The Controversial Order and Advisory:
To contain Covid-19 virus pandemic, nationwide lockdown was ordered. Absence of any economic activity during lockdown rendered migrant workers redundant. Consequently, a large exodus of migrant workers took place from various work places to reach their hometowns. Social distancing norms were ignored thereby upping risk of spread of virus.
To manage lockdown effectively and reduce economic hardship of migrant workers, the Ministry of Home Affairs ("MHA"), Government of India passed an order1 ("Order"). In the Order, MHA directed State Governments and/or Union Territories to implement additional measures. One such measure was to direct all employers owning factories, shops, commercial establishments to pay wages to their workers at their work place on due date without any deduction for the period their establishments were closed due to lockdown. State Governments/Union Territories acted on the Order and passed consequential orders to this effect. (emphasis supplied)
In the recital part of the Order, MHA mentioned 'migrant workers' whereas in operative/direction part MHA simply used word 'worker'. This forced employers to extend benefit to all non-managerial employees in addition to migrant workers.
Prior to issuance of Order, on March 20, 2020, the Ministry of Labour and Employment too, had issued an advisory to the industry. It advised employers to abstain from terminating services of workers or reducing their wages during the lockdown.
Employers across India filed writ petitions with Supreme Court and/or High Courts thereby challenging controversial Order. Various employees' organization and different unions filed intervention applications in support of Order and opposed employer's petitions. Aside employers/employees even public spirited individual filed public interest litigation in this regard. Thus Hon'ble Apex Court has a daunting task of adjudicating dispute between employer, employees and government.
- The Order compels employers to retain migrant and regular workers. It requires them to pay full wages especially when there was no business during lockdown. Thus the Order can force an otherwise stable and solvent industrial establishment into insolvency and lose control of business;
- MHA cannot invoke Section 10(2)(l)2 of Disaster Management Act, 2005 ("DMA") to impose financial obligations such as payment of wages on employers. The ultimate onus to compensate workers is that of government and it cannot shift the burden on employers;
- The Order was issued to safeguard interest of migrant workers. However, the scope of Order should not be extended to cover entire workforce of an establishment;
- The Order fails to differentiate between workers who worked during lockdown and those who didn't. Hence the Order conflicts with principles of 'Equal Work Equal Pay' and 'No Work No Pay';
- The Order groups them all industries and private establishments in one category thereby ignoring the fact that such industries and private establishments have different financial capacity;
- Failure to comply with Order for genuine reasons like complete absence of funds would still render the employer liable to prosecution. Thus the Order is ex-facie arbitrary and unreasonable; and
- Last but not the least, the Order is contrary to provisions of Article 143, Article 19(1)(g)4 and Article 300A5 of the Constitution of India;
- To make periodical payments to the workers, government must utilize funds lying with Employees' State Insurance Corporation ("ESIC") or constitute funds under DMA namely- 'National Disaster Response Funds' and 'State Disaster Response Funds'; and
- Some petitioners expressed their willingness to pay 50% wages for lockdown period. Few petitioners submitted that they are negotiating payment of wages for the lockdown period with their workers.
- Order and the advisories of Central/State Governments to the extent they compel employers to pay full salaries should be declared ultra vires Articles 14 and 19(1)(g) of the Constitution of India and quashed;
- If court concludes the government has powers under DMA to direct private establishment to pay wages to their workers during the lockdown period, it should order that Section 10(2)(l) of DMA be declared ultra vires to Articles 14 and 19(1)(g) of the Constitution of India;
- Pending final disposal of the matter, permit petitioners to make payment of 50% of Basic Pay + Dearness Allowance to its workers without payment of contribution towards provident fund and ESIC;
- Direct authorities to waive provident fund and ESIC contribution as there was no work during lockdown. Consequently even direct authorities to refund of March and April 2020 aforesaid social security contributions;
- Direct government to subsidize wages of workers to the tune of 70% to 80% during lockdown period. For this purpose, funds from ESIC or PM CARES funds should be utilized; and
- Pass appropriate direction to the government to strike a balance between the conflicting interest of MSMEs and workers/employees such that neither is unduly prejudiced.
