The outbreak of COVID-19 is a global pandemic and on March 14, 2020 the government of India declared COVID-19 as a "notified disaster". Following this declaration by the central government, several state governments such as Delhi, West Bengal and Maharashtra proceeded to impose a complete lockdown in their states invoking the 123-year-old legislation viz Epidemic Diseases Act, 1897.
In view of the prevailing lockdown imposed by various states, the Ministry of Labour and Employment issued an advisory on 20th March 2020 appealing to all employer's association not to terminate their employees or cut wages of its workers in view of the lockdown. The advisory also stated that all employers of public/private establishments are advised to extend their cooperation by not terminating their employees, particularly casual or contractual workers or reduce their wages. It further stated that if any 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.
Given that labour law statutes such as the Industrial Disputes Act, 1947, Payment of Wages Act, 1937, Contract Labour Act, 1970, Inter-State Migrant Workmen Act, 1979 to name a few govern payment of wages to workers/employees and particularly the provisions of the Industrial Disputes Act, 1947 which explicitly recognizes the right of an employer to lay off an employee and reduce wages to 50% upto a period of 45 days in certain eventualities including a natural calamity (Section 25C and Section 25M), and after 45 days if the layoff continues, no wages is payable, it appears that the Ministry of Labour and Employment has consciously chosen to issue an advisory instead of resorting to a formal order/direction mandating payment of wages during lockdown.
Considering the situation prevailing in the country due to the outbreak of COVID-19, the Central Government through the Ministry of Home Affairs, invoking its power under Section 10 (2) (l) of the Disaster Management Act, 2005 ("DM Act") declared a nationwide lockdown on 24th March, 2020 with effect from 25th March, 2020 till 14th April 2020 in order to contain the spread of COVID-19 from being further transmitted.
While the country was coming to terms with the nationwide lockdown, a huge exodus of migrant laborers trying to reach their hometowns started taking place. Such a mass efflux of laborers increased the risk of spreading the virus which prompted the central government through the Ministry of Home Affairs to issue an order on 29th March, 2020 ("order of 29th March, 2020") in exercise its power under section 10 (2) (l) of the DM Act directing the states and union territories to ensure adequate arrangements of temporary shelter and provision of food for migrant workers who had already moved out / got stranded in such states and union territories amongst other directions.
The order of 29th March 2020, in order to mitigate the economic hardship of the migrant workers also directed the states and union territories to take measures to ensure that all employers, be it in the Industry or shops and commercial establishments, pay wages to their workers without any deductions for the period their establishments are under closure during the lockdown. Consequently, all employers are now required to ensure timely and full payment of wages to their employees/workers even if no work was carried out and no service was rendered by them during the period of lockdown and the establishment was closed. With the same purpose, the order further prohibited landlords from demanding rent from migrant workers living in rented properties.
POWER TO ISSUE / LEGALITY OF THE SAID DIRECTION ON PAYMENT OF WAGES:
The objective of the DM Act is to provide for effective management of disaster, and to this effect, the National Executive Committee (constituted under section 8 of the DM Act) has the power to give directions to any Ministry/Department of the Government of India, State/ Union Territory Government / Authorities regarding measures to be taken by them in response to any disaster. The said power does not include the power to issue directions to any Industry, Shop and Commercial establishment, private enterprise/ its owner.
While in the present case, the order of 29th March 2020 was issued State/ Union Territory Government and State/ Union Territory Government authorities to take measures to ensure that all employers, be it in Industries or in shops and commercial establishments, shall make payment of wages to their employees at their workplace without any deductions during the period of the lockdown, what begs the question is how such State/ Union Territory Government/ authorities would enforce the order which pertains to issues falling within the domain of private employment and governed by employer employee relationship and whether any steps taken by the State/ Union Territory Government/ authorities solely on the basis of the order of 29th March 2020 issued in purported exercise of power by the Central Government under the DM Act vide would be legal.
Surely effective management of disaster cannot entail directions by the Central Government/ National Executive Committee to private employers, be it in Industries or in shops and commercial establishments to ensure timely payment of wages to their employees without any deductions during the period of lockdown. The DM Act does not envisage any role of Industries or shops and commercial establishments in effective management of disaster. A bare reading of the provisions of the DM Act does not indicate that the Industries or shops and commercial establishments can be fastened with any financial liability/ burden by the Central Government or that the operation/application of the relevant laws which govern the employer employee relationship/ labour laws can be suspended/overwritten for the effective management of disaster.
While it appears that the DM Act gives wide powers to the government to impose such measures as they deem necessary, given that these powers are not explicitly mentioned in the DM Act, the obligation cast on the private employers to ensure payment of wages during the period of lockdown appears to suffer from the vice of wrongful exercise of power. It seems far-fetched to imply that the powers under the DM Act empower the government to financially burden private employers as a measure to mitigate disaster. This imposition cast on private employers could certainly be termed as arbitrary and unreasonable since it appears to have no rational nexus for the purposes of achieving the objectives of the DM Act and is clearly overreach of powers.
