The Hon'ble Supreme Court (the "Apex Court"), on Friday, June 12, 2020, pronounced its order in the matter concerning the petitions filed by private companies challenging the Ministry of Home Affairs (the "MHA") order dated March 29, 2020 (the "MHA Order") which required employers to pay full wages to the workers for the lockdown period.
The Apex Court, by way of an interim order, has directed that private establishments, industries and employers, who are willing, may negotiate terms and enter into settlements with their workers and/or employees regarding payment of wages for the period with effect from the MHA order till May 18, 2020 ( the "50 Days Period") or for any other period as applicable in any particular state during which their industrial establishment(s) was closed down due to lockdown. In an earlier order, in the petitions filed, dated June 04, 2020, the central and state governments were directed not to take any coercive steps against private employers who have not paid full wages to their workers and/or employees during the lockdown.
2. THE MHA ORDER AND ITS VALIDITY
The Home Secretary, MHA in exercise of the powers conferred by Section 10(2)(l)1 of the Disaster Management Act, 2005 ("DMA") in the capacity as Chairperson, National Executive Committee under the DMA vide the MHA Order had issued additional measures which provided, inter alia, that all employers (in the industries, shops and commercial establishments) shall make payment of wages of their workers, at the work places, on the due date, without any deduction, for the period during which their establishments have been under closure during the lockdown. In the backdrop of the movement of migrant workers in large numbers due to loss of income owing to closing down of establishments/factorises during lockdown period, the Central Government issued the MHA Order to restrict the movement of migrant workers within the country in order to contain the spread of COVID-19 in the country. However, amongst other measures as per the MHA Order, the prescribed measure regarding payment of wages made a reference to workers only, without specifying the nature of relationship, which led to its wider interpretation and applicability being extended to different types of workforce, given the time when it was issued when several central and/or state advisories or orders were already in place.
The MHA Order directed the governments and authorities of the states or union territories to take necessary action and issue orders to their respective District Magistrate or Deputy Commissioner and Senior Superintendent of Police or Superintendent of Police or Deputy Commissioner of Police, to implement the additional measures contained therein. Pursuant to the MHA Order, several state governments had also passed orders along similar lines.
The MHA Order was in force for the 50 Days Period, before it was withdrawn with effect from May 18, 20202.
3. THE PETITIONS FILED BEFORE THE APEX COURT
A batch of petitions were filed before the Apex Court challenging the constitutional validity of the MHA Order. Among the petitioners, the Karnataka-based Ficus Pax Private Limited filed a writ petition3 challenging the constitutional validity of the MHA Order as well as an advisory dated March 20, 20204 issued by the Ministry of Labour and Employment, on the grounds that they violated Articles 14 and 19(1)(g) of the Constitution of India and, were in contravention of the principles of 'equal work, equal pay' and 'no work, no pay' by not differentiating between the workers so covered and those who had been working during the lockdown. The petitioners submitted that in light of the pandemic and the subsequent lockdown, many industries were unsustainable and already at the brink of insolvency, wherein payment of full wages to its workers would drive them out of business5.
On May 15, 2020, the Apex Court had asked the Central Government not to take any coercive action for a week against companies and employers who were unable to pay full wages to their workers or employees during the nationwide lockdown, in two cases while hearing multiple petitions on the said issue through video conferencing6. Later, the petitions were all brought together and the Apex Court made a reference to the aforesaid order in its order dated May 26, 2020. The Apex Court observed that the MHA Order directing companies to make payment of full wages to workers or employees, was an omnibus order and there was a larger question involved which needs to be answered.
The Apex Court also issued a notice to the Central Government. A counter-affidavit was filed by the Central Government with its submissions, which was to be considered for all the petitions pending before the Apex Court. Thereafter, the Apex Court vide its order dated June 4, 2020 extended the bar on coercive action against all employers.
