Friday, April 24, 2020

Liability of employers to pay salary during COVID 19 lockdown period


We are going through an unexpected period, a period mandated by government not to function our establishments and remain at homes, but still take care of the welfare of the persons employed, by paying their salaries and other benefits.

It requires no explanation as to why should we have a lockdown. Obviously, it aims at breaking the chain, by staying away from each other, avoiding crowding, which probably, is not possible when we function our establishments, even if we take all measures to mitigate spreading of epidemics like, temperature checking, washing hands and face frequently and so.

As part of nation’s efforts to mitigate spreading of virus, we are also forced to stay at homes, and probably without any revenue to come, but with burden of paying salaries to all, not only to those who are regularly employed on our rolls but to the casual workers whose contract commences in the morning when he starts working and ends in the evening when he completes 8 or 9 hours of working.

Today, this is a topic which is being discussed in large by HR groups, why should the employer pay for the days not worked?

Accordingly a few cases have also been filed in the Supreme Court challenging the government order requiring the employers to pay wages in full.

The purpose of lockdown, as we know, is social distancing so that spreading of virus to a certain extent can be mitigated. This is possible if people stay at homes. In order to make people stay at homes, directions have been issued following the provisions of Epidemics Diseases Act, 1897 and Disaster Management Act, 2005.

The Epidemics Act, provides for issuing any direction so that the disease is not spread.
The Government of Kerala has promulgated an Ordinance, Kerala Epidemic Diseases Ordinance, 2020, which replaces the very old Acts like, Cochin Epidemic Diseases Act, Travancore Epidemic Diseases Act and the Epidemic Diseases Act. The ordinance also provides for issuing any instructions which are necessary for mitigating and avoiding spreading of a disease. It also provides for prohibiting the functioning of shops and commercial establishments, factories, mines etc.

Similarly section 10 of the Disaster Management Act provides for issuing such directions which are necessary to mitigate the disaster.

Under both these Acts provisions for penalizing those who violate the directions are available. Section 51(b) of the Disaster Management Act, 2005 provides for one year imprisonment with or without fine. In case such violation of directions given by the authorities under the Act to prevent a disaster results in loss of lives, then the imprisonment shall extend to two years. The Kerala Ordinance also provides for two years imprisonment with or without fine of Rupees Ten Thousand or both.

Why should Employer pay Full Salary during lockdown period?

It is true that nowhere it is mentioned in any of these Acts that employer should pay full wages to workers during a lockdown period like this.

When we invoke the lay off provisions of Industrial Disputes Act, 1947, obviously, we can manage with 50 % salary as lay off compensation. But the directions issued following section 10 of the Disaster Management Act is very clear that we should not declare lay off. The ID Act also provides for payment of lay off compensation to workers on roll (other than badly workers) and those who have completed one year of service. But the instructions from the Disaster Management Committees call for payment of full wages to all employees including contract workers and casual workers.

In this circumstance, we may go back to the objectives of lockdown, ie, making people stay at homes. It is implied that they should not come out of homes in search of job, even though the establishment where they use to go for work is closed, let it be some other work, say, domestic work, at least, and if they come out of their homes the very purpose of lockdown would be defeated. Therefore, the only possible way to make the people stay at homes is compensating the loss of work by offering salary.

In this context I would also like to say that a similar was the objective to amend section 135 of the Peoples Representation Act in 1996. The previous section called for ‘giving opportunity to employees to cast their votes’, but when it was understood that people are not using it properly and would like to go for work and earn that day’s wages rather than going to polling station and queue up to cast vote, it was decided to make it a holiday with wages. When they were assured of their wages, people would go for casting their votes. Now section 135B provides for declaring holiday with wages to all employees including casual workers. In the similar way, I would say that the lockdown period is paid holidays so that people would stay at homes, failing which they would get out of their homes in search of earnings.  True, there may not be establishments opened to offer employment, but they would find any suitable engagement and for that they will move around. This cannot be allowed and this is the logic why the government has issued a direction to pay wages in full.

Can’t we invoke provisions of Industrial Disputes Act?

