This article is written by Lalit Ajmani, Advocate, practising before Delhi High Court and other Delhi courts.

Introduction

The COVID-19 has not just stalled the progress of the entire world, but also taken away thousands of jobs and caused massive salaries cut. Further various businesses, especially small and medium size ventures have suffered a deadly blow. Resultantly, the employees are suffering the impact of less liquidity and they are also bereft of other suitable opportunities due to the sluggish economy. 

In such times, law is evolving at frantic pace and trying to deal with the day to day challenges which were never heard of. Moreover, the government is also issuing various notices and amending policies on a regular basis to curb the impact of COVID-19. Despite various efforts from the different sectors, the jobs loss and salaries cut are the tough challenges to deal with. 

On these lines, this article is being written in an attempt to throw some light on the current legal developments dealing with the employment and the interests of the employees in these unprecedented times. Though the employment is governed by the employment agreement signed by and between the employer and the employee. But there are various other factors which affect the rights and liabilities of the employees and hence can’t be ignored. As stated earlier, the law is evolving on a daily basis and perhaps it’s not possible to detail out every movement, ergo for brevity, the following legal developments covering various aspects of the employment are being discussed herein. 

Suspension of the Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (for brevity- “the Code”), inter alia, entitles the operational creditors including the employees to file an application seeking corporate insolvency resolution process against the corporate debtors where default is of Rs 1 lakh or more (Section 9 read with Section 4 of the Insolvency & the Bankruptcy Code). Though in the case of Lalit Mishra & Ors. vs. Sharon Bio Medicine Ltd. & Ors., the Hon’ble NCLAT has held that the resolution under the Code is not a recovery suit. But in practice it is observed that various employees use the provisions of the Code to recover their dues, and the corporate debtors often accede to the demands of the employees and propose to settle the matter in order to escape from the resolution process.

As the pandemic has put the economy on the back foot, the Central Government in its wisdom vide notification dated 24.03.2020 had increased the threshold limit of default from Rs 1 lac to Rs 1 crore. A couple of months thereafter, the government brought an amendment to the Code on 5th June 2020 i.e. Insolvency and Bankruptcy Code Amendment (Ordinance) 2020 and thereby suspended the Code for 6 months which ultimately put a halt on the rights of the employees among others to file an application under the Code.

These changes have definitely hit the employees to take the benefits of the Code because as stated earlier the employees don’t restrain themselves to file the cases under the Code in order to secure the dues. Moreover, the resolution mechanism acts as deterrence against the corporate debtors from keeping the dues for long. 

Now, the employees are left with the fundamental civil proceedings that take years before showing some substantial result. It can also not be missed that once the Code will be resumed then the moratorium (Section 14 of the Insolvency and Bankruptcy Code) will stop all other proceedings, including the civil recovery proceedings, if any against the same corporate debtor. In other words, even if the employees use the civil remedies then the same may be stopped by the virtue of moratorium that could be issued in some future case filed against the same corporate debtor under the Code. Thus, as of now the employees have practically no effective and speedy remedy to recover the dues bearing the fundamental civil recovery provisions.

Public interest litigations

A few petitions in the form of PILs have been filed before the Hon’ble Supreme Court and various High Courts against the massive salaries cut and the layoffs. Further, sector specific cases have also been filed highlighting the plight of the employees in the related sectors. 

In the case of Supreme Court Bar Clerks’ Association vs. Union of India & Ors the petitioner, inter alia, sought for Rs 15,000/- relief for the clerks as the work of many lawyers have taken a huge dip, resultantly the clerks are also facing the acute financial hardships. Moreover, the petitioner association also prayed for framing of a National Scheme under Section 11 of the Disaster Management Act, 2005.

On the similar lines, the media industry is also seen struggling. Surprisingly, the employees in the media industry have also faced similar issues and couldn’t save themselves from the massive salaries cut despite there being clear directions that print and electronic media can work during these times too. Consequently, this issue was highlighted in the case of National Alliance of Journalists & Ors. vs. Union of India & Ors. the court has issued notice in the said matter but the same is still pending adjudication before the Hon’ble Supreme Court of India.

Till yet no conclusive direction has been delivered in this regard, but it is to be kept in mind that the cases are still pending and the final result is awaiting. Thus, only the future can tell us the fate of these litigations and it’d be interesting to witness the stand of the judiciary qua these unprecedented issues.

Executive orders

As we all are witnessing the cases of jobs loss and salaries cut, the executive body issued various orders directing certain classes of establishments not to cut salaries, wages of the employees and also not to fire them on the account of lockdown. One similar order was passed by the Ministry of Home Affairs on 29.03.2020, by the virtue of which the following direction, among others was given.

all the employers be it in the industries or in the shops, commercial establishment, shall make payment of wages of their workers, at their workplace, on the due date, without any deduction, for the period their establishments are under closure during the lockdown.

