TO PAY OR NOT TO PAY: A PERTINENT QUESTION

The pertinent question of whether employers should be compelled to pay full wages to their employees on account of the recent lockdown and COVID-19 restrictions has been at the forefront of judicial deliberation as well as business concerns. The Ministry of Home Affairs, Government of India, by its order dated March 29, 2020 (“MHA Order”), mandated employers to make payments of wages to their workers, without any deductions for the period of closure of their establishments during the lockdown. Similarly, the Government of Maharashtra, by its order dated March 31, 2020 (“Maharashtra Order”), mandated payment of entire salaries and allowances by employers to their workers during lockdown period. While the MHA Order has been subsequently withdrawn through an order dated May 17, 2020, the MHA Order and the Maharashtra Order have been challenged before the Supreme Court and the Bombay High Court in various matters such as Rashtriya Shramik Aghadi. vs The State of Maharashtra And Others[1]and Ficus Pax Private Limited & Others vs Union of India[2].

In the foregoing context, the principle of “no work, no pay” assumes considerable significance. This article seeks to examine the principle of “no work, no pay”, its development through judicial dicta and the relevance it assumes in present times.

The Concept of “No Work, No Pay”  

The principle of “no work, no pay”, is derived from the Latin phrase, “Dies-non juridicum" translating to, “a day when Courts do not sit or carry on business”. It refers to a quid pro quo relationship between the employer and the employee which provides for equal and reciprocal responsibility, and is based on the concept that an employee is expected to fulfil the work assigned to him, failing which, he would not be entitled to payment of any pre-assigned remuneration, for such work assignment[3].

Under the Indian legislation, the principle of “no work, no pay” finds its genesis under the Industrial Disputes Act, 1947 and the Payment of Wages Act, 1936. Section 2 of the Industrial Disputes Act, 1947 defines “wages”, to mean the remuneration payable to a workman in respect of his employment or the work done in such employment. Further, Section 7(2)(b) read with Section 9 of the Payment of Wages Act, 1936, expressly entitles the employer to deduct an employee’s wages on account of the latter’s failure to undertake work or absence from place of work without just cause or reason.

As such, the principle of “no work, no pay” becomes a significant weapon in an employer’s arsenal, balancing the scales of work and remuneration between employers and employees.

Judicial Evolution of “No Work, No Pay”

When elaborating on the principle of “no work, no pay”, the Supreme Court of India in Sukhdeo Pandey vs Union of India & Anr[4], observed,

“It is well-settled principle in service jurisprudence that a person must be paid if he has worked and should not be paid if he has not. In other words, the doctrine of 'no work, no pay' is based on justice, equity and good conscience and in absence of valid reasons to the contrary, it should be applied.”

As such, the concept of “no work, no pay” is based on the premise that performance of duty is a condition precedent to remuneration. The Courts have held that an employment contract is indivisible in nature. In the event, the contract provides for payment of remuneration upon completion of specific work or a definite period, then the remuneration cannot be recovered unless the service or period is completely performed. In the event, during such service or period, an employee fails to undertake work or absents from the place of work without just cause or reason, he commits a breach of the terms of the contract and should not be entitled to the pre-agreed remuneration.[5]

However, the concept of “no work, no pay”, is not without exceptions. For example, the Supreme Court in State of Kerala & Ors. vs. E. K. Bhaskaran Pillai[6], observed that the principle of “no work no pay” cannot be accepted as a general rule of thumb. Similarly, in J.N. Shrivastava v. Union of India[7], the Supreme Court held that the principle of “no work no pay” will not be applicable in cases wherein the employee is ready and willing to work, but the employer prevents him from performing his duties. In T.N. Atomic Power Employees’ Union vs Nuclear Power Corporation[8], the Madras High Court held that deduction of wages required the employers to establish that the workers had willingly refused to undertake their work.

COVID-19 & The Way Forward

The concept of “no work, no pay” assumes significance in present times due to the financial constraints faced by employers in order to pay full wages to their employees. The Bombay High Court in Rashtriya Shramik Aghadi. vs The State of Maharashtra And Others,[9] refused to invoke the principle of “no work, no pay”, citing the financial distress caused to employees on account of COVID-19. The Court held that it cannot turn a Nelson's eye to an extraordinary situation on account of COVID­19 pandemic, and as such, prima facie, the principle of “no work, no pay” cannot be made applicable in such extraordinary circumstances.

In Ficus Pax Private Limited & Others vs Union of India[10],the Supreme Court recognised the need to strike a balance between the interests of workmen and employers, stating that industry and labour need each other, and one cannot survive without the other. The Court appreciated the fact that while some industries and establishments may bear the financial burden of payment of wages during the lockdown period, however, other establishments or industries may not be able to bear the entire burden. Similarly, though employees and workmen were ready to work, they could not undertake work due to the closure of industries. As such, the Court held that a balance has to be struck between these two competitive claims. Therefore, the Court passed interim measures, for willing private establishments, employers and industries to enter into negotiations and settlements with their employees regarding unpaid wages. Further, the private establishments, industries, and factories shall permit willing workers/employees to work in their establishment, without prejudice to the rights of the workers/employees regarding unpaid wages.

A final judgment is awaited to be passed by the Supreme Court in Ficus Pax Private Limited & Others vs Union of India[11]. Meanwhile, the application of the “no work, no pay” principle to present circumstances continues to be debated. Employers continue to emphasise the lockdown and curtailed business activity as grounds for no work resulting in no payment of wages to employees. Conversely, employees and aforesaid judicial dicta state that such a principle may not be applicable in cases wherein the employees were willing and able to work but were restricted on account of the lockdown and COVID-19.

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

[1] Rashtriya Shramik Aghadi vs The State of Maharashtra and Ors., Writ Petition No. 4013 of 2020, decided on May 12, 2020 by Bombay High Court (Aurangabad Bench)

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

[3] Vijay Laxmi & Others vs Union of India WP(C) No. 3698 of 2009

[4] (2007) 7 SCC 455

[5] See Vikram Thamskar vs Steel Authority of India 1982 II LLN 319; Algemene Bank vs Central Government, 1978 I LLN 101; Ramchandran vs Indian Bank, 1979 I LLN 179

[6] (2007) 6 SCC 524

[7] 1999 I LLJ 546 (S.C.)

[8] 1999 I LLN 249

[9] Rashtriya Shramik Aghadi vs The State of Maharashtra and Ors., Writ Petition No. 4013 of 2020, decided on May 12, 2020 by Bombay High Court (Aurangabad Bench)

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

[11] ibid