LABOUR IMPLICATIONS OF COVID-19 IN INDIA
Recently, the spread of novel ‘coronavirus’ or COVID-19 was declared a ‘pandemic’ by the World Health Organization on March 11, 2020, followed by the National Disaster Management Authority of India declaring it a ‘notified disaster’ under the Disaster Management Act, 2005 (“DMA”). Following the rise of COVID-19 cases in India, the Ministry of Home Affairs (“MHA”) on March 24, 2020[1] notified a nationwide lockdown commencing from March 25, 2020 for a period of 21 days i.e. till April 14, 2020, which was further extended by a period of 19 days till May 03, 2020 by another order of the MHA dated April 14, 2020[2] (collectively referred to as the “Lockdown Orders”). This situation has brought to the forefront, a number of labour related issues for business owners, which have prompted a number of legal queries for employers and employees alike.
We have seen that under the umbrella of the Lockdown Orders, the government has ordered all public and private establishments to be shut down for the duration of the lockdown, with the exception of certain notified services, deemed to be “essential services”. This has adversely impacted businesses across the board. With office premises temporarily shut, businesses are facing a lack of employee availability, which has subsequently led to disrupted supply chains, low cash-flow and an all-time low demand. In order to maintain business sustainability in the face of such dire circumstances, various public and private institutions have enforced unprecedented labour measures such as reduction of labour costs by implementing layoffs, salary reductions, unpaid work suspensions, variable working conditions etc.
Despite the practical monetary difficulties faced by businesses at this time, the government has not introduced any labour related economic relief measures for them. On the contrary, the Union Ministry of Labour & Employment through an advisory dated March 20, 2020 (“Advisory”)[3], addressed to “all Employers’ Associations”, urged employers to not terminate their employees, “particularly casual or contractual workers from job or reduce their wages”. It is stated therein that if workers take leave during this period, they should be deemed to be on duty without “any consequential deduction in wages for this period”. Moreover, it is also stated that “if the place of employment is to be made non-operational due to COVID-19, the employees of such unit will be deemed to be on duty.”
In line with the Advisory, various State Governments, including those of Karnataka, Haryana and Maharashtra have also issued similar directives. Further, the State Governments of Telangana and Uttar Pradesh have directed all shops and establishments to be closed during the lockdown period as specified in the Lockdown Orders and declared such days as paid holidays for all categories of employees. Additionally, the MHA on March 29, 2020 issued a notification (“March 29 Notification”)[4] requiring employers of all industries, shops and establishments to pay wages to all workers without deductions during the period of lockdown.
In light of the above mentioned advisories and orders circulated by the Central and State Governments, it has become imperative to examine the legal validity and the binding effect of the same in light of the legal regime surrounding this fact situation.
Generally speaking, labour related issues in India are governed by a plethora of legislations. Depending on the nature of employment across sectors, employees/workers are primarily governed by (a) the clauses of the employees’ respective employment agreements with their employer; or (b) the Industrial Disputes Act, 1947 for workmen[5] engaged in factories or manufacturing units; or (c) the applicable state legislation governing shops and commercial establishments pertaining to those establishments that do not undertake manufacturing activities or other functions which might classify them as a factory; or (d) the Contract Labour Regulation and Abolition Act, 1970 which deals with contract labourers who have been defined as labourers who are hired to work for establishments by contractors on behalf of a principal employer.
The applicable processes for executing lay-offs, terminating employment, reducing wages and determining paid/unpaid leaves are found in the abovementioned labour legislations. Further relevant labour laws pertaining to (a) wages; (b) social security of employees; (c) working hours and conditions of service; (d) equality and empowerment of women and; (e) prohibitive/preventive law aimed at protecting employees’ fundamental rights, must be assessed in tandem with the abovementioned laws governing terms of employment.
As mentioned above, the Lockdown Orders directly impact the ability of employers to conduct their business operations and of employees to work from or physically report to their work premises. Employers are expected to abide by these notifications strictly by completely suspending work on location and/or implementing suitable work-from-home policies. Typically, work-from-home policies are not governed by any specific laws in India. Accordingly, such policies are being adopted by each business in accordance with its individual needs and preferences. However, one must be mindful of the fact that merely because an employee is working from home does not mean that the labour laws, as stated above, otherwise applicable to employers and their employees, cease to operate.
Take note that the Lockdown Orders and the March 29 Notification have been notified under Section 10(2)(1) of the DMA. The legal implications of not adhering to these are found under Sections 51-60 of the DMA which covers the offences and penalties chapter of the DMA. Further, Section 188 of the Indian Penal Code (disobedience of order promulgated by public servant) can also be attracted for non-compliance by individual offenders. Specifically, under Section 58 of the DMA, officers-in-charge of the conduct of the business of a company such as directors, managers, secretaries etc., can be held to be responsible and prosecuted against for any contravention of these notifications by a company.
