Various news agencies are reporting that SC has quashed the MHA order requiring full payment of wages. [See our previous post on this here.] The order of the Supreme Court has adjourned the hearing and extended its order on no further coercive action on employers who have laid off their workers or reduced pay. No judgement as such has been pronounced.
With the commencement of the lock-down in various States and throughout the country with effect from 25th March 2020, various Advisories/ Orders were issued by the Central and State Government from time to time. Amongst the various Advisories/ Orders that were issued by the Government, the Order issued by the Ministry of Labour and Employment dated 20th March 2020 and the Order issued by the Ministry of Home Affairs on 29th March 2020 to all State Governments and Government Ministries/ Departments (“MHA Order”) were the most significant for the employees/ workers, as it directed employers of all industries, shops and establishments to refrain from terminating employment and making it mandatory to pay wages without deductions, during the period of the lock-down.
However, the Advisories/ Orders have given rise to a lot of confusion among the employers with regards to payment of salaries and wages of their employees and workers, pursuant to which various writ petitions have been filed by the employers in the High Courts and Supreme Court. On the other hand, the employees have also sought actions against employers who are taking adverse steps against the Advisories/ Orders issued. Some key developments are captured in this post:
Challenging the validity of the MHA Order
Pursuant to the issuance of MHA Order, public interest litigation was filed by Ficus Pax Private Limited based in Karnataka, Nagreeka Exports Limited based in Mumbai and Ludhiana Hand Tools Association based out in Punjab (“PILs/ Petitions”), challenging the constitutionality of the MHA Order. The Supreme Court of India heard these Petitions on 27th April 2020. The Bench comprised of Justices N.V. Ramana, S.K. Kaul and B.R. Gavai (“Bench”). The Supreme Court granted a time of 2 (two) weeks to the Central Government to set its policy on payment of wages on record, in relation to the implementation of the MHA Order. These Petitions were heard by the Supreme Court, on 15th May 2020, along with other petitions filed by The Twin City Industrial Employers Association, Rajasthan Steel Chamber, Instruments and Chemicals Private Ltd and others, Chamber of Small Industry Association and others, Kerala State Small Industries Association, Federation of Industries and Association, All India Federation of Master Printers, Teknomin Construction Limited and Garments Exports Manufacturing Association and others. No interim orders were passed by the Bench and notices were issued to the Central Government returnable next week. The Supreme Court, on 15th May 2020, granted the Government one more weeks’ time to file its response in the aforementioned Petitions.
Further, on 15th May 2020, in the matters of Hand Tools Manufacturers Association v. Union of India and Others and Indian Jute Mills Association and another v. Union of India and Others, heard before the Supreme Court, the Bench issued an interim order that no coercive action will be taken against the employer for a period of 1 (one) week for non-payment of wages as per the MHA Order which has been further extended through the adjournment.
Layoffs and salary cuts during the lockdown
In another PIL, which was filed jointly by National Alliance of Journalists, Delhi Union of Journalists, and Brihan Mumbai Union of Journalists against media organizations for arbitrary lay-offs, salary cuts and related orders, the Bench directed a copy of the petition to be provided to the Central Government to file a reply within 2 (two) weeks.
No Work No Pay
The Bombay High Court, Aurangabad Bench (on 30th April 2020), in the matter of Align Components Private Limited and another v. Union of India and others, stated that in cases where the employees/ workers are not required to report for duties, the employers shall pay the gross wages to the employees/ workers, if the wages are being paid on a monthly basis, save and except conveyance/ food allowance. It was further stated that the said payment of gross wages to the employees/ workers, shall be subject to the outcome of the PILs (as mentioned hereinabove) in the Supreme Court.
The Bombay High Court, further clarified that, in areas where the lock-down has been partially lifted in the State of Maharashtra, the employees/ workers should report for duties, subject to the safety and health measures being followed by the employer. If such employees/ workers remain voluntarily absent from work/ their duty, the management would be at the liberty to deduct their wages, for their absence, subject to the procedure laid down in law while initiating such deduction.
In another matter of Rashtriya Shramik Aghadi v. The State of Maharashtra and Others, the Bombay High Court, Aurangabad Bench (on 12th May 2020), held that the principle of “no work, no pay” will not be applicable in the circumstances where the contract labourers/ workers are willing to work and desirous to provide their services but where the employers are unable to provide work due to the lock-down. The Court ordered the principal employer to ensure that full wages shall be paid to the concerned employees by the contractor for the months of March, April and May 2020.
Lockdown 4.0 – New Guidelines
While matters were pending before the Supreme Court, New Guidelines were issued by the MHA on 17th May 2020 (“New Guidelines”). The New Guidelines mention that all orders that were issued previously (which include the MHA Order) would cease to have effect from 18th May 2020, unless otherwise provided. It now appears that with effect from 18th May 2020, there seems to be no restriction at all on employers reducing the wages or terminating the employment of their employees, as per applicable laws and terms of their employment contract.
Ground realities
Despite the Government Advisories/ Orders, many companies have decided to lay-off their employees and impose salary cuts. This list of companies taking similar steps has been increasing rapidly:
Zomato – Zomato has announced terminations of more than 500 employees to reduce the economic impact caused due to the outbreak of Covid-19.
Swiggy – Swiggy has also decided to reduce its workforce by letting go 1,100 of its employees.
Air India – The employees of Air India employees have moved the Bombay High Court challenging Air India’s move to deduct wages (allowances) of its employees for the month of March by 10%, due to the Covid-19 lockdown.
Capgemini – Pursuant to the existing lockdown, Capgemini has tweaked its leave policy in India and has been forcing employees to apply for leaves, who have not been assigned any projects. The Labour Commissioner of Pune, Maharashtra has issued a notice to Capgemini, to revise its decision, giving an intimation that action may be taken in case it fails to revise its decision.
Wipro – The Pune Labour Commissioner’s office has recently issued a notice to Wipro, after receiving complaints of alleged benching of 300 employees and salary cuts of an undisclosed number of entry level staffers.
ZTE, a Chinese telecom equipment maker has reduced its workforce by almost 30 percent.
Ola – Ola has announced lay-offs of 1400 employees as its revenue takes a hit by 95% in the last 2 months.
Uber – Uber has also laid off 3500 employees (constituting 14% of its workforce).
In sum
Given the current situation and due to the Government mandated lock-down throughout the country, many companies have restricted cash flows, slowdown in business activities since the last two months and many are even staring at bankruptcy. Hence, such companies have taken actions (i.e. terminating employees, forced unpaid leaves, salary cuts, etc.) against the Advisories/ Orders issued by the Government during the lock-down period.
Further, with the cessation of the MHA Order and the imposition of the New Guidelines, the indefinite payment of salaries, while businesses of various employers are toppling, will become untenable and the Courts may view terminations by employers due to the outbreak of Covid-19, more leniently. This will however be subject to the outcome of such cases in the Supreme Court. It is also important to note that the New Guidelines do not revoke the Advisories/ Orders issued by the State Governments. The State Governments should come up with further directions to clear this ambiguity.
–Archana Balasubramanian (Partner), Charulata (Associate)
COMMERCIAL LAW BLOG 