COVID-19: Unlock – The Way Ahead – Part III

Unlock from Employment Laws Perspective

The nationwide lock-down and the resultant closure of various workplace directly affected the sustenance and livelihood of the employers and the employees. With closure of all business activities there was low or no source of income which gave rise to various issues and desire to implement cost cutting measures such as reducing wages, asking employees to go on leaves, retrenchment, etc. to keep the businesses afloat.

With the increase in the number of cases in India, various State Government such as Karnataka, Telangana, Uttar Pradesh issued directives to grant 28 days paid leave to employees affected by Covid-19. Subsequently, the migrant workers and labourers started losing their jobs. This crisis precipitated the issuance of the MHA Order dated 29th March 2020 (under Section 10(2)(l) of the Disaster Management Act, 2005) which directed the employers of all industries, shops and commercial establishments to pay wages to all their workers on the due date, without any deductions, during the period of the lock-down (“MHA Order”). Many State Government also issued directives pursuant to the MHA Order.

The authority of the Central Government was challenged for issuance of the MHA Order, given the fact that there are labour laws already in place to deal with reduction in wages, termination, lay-offs, etc. Various petitions were filed in the Supreme Court and the High Courts in this regard, the detailed overview of which has been covered in our previous post here.

Now with the lock-down being lifted in most parts of the country and taking into account that the MHA Order has ceased to have effect from 18th May 2020, there are numerous questions amongst employers as to whether the cost cutting measures can be implemented now, what action shall be taken in case the employees refuse to report to work, what steps shall be taken towards employees residing in containment zones, etc.

There is no one size fit all answer to this as all companies and establishments vary in size, nature, financial capacity. While some of the companies and establishments may be able to bear the financial burden of payment of wages or substantial wages to its workers and employees, some of them may not be able to bear the entire burden. Therefore, the aim should be to strike a balance with the employees/ workers.

Even though the restrictions outside Containment Zones have been eased, the Order issued by MHA on 30th May 2020 has put a cap on percentage of employees that can report to work in private and government offices that means that the companies and establishments cannot operate at their full capacity. The liability of the employers have also subsequently increased given that in addition to the existing statutory labour compliance, they will also have to follow all the Guidelines and the SOPs issued by the Centre and the State with respect to ensuring safety at workplace, maintaining social distancing norms, sanitization, etc.

Other Updates and Developments

Petitions challenging the validity of MHA Order

The Supreme Court Bench comprising of Justices N.V. Ramana, S.K. Kaul and B.R. Gavai on 4th June 2020 heard the petitions challenging the constitutionality of the MHA Order i.e. in the matter of Ficus Pax Private Limited, Nagreeka Exports Limited, Ludhiana Hand Tools Association, Indian Jute Mills Association, etc. The Bench listed these matters for Orders on 12th June 2020. In the meantime, the Bench directed that no coercive action shall be taken against the employers pursuant to the MHA Order for full payment of wages.

On 12th June, the Supreme Court in its detailed Order instructed employers and employees to negotiate and settle the issues relating to payment of wages amid the Covid-19 lockdown amongst themselves and that if they are unable to settle it amongst themselves, they should approach the concerned labour authorities to settle the issues. The Hon’ble Supreme Court opined that efforts should be made to sort out the differences and disputes between the workers and the employers regarding payment of wages of the 50 days intergenum of the impuged order and the latest order of the central government. The Supreme Court went on to state that any settlement or negotiation can be entered into between the employers and employees without regard to the order dated 29.03.2020, the said steps may restore congenial work atmosphere.

The Central Government is now required to file a detailed counter affidavit on the legality of the MHA Order within 4 weeks. All the matters will be listed again in the last week of July, 2020 and till then the earlier order of Supreme Court i.e. no coercive action shall be taken against the employers pursuant to the MHA Order shall continue to remain in force in respect of all matters before it.

Withdrawal Of Order On Extension Of Working Hours In Factories In Rajasthan

The Government of Rajasthan vide its Order dated 11th April 2020 and 24th April 2020 had exempted all factories registered under the Factories Act, 1948 from the provisions of Section 51 (Weekly Hours) and Section 54 (Daily Hours) and extended the working hours to 12 hours per day. However, through the Notification dated 24th May 2020 the Government of Rajasthan has revoked the said Orders dated 11th April 2020 and 24th April 2020, thereby reinstating the working hours in the State as prescribed under the Factories Act, 1948 i.e. 8 hours per day.

Withdrawal Of Order On Extension Of Working Hours In Factories In Karnataka

The Government of Karnataka vide its notification dated 22nd May 2020 had granted exemption to all factories registered under Factories Act, 1948 from provisions of Section 51 (Weekly Hours) and Section 54 (Daily Hour) of Factories Act, 1948 with effect from 22nd May 2020 to 21st August 2020, subject to certain conditions as per the notification. However, the Government of Karnataka through another Notification dated 11th June 2020 has withdrawn the previous notification. Therefore, the employers of factories in the State of Karnataka are now advised to comply with the working hours as prescribed under the Factories Act, 1948.

Extension Of Paid Holidays For Shops And Establishment In Telangana

The Telangana Labour Employment Training and Factories Department has issued a notification on 9th June 2020 thereby extending the declaration of paid holidays for all categories of employees working in shops and establishments from 7th June 2020 to 30th June 2020, subject to the relaxations given and conditions imposed therein.

Conclusion

As the country seeks to reinvigorate the economy, companies now need to optimally manage its funds and cash flows to stay afloat and adopt measures such as identifying the impact on the businesses’ overall financials for the current financial year and the expected impact in the upcoming financial years, also assessing the additional financial burdens due to loss of revenues, increased cost of operations, lost opportunities, reduced productivity and immediately commence issuing pending invoices, etc.

The need of the hour for reviving the economy is to effectively manage the “unlock down”. It is noteworthy that the Covid-19 crisis has highlighted a lot of significant changes that have been or may need to be adopted by the companies and businesses, some of them being localization of supply chains, more investment towards enabling technologies such as cloud and cyber security to ensure a smooth and efficient remote working environment, etc.

The businesses and the companies will also need to re-calibrate their ways of working to ensure that the operations are still run in an efficient and effective manner while ensuring basic health hygiene. The management shall also review and revisit the key policies and procedures so that critical changes in the processes are identified and communicated to all the concerned individuals for smooth operations.

Having discussed the preparedness required on various levels and fronts, it is also important to note that most of the migrant workers and labourers have returned to their respective states and therefore, it might be difficult for various businesses and companies to gain normalcy at once.

For the most part, much of the concern that loomed  over the heads of corporates was alleviated by the recent Supreme Court order where even for the 50 days of mandatory wage payment, Supreme Court has permitted employers to arrive at a negotiated settlement. Unlock will now be sweeter for businesses but the fate of workers is unsure.

-Archana Balasubramanian (Partner), Charulata (Associate)

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