The Attorney General of India, arguing on behalf of the Central Government, submitted that the MHA Order was passed with an intention to prevent human suffering amid the national lockdown and the directions contained therein, were a temporary measure to mitigate the financial hardship of the employees and workers, specially contractual and casual, during the lockdown period. By way of its counter-affidavit filed, the MHA submitted that financial incapacity (as claimed by the companies) is a legally untenable ground to challenge the MHA Order7.
4. THE INTERIM DIRECTIONS ISSUED BY THE APEX COURT
On June 12, 2020, the matters8 were listed for pronouncement of orders. The Apex Court remarked that "no industry can survive without its workers and employers" and passed its order encompassing the interim directions9, to be facilitated by the relevant state authorities:
- The employers willing to enter into negotiation and settlement with the workers or employees regarding payment of wages for the 50 Days Period, or for such period (as applicable in a particular state) during which their industrial establishment(s) was closed down due to the lockdown, may initiate a process of negotiation with their employees' organization and enter into a settlement with them. If they are unable to settle by themselves, a request may be submitted to the concerned labour authorities (statutorily prescribed to conciliate such a dispute), on such date as may be specified by the labour authorities. Such a settlement arrived at, may be acted upon by the employers and workers, irrespective of the MHA Order.
- Further, those employers' establishments, industries, factories which had been working during the lockdown period, although not to their capacity, can also take steps as indicated in direction No.(i).
- The employers who proceed to take the abovementioned step shall publicize and communicate about their steps to the workers and employees for their response or participation. Such a settlement would be without prejudice to the rights of employers and employees pending adjudication in the writ petitions.
- The employers shall permit their workers and/or employees (who are willing to work) to work in their establishment, without prejudice to the rights of the workers and/or employees regarding unpaid wages of the 50 Days Period.
- The central and state or union territories governments are required to circulate and publicize the Apex Court's order for the benefit of all employers and workers and/or employees.
The matters will be listed in the last week of July, 2020 and, meanwhile if a settlement is entered into between the employers and workers or employees, then an affidavit will have to be filed in the respective matter to bring the settlement on record.
5. INDUSLAW VIEW
The interim directions issued by the Apex Court have given an option to employers, whose businesses may have taken a commercial hit due to the lockdown. Undoubtedly, an employer, under the law, is obligated to pay wages or salary to its workers and/or employees. While there is a social obligation on the employers to mitigate financial hardships and ensure continued sustenance of its workers and/or employees during the pandemic, the government also has a corresponding responsibility towards the society. Having treated all employers, at par, irrespective of their nature of business, impact of pandemic on it and consistency of financial returns from operations, the government seem to have imposed an unreasonable expectation on the employers.
The approach taken by the Apex Court is very practical and viable. Though the employers have been given discretion and option to opt for negotiations and settlements with their employees, however, it would be expected by the government and Apex Court, that the employers adhere to the direction of the Apex Court and take proactive steps to resolve the issues amicably. During the course of the settlement (as directed by the Apex Court), the parties would now be in a better position to come to an agreement giving due consideration to the industry or establishment-specific practical issues involved. This may also pave the way for a harmonious approach, strengthening the bond between the employer and employees and/or workers, thus giving rise to a congenial environment wherein the employees and/or workers would be more open to sharing the responsibility to contribute towards the sustenance of the company or industry, in times of turmoil. Any understanding reached mutually will be legal and held to be fair.
Moreover, the direction to permit the willing employees and/or workers to work in the establishments, without prejudice to their rights regarding the payment of wages for the 50 Days Period, would allow the possibility of employers continuing to offer employment, rather than downsizing the operations leading to termination of workers and/or employees and, would hence prove helpful in the gradual revival of the industry and economy now that the lockdown restrictions have been eased.
The order does not get in into the aspect if any non-compliance by the employers for not having paid wages, for the period in question, in the petitions. However, given that the matters are still sub judice, the result achieved before the next date of hearing may determine what the Apex Court finally decides. Also, it is to be seen whether the Apex Court will address the issue of non-payment of wages being a non-compliance or not.
