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The article does a legal analysis of the wage conundrum in view of various government orders along with its implications and practical solutions.
Amidst all which may be characterized as effective governance to tackle the pandemic in India, the governments have been tussling to strike a fair balance concerning wages as the private sector has been brought to a grinding halt. Given the disastrous consequences that the standard “no work no pay" rule would have ensued, the government felt it appropriate to intervene in order to mitigate the consequences of the lockdowns for workers.
Resultantly, the Central and various State governments purportedly exercised their powers under The Disaster Management Act, 2005 (DMA) and the Epidemic Diseases Act, 1897 (EDA) (Collectively as “Acts") directing the employers to pay full wages/salary to their workers/employees during the lockdown period. As a consequence, the employers are now forced to approach the Supreme Court challenging the decisions taken by the governments.
With the background stated above, this article aims to highlight and analyze the various orders/circulars/advisory passed by the authorities under the provisions of the Acts and cull out all possible scenarios that may present itself in the course of time. Accordingly, the analyses has been bifurcated into two broad categories:
Jurisdictional competence to pass such directions; and
Consequences for non-compliance in case orders are indeed held to be legal.
It further suggests that the directions issued are based without due deliberation to practical implications and interests of all stakeholders.
Orders/Directions passed by Governments
Before dealing with the Acts, it is apposite to refer to various orders passed by the Central as well as the State governments:-
There have been multiple orders/directions or advisories been passed by the Central Government. Relevant to mention: (i) Order issued by Ministry of Home Affairs (MHA) u/s 10(2)(l) of DMA (29.03.2020); and (ii) Advisory issued by the Ministry of Labour and Employment (20.03.2020). Interestingly, the reasons stated for the issuance of MHA order i.e. to deal with the violation of lockdown measures due to exodus of migrant labour and economic hardship suffered by them along with the use of words such as "extending coordination" and "preserving the morale" in the advisory, suggests the operative scope and intent of such directions.
Further, circular issued by the Ministry of Corporate Affairs clearly states that payment of salary/wages shall be treated as a "moral obligation" during the lockdown period.
Similarly, various state governments such as Delhi, Uttar Pradesh, and Tamil Nadu have passed similar directions invoking Section 2 of EDA. Relevant to mention, the order issued by Delhi under EDA itself clarifies that it is operative till the 31st March, 2020. This order has not been extended/ amended. However, the Delhi Disaster Management Authority has already issued these directions, purportedly, exercising its power under Section 22 of DMA.
The preamble of the Act provides for effective management of disasters and ‘for matters connected therewith or incidental thereto’. Further, as per Section 2(d), disaster means any catastrophe, mishap, calamity or "grave occurrence".
Section 10 provides for the powers of the National Executive Committee (which has passed the order for payment of wages). Section 10(2)(l) specifically empowers the committee to either lay down guidelines for or give directions to the State Governments or other authorities regarding measures to be undertaken for containment and mitigation.
Section 22 deals with the functions of the State Executive Committee wherein Section 22 (2) (f) provides that it may issue directions for "enhancing preparedness" for the disaster.
Section 51 provides for penalty in case of non-compliance "without reasonable cause" and person shall be punished with imprisonment up to 1 year or fine or both. Section 58 deals with offences by companies which provides that the person in-charge of the company shall be liable for punishment along with the company.
Being a relatively short statue in terms of its provisions, the powers envisaged are general and broad in nature. Since the State Governments have invoked this Act, we shall confine to Section 2 of the Act which stipulates that when any state government "is satisfied that India or any part thereof is visited by, or threatened with, an outbreak of any dangerous epidemic disease and that the ordinary provisions of the law for the time being in force are insufficient to prevent the outbreak of such disease", it may take measures and prescribe regulations. It is important to mention that it is under this Section that Delhi passed its Delhi Epidemic Diseases COVID-19 Regulations, 2020. Similar regulations have been passed by other states such as Himachal Pradesh and Maharashtra.
One of the biggest issues concerning these orders is that it applies to the employees across the board. However, a careful reading of the orders passed by MHA under the DMA and various other regulations passed by states under EDA is bound to paint a different picture in light of the purpose it seeks to achieve. Relevant to mention the title of the 29.03.2020 order passed by MHA which reads as: "Home Ministry Order For Effective Implementation Of The Lock-down Measures And To Mitigate The Economic Hardship Of The Migrant Workers". Similarly, other regulations have been passed with the intent of effective implementation of the lockdown measures only.
Therefore, it is apparent that all the directions, including the payment of wages, have been done with an idea to achieve effective implementation of the lockdown measures which were being flouted given the exodus of migrant workers for their home towns in fear of economic hardships due to the lockdown. Relevant to mention that "inter-state migrant worker" has been defined under Section 2 (e) of the Inter-State Migrant Workmen Act, 1979 which includes a person recruited through a contractor in another state. This interpretation may further be fortified with the clarification issued by the MCA as discussed above. Despite all of this, the ultimate substantive "legal" mandate has been drafted in a manner which may well be interpreted by few to include all employees, and not just the migrant workers working in a different state.
