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Coronavirus: the tale of the Pandemic and Payment of Wages

By: Amey Salatry and Jagdish Kaisare

Note: The content herein is only for informational purpose and does not constitute any legal opinion or advice on behalf of Legal Minds LLP.

The unexpected outbreak and proliferation of COVID-19 have invited measures aimed at resisting its repercussions on the economy. Consequently, the Government of India has issued numerous Orders, Advisories, Notifications and Circulars.

The Ministry of Home Affairs by an Order dated 29.03.2020 directed the State Governments to ensure that "All the employers shall make payment of wages of their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown". The Employers' Associations and several Employers questioned and challenged the said Order to be arbitrary, unreasonable and violative of Article 14, Article 19(1)(g) of the Indian Constitution.

The case of Ficus Pax Private Limited & Ors. v Union of India[1] has deliberated the tale of the Pandemic and the Payment of Wages at length. On the one end, the Employers claimed that the Government of India could not invoke the provisions of the Disaster Management Act, 2005 to impose financial obligations on the private sector. The Employers argued that, under the Disaster Management Act, the Central Government has the authority to allocate funds for emergency response, relief, rehabilitation and mitigation of disaster and that the ultimate onus for any compensation toward workers shall be on the Government.

On the other end, the Government of India contended that it had withdrawn the said Order with effect from 18.05.2020. However, the Government claimed the right to wages is a pre-existing right under the contract of employment and the broad framework of constitutional and labour-specific statutory schemes. Therefore, the Government argued that they had complete legislative competence to issue such directions under the Disaster Management Act, 2005. Further, the intent of the Government in publishing the said Order was to mitigate the financial hardship caused to the Employees and workers.

The Supreme Court of India observed that the said Order was no longer operational. However, the Court felt the need to address the fact that the said Order remained operational for 50 days. The questions before the Court were as follows: (i) Was the said Order violative of the Disaster Management Act, 2005 and the provisions of the Indian Constitution?; (ii) If interpreted to allow the Government to direct Employers of Private Establishment, is Section 10(2)(1) of the Disaster Management Act, 2005 ultra vires Article 14 and Article 19(1)(g) of the Indian Constitution?

On 04.06.2020, the Supreme Court of India in interim relief to the Employers directed that, under the said Order, the Employers shall not be liable for coercive action.

Further, on 12.06.2020, the Supreme observed that the said Order hurt the Employers and Employees equally. The Court sought to strike a balance between the stakeholders such that neither is prejudiced. In doing so, the Court has issued the following interim measures to ensure the smooth functioning of industries.

1. Those Private Establishments and Employers willing to negotiate and settle with the Employees may initiate a process of negotiation and enter into a settlement irrespective of the said Order. If they are unable to resolve the matter, they may submit the issue to the designated labour authority entrusted to negotiate, conciliate and settle industrial disputes.

2. Employers and Private Establishments that were operational during the lockdown period may avail the measure mentioned above.

The Court directed all Employers and Private Establishments availing the settlement process to publicise and communicate the settlement process with their Employees and to facilitate their participation.

3. Employers and Private Establishments shall permit the employees to work in their establishment without prejudice to their rights concerning unpaid wages of above 50 days.

The Court has issued the interim measures without prejudice to the rights of Employers and Employees which is pending adjudication in the various writ petitions. The Court has listed the matter in the last week of July 2020.

Insight. It is crucial to consider that Employers and Employees have a symbiotic relationship, and neither can survive without the other. Concurrently, it is also essential to understand that all industries and Private Establishments have different financial capacity and circumstances. Therefore, to group all establishments as one and issuing standard directions to may cause grave injustice. The implication of such an Order may lead to the insolvency of an otherwise stable and solvent establishment. Therefore, the issue deserves an adjudication such that neither stakeholder is prejudiced. Additionally, the judicial inclination indicates a mid-path solution to ensure the smooth functioning of industrial establishments and the sufficient resolution of disputes between the Employers and the Employees.

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[1] W.P (C) D. No. 10983 of 2020