Section 25 C and 25 M say about lay off and compensation payable to workers laid off. Section 25C applies to establishments wherein less than 100 workers are employed whereas section 25M (under Chapter VB) applies only to establishments wherein more than 100 workers are employed. Obviously, small establishments wherein less than 50 workers are normally employed cannot lay off workers. If they lay off the workers shall be paid full wages. (Ref. Workmen Vs Firestone Tyre & Rubber Co [1976(1)LLJ493 SC]

The Act permits payment of 50% of wages to workers who are laid off and the maximum period of lay off shall be 45 days. Only employees who have completed one year of service shall be eligible for lay off wages.

In respect of establishments employing 100 or more workers, the layoff requires permission from the government (though lay off due to natural calamities does not require prior approval)

Again, nothing in any labour law will protect supervisory and managerial persons and as such lay off is not applicable to them.

Since the directions issued by the authorities under the Disaster Management Act following the clauses of section 10 of the Act do not permit the employers to declare lay off, declaring lay of will become violation of the directions punishable under section 51(b) of the Act.

Now can the employees invoke ID Act or provisions of Payment of Wages Act, if salary is not paid?

Certainly yes, because the lockdown days are to be treated as holidays with pay and if not paid, they can invoke section 15 of Payment of Wages Act or 32C(2) of ID Act.

What is the status of casual workers?

Legally they are workers with whom we do not have any formal agreement or contract of employment. They are not even recruited by your HR Managers nor do they undergo the formal induction program. The Standing Orders of the company may not be applicable to them. Their agreement with the establishment commences in the morning when they are hired at the factory gate and will extend till evening when they complete that day’s work. They will be hired only when we need additional manpower to handle excess production and similar scenario. They are not hired on holidays and paid for that holiday. They do not get regularized in service also. In their case, the direction to pay wages is not convincing, because in respect of them there does not exist any formal legal relationship.  

What is the status of contract workers?

The contract workers are employees engaged through a contractor. The contract workers are paid through the contractor and the total pay they receive would normally include the wages for the days on which the establishment did not function due to holidays. Though there exists no legal relationship with individual workers of the contractor, the Principal Employer should have a contract with the contractor. If it is not sham or camouflage, the Principal Employer is expected to reimburse the costs incurred by the Contractor in paying the wages of the workers during lockdown period.  
What happens if full salary is not paid?

Obviously, section 51(b) of the Disaster Management Act provides for penal provision for noncompliance of directions given by the appropriate authority.

It is true that these Acts or Ordinance do not empower the government to require the employers to pay salaries for the days the workers did not work. At the same time, if the objective of the direction is to make the people stay at homes against a compensation in the form of full salary, the employers are ought to comply with it.

It is a fact that while issuing such  a direction, the government has not considered the hardships which the employers will face or are facing due to economic slowdown which they are facing even before COVID 19 issues. In this scenario asking to pay full salary even to casual workers is unethical. In the case of workers on the rolls and those engaged through contractors under a specific service contracts it is okay but in respect of workers with whom we do not have any formal contract of employment, it cannot be justified. I do not say that the casual workers should be kept away from this direction but there should be a logical thinking about this class of employees.

It will be okay if the employers are asked to pay an amount required for the subsistence of the casual workers which may come around 50% of the normal wages, roughly.

The theory that the cost of losing lives is more than what we cost to pay for the workers should be remembered and as a moral responsibility, payment of a remuneration equal to their subsistence shall be ensured by us.

Initiatives of Employees Provident Fund Organisation, ESI Corporation etc

The EPF Organisation, ESI Corporation and various Labour Welfare Fund Boards have come up with various schemes to help the workers who have lost wages due to lockdown. The EPFO has decided to bear the contributions payable by the employees as well as employers subject to certain conditions. ESIC has a proposal to extend its unemployment allowance to the workers who do not get wages due to lockdown also. Various Welfare Funds have started paying a fixed amounts considering the loss of job and subsequent loss of revenue to the workers.

The Government has directed the employers to pay full salaries to all employees during lockdown period. That means the employees will get their remuneration in the same rate as they were getting prior to lockdown period. Then why should the EPF Organisation bear the ‘employees’ share’ of provident fund contribution?

I am okay with EPFO bearing the ‘employers’ share’ which is an additional burden to the employers who pay salary when they do not have any revenue to come, but why should they bear employees’ share which they contribute from their salary received in full without working?

If the workers are to be paid full salary, why should the ESIC pay unemployment benefits?

This is contradictory, one side the government directing the employers to pay salary in full and the other side, government agencies themselves assuming that the employees would lose their wages, and on the basis of that, announcing measures to compensate it. 


Madhu T K
24-04-2020