Writ Petitions have been filed for quashing of the MHA Order and the MOLE Advisory regarding termination and/or reduction of wages of the employees during lockdown period. This article discusses the MHA Order and the MOLE Advisory and its constitution validity in the unprecedented COVID-19 pandemic circumstances.
Several Writ Petitions (including Intervention Applications) have been filed in the Supreme Court of India by companies challenging the constitutional validity/ quashing of Advisory issued by Ministry of Labour & Employment on March 20, 2020 (“MOLE Advisory”) and Order of Ministry of Home Affairs on March 29, 2020 (“MHA Order”) issued by Central Government to not terminate pay or reduce wages of the employees/ workers during the lockdown period. The constitutional validity of the MOLE Advisory and MHA Order has been challenged as being ultra vires Article 14 and Article 19(1)(g) of the Constitution of India.
Present Status (as on May 15, 2020): The Writ Petitions are pending adjudication before the Supreme Court of India and in the hearing held on May 15, 2020, a notice has been issued to the Central Government for filing their reply in a week’s time on the implementation of the MHA Order and MOLE Advisory. Further the Supreme Court has passed an Interim Order in Hand Tool Manufacturers Association vs. Union of India & Ors. that no coercive action shall be taken against private establishments till the time reply is filed by the Central Government.
While no such Interim Order has been passed in other Writ Petitions however, it is likely that since the matter/ issue is sub-judice before the Supreme Court, no coercive action would be taken by the authorities on any action taken by private establishments till this Interim Order remains in operation.
Advisory issued by Ministry of Labour & Employment on March 20, 2020 (“MOLE Advisory”)
As per the MOLE Advisory, all Chief Secretaries of States and UTs, have been requested to issue necessary Advisory to Employers and Owners of all establishments in the State, to extend their cooperation by not terminating the employees, particularly casual or contractual workers from job or reduce their wages. According to the MOLE Advisory, if any worker takes leave or the place of employment has been made non-operational due to COVID-19 pandemic, such employee should be deemed to be on duty without any consequential deduction in wages for this period.
Order of Ministry of Home Affairs on March 29, 2020 (“MHA Order”)
As per the MHA Order, all employers whether in industry or in shops and commercial establishments will have to pay wages to their workers, on the due date, at work places, without any deductions, for the period their establishments are under closure during the lockdown. The MHA Order further directs the States / UTs to take necessary action in case of violation of the said MHA Order.
The constitutional validity of the MHA Order and MOLE Advisory (hereinafter together referred to as “Directives” for the purpose of this article) has been challenged inter alia on the following main grounds:
- The Directives are ultra vires the Constitution of India as the Government lacks the power under the Disaster Management Act, 2005 to direct private establishments to pay full wages irrespective of work done. It has been plead that payment of full wages, in these unprecedented times, is akin to a tax, but without any statutory backing;
- The Directives are arbitrary, irrational, unreasonable and contrary to provisions of law as, an otherwise stable and solvent industrial establishment, can be forced into insolvency and loss of control of business thereby hampering their rights to under Article 19(1)(g) of the Constitution of India;
- The Directives are contrary to principle of “Equal Work Equal Pay” and “No Work No Pay” as it does not differentiate between the workers who are working during the lock down period and those who are not working thereby violating principles of Article 14 and Article 39 of the Constitution of India;
- The Government has the responsibility and power to allocate and utilize funds collected for emergency response, relief, rehabilitation, mitigation of disasters under Sections 46 and 47 of the Disaster Management Act, 2005.
Alternatives have been suggested to subsidize the wages of workers to the tune of 70-80% for lockdown period by utilization of the funds collected by the Employees’ State Insurance Corporation (ESIC) or the PM Cares Fund. It has been plead that the economy is in lockdown and business revenues are at zero, it is impossible for employers to continue making payments to workers. The Government cannot be permitted to cause financial hardship to industrial establishments by compelling them to pay wages without getting any work done from the employees during the lockdown period.
While the aforementioned Directives issued by the Central Government is with the intention of mitigating the economic hardships of the employed persons that such employees may face in case of termination/reduction of wages, it has burdened the employers as there has been absolutely no business activity during the period of lockdown, which has resulted in financial burden/crisis on the employers. And faced by this hardship many of the MSME units have already closed down their operations or on the verge of becoming insolvent.
In my considered view various Indian labour legislations including the Directives provide protection only to those employees who earn ‘wages’ under the applicable Payment of Wages Act, 1936 or Minimum Wages Act, 1948 and fall within the category of ‘workman’ under the Industrial Disputes Act, 1947. For all other employees, their relationship with the employers is entirely governed by respective employment contracts and/or the employee handbooks. So, there is no statutory mandate on the employers to pay full salaries to such employees that are not earning ‘wages’ and are not ‘workman’. The employers may reduce/ defer salaries or alter payment terms and even terminate the employees, if there are business conditions that may cause loss to the establishments or lead such establishments to insolvency. Needless to mention, this may be done by seeking implied or express consent from the employees.
However, considering the unprecedented COVID-19 pandemic situation there is high probability of the authorities not going by the strict interpretation and take a conservative/ sympathetic view that the Directives are mandatory on all the employees. Hence, till such time the Supreme Court does not finally decide the issue of constitutionality or implementation on the employees (‘workman’ and ‘non-workman’ included) of the Directives, it will be premature to draw any conclusion.
The author is a Corporate and M&A lawyer at Sarin Partners Advocates & Legal Consultants. The views in the article should not be construed as legal advice. Please contact the author for any clarification.