Interim Relief to the Employers Against the Payment of Full Wages During Lockdown

The MHA Order and its Withdrawal

During the period of lockdown imposed by the Central Government pursuant to the COVID-19 pandemic, the Ministry of Home Affairs (hereinafter “MHA”) issued a circular wherein it directed such establishments to pay full wages to their employees during the lockdown. But the legality of this direction was questioned as there was uncertainty in its interpretation.

Invoking the powers under Section 10(2)(I) of the Disaster Management Act, 2005,[1] the MHA had issued an order dated March 29, 2020 (“MHA Order”) with the measures and directions to be followed in the course of handling the COVID-19 pandemic. One of these directions was to the employers of the private establishment to make the payment of the wages to their employees without any deduction for the period of lockdown. The direction to the employers from the MHA Order stated as follows:

“All employers, be it in the industry or in 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 establishments are under closure during the lockdown.”

Subsequently, the MHA issued another circular dated May 17, 2020 (“Withdrawal Order”) with the necessary measures that are to be taken to curb the spread of COVID-19, wherein the MHA Order had been withdrawn and the employer was no longer imposed to pay full wages. The MHA Order was, therefore, in force and effective from March 29, 2020 till May 17, 2020, which made the employers liable to pay full wages to their employees.

Challenging the MHA Order

An association of employers filed a series of writ petition, Ficus Pax Private Limited & Others[2] challenging the arbitrariness of the MHA Order along with the orders passed by the individual states. The MHA Order was challenged on the grounds of violation of Article 14 and 19(g) of the Indian Constitution[3], claiming that the lockdown has hindered their business and affected the cashflow of the establishments. In this given scenario it would become difficult for the employers to pay the full wages and abide by the MHA Order. It was contended before the court that the MHA Order is contrary to the principle of ‘Equal work, equal pay’ and ‘No work, no pay’. Although the Withdrawal Order has removed the obligation on the employer to pay full wages, the question that needed to be answered pertained to the obligation on the employers to pay the full wages from the date of issuance of MHA Order till the date of issuance of the Withdrawal Order (“Lockdown Period”).

Interim Relief by the Apex Court

Supreme Court while analyzing the writ petitions with an objective to sort the differences and disputes among the employer and employees for the payment of wages during the Lockdown Period opined that:

“….some of the industries and establishments may bear the financial burden of payment of wages or substantial wages during the lockdown period to its workers and employees. Some of them may not be able to bear the entire burden. A balance has to be struck between these two competitive claims.”

Considering the contentions from both the sides, the court ordered an interim relief to the private establishments stated that the private establishments and their employers can initiate the negotiations and settlements among themselves regarding the payment of the wages during the period of lockdown. Further, in the event a settlement has been reached among the employers and the employees, then they are free to act upon such conditions and obligations as under the agreed settlement terms. The present matter is still pending before the apex court and a final order is awaited in this regard.

Conclusion and the Step Ahead

The principle of ‘Equal work, equal pay’ was made applicable by the Supreme Court in the case of State of Punjab and Ors. v. Jagjit Singh and Ors.[4] In this case, the daily wage earners and the contractual workers who do the work as the regular workers are to be treated equally. However, this concept took a toll during the lockdown for the contractual workers and daily wage earners. To a certain extent, it can be paraphrased that the MHA in the interest of these daily wage earners issued the MHA Order.

The first phase of the lockdown was implemented by the Central Government for a period of three weeks as a preventive measure regarding COVID-19. Towards the end of the first phase, the lockdown was further extended for up to May 03, 2020. However, the second phase was not the end and it was once again extended till May 17, 2020. In the light of the aforesaid unanticipated extension of the lockdown, the private establishments were imposed with the burden to pay wages during the Lockdown Period to their employees as per the MHA Order.

With the very limited movement and restricted running of the business operations which was allowed during the lockdown, a lot of private establishments did not have any business and their cashflow had stopped. The stance of the private establishment in the present matter is that these private establishments cannot be forced to comply with the MHA Order. Nevertheless, the financial crunch that an employee would have faced during this unprecedented time also cannot be forsaken. There is a need to strike balance between the employer and employee. The companies and the employers are also facing challenges due to the lockdown and pandemic. Some of these companies, if asked to pay the full wages to their employees, the establishments with no business and zero cash-flow might go into insolvency.

The Central Government took several steps to help and aid the daily wage earners of the society in every possible manner. The Central Government, in several tranches, had released the schemes of ration supply to the daily wage earners. The interim relief awarded in the case seems to be a viable solution among the employee and employers to reach a settlement and implement the same if any settlement has been reached. However, in the event that the no settlement has been reached the relief which can be ordered in the present case is to allow the establishments to pay 50% (fifty percent) of the wages as prayed in the petition and allow the establishments to pay the remaining at a later point after gaining the business of the establishment in place in the form of bonus or other incentives.

The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal, Hyderabad.

[1] Section10 (2) (i) of the Disaster Management Act, 2015 states: “evaluate the preparedness at all governmental levels for the purpose of responding to any threatening disaster situation or disaster and give directions, where necessary, for enhancing such preparedness”

[2] W.P. Diary No.10983 of 2020

[3] The Constitution of India, 1950.

[4] AIR 2016 SC 5176