Employment Law Under Lockdown

Legal Consequences of Covid19 Lockdown on Employment Arrangements

As we all know that Prime Minister of India Shri Narendra Modi had announced the first lock down with effect from 23rd of March 2020 for the 21 days which was supposed to be ended on 14th of April 2020 but unfortunately due to increase in number of Covid 19 cases, Central Government with the consultation of the states further extended the lockdown upto 03rd of May 2020.

During this lockdown period Central Government including the Ministry of Labour and Employment, Ministry of Home Affairs, Ministry of Corporate Affairs and various states had issued various advisory, clarification, notification and orders regarding the payment of salary/remuneration to the employees/workers during the lockdown period and since it’s an extraordinary situation to the industry/establishments and everybody is in dilemma that how that above announcements are effected and applicable upon them in contrary to the existing legal provisions/statutes laid down in the Labour and other Laws.

Before going to the announcement made by the Central and State Government regarding Covid-19 lockdown recently inrespect of employment, We have to understand the pre-Covid-19 lockdown Legal situation to the employment.

Employment structure and categories in India may be classify into three major employment categories i.e. “1. Central and State Government Employees, 2. Public Sector undertakings /autonomous bodies and Local Bodies and 3. Private Enterprises.”

Employment falls under Category No. 1 and 2 are governed by the rules and regulation, bye laws made by the Central/Government/respective authorities time to time, and their employment conditions are not likely to be affected, So no need to discuss the same in the context of Lockdown during Covid-19.

With respect to the private enterprises we may distinguish employees into two types i.e. Employees who are holding the post of management /supervisor level and another employees who are not holding any managerial or supervisory post in the enterprises and these employees may be referred as workmen also. Pre Covid19 Lockdown period legal provision relating to the employees holding managerial or supervisory post may governed with the appointment letter issued to the employee, Law of Contract along with other Civil Laws which may be binding upon them, However Legal provision laid down in the various Labour Laws, i.e. Minimum Wages Act, Payment of wages Act, Industrial Disputes Act etc. will applicable to the workmen/employee who are holding post lower than the Managerial or Supervisory Post.

In pre covid19 lockdown the employment of the employees who were holding the managerial or supervisory post may be terminated or suspended if they had an appointment letter and this appointment letter was having any Force Majeure Clause and the said clause will specifically describe that the employment may be suspended or terminated in a situation where it is not possible to give work to the employee at any time or in future, and accordingly employment may dealt with inaccordance to the Force Majeure clause. Since the employment letter is a Contract and Contract can be performed in accordance of the law of contract.

If any employment letter is not containing any Force Majeure Clause in that situation also law of contract may permit the employer to suspend or terminate the employment contract under the doctrine of “Frustration”.

Doctrine of Frustration means a Contract may be frustrated where there exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprive the contracts of its commercial purpose. Where a contract is found to be frustrated, each party is discharged from future obligation under the contract and neither party may sue for breach.

On the basis of the above and as per the contract act during the period of pandemic Covid-19 Lockdown it is not possible for the employer to give employment to the employees, in this situation provision of Force Majeure or Doctrine of Frustration may not be invoked upon the employees who falls in the category of employees who are holding managerial or supervision post in the private organization, since it is not an ordinary period.

Except above there is set of employees who are workmen working below the level of managerial or supervisory post in the private enterprises on which terms and conditions are strictly regulated on the basis of various Labour laws enacted by the government of India as well as various states and all of these provisions are statutory in nature.

The statuary provisions which may be called as minimum wages act, payment of wages Act, Industrial Disputes Act, Labour Contract Act etc. are applicable only in the case of work from the employees and especially when the employees are not working then these provisions are not enforceable upon the employer. In normal situation when the employee is not working in that case employer has reasonable reason not to pay to the employees as no work has been undertaken by him or her.

In the current situation due to lockdown declared by the Government due to Covid-19 Pandemic and workmen are not in position to come at work place as well as to work to the employer and are not entitled to get enforce the existing Labour Laws, the Government of India (which was subsequently followed by state government) was compelled to issue few order/notifications/announcement etc. to overcome from the present legal situation of the employment to facilitate employees who are public at large and also to create some social balancing as their employment is the only source to earn bread and butter for their survival in this extreme situation of pandemic Covid-19.

The Highlight of Announcements/Advisory/Order /Notifications are as under :-

The Ministry of Labour & Employment, Government of India has issued its first advisory on dated 20th of March 2020 in which it has been advised “to the employers of Public/Private Establishment to extend their coordination by not terminating their employees, particularly casual or contractual workers from job or reduce their wages.”