Public Interest Litigation:
By Public Interest Litigation, a public spirited person sought to mitigate problems of both financially weaker employers as well as employees. Accordingly, following directions were sought:
- Formulate policy measures to mitigate problems of sudden laying-off of employees of private sector during lockdown;
- Where employer is financially weak and unable to maintain the employees, direct the government to support such employees who in turn cannot maintain their families and fulfill basic needs;
- Government's power to issue Order can be traced under Section 10(1)7 of DMA. Section 10(2) of DMA does not restrict the scope and ambit of Section 10(1) of DMA. Thus the Order was in full conformity with provisions of DMA;
- The Order was issued to prevent perpetration of financial crisis within lower strata of society represented by such labourers and employees;
- The Order was issued as a temporary measure aimed to mitigate financial hardship of employees and workers especially contractual workers and casual workers during lockdown period;
- The Order was in force for 54 (fifty four) days only as it ceased to be in operation w.e.f May 18, 2020;
- The Order was an economic and welfare measure; and
- The ground of financial hardship raised by employers is legally untenable ground to challenge the Order;
Intervenors' support to government:
Intervenors supported government by submitting as under:
- The government has offered economic stimulus package to all small and medium enterprises to remain viable as well as cope with both financial situation and the burden of payment of wages;
- The Order and advisory were issued in larger public interest to prevent possible spread of disease;
- Closure of the workplace due to nationwide lockdown directly affected the sustenance and livelihood of members of union whereas the Order seeks to reinforce pre-existing right of workers to receive wages without reduction. Thus if the Order is struck down then even nationwide lockdown is liable to be struck down for arbitrariness;
- DMA is a self-contained code. Reliance cannot be placed on other laws as Section 728 of DMA overrides provisions of all other enactments;
- Central Government has full authority under DMA to issue such an Order and measures undertaken by government were under its legislative competence;
- The prayer of petitioners to utilize ESIC funds was refuted;
Important noting of Apex Court:
- The Apex Court took note of the fact that the Order is no longer in operation. However, the issue, whether the Order (when in was in force i.e. from March 29, 2020 to May 17, 2020) was ultra vires the Articles 14, 19 and 219 of the Constitution of India needs to be answered;
- The Court took note of the fact that (i) all industries/establishments are of different nature and of different capacity including financial capacity; and (ii) not all employers would be able to bear the burden of payment of wages or substantial wages to their workers during lockdown; and (iii) no industry/establishment can survive without employers/labourers and vice-versa; (emphasis supplied)
- Hon'ble Apex Court therefore felt a need to strike balance between competitive claims of employers and employees through negotiations.
- On June 4, 2020 Apex Court had directed that no coercive action be taken against employers not complying with the Order. The Court has continued with this direction for all matters;
- All private employers (including employers whose establishments/industries were functional during lockdown as well as petitioners) and employees, negotiate and arrive at a settlement with regards to payment of wages for the applicable period during which establishment was closed due to lockdown.
- Where negotiations fail, conciliation assistance may be requested from the concerned labour authorities under different statutes to arrive at a settlement. Where settlement is arrived, employers and employees shall act upon it dehors the directions of government set out in the Order. In this context, court directed petitioners to file an affidavit on the next date of hearing if a settlement is reached.
- The Court has taken note of the challenges faced by employers owing to government's Order under DMA. However, given the fact that Covid-19 pandemic is continuing, one cannot rule out the fact the Court may be constrained to sacrifice private interest to safeguard public interest. Thus the interim measure of Court is a blessing in disguise for employers- both who have complied with Order as well as those who failed to comply with it.
- Given the economic downturn, employees are more concerned about job-security rather than reduced pay. Employers must proactively discuss cost-containment measures such as 'lay-off', 'reduced pay', 'working from home', 'exhausting paid leaves', reducing 6 working day week to 3/4 working day week owing to social distancing norms, 'insurance', etc. Discussions/negotiations would culminate into settlement with unions/employees which would insulate businesses from onerous, unreasonable and arbitrary executive diktats issued under DMA or similar statutes.
* Order dated June 12, 2020 in Ficus Pax Pvt. Ltd. & Ors. Vs. UoI WP (C) Diary No. 10983 of 2020.
1. Order No. 40-3/2020-DM-I(A) dated March 29, 2020 under Section 10(2)(l) of DMA.
2. Powers and functions of National Executive Committee ("NEC") are set out in Section 10 of DMA. Under Section 10(2)(l), NEC is empowered to laydown guidelines or give directions regarding measures to be undertaken by concerned ministries/departments of the Central/State government or state authorities in response to any threatening disaster situation or disaster.
3. Article 14 of Constitution of India, deals with equality before law. Articles stipulate that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India
4. Articles 19 of Constitution of India, protects certain rights regarding freedom of speech, etc. whereas Article 19(1)(g) specifically protects the right to practice any profession, or to carry on any occupation, trade or business.
5. Article 300A of Constitution of India, states that no person shall be deprived of his property save by authority of law.
6. Petitioner include private employers like 'Ficus Pax Private Limited' and 'B4S Solution Private Limited'; and association like Small Industry Associations;
7. Section 10(1) of DMA imposes a duty on NEC to assist National Authority in- (i) discharge of its functions; (ii) implement its policies and plans; and (iii) ensuring compliance of directions issued by Central Government for the purpose of disaster management.
8. Section 72 of DMA states that the provisions of this Act, shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than DMA.
9. Article 21 stipulates that no person shall be deprived of his life or personal liberty except according to procedure established by law.
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