YNSS LAW OFFICES

published by www.yourstory.com on 17 April 2020 [https://yourstory.com/2020/04/moral-dilemma-employers-facing-covid-19-lockdown]

-By Rohan Batra & Dhruv Sethi

Not just life but equally livelihood hangs in balance as India enters Lockdown 2.0.

Last 21 days of lockdown had spelt financial woes for new entrants to established business players, who struggled with the moral dilemma- Save the business or Save the workers’ livelihood.

Let us recount the measures taken by the govt. that have tilted the balance in favour of keeping employees’ livelihood intact.

Govt. directions

Ahead of Lockdown 1.0, on 20.03.2020, Ministry of Labour & Employment asked its Chief Secretaries of States/UTs to issue an advisory to all employers of public/ private establishments to not terminate their employees, particularly casual or contractual workers from job or reduce their wages.

States including Haryana, Puducherry and more recently, Karnataka have followed suit by issuing similarly worded advisories to the concerned departments for dissemination to the employers.

In a novel use of the epidemic diseases law, Delhi Govt., while ordering lockdown from 23 -31 March 2020, directed that employees (including temporary/contractual/outsourced etc.) of private establishment, staying at home, be paid in full. Telangana Govt. too issued a similar direction while imposing lockdown till 31 March 2020, which was later extended till 14 April 2020. However, as of date, none of these directions have been continued till 03 May 2020, leaving it unclear if these directions have run their course.

At the Centre, the Home Ministry invoked the Disaster Management Act, 2005 on 29 March 2020 to direct employers to pay full wages to workers during lockdown period. This measure was prompted in the wake of the mass migrant workers’ movement risking the lockdown.

Though Centre has extended the lockdown measures till 03 May 2020, this direction to fully pay workers does not find mention in the consolidated guidelines nor has been expressly renewed.

Critical Q

These directions give rise to the important question: Can employers still resort to lay-offs/retrenchments/pay-cuts, if required?

Industrial Disputes Act, 1947 provides for lay-off and retrenchment of workmen. An employer can lay-off a workman if it is unable to provide employment for number of reasons including a natural calamity.

Lay-off is, of course, subject to payment of statutory dues to the workman which can be negotiated and avoided after the 45-day period of lay off. On the workman remaining laid off after the 45-day period, the employer can retrench/terminate his employment if other conditions are met. Only where an industrial establishment employs 100 or more workman, appropriate authority’s permission is required before laying off or retrenching a workman.

Out of all the directions, the directions discouraging lay off/retrenchment is the advisory issued by the Labour Ministry on 20 March 2020 and the follow-on advisories by state govts.

As the direction itself suggests, it is an “advisory” to seek employers’ cooperation. At best, it imposes a moral obligation not a legal one. This explains why no legal provision has been cited in support of such an advisory. Moreover, an advisory of this nature from the executive, Labour Ministry, cannot overcome these statutory rights that otherwise have an overriding character under the act.

The bigger picture must not be forgotten. Despite theories floating around, COVID-19 is still not attributable to a human fault, particularly to the Indian businessman. Long before the lockdown, on 19 February 2020, Ministry of Finance considered COVID-19 a ‘natural calamity’ to invoke force majeure where supply chains were disrupted by the spread of this virus.

If deadlines for contracts can be extended citing COVID-19 as a natural calamity, what is to say that the same logic cannot be used to lay-off/retrench workman? Though for industrial establishments requiring prior permission from govt. for lay-offs/retrenchments, the authorities may be not so forthcoming.

As far as directions against pay cuts are concerned, no support can be found under the Industrial Disputes Act which is silent on wage deduction for temporary closure of establishments.

Perhaps, this is why the generic language of Section 10(2)(l) of the DMA, which provides for “measures” to be taken “in response” to any “threatening disaster situation or disaster”, has been availed by the Home Ministry to ask employers to refrain from pay-cuts. Besides the lack of clarity on the continuation of such a direction, it is debatable whether a direction for preventing pay-cuts can amount to a measure in response to this disastrous pandemic.

Never mind the legal ambiguity in these measures- the question still remains if the object was to protect livelihood of those really in need, why stretch it to all classes of workers/employees, possibly including white collar jobs and to all kinds of establishments, shops, factories etc.?

Aid by the Govt. to resolve the dilemma

Majority of the Indian economy accounts for Micro, Small and Medium Enterprises (MSME). For MSMEs that don’t’ have strong balance sheets, these directions are a source of worry. Corporations have already announced job and pay cuts.

Hopefully, with phased opening of the economy under Lockdown 2.0, these concerns may not persist for long. Still, clarity on the directions against job & pay-cuts for businesses under lockdown and even those operating is required.

While the Prime Minister’s appeal to not go for job-cuts is appreciable, a helping hand is required to aid the companies from falling into the pit. If businesses shut, then what good would such directions bring anyway.

Thus, a case for a fiscal stimulus is made out for the private sector- not just for the loss already suffered and what may be ensued in the coming months. The government’s decision to contribute to the employee provident fund for both the employer and employee is a step in the right direction.

Asides following the track of our foreign counterparts which are offering wage subsidisation, the govt. can consider incentivising companies which take the unconventional and humane road of retaining their employees- by announcing low-interest loans or decent tax breaks/exemptions.

These measures may restore the balance to save the businesses potentially ensuring protection of livelihood.

Until then, the employers’ moral dilemma continues.