This advisory has been followed by the order issued by the Ministry of Home Affairs vide Notification No. 40-3/2020-DM-I(A) dated 29/03/2020 in which relevant Para No. iii specifically directed as under : -

All the employers, be it in the Industry or in the shops and commercial establishment, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishment are under closure during the lockdown.

The above said order is issued by the Central Government under the provisions of section 10(1) of the Disaster Management Act, 2005 which empowers the government to make such provisions in the case of any natural calamity or Pandemic , these provisions of this act has overriding effect embodied under section 72 of the Disaster Management Act and it will prevail over any other existing provisions of the law, i.e. Contract Act, the Industrial Disputes Act, Minimum Wages Act, Payment of Wages Act or any other Act, Law, Rules, order or any other provisions applicable in ordinary condition. In accordance to section 71 of this Act, no suit or proceedings can be filed against such order passed in this Act, except the jurisdiction of High Court or Supreme Courts. In case this order is not abided by any person to whom it is applicable he or she shall be liable to be penalize as per the provision mentioned under section 51 of the Disaster Management Act, 2005 and that should not be the penalty only it may be the prosecution also and the same shall be depend upon the gravity of the offence.

As on date the above said order dated 29/03/2020 issued by the Ministry of Home Affairs is binding and applicable on all the employers whether it is industry or establishment and this order is statutory in nature.

In regard to the above said order one petition was filed before the “Apex Court” and in this matter it was held by the “Apex Court” that Order passed by the Central Government shall be binding and be abided by each and every person in soul and spirit to whom it is applicable. So at present there is no escape to the employer to cut down, part payment, deferment of the salary or remuneration to the employees or to send employee on leave or make any adjustments in leave.

After knowing the above said provisions we have to understand the applicability of the said order dated 29/03/2020 in different case which are enumerated as under :

Regular Employee :– As we discussed above that there are two type of employees i.e. on the post of managerial/supervisory Level or below this level, both the employees can be regular employee of the employer and the above said order is applicable to for all types of regular employees, so as per the order All the employers, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishment are under closure during the lockdown so employee are eligible to get benefit of the order, irrespective of the hardship to the employer.

Contractual Employee : – During the period of Lockdown the Contractual Employees cannot be terminated till the expiry of the contractual period. However employer is not bound to extend the contract. As extension of contract is no where mentioned in the order.

Outsource Employee : – Many companies are outsourcing their work to the outsource agency, as per section 21 and 22 of the Contract Act, if contractor will not pay the salary to the employees then the principal employer is liable to pay to the employees, so during the period of the lockdown the employer is liable to make the payment and in case of non-payment by the employer then principle employer be liable for the payment. So in this situation of the Lockdown Principle Employer and immediate employer have to find a solution between them mutually for the payment to the outsource employees.

Daily Wages Workers : Payment of daily wages workers shall be depend upon case to case basis and the main criteria for computation will depend upon nature of work, length of services and abundance of work by the workers.

Part Pay :- Payment made by the employer to the employees in part or in percentage is not allowed as per order dated 29/03/2020.

Can this Lockout period may be treated as leave period by the Employer?

Answer : No, this period cannot be treated as leave period since as per the order dated 29/03/2020 it is specifically stated that “All the employers, be it in the Industry or in the shops and commercial establishment, shall make payment of wages of their workers, at their work places, on the due date, without any deduction, for the period their establishment are under closure during the lockdown.

However if the leave may be taken by the employees voluntarily by their own and without having any force and pressure then it may be treated as leave period, with the mutual consent of both employee and employer.

Layoff :- Can layoff will be possible during the Covid-19 Lockdown Period.

Answer : As per the circular and order issued by the government, No layoff are allowed during the period of lockdown since other provisions of the Labour or other laws will not be applicable which were applicable in the ordinary course of business. After the Lockdown some industry may go for the layoff as per the circumstances and during the Lockdown it is allowed only with the permission of the Competent Authority as prescribed under the Disaster Management Act, 2005.

Is any employee whose employment comes under essential services/goods activity is entitled to get salary if he abstain from the work ?

Answer : No. The above said order dated 29/03/2020 is making directions to the employer only who are unable to provide work to the workers during lockdown as their activity is restricted by the government by passing a order. The Employees of Employer who are allowed by the government to do their business cannot abstain from the work and if so then employer is not bound to pay such employees.

Disclaimer- This advisory note is generic with broad guidelines on topics covered, with views that are directional and recommendary in nature. For specific queries, interdependent factors and state-level regulations and statutory laws under COVID (or otherwise) need to be referenced. We are not responsible for any action based solely on the recommendations