The Central Government has issued Advisories and Directions under the Disaster Management Act 2005 dealing with several aspects of the pandemic. One such order under Section 10(2) was issued on March 29 dealing with the issue of payment of wages to works. The order has been challenged on several grounds by employers including on the ground that the Central Government ought to provide employers with a subsidy to meet the wage liability during the period there is no work to meet the liability under the order. The Supreme Court has called upon the government to respond
The Leaflet explains the entitles at the order for workers with the cavort that ultimately, the Supreme Court will decide on the validity of the Orders under the Disaster Management Act and the scope and impact of the order.
Q: Is there a power under the Disaster Management Act to decide the question of payment of wages during the period of lockdown?
A: The ambit of the Disaster Management Act is very wide.
Though the DM Act does not specifically confer or vest any power with the Central or the State Government /Authorities appointed under the Act to direct the payment of wages/salaries by private establishments, this direction is clearly covered by various provisions of the Act. It may be argued that the Orders are issued pursuant to Section 35 (l) and 38 (l) of the DM Act which provide the Central and State Government to take ‘such other matters as it deems necessary or expedient for the purpose of securing effective implementation of the provisions of this DM Act’, as also sections 10(1); 10(2)(d) & 10(2)(q).
Section 2 of EDA entails the power to take special measures and prescribe regulations as to dangerous epidemic disease. Paying wages to workers definitely is a measure against the spread of COVID-19. Without wages, workers cannot afford soaps, sanitation and other health care and safety requirements.
Q: Is an employer liable to pay wages during the Covid-19 nationwide lockdown period?
A: The Home Secretary, The Ministry of Home Affairs (MHA) and the Government of India, through an Order dated 29.03.2020, directed the authorities of the State/Union Territories to take necessary action and to issue the necessary orders to their District Administration / Police Authorities in order to ensure that all the employers, shall make payment of wages to their workers on the precise due date, without any deductions for the period during the nationwide lockdown when the commercial and business establishments are under closure. In addition, The Ministry of Labour & Employment, The Government of India through its letter dated 20/03/2020, advised all the employers of Public and Private Establishments to not terminate their employees or implement any kind of wage cut. The Order, specifically laid emphasis on the casual or contractual worker. The Order said that if any worker took any leaves, he should be deemed to be at work without any substantial wage cut during the time of the nationwide lockdown. Further, if the employment space is deemed as non-operational due to the COVID-19 lockdown, the workers of such units shall be deemed to be on duty. In certain states such as Haryana, the Director, Industries of Commerce, Haryana through their advisory dated 27/03/2020 has advised all the industrial and commercial establishments to transfer salaries to those who are employed under them.
Q: Is the order dated 29/03/2020 by MHA, binding direction or an advisory? What is the legal meaning and implication of the Order?
A: The MHA order dated 29/03/2020 was issued by the Home Secretary, the Ministry of Home Affairs and the Government of India, in exercise of the power conferred under Section10(2)(1) of the Disaster Management Act, 2015. This Order is binding upon all the concerned parties. The Section 10(2) (1) of the Disaster Management Act, 2015, empowers the National Executive Committee to lay down direction to the Ministries or departments of the government of India and State authorities, for preparing disaster management plans. Section 51 off the Disaster Management Act describes the punishment for any obstruction or non-compliance of any such directions passed under the Disaster Management Act, 2005. As Stated earlier, Section 72 of the Disaster Management Act creates an overriding effect, regardless of anything contained in any other law that may be inconsistent with the orders under the Disaster Management Act for the time being in force. The said order under the Disaster Management Act, 2015 shall not be set aside until any High Court of any State or the Supreme Court modifies it or sets it aside.
Q: What is the meaning of “workers” for the purpose of payment of wages?
A: On the basis of the Orders and Advisories issued by Central Government and certain State Governments, wages must be paid to regular, casual & contractual workers. Even though, this is not detailed in the Order dated 29/03/2020 under the DMA, all workers shall be covered. “Workman” as defined under the Industrial Disputes Act 1947 broadly includes any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, but excludes those employed mainly in a managerial or administrative capacity. It excludes those workers who are employed in a supervisory capacity & those who draw wages exceeding Rs 10,000 per mensem. As per Section 3 of the Payment of Wages Act, the employer is obligated to pay wages to “all persons employed by him.” According to Section 3(2) of the Act, this covers permanent, temporary, casual & badli workers. Section 3(2) further specifies that it shall be the responsibility of the employer to make payment of all wages in case a contractor fails to make the payment. Section 21 of the Contract Labour (Regulation & Abolition) Act, 1970, provides the same.
Q4: What is the definition of the term “wages” in context of what have to be paid of payment to workers?
A: The term “wages” has been defined under the Industrial Disputes Act, 1947 under Section 2 (gg) (rr) in the Industrial Disputes Act, 1947. Accordingly, wages constitute all remuneration that is capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied fulfilled, be payable to a workman in respect of his employment or of work done in such employment. This includes allowances such as the dearness allowance that the work man may be entitled to; the value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food- grains or other articles; any travelling concession; any commission payable on the promotion of sales or business or both; However, it does not include any bonus; any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force; any gratuity payable on the termination of his service.
Q: What is the deadline by which the wages must be paid to the workers?
A: According to the MHA order, the wages have to be paid on the due date. The due date shall be as per the prevalent date for the specific establishment and by all means by the 7th day of the month for establishments with less than 1000 employees and by the 10th day of the subsequent month for establishments with more than 1000 employees as per the Payment of Wages Act.
Q: Can the wages be deducted or reduced?
A: According to the MHA order, the wages are required to be paid on the due date without any deduction.
Q: Can the employers compel their employees to utilize their accrued annual/privilege leaves for absence from work during the Covid-19 lockdown period?
