: Dyuthi, SLS, Pune


INTRODUCTION AND BACKGROUND

Considering the menacing nature of the unprecedented calamity prevailing in India due to the upsurge in the cases of COVID-19, the Ministry of Home Affairs, Government of India passed an order[1] declaring a nationwide lockdown from 25th of March, 2020 to 14th April, 2020.

The order for the lockdown was passed to prevent further spreading of the virus. However, they failed to anticipate and prepare for the mass exodus of migrant workers travelling back to their hometowns which in turn increased the chances of the spreading of COVID-19 virus. So, as a response, the Central Government through the Ministry of Home Affairs issued an order on 29th of March, 2020 directing states and union territories to take appropriate measures to ensure that

“all employers, be it in the Industry or shops and commercial establishments, shall make payment of wages to their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown[2].”

OBJECTIONS TO MANDATORY PAYMENT

The order of 29th March was primarily passed by the Central Government to mitigate the economic hardships that were faced by these migrant workers during the period of lockdown. The constitutional validity of the order was put to question by many and was also challenged before the Hon’ble Supreme Court. While it was argued that the order was translation of the constitutional provision into action, a counter petition that the order was ultra vires.

It was submitted that a perusal of the provisions laid down under the Disaster Management Act does not indicate that Industries or Commercial establishments have any role to play in effective disaster management. The do not undertake the obligation burdened with any financial liability by the Centre. Additionally, that the obligation cast on part of the private employers to make payment of wages is purely made on arbitrary grounds by the wrongful exercise of power by the government. Hence, the order passed by the MHA on the 29th of March is not only ultra vires of the powers laid down under the Disaster Management Act but also stands in contravention to Article 14 of the Indian Constitution which ensures “equal protection of laws.”

However, many employers have gone against the MHA Wage order and the directions of the government by reducing salaries, terminating a huge number of employees, aking them to undertake leave without pay, etc. Post 17th May, 2020, however, the scenario changed.

The MHA Wage Order ceases to be effective with the passing of the 17th May, 2020 MHA Wage Order[3]. The new order states that

“the employers to govern the terms of employment including payment, retrenchment, lay-off, and termination as per the provisions of the respective employment agreements and the applicable legislation such as the state-specific Shops and Establishments Act, Industrial Disputes Act, 1947 and other applicable labour laws without the contravention of the MHA Wage Order. This is however subject to any further orders or directions being issued by the government specially related to employees in the near future[4]”.

EFFECT OF MHA ORDER DATED 17.05.2020

The Order dated May 17, 2020 will have implication on the payment of full wages of the employees and it ceased to have effect from the 18th of May 2020. And thereby, as the previous Order gets nullified, all the State government orders deriving authority from it, gets repealed.

The new Order follows the principle of ‘no work- no wages’ and thus, the industry employers the employers are discharged from the obligation of mandatorily paying full wages to employees. This brings forth the obvious need of the workers to be paid the minimum level of wages for survival on humanitarian grounds.


The Disaster Management Act (DMA)[5] empowers the National Executive Committee (NEC) to lay down guidelines and give directions to the State Governments or the concerned authorities with regard to the measures that have to be taken by them in case of a disaster. But again, Labour and Employment comes under the Concurrent list. So, if the states wish to not provide with any relaxation to the compulsion of paying full wages to employees, they shall issue other Orders or notifications with regard to this.


The nullification of the previous order and the implication of the new order, is in fact, beneficiary for the private sector employers. It acts a safeguard for the employers against any litigation process with regard to the non-payment of wages. But, it comes at the cost of leaving citizens unemployed and unpaid.

GOVERNMENTAL MEASURES

The vulnerable migrant workers are the most affected during this pandemic. They were left stranded without any notice in in far away places from their homes where they arrivedto earn wages. But due to the pandemic and subsequent sudden nationwide lockdown, their workplaces closed and they lost their means of livelihood. In India, as the industries were closed the employers found it difficult to pay the wages as there was very less or zero production during initial phases of lockdown.


The measures taken by Central Government, in this regard are (in chronological order)-

i. The MHA order,[6] provided that all the employers should make the payment of wages to their workers without any deductions for the period of closure of their establishments during lockdown.

ii. Ministry of Corporate Affairs (MCA) released a set of ‘FAQs’ clarifying the position that payment of wages to the employees during the time of pandemic is the moral obligation of the employer as they don`t have other source of income and it will not be accounted as Corporate Social Responsibility (CSR) expenditure.[7]

iii. Later through another MHA order,[8] the mandatory obligation upon the employers to pay full wages to the workers was relaxed. However, the minimum subsistence level of payment is to be done by the employer on humanitarian grounds.


“Labour and employment” is a subject matter of Concurrent List.[9] Therefore, both the Central and State Governments are authorized to issue regulations based on this regard. Therefore, states which do not intend to allow this relaxation on mandatory payment of wages, may take up the same. However, some states have gone the opposite route and have relaxed labour laws for the employers:

Ø Uttar Pradesh: The U.P. Government promulgated an ordinance[10] which exempted all existing and new businesses and industries from all major labour laws for 3 years. The ordinance provided that the minimum wages as ascertained by the government have to be paid within the time frame provided under Payment of Wages Act,1936[11] directly in their bank accounts. Laws relating to women and children, safety and security of workmen, Bonded Labour Act etc. will continue to apply.

