This article is written by Samiksha Gupta, an Associate Advocate at Suren Uppal Offices, Noida. In this article, she mentions about the liability of the employers to remunerate its employees during COVID-19.
Where the world is distressed by the daunting situation created due to the catastrophic outbreak of COVID-19, Companies/Industries/Associations and their workforces are also facing frantic challenges during such period of disruption.
As a consequence of lockdown nearly all business activities have come to halt due to the restricted movement and shutting down off all non- essential services which has impacted the business entities and economy at large.
The major repercussion of worldwide lockdown is being faced by the Employers who are now incapacitated to remunerate its employees due to the paralyzed state of affairs. Furthermore, in such a situation where the Government is expected to support the Companies, industries and establishment but in the absence of the same, tacking this unprecedented challenge is wholly left to the Companies itself and wherein the employers are in a predicament after the various advisories and order passed by the Central Government to remunerate the workmen and protect their interests.
Order issued by the Ministry of Home Affairs dated 29.03.2020
It is to emphasize that the order passed by the Ministry of Home Affairs dated 29th March 2020 was in pursuance to the powers conferred under the Disaster Management Act, 2005 under Section 10(2)(l). In the forthcoming paragraphs Ministry had stated its intention i.e. the reason for passing such an order “Whereas, to deal with the situation and for effective implementation of the lockdown measures, and to mitigate the economic hardship of the migrant workers in exercise of the powers conferred…hereby directs the State/Union Territory to take necessary actions…. And to take following additional measures:
All the employers, be it in the Industry or in the shops and commercial establishments, shall make payment of wages of their workers at their workplaces on the due date without any deduction for the period their establishment are under closure during the breakdown.”
Whether Payment of Wages can be mandated for all employees as per the Aforementioned Order?
Significantly, it is noticeable that neither the Disaster Management Act, 2005 not the Epidemic Diseases Act, 1897 prescribe any clause empowering the Central Government to mandate the payment of wages in a case where the Company is incapacitated to operate its activities due to force majeure conditions like that of COVID-19 pandemic. Therefore, as per the powers and functions granted to the National Executive Committee under the aforementioned Acts, the said authority can only pass such order or directions for the purposes of disaster management in the country. The direction of mandating the remuneration to all the workers at the cost of the industries is not only antagonistic to the objectives which the legislature seeks to attain under the Disaster Management Act, 2005 but also against the jurisprudential principle of utilitarianism.
Principle of Utilitarianism
Utilitarianism is the most powerful and persuasive approach. One important thing to be noted is that this principle is a form of consequentialism guiding the government and the individuals to take actions as per the consequences.
According to this theory propounded by Jeremy Bentham who was an English Philosopher and a political radical, the actions of the government are weighed against community good to bring greater happiness and maximizing the good i.e. to bring “the greater amount of good for the greater number” Furthermore, to achieve such an end, the government must pursue the four “subordinate” ends of utility and these are universally applicable as the greatest happiness principle
“Subsistence, abundance, security and equality”
Now, keeping this principle in mind while interpreting the order passed by the Central Government directing all industries to mandatorily pay wages to its employees, it manifests that such an order, if applied bluntly to all employers including those facing sustenance issue, would cause menace to the society. Large scale of unemployment leading to the phase of depression would only cause pain and agony.
Interpretation and Deriving Intent of the Government in case of ambiguity
Now, what is clear from the above order is the intent and objective of the Government while giving such directions. What still remains ambiguous is the applicability of the said order to all the industries/Companies/undertaking etc and even though in circumstances when the aforementioned entities are in doldrums.
Whether under such circumstances when the entities are not generating revenue and suspects the closure considering the present scenario, are they still bound to remunerate their employees?
It is a common rule of interpretation that in the absence of specific indication, words should be interpreted according to its literal and plain meaning. But if the statute is ambiguous, then courts resort to statutory construction wherein the following would be considered:
- The objective sought to be attained
- The legislative intent
- The consequence of a particular construction etc
It is pertinent to state that the legislative intent as deduced from the reasons stated in the order dated 29.03.2020 points out towards protecting the interest of migrant workers and to mitigate the economic hardships of such class of people belonging to the majorly the unorganized as well as organized sector such as industries and regulated by the labour laws. Such workers who work for sustaining their lives are now in blues due to the unprecedented COVID-19.
Furthermore, the objective which is sought to be attained is to enable the casual workers/migrant workers/contract workers etc to sustain themselves and succor them in times of distress.
Further, the order should be construed in such a manner that it does not lead to absurdity. Now, if the order dated 29.03.2020 is considered to be binding upon each and every employer and employee after bluntly ignoring the implications on the collapsing Companies then instead of attaining the desired objective it may lead to adverse impacts for instance: mass unemployment due to the shutting down of the business units incapable of sustaining losses and altogether shattering of the economy due to disruption in the purchasing power parity and further resulting in depression.
Therefore, in the light of such interpretation, a glance to the following provisions are required
Section 2(s) of Industrial Disputes Act– “workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—
(i) who is subject to the Air Force Act, 1950, or the Army Act, 1950 or the Navy Act, 1957
(ii) who is employed in the police service or as an officer or other employee of a prison; or
(iii) who is employed mainly in a managerial or administrative capacity; or
(iv) who, being employed in a supervisory capacity, draws wages exceeding 3 [ten thousand rupees] per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.
Section 2(kkk)– “lay-off” means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other connected reason] to give employment...”
Section 25C- “Whenever a whose name is borne on the muster-rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid-off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid- off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid-off.
Provided that if during any period of twelve months, a workman is so laid-off for more than forty-five days, no such compensation shall be payable in respect of any period of the lay-off after the expiry of the first forty-five days, if there is an agreement to that effect between the workman and the employer.”
Is the order Directory or mandatory?
The Supreme Courts have pointed out that the question of a statute being mandatory or directory should be dependent on the intent of the legislature and not upon the language in which the intent is clothed.
The intent of the Government is discernable from the statement of reasons in the stated order. Further, the Government has been equipped with the power to issue directions with an aim to prevent the disasters under the Disaster Management Act, 2005.
Firstly, if the said order is treated to be mandatory for those employers who are in a position to break even and succor its workers, then the object and purpose seems to be served by keeping in view the interest of both the employer and employee. Also, as a matter of fact, the Companies should act humanly and ethically to sustain its workers.
Secondly, if the said order is also treated to be mandatory for those employers who are facing financial crisis and suspecting closure due to the prevalent conditions, then the consequences ensuing would defy the whole object and purpose of the government as in the long run the companies would be constrained to shut down its units thereby affecting the employee due to retrenchment.
Therefore, in the light of the aforementioned, the order dated 29.03.2020 should be treated as a directive only for the industries facing sustenance issues at the present moment.
Should every Employer Pay and Every Employee be paid?
The interpretative approach as an application of the “Principle of Legality” is preferred to “ambiguity” When one of the construction results in impairing the rights, freedom and immunities recognized then it is always preferred to avoid such a construction. The stumbling block at this crucial hour is the sustenance of the business entities wherein they are struggling to cover the unanticipated losses due to the lockdown and striving hard to get the business going.
On humanitarian grounds, though such Companies are required to remunerate but only when they are capable and not on the verge of collapsing due to financial distress. Hence, such an order mandating the payment will infringe the rights of the employers and will be detrimental in the long run. The Company after being satisfied about its financial position can adopt ways and means either to deduct the salaries or keep the salaries in abeyance for a certain time period till it is able to revive its activities.
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