A: They cannot do so without the consent of the employees. Suggestions can be made to the he employees to utilize their accrued annual /privilege leaves. However, employees cannot be compelled to adjust this accrued annual leave.
Q: Can the employees working refuse to join work in the industries that are exempted from the Covid-19 lockdown period and are allowed to operate as usual, such as essential services?
A: The workers of the exempted industries are required to join work, provided the industry maintains adequate standards of safety, health and sanitation.
Q: Is there a provision to deal with National Emergencies in the IDA?
Section 2 (kkk) of IDA, defines “lay off”, if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason, then the same would fall within the definition of “Lay off”.
Section 25C of the IDA mandates employers employing 50 or more workers who lays off workmen to pay a compensation equivalent to 50 per cent of the wages.
Section 25M (1) of the IDA requires an industrial establishment with more than 100 workmen to seek prior permission from the appropriate government or such authority.
However, such permission is not mandated if the lay-off is due to a natural calamity.
Q: Can workers be laid-off, terminated or retrenched?
A: At the moment, all the advisories of the government discourage termination or retrenchment of workers. The Industrial Disputes Act, 1947, does allow “Lay-off” in the circumstances in which the employer is unable to pay the wages due to a natural calamity. However, this law does come in conflict with the Order dated 29/03/2020, that was passed under the Disaster Management Act, 2005. In any case, as per section 72 of the Disaster Management Act, the Order passed under the DMA shall prevail over any other existing law. However, the Circular dated 20/03/2020, is only an advisory against retrenchments. It is a matter of practice that retrenchments and lay offs are not undertaken unless there exists absolute no other option.
Q: Does the Disaster Management Act override the Industrial Disputes Act?
The Order of 29/03/2020 directing the payment of wages during the Pandemic has been issued under the provisions of the Disaster Management Act, 2005. Section 72 of the Disaster Management Act is a non-obstante clause giving overriding powers to the Government in the time of a disaster, and specifying that “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act”. It will thus override the sections of the Industrial Disputes Act, 1947, which allows an employer to lay-off and pay only 50% of wages (including on the grounds of “natural calamity” – Sec. 25C & 25M – see below).
Q: What is the argument of employers?
Employers argue that the orders are ultra virus the DMA in that there is no power in the act to decide on the payment of wages to employees. They also argue that they are unable to pay since there is no income being generated during lockdown due to the fact that manufacture is non-operational. They have also demanded that the Central Government should make good the payment of wages to the employers at least to some extent as has been done in other countries
Q: How have other countries dealt with the situation of payment of wages?
Countries across the world are taking steps to counter the difficult Covid-19 crisis by rolling out special and stimulus packages schemes to enhance the capacities of employers to pay their employees.
In the United Kingdom, all employers can get 80% funding from the government for the next three months towards the salaries of workers up to 2,500 GBP per month. Ireland has provided a temporary wage subsidy of 85%, of the net weekly take-home pay up to 412 Euros, which is a raise of about 70% that was provided in March.
Similarly, the United States has provided income support for families of 1200 Dollars per adult and 500 Dollars for children. A boost of 250 million dollars has also been provided to boost insurance towards unemployment. All Japanese citizens shall receive a cash payment of 100,000 yen. The Central government of South Korea shall provide relief checks to households that fall under the bracket of the bottom 70%, which includes over 14 million households. These relief checks shall be worth up to 829 Dollars per household.
Employees in France shall receive an allowance of nearly 84%of their salaries while minimum wage workers shall get 100% of their salaries. The State of Denmark is paying 75% of wages for 3 months if employers do not lay off their employees. The Austrian State has guaranteed 90% for the gross salaries below 1700 Euros, 85% for salaries below 2,685 Euros and 80% for salaries below 5,370 Euros. Apprentices in Austria get compensated in full. In Spain, workers shall receive full salary during the lockdown. There is a bar on outright dismissals and there is an allowance for temporary workers and household employees. German employees have a 26 billion Euro insurance fund which guarantees workers a minimum 60% of their basic pay. Italy has provided a 5 billion Euro on top-up wage supplementation scheme towards those employees who are furloughed. In addition to this, there shall be one-off payments to various other categories of workers. Argentinian employers are not allowed to fire any workers during a period of 60 days and they are required to pay minimum parts of their salaries. Australia has provided a wage subsidy worth 130 billion Australian Dollars to business, which is 6.5% of the GDP of Australia. China has provided some temporary living allowances for the migrant workers and some other benefits for the jobless Chinese. The Saudi Arabian government shall cover 60% of salaries of Saudi employees in distressed companies for the next three months. Poland shall provide subsidies for employees’ salaries of up to 40% of the average statutory wage subject to certain conditions.
Greece has provided an allowance of 800 Euros for employees of companies that have been affected. In Serbia, 50% of the net minimum wage is being paid for three months for employees in the big private sector companies and for employees who are currently out of work. Norway has made provisions for employees who are on temporary lay off to receive full wage compensation of up to 50,000 Kroner per month. The Netherlands hall provides temporary compensation for company wage costs of up to 90% of the wage bill. Kenya has provided 100% tax relief for all persons with a gross monthly earnings of up to 225 Dollars. These are those employees who fall under the group of low-income earners. In Indonesia, manufacturing workers with an annual income below a given slab shall be exempted from income tax for six months.
Quarantines employees in the Czech Republic shall get 60% of their salaries while employees of firms that had to stop their operations, shall be fully compensated. In Canada, for all those who have lost their income due to the Covid-19 crisis, shall be paid 2000 Canadian Dollars per month. Belgium has raised the benefit for temporary unemployment from 65% to 70% of gross wages and has issued help for those in self-employment.
Brazilian informal workers and unemployed persons shall receive a temporary new benefit if 120 Dollar per month, for three months, under certain conditions