PAYMENT OF WAGES TO WORKERS DURING THE COVID CRISIS: THE SUPREME COURT’S VERDICT
A Government Order dated March 29, 2020 [Ministry of Home Affairs, Order No. 40-3/2020-DM-I(A)] issued under section 10(2)(I) of the Disaster Management Act, 2005, directed the State governments and the Union Territories (SGs/UTs) to issue orders, compulsorily requiring all the employers in the industrial sector and shops and commercial establishments to pay wages to their workers at their workplaces on the due date without any deduction during their closure due to lockdown. The Order passed in the context of restricting movement of migrants with the aim to “mitigate the economic hardships of migrant workers” became central to controversies.
The general applicability of this Order then becomes debatable, and was challenged before the Supreme Court on April 18, 2020, and then in several other cases. The Supreme Court was cautious in its dealing of the Order from the beginning, and had directed that “no coercive action be taken in the meantime” against the petitioners for non-compliance, in two petitions challenging the direction [See Order dated May 15, 2020 in Hand Tools Manufacturer Association v. Union of India, W.P.(C) Diary No. 11193/2020].
On June 12, 2020, a judgment has been rendered by the Supreme Court in the matter challenging the validity of the MHA Order and related directions by the states, by a Bench of Hon’ble Justices Ashok Bhushak, S. K. Kaul and M. R. Shah [Ficus Pax Ltd. v. Union of India and connected cases, Writ Petition (C) Diary No. 10983/2020]. This article examines that judgment and explains the obligations upon parties based on the directions by the Supreme Court.
1. What were the key observations and directions of the Supreme Court?
The judgment collectively addresses a series of petitions that have challenged the constitutional validity of the MHA Order and related guidelines under Articles 14, 19(1)(g) and 300A. Some of the petitioners have also prayed for relief of being permitted to pay lesser wages than the full amount due, and for subsidization of wages due through contribution from government funds.
The court made the following important observations in its judgments which gave basis to and shaped the directions ultimately passed by them:
“33. It cannot be disputed that the lockdown measures enforced by the Government of India under the Disaster Management Act, 2005, had equally adverse effect on the employers as well as on employees. Various Industries, establishments were not allowed to function during the said period and those allowed to function also could not function to their capacity. There can be no denial that lockdown measures which were enforced by the Government of India had serious consequences both on employers and employees...
34. As noted above, all industries/establishments are of different nature and of different capacity, including financial capacity. Some of the industries and establishments may bear the financial burden of payment of wages or substantial wages during the lockdown period to its workers and employees. Some of them may not be able to bear the entire burden. A balance has to be struck between these two competitive claims... The obligatory orders having been issued on 29.03.2020 which has been withdrawn w.e.f. 18.05.2020, in between there has been only 50 days during which period, the statutory obligation was imposed. Thus, the wages of workers and employees which were required to be paid as per the order dated 29.03.2020 and other consequential notification was during these 50 days.
35. ...The State is also under obligation to ensure that there is smooth running of industrial establishment and the disputes between the employers and employees may be conciliated and sorted out.
36. It cannot be disputed that both Industry and Labourers need each other. No Industry or establishment can survive without employees/labourers and vice versa. We are thus of the opinion that efforts should be made to sort out the differences and disputes between the workers and the employers regarding payment of wages of above 50 days and if any settlement or negotiation can be entered into between them without regard to the order dated 29.03.2020, the said steps may restore congenial work atmosphere.”
A reading of these observations by the court implies the following:
• The Order in question stood revoked from May 18, 2020, therefore the obligations that arise under it are no longer in force and the obligations are for the period of the 50 days when that Order was in operation.
• The lockdown was extremely challenging for employers and employees both. It led to a complete shutdown of operations for most businesses, and different businesses have different financial capacities. Some businesses may possess the capability to be able to pay their workers entirely for this period, and some may only be able to pay to a limited extent.
• There exists a mutual co-dependence between the industry and laborers. Neither can survive without the other. Therefore, attempts at reaching a settlement and sorting out the disputes should be made by way of negotiations.
The Court passed four directions which have been summarized as follows:
• Personal and Government-aided Attempts at Negotiation and Conciliation: The 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. If they are unable to settle by themselves, they can involve the concerned labour authorities who are entrusted with the obligation under the different statute to conciliate the dispute on receiving such request. In case of reaching a settlement, it may be acted on by the parties involved irrespective of the MHA Order dated 29.03.2020.
• Options for Partially Open Businesses: The above remedy is also available to employers’ establishments, industries, factories which were working during the lockdown period although not to their full capacity.
• Rights of Workers: Workers/employees who are willing to work shall be permitted to do so without prejudice to rights of the workers/employees regarding unpaid wages of above 50 days. The private establishments and factories who proceed to take the above suggested steps shall publicise and communicate the same to their employees for their response and participation. The settlement, if any, as indicated above shall be without prejudice to the rights of employers and employees which is pending adjudication in these writ petitions.
• Governments to Make Employers and Employees Aware of this Option: The Central Government, all the States/UTs through their Ministry of Labour shall circulate and publicise this order for the benefit of all private establishment, employers, factories and workers/employees.
2. What is the obligation of the employers as per this judgment?
The Court has directed that employers, whose business were completely or partially inoperable during the lockdown, to attempt the following recourse:
• Personal Attempt at Negotiation/Conciliation: Employers must try and negotiate with their employee unions for reaching a settlement as to what should be due and made payable to the employees for the period of the lockdown when the MHA Order was in force. Employers must keep in mind that it is ideal to reach an agreement on your own, as their interests will be best protected in this manner and it will save time and costs.
• Encourage Employee Participation: The most likely reason that the court has specifically orders that the views of the workers on duty be considered is so that employers can fully understand the plight of the workers in this time and attempt to reach a settlement that directly addresses those issues. This is a good opportunity for employers to understand what the employees struggled with most during the period and compensate them accordingly.
• Help from Labour Authorities: State labour authorities can be approached if employers and employees are unable to reach a settlement on their own. The labour authorities who are entrusted with the obligation under different statutes to conciliate disputes between the parties shall on receiving such request, have the power to call the concerned Employees Trade Union/workers Association/ workers to appear on a date for negotiation, conciliation and settlement.
3. What are the rights of the workers as per the judgment?
The Court understands the need to protect workers and the role they play in keeping the industry going. Aside from participating in the negotiation and conciliation proceedings taking place, they have been provided the following remedies:
• Workers/employees who are willing to work shall be permitted to do so without prejudice to rights of the workers/employees regarding unpaid wages of the concerned 50 day-period.
• Employees shall try and participate in the negotiations, communicating their needs and issues to the employers so that they can be factored in the negotitions.
• The settlement reached, if any, shall be without prejudice to the rights of employers and employees which is pending adjudication in these writ petitions.
In conclusion, the Supreme Court has taken a conciliatory approach. It has been accepted that workers are essential to every business and should not lose their wages, stating that those who want to continue working should be allowed that opportunity. At the same time, taking a balanced approach, the court acknowledges the employer’s limited ability to pay in the present circumstances. The matter will be taken up again in the last week of July.