On humanitarian grounds, there can be no debate about the need to pay wages to employees. However, whether such an obligation should be that of private employers or of the State has to be evaluated. Hence, after narrowing the scope of application of these orders, we shall now examine the legal sanctity under its relevant statutes which is discussed herein as follows:
Examining the objective and provisions of the Act, it may be correct to suggest that the government, Central or State, are indeed empowered to pass directions/ regulations in order to ensure the effective implementation of measures aimed for the prevention, mitigation and management of a disaster. However, the disaster management policy, as well as the High Powered Committee Report, suggests that these powers are of regulatory nature only. Nowhere does it remotely suggest that authorities have been vested with powers to impose financial burden upon private entities or citizens.
On the contrary, Sections 12 and 13 of the Act ensures minimum standards of relief and relief in loan repayment for the persons affected by disaster. Interestingly, the financial implication of such relief measures has to borne from the National Disaster Relief Fund set up under Section 46 of the Act. Hence, the direction imposing liability upon private persons is not only unfounded, but seems to be against the scheme of the Act itself.
As far as the penal consequences goes, assuming the orders are held to be legal, the non- compliance of such orders may not culminate into any consequential penalty. Section 51 begins with the phrase "without any reasonable cause" which means exemption from penalty is available subject to satisfaction of the cause for non-compliance. Accordingly, given the economic havoc inflicted owing to the pandemic, financial incapability of any establishment ought to be regarded as a "reasonable cause" in case of non-compliance.
The State Government has the power to issues such temporary regulations to be observed by any class of persons (which may include private establishment) and may also determine "in what manner and by whom any expenses incurred (including compensation) shall be defrayed". The dictionary meaning of the word "defray" means "provide money to pay". Therefore, a literal interpretation would mean that the State government may direct the companies to bear the expenses for its employees.
However, such an interpretation cannot be accepted as per our current Constitutional framework and jurisprudence. Such wide powers and unfettered discretions might hold true during the times when this Act was brought in place (1897) under the colonial regime. But today, the Government and its functionaries are bound by the mandate of the Constitution. Therefore, imposition of financial burden upon any private establishment is akin to a "tax/duty" and hence, it is required to be clearly and explicitly stated. Therefore, such literal interpretation is in clear violation of Article 265 of the Constitution of India and it is highly unlikely that it would pass the Constitutional muster.
Hence, the directions issued by the government to employers to pay wages to all the workmen neither comes within the framework of the Acts (DMA or EDA) nor is backed by any other statutory law. Furthermore, the employer shall have adequate protection as per the Industrial Disputes Act, 1947 which lays down specific provisions for lay-off and retrenchment in case of natural calamity which disrupts economic units.
A few reflections
It is true that the current situation is unique and complex. This is particularly evident given that law makers, like the rest, never envisaged such a situation. This has led to experts and stakeholders interpreting the directions as per their respective convenience and conviction. Resultantly, stakeholders are nudged to seek judicial interpretation in the interest of certainty and clarity. However, these legal battles are the last thing that industry or the governments needs at these troubling times. Perhaps, the authorities would have been better advised if they issued effective clarification so that such an ambiguous situation is contained, like how they are attempting with the pandemic itself. This has led to a situation which may be well characterized as the "cure being worse than the disease itself". Governments, rather than inducing the industry towards a conflict to be resolved through judicial process, ought to have guided towards co-operation by arriving at a common agreeable stand, if possible.
Further, the approach adopted by the Government should take account of some other relevant factors which requires due deliberation, namely:
How is it that the government is allowed to defer or deduct salary/wages on the ground of economic impact caused, but the same avenue is not afforded to private employers?
The direction issued by the government to pay full wages unfairly benefits employees, not merely because they earn it without having to work, but governments have already directed non-levy of rents for a month which otherwise would have been an expense for employees (food and shelter are provided by the Government). Resultantly, the directions of the government has lead to a situation where employees may be taking home more wages/salary than they otherwise would.
Should businesses that don't have financial capabilities be in a position to lay off or reduce salaries (as long as contractual obligations are met), as otherwise provided under law?
In case of natural disasters, the doctrine of Paren Patria is applicable which imposes an obligation upon the State to provide help, assistance and support to the victims of such natural calamities to help them to save their lives. Whether such responsibility may be passed on to private sector without any sanction of law?
As Mark Moore's strategic triangle for policy enactment suggests, will such a policy maximize public value or not?
If the directions of the government continue to be effective, many private employers will be put through hardships which may well bankrupt them. Hence, it is imperative that the Indian Government may consider coming up with a scheme to either "subsidise" employers towards the wages paid during the lockdown or either relax the terms. Money from the provident funds and cess may be made available for meeting such expenses.
Going forward, the Government must come up with a specific right based statute to dealwith such a situation. The current legal scenario has proved to be outdated, merely regulatory and not rights-based, and lacks a focus on the people. It is apparent that legal frameworks are pivotal to deal with such emergency situations as it clearly spells out the scope of the government's responses to public health emergencies along with citizen's rights and corresponding duties.
The author is Udit Chauhan, a Litigation Counsel and Corporate Attorney practicing in Delhi and Partner, Jade Lex Associates. He is an alumnus of Faculty of Laws, University College London.