Further the Ministry clarified that the necessary actions shall be taken against the employers in case of non compliance. Thereafter, the said order was challenged before the Hon’ble Supreme Court and the court in the case of Ficus Pax Private Ltd. & Ors. vs. Union of India & Ors. vide interim order dated 12.06.2020 held that the no coercive step will be taken in the case of non compliance of the MHA order dated 29.03.2020. Further the Hon’ble Court asked the employers and the workers/ employees to explore the possibilities of the settlement regarding the dues during the term of the lockdown notwithstanding the directions issued by the government vide order dated 29.03.2020. 

Further, in this case, the respondent has apprised the Court that the said order was withdrawn w.e.f. 18.05.2020. Subsequently, the Court noticed that the impact of the notice is of 50 days and considering the gravity of the matter, the Court directed the respondent to file a detailed reply and put the matter for the last week of July, 2020. Till then, the aforesaid interim directions were to be in force.

Though the government in its wisdom has directed the various players not to deduct wages and refrain from laying-off the staff, the same was not in consonance with the practical limitations. Resultantly, the government has withdrawn such orders w.e.f. 18.05.2020. Despite that , the government didn’t clarify the impact of the orders from the date of issuance of order till the withdrawal of the orders on the employers. The said confusion is now the contention before the Hon’ble Court which will be put up in the last leg of July 2020 for further consideration.

Suspension of the employment terms

In addition to the above, it is being witnessed that the employees are unable to cherish their normal employment terms and benefits in the light of COVID-19. Such cases shouldn’t be compared with the aforementioned serious situations where the employment is terminated or a considerable amount of salary is slashed. But the grievance of the employees can’t be ignored on the basis of the comparison and the possibility of misuse of these unprecedented events by the employers can also not be ruled out.

One similar issue was recently dealt with by the Hon’ble Delhi High Court. In the case of All India Air Force Civilian Cooks Association & Anr. vs. Union of India & Ors., the petitioner association has, inter alia, urged the Court to direct the respondent to enforce normal employment terms as the cooks are being stayed away from their homes for 28 days, out of which their services are not utilized for 14 days due to quarantine schedule. The Court didn’t agree with the contention of the petitioner and noted that the petitioner cannot seek enforcement of employment terms as in normal time, when the nation is witnessing the tough times. Thus the court clarified that the balance needs to be maintained between the needs of the employees and the demands of the current situation.

Rental income

The rent payment in the current times is worrying almost every employer, and the people who are largely dependent upon the rental income. Moreover, the employees staying on rent are also concerned about it. Fortunately, the issue is now no more res integra and recently the dust is settled by the Hon’ble Delhi High Court.

In the case of Ramanand and Ors v. Dr Girish Soni and Anr the Hon’ble Delhi High Court categorically held that the tenant can’t take the defense of the current pandemic in order to avoid paying rent to the landlord unless otherwise clearly mentioned in the  rent agreement. The Court elucidated that the terms of the agreement like force majeure clause or alike will govern the issue of suspension of rent, but in the absence of such terms, the applicable law will govern the situation. 

In the former case, where agreements stipulate force majeure clause, then the case will be analyzed in the light of Section 32 of the Indian Contract Act, 1872 (for brevity –“Contract Act”). Further, the issue of suspension largely depends upon the wordings of the force majeure clause, therefore no straight jacket formulae can’t be derived out. However, where the tenant wishes to keep the possession, then the relief of suspension can’t be considered unless specifically stated out in the contract. Since the pandemic is an unprecedented event, it is, therefore, possible that the rent agreements will be devoid of such stipulation, hence the relief of suspension of rent is a bleak possibility.

In the other scenario, where the Contract is devoid of force majeure clause or alike, then the applicable law will be considered. In such cases, Section 56 of the Contract Act is a relevant provision. But the Court held that the lease is a completed conveyance and therefore Section 56 is not applicable. Hence, the lessees are bound to pay the rent to the landlords.

Though the aforesaid development doesn’t directly touch the issue in hand. However, the same is quite important because the employees who reside on rent need to consider it in the light of tough job days. Moreover, at the time when the businesses ain’t working, the employers are penalized to keep paying rent for their offices. Therefore, the expenses without normal business can cause the layoffs and salaries cut of the employees which have been happening since the beginning of the lockdown.

Conclusion

At the end it is stated that the mere perusal of the aforesaid legal developments clarify that the judiciary and the legislature are trying to maintain the balance between the employers’ interests and the employees’ needs. The aforesaid pending cases’ fate will further clarify the future of the employees’ interests. Beside the said legal developments, the fate of a particular employee or a class of employees is largely dependent upon the employment agreement. Therefore, it is advisable to consider the terms of the agreements along with the applicable law and recent legal development before jumping to any conclusion.

References

• https://www.ibbi.gov.in/legal-framework/act
• Article titled “Journalists laid off: The COVID–19 Lockdown”. Available on https://2019.hrln.org/journalists-laid-off-the-COVID–19-lockdown/
• Order dated 29.03.2020 issued by the Ministry of Home Affairs under Section 10 of the Disaster Management Act

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