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Payment of Wages During Lockdown- Frequently Asked Questions

Apr 11, 2020

Whether an employer is liable to pay wages for the period of lockdown due to COVID- 19?

The Home Secretary, Ministry of Home Affairs, Government of India vide Order No. 40-3/2020-DM-I(A) 1 dated 29.03.2020, directed the State/ Union Territories Authorities to take necessary action and to issue necessary orders to their District Administration/ Police Authorities to ensure that all the employers, be it in the industry or in the shops and commercial establishments, shall make payment of wages to their workers, at their workplace on the due date, without any deduction for the period their establishments are under closure during the lockdown.

Furthermore, As per D.O. No.M-11011/08/2020-Media2, the Ministry of Labor and Employment, Government of India, advised all the employers of Public/ Private Establishments to extend their coordination by not terminating their employees, particularly casual or contractual workers from job or reduce their wages. If any worker takes leave, he should be deemed to be on duty without any consequential deduction in wages for this period. Further, if the place of employment is to be made non-operational due to COVID-19, the employees of such unit will be deemed to be on duty.

As per the Office Memorandum/ Order No. F-51/DGHS/PH-IV/COVID- 19/2020/prsecyhfw/3064-31633, issued by Government of NCT of Delhi, Health and Family Welfare Department, “The employees of private establishments (including temporary/contractual/outsourced etc.) required to stay at home in view of this order shall be treated as “on duty” and be paid in full.”

As per the Necessary Advisory No. 7047-71274 issued by The Principal Secretary to Government of Haryana, Labor Department, “All the Employers/ owners of Industries/ Factories/ Shop and Commercial Establishments, etc. are advised not to terminate their employees/workers particularly casual/ contractual workers from their jobs and not to deduct their wages/ salary. Further, the employees/workers of such unit may be treated “on duty and be paid in full”, if the place of employment has been made non-operational due to COVID-19 by any order/advisory of the government.”

As per Endst.No.F-2071/F-II(6)-2020/50235 dated 23rd March, 2020, issued by the Chandigarh Administration, in exercise of the Epidemic Diseases, COVID-19 Regulation, has ordered that “The employees of private Establishments / Industries/Factories / Shops etc., (including temporary /casual /contractual / outsourced

/daily workers) who are required to stay at home in view of the orders of Chandigarh Administration shall be treated as „on duty and be paid in full till 31st March, 2020.”

As per Notification No. G.O.Rt.9416 issued by the Telangana Government, in exercise of powers conferred under Section 13 and Section 31(2) of the Telangana Shops and Establishment Act, 1988 had ordered all shops and establishment other than those exempted to be closed during notified lock down period i.e. from 22nd March 2020 to 31st March 2020 in public interest and shall be declared as paid holiday for all categories of employees.

What is the scope of “workers” for the purpose of payment of wages?

“Workman” as defined under Section 2(s) of the Industrial Disputes Act, 1947 will broadly include any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, but excludes those employed mainly in a managerial or administrative capacity. Also excludes those employed in a supervisory capacity & draws wages exceeding Ten thousand Rupees per mensem or exercises. However, in light of the recent advisories and orders issued by Central Government/ State Governments, the scope of payment of wages seems to extend to regular, casual & contractual workers.

What is the scope of “wages” for the purpose of payment to workers?

As per the definition of “wages” under Section 2(rr) of the Industrial Disputes Act 1947, “wages” means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment or of work done in such employment, and includes dearness allowance; value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food-grains or other articles; any travelling concession; any commission payable on the promotion of sales or business or both; but does not include any bonus; any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force; any gratuity payable on the termination of his service.

Can the salaries during this lockdown be reduced or deducted?

As per the Ministry of Home Affairs order dated 29.03.2020, the wages are to be paid on the due date without any deduction.

Can the employees be laid-off, terminated or retrenched?

The various advisories issued by State Government/ Union Territories are against termination or retrenchment of employees. “Lay-off” as per Industrial Disputes Act 1947 the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other connected reason to give employment to a workman. However, due process of law as laid down under Industrial Dispute Act needs to be followed and should be considered as last resort.

What is the legal position of Orders/ Advisories issued by Central Government/ State Government? Are they binding or advisory?

Section 10(2)(l) of Disaster Management Act, 2015 empowers National Executive Committee to 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. Section 51 of Disaster Management Act, 2015 prescribes Punishment for obstruction, etc. against whomever, without reasonable cause refuses to comply with any such direction. As per Section 71 of Disaster Management Act, 2015 No court (except the Supreme Court or a High Court) shall have jurisdiction to entertain any suit or proceeding in respect of any such direction. And in terms of Section 72 of Disaster Management Act, 2015, the Act shall have overriding effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

However, these ‘advisories’ are not binding upon the employers as the same does not have any sanctity under any notifications or legislation. It is pertinent to note that Disaster Management Act empowers the State Governments/ Authorities in relation to measures to be taken by them in response to any disaster, but it does not provide for the State Governments/ Authorities to impose on the employers payment of wages in full to the workman and moreover, it is not backed by statutory law.

Employer options: It is also necessary to keep in mind that while there is no specific statute or legal provision which deals with any step taken by the Employer in relation to lower payment for the period of lockdown, it needs to be agreed mutually between the employer and employees in the interest of the enterprise. The following could be certain alternatives for remuneration during lockdown period:

reduction of pay (pay cuts), or Payment of 50% of salary/wages

  • deferred payment of salary- payment of part or full remuneration in question, over a period, after the initial moratorium easing cash flow
  • adjustment of accrued leave or grant of advance leaves

If the Employer is looking at reduction of salary or pay cut to sustain the business, and their cash flows and sustainability, it is important that the same is applied universally for each class of employees, without any discrimination.

Please note that in light of the various advisories/ orders issued by the Central/ State Government, it may be difficult for employers to lay-off employees or deduct their wages, and in case of claims by employees, the Employers may be subjected to litigation. Hence, it is necessary to undertake due consideration, diligence and seek legal counsel advise before taking any of the abovementioned steps as facts and circumstances of each case will vary, therefore, it is advised that before persuading the above steps please seek written legal opinion.