Ø Madhya Pradesh: The M.P. Government amended the Industrial Disputes Act, 1947 through notification in official gazette[12], which exempted new industries from the provisions of layoff and retrenchment for 1000 days from date of publication of the order. Furthermore, it has limited the scope of applicability to those enterprises which have more than 100 workers alone.

Similar amendments have been brought by other states like Gujarat, Rajasthan and Haryana.


JUDICIAL STANDING

After the MHA order[13], certain employers are following the principle of ‘no work, no pay’, increasing the problem faced by workers who have gone back to their native places.

“Faced with the above difficulties, a few trade unions and workers have also filed counter petitions seeking protection from wrongful termination and payment of wages. In one such petition filed by the Rashtriya Shramik Aghadi, a contract labourers' union, the Aurangabad Bench of the Bombay High Court, on May 12, 2020, held that the principle of 'no work-no wages' cannot be applied during the present extraordinary situation prevailing in the country due to the COVID-19 pandemic and directed the principal employer to ensure that the contractor pays full wages, save and except food allowance and conveyance allowance, to the employees for March, April and May 2020[14].”

The Bombay High Court`s Aurangabad bench held that full wages of the contract workers have to be paid upto the month of May who were not able to work due to pandemic and the principle of ‘no work, no pay’ cannot be applied in such circumstances.[15] In the case of Ficus Pax Private Limited v. Union of India,[16] the Supreme Court passed interim order regarding payment of wages to workers during the pandemic. The three- judge bench said that settlement between the employers and employees must be carried out as no industry can survive without workers. This order provided the process of negotiations and settlement between the parties, if the settlement is reached then it should be acted upon irrespective of any orders. This is to apply to all establishments irrespective of whether it functioning in its full capacity or not. Additionally, if any employee is willing to work he should be permitted without any prejudice to their rights regarding unpaid wages. Until the next hearing, no coercive action is to taken against any employer regarding unpaid wages.

SUGGESTIONS AND CONCLUSION

This is a difficult issue to resolve due to the scarcity of resources available with all stakeholders involved. However, we need to consider the role of the Government as a welfare state. The package which was released in the form of Atmanirbhar Bharat Abhiyan fell short of being either a relief or a fiscal stimulus package. It is true that there are multiple dimensions of challenges to consider. However, a strengthening argument through academic and administrative circles claims that the singular focus of the stimulus package should have been an increase of direct cash transfers and subsidies and an increase in the direct welfare benefits, would have eased the pressure on the citizen and the employer.[17]

At a time when the whole country is battling a crisis and economy seems to struggle, we need to take actions in mutual interest. “It throws an opportunity both for capital and labour to act in mutual interest by exploring ingenious methods to sustain[18]”. Going by the observation made by the Supreme Court which stated that industries and labourers are co-dependent and one group can't survive without the other so there should be mutual efforts from both the sides to solve the disputes and arrive at a suitable settlement.

[1] Under Section 10(2) (I) of the Disaster Management Act, 2005 [2] Order No. 40-3/2020-DM-1(A), Dated 29.03.2020. [3] Order No. 40-3/2020-DM-1(A), Dated 17.05.2020. [4] Supra footnote 3. [5]Sect 10 (2)(1), Disaster Management Act, 2005 No.53 of 2005. [6]Supra footnote 2. [7] MCA General Circular No. 15/2020 (F. No. CSR-01/4/2020-CSR-MCA), 'COVID-19 related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)' dated 10.04.2020, FAQ 5 [8]Supra footnote 3. [9]Indian Constitution, Schedule 7, List III Entry No.24 [10]Uttar Pradesh Temporary Exemptions from Certain Labour Laws Ordinance,dated 08.05.2020. [11]Sect.5, Payment of Wages Act , 1936 Act 4 of 1936. [12]Dated 05.05.2020. [13]Supra footnote 3. [14]Seema Jhingan and Tanmay Mohanty, India: MHA Withdraws Order Requiring Compulsory Payment of Wages, 19 May, 2020. Available at (https://www.mondaq.com/india/employment-and-workforce-wellbeing/937246/mha-withdraws-order-requiring-compulsory-payment-of-wages) [15]Rashtriya Shramik Aghadi v. State of Maharashtra, Writ Petition No.4013 of 2020, Bombay HC. [16]Writ Petition Diary No.10983 of 2020 ,Dated 12.05.2020. [17] No Stimulus in Economic Stimulus Package Atmanirbhar Bharat Abhiyan falls short of being either a relief or a fiscal package, Vol 55,Issue No22,23 May,2020. Retrieved from: https://www.epw.in/ [18] Shridhar Prabhu, Payment of wages during COVID-19 Lockdown: To pay, or not to pay? , Apr 24, 2020. Available at (https://www.barandbench.com/columns/payment-of-wages-during-covid-19-lockdown-to-pay-or-notto-pay)

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