Wednesday, 10 March 2021

​Legal Obligations to Pay Wages during Lockdown

 Due to lockdown being imposed as a defence mechanism to keep the public safe from the Coronavirus outbreak, the workforces in various business sectors have also been facing challenges. Being one of the most effective solutions to contain the pandemic, the lockdown is one of the most lucrative measures implemented by the government, however, the same is affecting nearly all business activities putting them on hold due to the restricted movement and shutting down of all non-essential services. Consequentially, this has impacted business entities and economy at large which has further resulted in salary deductions and employees being laid off.


In order to protect the interests of employees, the union and the state governments have asked the industrial establishments to pay wages to its permanent as well as contractual employees for the lockdown period on humanitarian grounds. However, what needs to be considered is whether the Indian law can put such an obligation over private organisations during such hard times. Let’s take a look at the mandates provided by law for an employer to pay wages to its employees during a quarantine situation.


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What are the legal obligations to pay wages during a lockdown?

As per the Indian law, there is no specific provision that deals with a situation wherein employers are required to pay wages to its employees during a lockdown. However, the Industrial Disputes Act, 1947 talks about a similar situation. Under Section 2 (kkk) of the Industrial Disputes Act the term ‘lay off’ has been defined which states that when an employer is unable to provide employment to an employee due to a natural calamity or a similar situation the same would fall under ‘lay off’.




Subsequently, the Act also speaks about the terms on which an employee can be laid off. Under Section 25 C of the Act, the employers laying off workmen are required to pay compensation to the workmen being laid off which shall be equivalent to 50 percent of the wages. Moreover, the Act mandates any industrial establishment with more than 100 workmen to take prior permission before laying off the workmen. Although the permission is not mandatory if the laying off is due to a natural calamity.


However, the question again arises whether COVID-19 can be considered as a natural calamity. The Ministry of Finance through its notification dated 19th February 2020 has stated that the disruption of the supply chain due to the spread of novel COVID-19 will be considered as a natural calamity. Therefore, the workmen can take resort in the above-mentioned Sections on being laid off.


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Can government make it a mandate for private organisations to pay wages during lockdown?

In the absence of any specific law in this regard, the government lacks the authority to mandatorily obligate private organisations to pay wages to their employees. The Central Government has invoked the provisions of the Disaster Management Act, 2005 to declare the lockdown and the State Governments have invoked the provisions of the Epidemic Diseases Act, 1897 to frame regulations and issuing guidelines/directions to deal with the pandemic. However, the directions issued by the governments to the employers to pay wages to all the contractual and permanent employees neither comes within the scope of the Disaster Management Act nor the Epidemic Diseases Act. A simple reading of these two Acts makes it clear that neither the Central nor State governments have the powers to direct private employers to pay wages to its employees during a lockdown situation. The Acts merely empower the committees established within its scope to frame strategies to deal with the disaster. Therefore, the directions issued by the governments to pay wages can only be considered as advisory and cannot act as an obligation on private organizations.

 


What can be done to remedy the situation?

Foreseeing that the lockdown could cause a burden on the economy due to the restricted movement and shutting down of all the non-essential services, various governments across the world have taken a slew of measures to tackle this situation. For example, Australia has introduced a “Jobkeeper” wage subsidy plan where an employer can claim a periodic payment of $ 1,500 per eligible employee. Similarly, England has provided for 80 percent of the average earnings to be subsidized. Denmark has announced that 75 percent of the wage bills shall be covered by the government. The Netherlands, on the other hand, has allocated a package that covers compensation of up to 90 percent of the labour costs for organisations that are expecting a reduction in revenues of up to 20 percent or more.


In order to protect the interests of employees among various business sectors, the Indian Government can take similar steps to help employers in providing wages to its employees. The government can also introduce a plan either to subsidize the wages in part if it’s unable to cover the entire wage cost. As in the absence of such a scheme, the private employers, especially the ones running small and medium-size organisations, can be put through hardships that can ultimately result in their bankruptcy.


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How can a lawyer help?

In circumstances like these, if you are being laid off by your company or your salary is being deducted, it is necessary to understand as to what steps can be taken to retain your job or to get back the deducted salary. This is why it is important to have a labour lawyer by your side who can guide you with the right steps to be taken and help you in doing the needful to restore your rights. A labour lawyer, being an expert in the service sector laws, can help you understand the options available to you in situations like these and can also assist you with the necessary procedures in order to resolve your salary or job-related issue.

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