1. 10. Powers and functions of National Executive Committee.—(1) The National Executive Committee shall assist the National Authority in the discharge of its functions and have the responsibility for implementing the policies and plans of the National Authority and ensure the compliance of directions issued by the Central Government for the purpose of disaster management in the country.
(2) Without prejudice to the generality of the provisions contained in sub-section (1), the National Executive Committee may— (a) act as the coordinating and monitoring body for disaster management; (b) prepare the National Plan to be approved by the National Authority; (c) coordinate and monitor the implementation of the National Policy; (d) lay down guidelines for preparing disaster management plans by different Ministries or Departments of the Government of India and the State Authorities; (e) provide necessary technical assistance to the State Governments and the State Authorities for preparing their disaster management plans in accordance with the guidelines laid down by the National Authority; (f) monitor the implementation of the National Plan and the plans prepared by the Ministries or Departments of the Government of India; (g) monitor the implementation of the guidelines laid down by the National Authority for integrating of measures for prevention of disasters and mitigation by the Ministries or Departments in their development plans and projects; (h) monitor, coordinate and give directions regarding the mitigation and preparedness measures to be taken by different Ministries or Departments and agencies of the Government; (i) evaluate the preparedness at all governmental levels for the purpose of responding to any threatening disaster situation or disaster and give directions, where necessary, for enhancing such preparedness; (j) plan and coordinate specialised training programme for disaster management for different levels of officers, employees and voluntary rescue workers; (k) coordinate response in the event of any threatening disaster situation or disaster; (l) lay down guidelines for, or give directions to, the concerned Ministries or Departments of the Government of India, the State Governments and the State Authorities regarding measures to be taken by them in response to any threatening disaster situation or disaster; (m) require any department or agency of the Government to make available to the National Authority or State Authorities such men or material resources as are available with it for the purposes of emergency response, rescue and relief; (n) advise, assist and coordinate the activities of the Ministries or Departments of the Government of India, State Authorities, statutory bodies, other governmental or non-governmental organisations and others engaged in disaster management; (o) provide necessary technical assistance or give advice to the State Authorities and District Authorities for carrying out their functions under this Act; (p) promote general education and awareness in relation to disaster management; and (q) perform such other functions as the National Authority may require it to perform.
2. The Union Home Secretary by way of order dated May 17, 2020 stipulated that, "Whereas, save as otherwise provided in the guidelines annexed to this order, all orders issued by National Executive Committee (NEC) under Section 10(2)(l) of the Disaster Management Act, 2005, shall cease to have effect from 18.05.2020." The guidelines annexed to the said order contained six sets of standard operating protocols, mostly related to movement of people, which continued to remain in force. It did not include the MHA Order (dated March 29 2020) that directed all employers to make payment of wages of their workers, at the work places, on the due date, without any deduction for the establishments are under closure during the lockdown.
3. Ficus Pax Private Limited vs. Union of India & Ors., W.P. (C) Diary No. 10983/2020
4. The Joint Secretary, Ministry of Labour and Employment by way of an advisory dated March 20, 2020 advised all employers of public/private establishments to extend their coordination (in light of COVID-19) by not terminating their employees (particularly, casual or contractual workers) or reducing their wages. It also advised the employers that in case the place of employment is to be made non-operation due to COVID-19 or if a worker takes leave, they should be deemed to be on duty without any consequential deductions in wages for this period.
6. Indian Jute Mills Association & Anr., vs. Union of India & Ors., W.P. (C) Diary No. 11281/2020
Hand Tools Manufacturers Association vs. Union of India & Ors., W.P. (C) Diary No. 11193/2020
8. The matters are now (tentatively) listed for July 27, 2020.
9. Please refer to the order of Hon'ble Supreme Court of June 12, 2020 for detailed orders, as the information provided herein may not be verbatim.
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