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The Supreme Court's judgment is likely to prove inadequate in alleviating the economic distress being faced by lower and middle income households.
On June 12, 2020, the Supreme Court of India, in the case of Ficus Pax Private Limited v. Union Of India, ruled on the legality of the Ministry of Home Affairs’ (MHA) notification on March 29, which directed employers to “make payment of wages of their workers, at their work place, on the due date, without any deduction, for the period their establishments are under closure during the lockdown”.
The judges pronounced that those “private establishment, industries, employers, who are willing to enter into negotiation and settlement with the workers/employees regarding payment of wages for 50 days or for any other period as applicable in any particular State during which their industrial establishment was closed down due to lockdown, may initiate a process of negotiation with their employees organization and enter into a settlement with them”.
In cases where this could not be realised, “labour authorities who are entrusted with the obligation under different statutes”—such as the Industrial Disputes Act, 1947—would be required to facilitate negotiations, conciliation and settlement.
But, despite its intention to balance the financial ruin faced by employers due to COVID-19 with the desperate need to ensure payment of wages to migrant labourers and employees during the lockdown period, the judgment is likely to prove inadequate in alleviating the economic distress being faced by lower and middle income households.
Petitioners such as Ficus Pax, which is an industrial product packaging company, pleaded for relief as their operations were reduced to 5-6%, thus affecting their ability to pay salaries. Some writ petitions also demanded an expansion in the remit of social security schemes, such as the Employee Insurance State Corporation or the PM Cares Fund, to subsidise up to 70-80 percent of labour wages during this period.
On the other hand, labour unions have used the MHA’s notification to challenge rampant salary cuts and terminations. For instance, the National Information Technology Employees Senate (NITES), Information Technology Employees Association, Telangana and All India Forum for IT Employees, Tamil Nadu, have filed complaints for over 68,000 employees in Maharashtra’s IT sector facing salary cuts or job losses during the lockdown period.
To justify its notification, the MHA later argued before the Supreme Court that “financial incapacity [was] a legally untenable ground to challenge a direction issued by a competent authority in exercise of its statutory power”. This is clearly a case of a debt-ridden and highly stressed Capitalist class (which was already facing an economic downturn prior to COVID-19), and a fiscally conservative and revenue deprived Central government, each wanting to shift the burden of social security on the other. While the Court has implicitly recognised that such a “burden” cannot be placed on private corporations, it has sought to leave the door open for an employee-employer compromise to emerge.
First, for the efficacious impact of the Court's judgement to be realised, one would have to presuppose that there is a Labour Union in every private establishment. In Para 35, the judges remark: "In most of the industries, factories and establishments, the workers are represented by Trade Unions or other Employees associations.” However, in companies where there are no Labour/Trade Unions, negotiations will take place between an individual labourer and the employers, putting the former at a grossly disadvantaged position without collective bargaining powers. Second, and more importantly, the time delays caused by the settlement processes could prove debilitating.
The judgement states that if the settlement process fails, an industrial dispute may be submitted to the concerned labour authorities. Such a reference is likely to be availed under Section 10 of the Industrial Disputes Act (1947), leading to a flood of cases in labour courts all over the country. Even in cases where an award is passed, it is likely to be appealed in the higher courts. Due to these delays, employees or labourers would have either lost interest, switched jobs, or in some cases, may not outlive the litigation, leaving their legal heirs to become parties. In light of these two social realities, the judgment is unlikely to bring relief to a major portion of India’s workforce.
In lieu of a conclusion, we would like to point out that what is also conspicuous in the judgment are its absences. The larger question at the heart of this case was “who is accountable to India’s employees?” In India’s socialist-constitutional scheme, the State is intended to be the primary source of social security and welfare. But, the Supreme Court did not choose to comment on the State’s basic responsibility towards its labour force.
While COVID-19 is indeed an unprecedented situation, it now portends a challenging future. In the short to medium term, despite liquidity injections and structural reforms, corporations are likely to consolidate their market positions, reduce expenses and staff requirements, and revert to cheaper work-from-home models. In the long-term, despite the government’s commitment to increasing the contribution of manufacturing to India’s GDP, automation and robotics are likely to cause greater labour market disruptions.
This case therefore, was an opportunity to bind the government to its responsibilities, and dis-incentivise a future attempt to shift the onus of public welfare on the private sector. Unfortunately, Prime Minister Modi’s Garib Kalyan Rozgar Abhiyaan does not cast a net wide enough to guarantee the future of India’s labour force. It is likely that the judiciary will once again have to step up if there is a dereliction of duty.
Ameya Pratap Singh is DPhil (PhD) student in Area Studies at the University of Oxford. He previously read for an MPhil in South Asian Studies at the University of Cambridge, and a Masters in International Relations at the London School of Economics. Gaurav is a final year law student at Symbiosis Law School, Pune.
The authors would like to sincerely thank Tapesh Kumar Singh, advocate in the Supreme Court of India for his invaluable inputs.