From a humanitarian perspective, directing employers to ensure payment of wages to migrant labour may at first blush appear logical as in the event these workers are left without any source of income, they would be constrained to travel home which would defeat the very purposes of the containment measures. But to cast the financial obligation on private employers to ensure timely payment of wages without any monetary aid from the government at a time when operations are down and no revenue is generated, cannot be said to be an objective under the DM Act and appears to ring hollow in light of the fact that many state governments have itself taken a decision to cut or defer salaries of government employees in light of the Covid-19 pandemic.
Both employer and employee have a fundamental right to carry on any occupation, trade or business, as enshrined under Article 19(l)(g) of the Constitution of India, which fundamental right stands effectively suspended during lockdown. However, it appears that the order of 29th March 2020 only seeks to take measures to mitigate the economic hardship of the employees/workers to the detriment of the same rights of an employer. The measures adopted by the government have ignored the rights/entitlement of the employer to measures to mitigate their economic hardship and have failed to consider that COVID-19 is adversely impacting both employer and employee and it was incumbent on the government to take a balanced view so that both these classes could overcome this unprecedented situation.
Thus the order of 29th March 2020, to the extent it directed the states and union territories to take measures to ensure that all employers, be it in the Industry or shops and commercial establishments, to pay wages to their workers without any deductions for the period their establishments are under closure during the lockdown, besides being ultra vires the powers under the DM Act, appears to be in derogation to Article 14 of the Constitution of India which protects a person's right to equal protection of laws.
It is relevant to note that the existing labour law statutes such as the Industrial Disputes Act, 1947, Payment of Wages Act, 1937, Contract Labour Act, 1970, Inter-State Migrant Workmen Act, 1979 to name a few govern not only payment of wages to workers/employees but also regulate the manner in which workers can be terminated. These include deductions for absence from duty, deductions for damages for loss of goods expressly, deductions for house-accommodation supplied by the employer, deductions for such amenities and services supplied by the employer etc. Similarly, the respective Shops and Establishment Act enacted by every state also delineates the manner in which payment of wages is to be made to employees and in which circumstances deductions can be made by an employer. These would continue to govern the employer employee relationship in any Industries or shops and commercial establishments dehors the order of 29th March 2020 issued by the Central Government.
While the intentions of the government appear to be noble, the measures adopted to ensure payment of wages are not adequate to tackle the problem. The need of the hour is a dedicated framework in the form of monetary subsidies similar to the ones declared by governments across the globe.
Australia has initiated a "Jobkeeper" wage subsidy plan, under which an employer can claim a payment of $1,500 every fortnight per eligible employee from March 30, 2020. The Australian government has provided payments of up to $25,000 to businesses to cover wages of employees.
The government of Canada has announced a fiscal stimulus package amounting to C$202 billion which also includes wage subsidies and tax deferrals to inject cash into the country's small and medium-sized businesses providing 75% subsidy on wages.
Similarly, Ireland has also announced a Wage Subsidy scheme, under which employers are refunded up to 70 per cent of an employee's wages, up to a specific amount to reduce the adverse financial effects of COVID-19 on employers.
The United States of America has announced a $2.2 trillion stimulus package which includes distribution of $1,200 stimulus checks, enhanced unemployment benefits and forgivable loans for small businesses to pay workers and other expenses even while they're shuttered. Individuals with an adjusted gross income below $99,000 as a single filer, $136,500 as head of household, or $198,000 as a joint filer will be getting stimulus checks.
The obligation to mitigate disaster under the DM Act is cast upon the central and state government and passing this burden, financial or otherwise onto any Industries or shops and commercial establishments or private employers/individuals without any express provisions under the DM Act would be ultra vires the DM Act. As such even section 72 of the DM Act, which states that the provisions of the DM Act shall have an overriding effect, notwithstanding anything inconsistent therewith contained in any other law, would not be attracted in such a case.
It would also be relevant to note the clarifications issued by the Ministry of Corporate Affairs on 10th April 2020 where it said: "Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, payment of salaries/wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period." While these clarifications were issued in relation to questions raised whether payment of salaries/wages during lockdown period would qualify as Corporate Social Responsibility, it appears that there is no unison amongst the various ministries on the issue of whether payment of wages without any deductions during lockdown is a moral or a statutory obligation under the provisions of the DM Act.
As the nationwide lockdown has been extended by the government to 3rd May 2020, it is likely that all businesses across all industries would be severely impacted. In such a situation it would neither be prudent nor fair to further direct an employer to continue payment of wages to its workers without any corresponding business being transacted by the Industries or shops and commercial establishments.
The only way to tackle this problem and prevent a complete deterioration of all industries would be by subsidizing employers for the payments made by them to their workers and employees during the period the lockdown is in force. In the absence of such measures, Industries or shops and commercial establishments will be put through hardships that would most likely push them to bankruptcy, the impact of which on the workers / employees would outlast the pandemic itself.
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