Supreme Court extends order for withholding payment of wages during lockdown

Introduction

The Supreme Court (SC) recently extended its order of no coercive action to be taken against any companies for failing to comply with the Ministry of Home Affairs (MHA) circular dated March 20, 2020 asking for payment of wages to workers to not be suspended or delayed during COVID-19 lockdown (“Circular”). In the case of ‘FicusPax Private Ltd. and ors. v. Union of India and ors.’ In a related petition, the SC ordered that no coercive action will be taken against an association of fifty two (52) companies in Punjab for failing to comply with the MHA notification.

The SC asked factory owners and other private industrial establishments to negotiate terms and enter into settlements with the workers on the payment of wages during the lockdown period. They observed that the industry could not survive without the labourers and workers and that both labourers and the industry need each other and should make efforts to solve the dispute mutually. The SC urged employers and employees to sort out their differences and resume work in a congenial atmosphere.

Petition by the industries

As soon as the Circular was passed, various associations sole proprietorship firms, partnership firms, private limited companies etc. engaged started knocking on the doors of the Courts for relief challenging the constitutional validity of the Circular, which in a way compelled payment of full wages to workers and employees during the period of lockdown.

The aggrieved parties submitted that the circular and all such related notifications compelling any form of payment was arbitrary, illegal, irrational, unreasonable and contrary to the provisions of law including Article 14 and Article 19(1)(g) of the Constitution of India, 1950 (“Constitution”). Their plea further stated that the existence of the power under Section 10(2)(l) of the Disaster Management Act, 2005 to treat all private establishments at par by passing a blanket direction to pay full salaries against no work is manifestly arbitrary and violative of Article 14 of the Constitution.

On April 27, 2020 the SC, while hearing another similar plea had granted the MHA two (2) weeks to put its policy on record regarding the notifications directing payment of full salaries to employees during the COVID-19 lockdown. On 4 June, 2020 the SC had granted interim protection to private companies and said no coercive action will be taken against them.

SC’s order

The SCin an order dated June 12, 2020, has given a slew of directions to the states’ labour departments to facilitate the negotiations between the employers and the employees. State Governments were asked to facilitate, initiate the process of settlement and submit a detailed report to the labour commissioners regarding the same. The MHA has been given four (4) weeks by the SC to file its reply on the question of legality and validity of the notifications that all employers, including all public as well as private establishments have to pay full wages to their employees during the lockdown period.The SC further directed that no coercive action would be taken against employers due to non-payment of one hundred per cent (100%) salaries of their employees. The state government labour departments were asked to facilitate negotiation between employees and employers.

Conclusion

The Circular and related notifications can be seen as a temporary measure, since people were migrating in large numbers. Its effect was to mitigate their suffering and stop them from leaving. However, the aggrieved businesses in this case have been hit because of the lockdown and being forced to pay workers in full has caused extreme financial and mental stress on them. The aggrieved parties in their cases have argued that they cannot be compelled to pay one hundred per cent (100%) of the salaries of their workers and that they should be allowed to pay the employees seventy per cent (70%) less salary and argued that the Government should take care of the rest by utilizing the funds collected by the Employees’ State Insurance Corporation or the PM Cares Fund.

It is essential to work out a solution after negotiations with industries and the Government and the SC should play the role of facilitator.

This update is by Shambhavi Singh, Advocate & Associate at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: shambhavisingh@agarwaljetley.com or Mob: (+91) - 9650424966