On the other hand, the Advisory, as the name suggests and by its very nature, has only an advisory role to play and non-adherence to or deviation from it is necessarily and implicitly permissible if the circumstances of any particular fact or law situation warrants the same. Judicial control is likely to take over only where the deviation either involves arbitrariness or discrimination which is then directly in violation of Article 14 of the Constitution.
Having said that, since the text of the Advisory and the March 29 Notification seem to overlap to the extent of directing employers to “make payment of wages to their workers on the due date, without any deduction for the period their establishments are under closure during the lockdown”, these directions will have to be necessarily followed by the employers/ business owners to avoid any prosecution by the government or any disputes that may be brought upon by employees/employees’ associations before the relevant Labour Authority.
Pertinently, a writ petition under Section 32 of the Constitution has been filed in the Supreme Court challenging the constitutional validity of the March 29 Notification to the extent that it directs employers to pay full salaries to their employers on time even during such exigent circumstances. The petitioner, Nagreeka Exports Limited is a manufacturer and exporter of cotton yarns and related products. It has reasonably contended that in the absence of any or very limited revenue generation during the period of lockdown, it is practically impossible for the petitioner to pay its workmen and employees. The petitioner has further put forth pertinent questions of law that whether the government is empowered under the DMA to issue directions in the nature of mandating private establishments to make full payments to their employees and workmen; whether government action stands the test of reasonableness as envisioned in Article 14 of the Constitution as it seems to have been taken without proper deliberation and without considering the financial capacity of each employer to bear the burden of payment of salary to its workers without there being any production/conduct of meaningful business. The observations and direction of the Supreme Court in this case will therefore, be directly of relevance in the current scenario.
It’s interesting to note that despite the Advisory and the March 29 Notification, the Government of Telangana by way of its notification dated March 30, 2020[6], has actually deferred payment of wages/ salaries, including all allowances and perks of all government employees and workers on the ground of economic impact caused due to the lockdown, consequent lack of cash flow and in view of additional expenditures being incurred to control the pandemic. Furthermore, even the Central Government by way of the ‘The Salary, Allowances and Pension of Members of Parliament (Amendment) Ordinance, 2020’ has taken steps to reduce the salaries, allowances and pensions of Members of Parliament by 30 per cent for one year for purposes of raising resources to manage and control COVID-19.
It is noteworthy that the Constitution of India makes it imperative on the State to secure for its citizens’, the rights guaranteed by the Constitution even in situations of natural calamity, as a territorial guardian of its people. Each State is therefore obliged to provide assistance and support to the victims of natural calamities and such obligations of the State cannot be assigned to a private establishment by way of an order under the DMA.
Awaiting the observations of the Supreme Court on the abovementioned writ petition, it may be practically and most legally sound for an establishment, to the extent that it belongs to a State that has not as yet prohibited the termination of employment, to reduce its work force (if required) by following the due process set out in the applicable labour laws (as mentioned above) read with the terms of the relevant employment agreement and the organization’s employment policies, while ensuring that no wages/ salaries of the existing employees are cut. While dealing with these cases, it’s necessary for employers to also treat employee health information that they may receive, as confidential and to ensure that their policies apply to all employees uniformly without singling out those employees perceived to have or actually contracted COVID-19.
[1] MHA order no. 40-3/2020-DM-I(A), available at https://prsindia.org/files/covid19/notifications/144.IND_Citizens_Guidelines_Lockdown_Mar_24.pdf read with https://prsindia.org/files/covid19/notifications/145.IND_Citizens_Guidelines_LockdownAnnexure_Mar_24.pdf.
[2] MHA order no. 40-3/2020-DM-I(A), available at https://prsindia.org/files/covid19/notifications/2737.IND_Extension_Lockdown_Order_April_14.pdf.
[3] Ministry of Labour and Employment DO No. M-11-11/08/2020-Media available at https://prsindia.org/files/covid19/notifications/112.IND_Businesses_Advisory_Continuation%20of%20Employement%20and%20Wages_4_Mar_20.pdf
[4] MHA order no. 40-3/2020-DM-I(A), available at https://prsindia.org/files/covid19/notifications/864.IND_MHA_Directions_for_Migrant_Workers_March_29.pdf.
[5] Section 2(s) of the ID Act defines a ‘workman’ as any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied and does not include any such person (i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or (ii) who is employed in the police service or as an officer or other employee of a prison; or (iii) who is employed mainly in a managerial or administrative capacity; or (iv) who, being employed in a supervisory capacity, draws wages exceeding ten thousand rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.
[6] GO Ms. No. 27 available at https://prsindia.org/files/covid19/notifications/1682.TS_salaries_deferment_MAr_30.PDF.