PAYMENT OF WAGES: THE EMPLOYER-EMPLOYEE TUSSLE IN THE COVID-19 CONTEXT

Pritesh Raj & Tamanna Gupta

“Lockdown had an equally adverse effect on employers as well as employees…”

Ashok Bhushan, J.

The COVID – 19 pandemic has led to complete shutdown of commercial entities, as a result of which a considerable proportion of the labour class has gone unemployed. This has led to a surge of litigation in courts under numerous legislations (particularly Payment of Wages Act, 1936) demanding their employers to pay them their due for the time during which lockdown was imposed nationwide.

Prima facieit’s the predicament of labourers which seems evident but it’s also the employers who have faced the brunt of COVID-19 pandemic with depreciation in their revenue as well as demand for their product. An entity cannot be expected to pay its employee salary beyond a certain limit when the entity itself is unable to sustain its existence and moreover when those employees are not contributing members of the entity.

IMPEDING SITUATION

On 20th of March 2020, an advisory issued by Ministry of Labour and Employment recommended employers at different private commercial entities to not deduct wages of their employee during the ensuing lockdown. To further substantiate the notification by Labour ministry, five days after the nationwide lockdown was imposed an order under Section 10(2)(l) of the Disaster Management Act, 2005 was issued by the Home Secretary in the exercise of his authority as the Chairperson of National Executive Committee making it mandatory for all commercial establishment to make full payment for the time period during which the ongoing lockdown ensued. This order by the Home Secretary had a severe effect on the Micro, Small and Medium  Enterprises and particularly the new start-ups who had work at their establishment halted because of lack of manpower and were instead being forced to pay for labour which was never rendered to them.

This imposition by the government led to hue and cry amongst the employers in the private sector as these entities were running losses throughout the lockdown period as the sale of their products and services were at a standstill. Thus, to contend with the constitutional validity of the impugned order and its imposition, several employers as well as employer unions, filed petitions before numerous High Courts as well as the Supreme Court seeking relief from obligations imposed by the government. 

Legislations related to labour regulations enacted in India are particularly inclined toward the working class instead of the employers as they are the ones who are for the most part exploited by the higher echelons of society. In order to counter exploitation of menial labourers and employees in large establishments, Parliament has laid down a comprehensive framework to ensure payment of minimum wages to labourers. Legislations like The Minimum Wages Act, 1948 and Payment of Wages Act, 1936, for instance, makes it evident through multiple provisions encompassed in them. Nonetheless, these legislations also contain provisions which have the potential to mitigate the responsibility of the corporation from paying wages in unusual circumstances. For instance, provisions like Section 9 of The Payment of Wages Act, 1936 taks about circumstances wherein if the employee has not rendered any service for a certain period of time then the employer can deduct his wage depending upon the impeding situation and numerous other factors.

FICUS PAX PVT. LTD. & ORS v. UNION OF INDIA (2020)

Question regarding payment of wages by private entities to employees during lockdown was raised before a Three – Judge Bench of Supreme Court in Ficus Pax Pvt. Ltd. & Ors v. Union of India & Ors (2020), where numerous writ petitions filed by different employers as well employer association were clubbed together. In conjunction with each other, the Association of Employers made a plea before the Hon’ble Supreme Court to absolve them from their liability to pay the labourers wages for the period of lockdown during which they were not actively employed.

It was contended by the petitioner’s that the impugned order by Home Secretary was unconstitutional as well against the doctrine of “Equal Work – Equal Payand “No Work – No Pay”, whereby employers were forced to pay those employees who did not render any service to the private entity during the period of lockdown. If the impugned order by the Home Secretary is sustained by the Supreme Court, it may lead to huge implications and a resounding effect on the private sector which the incumbent government is so determined to help grow. 

Moreover, different organizations and commercial entities are indifferent to each other in terms of capability to bear the burden of paying wages during these turbulent times. While one might be a multinational corporation having sources of revenue world over, others might be as small as a Hindu Joint Family Business where the family might not even have resources to cover their own personal expenses. Therefore the impugned order infringed Article 14 of The Indian Constitution which espouses the doctrine of “Equality among equals”.

It was contended by the counsel on behalf of UOI, Attorney General K. K. Venugopal that in response to the lockdown government had also issued an economic stimulus package to support MSME’s to pay off wages of their employees but the package did not consider the employers in MSME’s who also need resources to sustain themselves as well as needs of their establishment.

In response to the petition filed by employers association, Supreme Court through its order passed, showed a lenient approach toward the employing class wherein the order as well as the advisory was temporarily set aside and instead directions were issued to private entities to initiate negotiation proceedings through a local statutory labour authority to resolve the dispute. Moreover, it was also directed that if the result of the negotiation is not in consonance with the Order issued by the Home Secretary, then the resulting decision will prevail over the order. 

SUGGESTION

It cannot be refuted that working class has suffered considerable economic backlash during this pandemic because of their loss of employment however it should also not be overlooked that commercial entities have also suffered severe lack of revenue and financial constraints because of the abrupt decline in demand for their products as well as services, thus converting their once profitable establishment into a huge loss-making organization leading to bankruptcy in several instance. A middle ground has to be found otherwise the loss will be on both sides of the aisle.

One such solution is that the burden of paying wages of employees must be taken by both the employers as well as the Government. In the petition filed before the Supreme Court in Ficus Pax Pvt. Ltd. & Ors Union of India & Ors (2020), a suggestion was promulgated by the petitionerbefore the Hon’ble Court, wherein it was proposed that the private entity will pay 50% of basic pay as well as the dearness allowance (without PF and ESIC which is not considered as wage) to all its employees, whereas the other half be paid by the government using funds present in Employers State Insurance Corporation (ESIC).

CONCLUSION

COVID-19 pandemic has put the whole world in a state of conundrum. This has affected employees and employers alike. While employees have lost their employment as a means of sustenance, employers have lost their revenue source to sustain their business during these turbulent times. In light of the impeding situation the Apex Court decision is viable and a practical one which will provide a quick solution to the problem at hand. Unlike earlier when the concerns of the labour class were given preference over employers, in this instance the Supreme Court has extended an olive branch on behalf of the employees to the employers requesting them to solve the matter in an amicable manner. This decision by the Supreme Court will provide impetus to the MSME’s nationwide as well as cut some slack at a time when they are already in a state of conundrum with a government-sanctioned hiatus on operations of their establishment. Especially those establishments which are functioning in non-IT sectors as work from home is not possible for them. Despite the decision of the Supreme Court it is yet to be seen whether both the parties will be able to come to a harmonious agreement.

Pritesh Raj, Second year student at NUSRL, Ranchi & Tamanna Gupta Fourth year student at RGNUL, Patiala

Picture Credits: The Financial Express

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