COVID-19 AND YOUR EMPLOYMENT RIGHTS
As we all know that the Corona
Virus is a Infectious Disease, or COVID-19 has been declared a pandemic by
several countries all over the world. It is still growing and at present seems
to be having a long-lasting and deep effect on global economies. In such a
scenario, various Organizations are laying off their employees to safeguard
their revenues, incomes and economic interests including India. Recently we all
have read several news on mass termination of employees by various companies. Hence
we need to understand the rights and obligations of Employers and
Employees during the times of COVID-19 outbreak and lock down.
The Ministry of Labour & Employment,
Government of India had issued an advisory dated 20.03.2020 to all public and
private establishments with a request not to terminate employees and
contractual workers or reduce their wages during the COVID-19
situation. Various other state governments such as Maharashtra,
Haryana, and Delhi have also issued similar advisories. Legally, these
‘advisories’ are not binding upon the employers as the same does not have a
sanctity under any notifications or legislation.
On 29.03.2020, order was issued
under Section 10(2)(1) of the National Disaster Management Act, 2005 which
directs all states to issue orders compulsorily requiring all employers in the
industrial sector, shops and commercial establishments to pay wages to
their workers on the due date without any deduction during their closure due to
the lock down. The relevant provisions of the Act are Sections 10, 51 and 58.
If there is deliberate non-compliance with the directions issued by the
government, a complaint can be made by the authorities as enumerated in Section
60 (a) or any person as envisaged in Section 60 (b). If an inquiry is made and
it’s found that an offence has been committed by any company, the
head/in-charge there shall be deemed to be guilty and be punishable with
imprisonment for a term which may extend to two years. Therefore, if the
provisions of the Act have been invoked and are in effect, any decision by an
employer to terminate an employee can be punishable by penal provisions under
the Act.”
Here we need to understand certain provisions regarding wages, workmen, retrenchment, layoff and work place under the various laws in India
The Code on Wages, 2019, is an Act
of the Parliament of India that consolidates the provisions of four labour laws
concerning wage and bonus payments and makes universal the provisions for
minimum wages and timely payment of wages for all workers in India. However,
this act though published in the official gazette, will only come into effect,
on a future date notified by the Central Government. Till that day, the
existing regulations continue.
The Payment of Wages Act, 1936 (“POW Act”) defines what is ‘wages’. The preamble to the POW Act states that it is an Act to regulate the payment of wages of certain classes of employed persons, whereas it is expedient to regulate the payment of wages to certain classes of employed persons. This makes it clear that there are other classes of employed persons to whom ‘wages’ need not be paid. Wages[1] as per section 2(vi) and section 3 of the PoW Act clearly states that employers shall pay wages to their workmen engaged in factories, industrial or other establishments governed by the Act. Most corporates and employees engaged in industries, factories and other establishment, but performing managerial, administrative and supervisory functions as stated above shall not be governed under the PoW Act. Further, the POW Act also clearly states under section 1(6) that it is applicable upon such class of employees whose wage does not exceed Rs. 24000 (Indian Rupees Twenty-Four Thousand) per month.
The term worker is defined as per Section 2 (l) of the Factories Act, 1948 to mean a person employed directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer whether for remuneration or not in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union
There is mention of ‘wages’ to be paid to employees in two other legislation, namely, the Industrial Disputes Act, 1947 (“ID Act”) and the Shops and Commercial Establishments Act, 1961 (‘SCE Act’).
The SCE Act (each state has its own Shops and Commercial Act along with specific set of rules), states that wages need to be paid to employees as per the POW Act. As per the POW Act, employees who are earning more than INR 24000/- per month are not governed under the POW Act and hence not required to be paid wages under the MHA Order.
The Industrial Disputes Act, 1947 defines “lay-off” and “retrenchment” in Sections 2(kkk) and 2(oo) respectively. Retrenchment means involuntary separation of an employee due to the replacement of labour by machines or the close of the department. lay-off means the failure, refusal or inability of an employer on account of the shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity. The layoff is an action step, whereas retrenchment is a business strategy to reduce company's expenses.
Section 2 (cc) of the ID Act defines “closure” to mean the permanent closing down of a place of employment or part thereof. India, being a common law country, our laws are subject to strict interpretation. It can also be safe to interpret that this does not apply to an establishment that has work from home or is partly working or is not under closure through other arrangements. However, we are proceeding with the assumption that the MHA Order is applicable even to those with work from home or other arrangements in place and ‘closure’ mentioned in the MHA order includes partial closure and/or inability to perform normal operations.
Finally, workplace, shall have the meaning under the ID Act, if such workplace falls under the definition of industry/undertaking therein, else shall be either a shop or establishment under the SCE Act.
Employees who fall under
the category of workmen and earn wages as per the payment of wage
(POW) act act, cannot be terminated in light of the Ministry of Home Affairs
(MHA) Order and shall continue to be employed and paid until the lock down continues
or until such time prescribed by the Government in this regard. No unilateral
amendment to an employment contract is possible, unless it is specifically
stated in the employment contract between the employer and employee. If the
employment agreement or the manual does not set out unilateral powers to the
company, it will need to obtain the employees consent, implied or express,
before such a change is affected, which affects their employment terms and/or
conditions is made.
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For all other employees, who does
not earn wages under the POW Act, their relationship with the employers are
entirely governed by the employee handbooks and/or their employment agreements
(appointment Letter). So, there is no statutory mandate on the companies
to pay salary to these employees that are not earning ‘wages’. The companies
may also defer payments or alter payment terms, if there are such business conditions
that may cause loss to the company or lead the company to insolvency. This may
be achieved by communicating in writing to the employees and also by obtaining
either an express or implied consent from the employees.
The employees who are not required to be paid wages under the MHA Order and
whose services do not fall under the ambit of the MHA Order can be terminated
by the employers. Termination for such employees will have to be carried out as
per the employment contract duly executed between them and/ or as per the Shops and Commercial Establishments Act of the relevant jurisdiction where the employee is located and is engaged
by the employer.
It is recommended that the
employer, before making a decision to terminate, shall at all times ensure that
they are in compliance with the provisions of termination under the employment
contract and the Shops and Commercial Establishments Act of the State where the employee is located and engaged
in services, as the case may be ,
When the employee is terminated,
it is also highly likely for the employee may disagree to the interpretation
that he is not a ‘wage’ earner and hence cannot be terminated. Hence, it is
very important to issue a carefully worded termination letter.
The Employee may approach the
COVID-19 employee helpline and use the helpline as a forum to register a
complaint and seek relief against the employer for non-payment of wages from
the Government. There is a strong possibility of the labour department,
overstepping its jurisdiction, and to entertain complaints from employees
sympathetically (and also recommend to the police to register a complaint) and
directing the employer to pay wages to the complainant employee on compassionate
grounds.
Thus, from the above, we can see
that there exist a multitude aspects with regards to termination as a
consequence or during the corona virus crisis.If you as an employer/employee
have any inputs, comments or queries with regards to the same, please drop a
comment.
-:Thank you:
Disclaimer
Please note that this not a legal opinion and is only the summary of excerpts from legal opinions that we have provided to our Clients on the basis of their facts and situations. You are requested to not base your legal opinions on this article and are advised to seek independent legal advice. We are not liable to the reader or any person (natural or juristic or otherwise) for any losses that may be caused to them after taking any legal or business actions placing reliance on this academic note.
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