Negotiation/Settlement of Lockdown Wages is a Way Forward Holds Supreme Court

Seema JhinganPartner, LexCounsel

Non-payment or substantial reduction of wages for the period the Indian industry was closed or operating at limited capacity due to COVID-19 despite the Central Government’s order to continue paying wages to workmen during the lockdown period has led to filing of several petitions before the Hon’ble Supreme Court of India.  In  the matter of Ficus Pax Private Ltd. & Ors. Vs. Union of India & Ors. [Writ Petition (C) Diary No. 10983 of 2020] (clubbed with various writ petitions), the Supreme Court has issued interim measures aimed at negotiating and settling the wages to be paid by employers to its employees for the lockdown period pursuant to the order dated March 29, 2020 (“MHA Wage Order”) issued by the Ministry of Home Affairs (“MHA”) in exercise of its powers under Section 10(2)(l) of the Disaster Management Act, 2005 (“DM Act”) and its subsequent withdrawal vide MHA’s order dated May 17, 2020 with effect from May 18, 2020. The settlement, if any, will be without prejudice to the rights of the employers/employees which is the subject of adjudication of the aforesaid petitions.

 

Background

 

The Ministry of Labour and Employment had issued an advisory on March 20, 2020 (“Advisory”) advising all employers of public and private establishments to extend their cooperation by not terminating the employees, especially casual and contractual workers, or reducing the wages of such employees. The Advisory further stated that in case the place of employment is made non-operational due to the COVID-19 pandemic, then the employees of such unit will be deemed to be on duty.

 

Thereafter, the MHA Wage Order was issued. Pursuant to the issuance of the Advisory and the MHA Wage Order, most states in India issued orders/advisories (applicable upto the initial lockdown, i.e. till March 31, 2020) on similar grounds, i.e. advising or directing employers not to terminate the employees/workmen and to treat the lock-down period as a ‘paid leave’ for all its employees.

 

Subsequently, in view of the extension of the nationwide lockdown, some states extended the applicability of the orders beyond March 31, 2020 or issued new orders under the Epidemic Diseases Act, 1897 stating that the employees (including temporary/contractual/outsourced, etc.) of private establishments, required to stay at home due to lockdown order shall be treated as ‘on duty’ and shall be paid in full in this respect.

 

Even though the MHA Wage Order has been subsequently withdrawn vide MHA’s order dated May 17, 2020 with effect from May 18, 2020, the industry is still liable to pay the wages for the 50 days of lockdown period starting from March 29, 2020 to May 17, 20220. Consequently, the above stated orders including the MHA Wage Order and several advisories and directions issued by the states have been challenged by the industry before the Supreme Court of India as being unconstitutional on several grounds including that they impinge upon the fundamental right to freedom of the industrial units and enterprises to carry on any occupation, trade or business under Article 19 of the Constitution of India as it will lead to collapse of the industrial units if they are forced to pay salaries without any revenue. The Apex Court in a few of the petitions passed an order on June 4, 2020 that no coercive action will be taken against the employers pursuant to the MHA Wage Order (refer our earlier article published at https://www.mondaq.com/india/employment-and-workforce-wellbeing/937246/mha-withdraws-order-requiring-compulsory-payment-of-wages).

 

Central Government’s Stand

 

The Central Government argued that it was fully competent to issue the MHA Wage Order under the DM Act and the MHA Wage Order was in full conformity with the provisions and scheme of the DM Act. The Central Government stated that the MHA Wage Order was issued in larger public interest as a temporary measure to mitigate the financial hardship of employees and workers especially contractual and casual workers during the lockdown period.

 

Additionally, the Central Government contended that the ground of financial hardship and incapacity is an untenable ground for challenging the MHA Wage Order.

 

Interim Measures

 

Taking note of the adverse effect of the lockdown on the employers as well as employees and prayers of various petitioners concerning part-payment of wages with a direction to the Central Government to “strike a balance between the interest of MSMEs and the interest of the employees”, the Supreme Court opined that efforts should be made between the industry and workers to sort out the differences/disputes regarding of payment of wages for the lockdown period of 50 days and if any settlement/negotiation can be arrived at between the employer and employees without regard to the MHA Wage Order, the same may be undertaken to restore congenial work atmosphere.

 

In the regard, the Supreme Court issued the following directions which can be availed by all private establishments, industries, factories, trade unions/employee associations etc.:

 

  • Private establishments and employers may initiate negotiation with their employees regarding payment of wages for the lockdown period as issued by the Central Government or such period as applicable in any particular state during which the establishment was closed and enter into settlement. In case of failure of settlement, a request can be submitted to the concerned labour authorities for negotiation, conciliation, and settlement. In case a settlement is reached between the parties, the same may be acted upon irrespective of the MHA Wage Order.

 

  • Establishments, industries, and factories operating during the lockdown at limited capacity can also enter into negotiations with their employees/workers for settlement as specified in point (i) above.

 

  • Private establishments, industries and factories shall permit workers/employees, who are willing to work, to work in their establishments without prejudice to the rights of the worker/employee regarding the payment of wages for the lockdown period.

 

  • Private establishments, industries and factories who initiate negotiation for settlement with their workers/employees shall publicise and communicate about such steps to workers/employees for their response/participation. The settlement, if any, will be without prejudice to the rights of the employers/employees which is pending adjudication in the petitions.

 

Additionally, the Supreme Court has continued its earlier order of June 4, 2020 wherein it had directed that no coercive action be taken against employers pursuant to the MHA Wage Order.

 

The case will be listed for further hearing in the last week of July 2020.

 

Summation:

 

It is evident that the Supreme Court is trying the balance between the conflicting interest of the industry and establishments who have been hit hard during the lockdown with no operations and lack of revenue and the devasting financial conditions of poor workers and employees due to lack of work and wages. Even though the country is slowly moving back towards normalcy in many states, the competing claims and interest of industry and workers for those 50 days during which the MHA Wage Order was in force is creating serious differences and bitter working environment for both employers and employees and should therefore be best resolved through mutual discussions and settlement. It is expected that the labour authorities would in the near future be flooded with petitions for negotiation, conciliation, and settlement in tandem with the Apex Court’s order.

 

For COVID-19 related legal updates, please refer to https://lexcounsel.in/newletters/newsletters-2020/ and Mondaq at https://resources.mondaq.com/mir/articles.aspx and for COVID-19 related articles, please refer to https://lexcounsel.in/articles-2020/.