Covid-19: No Work No Pay
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This Blog is written by Yashendra from National Law University, Delhi. Edited by Harsh Sonbhadra.
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INTRODUCTION
Jobs in the government sector are always considered prominent, promising, and reputed in Indian society. It has established repute due to various benefits that the government offers to its employees. These benefits include but are not limited to post-retirement benefits, paid leaves, and reimbursement of medical expenses. While Private jobs lack these benefits and even in private jobs, blue-collar jobs are even more vulnerable. These workers are generally paid in terms of the work done or simply by utilizing the principle of ‘no work no pay’.
The COVID-19 has come as a tragedy to these workers and the subsequent lockdown as a preventive measure has caused severe hardships to them. The lockdown has resulted in mass unemployment, retrenchments, and salary cuts. To avoid further unemployment or economic hardships, the central government and other state governments have also requested all the employers to not deduct salaries and this has been effected through a notification of Home Ministry dated 29th March 2020. On similar patterns, the March 20th notification by the secretary (labour and employment) has advised the employers to not substantially deduct the wages of these workers.
This notification has aggrieved the employers as the lockdown has impacted their businesses also and this could lead to their insolvency. Many cases were filed by the employers against the impugned notification. Meanwhile, the Bombay HC in Rashtriya Shramik Aghadi v. State of Maharashtra [1] (Aghadi case) held that the principle of no work no pay cannot be applied in these extraordinary situations. The case was filed by a union of contract workers who were involved in guarding temples of Shri Tuljabhavani Mandir Sansthan, Tuljapur. These security workers were willing to provide their services but refused to do so by the trust due to the clamping of lockdown. Eventually, they were refused to pay their wages and were forced to file the case. This article highlighting the Bombay HC judgement will look into the principle of no work no pay and the difficulties in employing this principle in these extraordinary times.
SIGNIFICANCE OF THIS DEVELOPMENT
Private companies have always been strict about paying wages. The wages of workers have been generally provided for the number of days, one person is assigned for the work. In the organized sector, the workers are also paid for leaves in addition to the number of days work has been done by any worker while in the unorganized labor sector; they are paid generally on daily basis. The Covid-19 period has impacted more to the latter as they are advised to stay at home and this stay has given them no opportunity to earn the livings and applying the principle of no work no pay is more harmful to them.
The principle of no work no pay has been applied by the Supreme Court (the SC) in various cases. In the case of Airport Authority of India v. Shambhu Nath Das [2] , it held that if a person was absent from the work without authorized leave or valid justification, he would not be eligible for wages in that period. This laid down the scope of this principle for deciding such cases. During the lockdown, as every industrial establishment and movement of people has been restricted, the workers were also locked down in their houses. This can be said as a valid as well as a legal reason for their absence from work and hence, the principle of no work no pay cannot be applicable in this situation. The Aghadi case has been an important development in terms of the fact that the employer is now liable to pay the full wages of the workers in calamity or disaster like situation. They cannot abdicate their responsibility to feed these people who help them to run their businesses. This case has created the responsibility of employers to not let the workers die because of hunger or let out of their shelters. It has also removed the shades of cloud over uncertainty among workers for the wages of the lockdown period.
Despite being a High Court case, this case has created the persuasive value for other High courts and Supreme Court to look into the humanitarian aspect also. The pandemic is a shock for these companies as well as for the workers also. This newly arisen situation can push the workers into never-ending debts. Hence, there is a need for devising a solution to this problem and this has been done by this case. In the aftermath of the Bombay HC judgement and the MHA guidelines, other problems have ensued.
IMPACT
While the Aghadi case [3] has created a liability of the employer for taking care of their workers, on the other hand, this newly established responsibility for small businessmen and MSMEs is very hard to take care of. They are already not in a well-to-do situation and now there is an extra burden on them to pay these workers. There is also no guarantee of any improvement in this situation even when the restrictions are lifted and life becomes normal again. All these fears and market analogies can impact their business and also lead them to insolvency. Many companies are already going out of the market due to the pandemic and complying with the Ministry of Home Affairs (MHA) guidelines along with the judgement can result in the lack of competition in the market in the post-lockdown era as smaller companies would eventually bound up owing to lack of funds.
LEGISLATIONS
As the central government has declared the current pandemic situation as a ‘notified disaster’, the provisions of the National Disaster Management Act, 2005 (NDMA) are invoked across India. Along with the NDMA, Epidemic Diseases Act 1897 has been the main tool of the governments in fighting with the corona. Section 10(2)(1) of NDMA empowers the National Executive Committee to lay down directly to the Ministries or departments of the government of India and State authorities, for preparing disaster management plans and the same has been utilized by MHA to enforce such notifications. Similarly, Section 2 of EDA also empowers the government to take all necessary steps to ensure the containment of the disease. This notification for the protection of the livelihood of workers was considered important for enforcing the lockdown and to ensure the containment of this deadly contagion disease.
On the other hand, the Industrial Disputes Act 1947 gives power to employers to lay-off the workers in the situation of natural calamity or for any other connected reasons and also gives the power to reduce wages to 50% up to 45 days. It can be argued that the employers’ can lay-off as the phrase “for any other connected reasons” can accommodate the pandemic also but it also depends upon the court to interpret the phrase. Moreover, employing the Section 72 of NDMA and the principle of Generalia specialibus non derogate and Generalia specialia make it clear that the special law i.e., NDMA has an overriding effect over any other law. Hence, any other provision of labour law will be subordinated to the NDMA and will attract the penalties under the section. Moreover, Section 51 of the Disaster Management Act prescribes the punishment for any obstruction or non-compliance of any such directions passed under DMA and the same will be used against those not complying with the MHA guidelines.
CASE LAWS
There are several cases where the Supreme Court and other courts have affirmed the principle of no work no pay to apply while paying wages. While it was made clear by Supreme Court that if the absence is due to the employer whether for some other work or restrained from performing the work, the employer would be liable to pay the wages, it is to be seen whether those complying with the lockdown order can be put into this exception. Again, in the case of Chief Regional Manager, United Insurance Company Ltd. v. Siraj Uddin Khan [4], the SC has reiterated the principle of no work no pay to decide on the question of wages of absence or unauthorized leaves. It is clear from this discussion that there are no such exceptions as insinuated by the Bombay High Court in Aghadi case to the principle of no work no pay.
ANALYSIS
The MHA notification dated 29 March 2020 on making mandatory the payment of wages read as –
“All the employers, be it in the industry or the shops and commercial establishments, shall make payment of wages of their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown.”
This notification has been ambiguous concerning certain terms that have been used but did not define in the notification. There is confusion over what type of workers is covered, what wages would include, for what period, and when the workers are to be paid. These uncertainties have not only created challenges for the employers but also the workers. Every employer can use own interpretation while paying the workers. The Supreme Court has also asked for clarifications while hearing the number of petitions filed by the employers challenging the validity of such guidelines. While the Bombay high court judgement has come amidst these pending petitions in SC.
The question of the validity of such notification has also been raised as the DMA empowers committees to frame plans to meet disasters and allocate funds for emergency response/ mitigation, but does not authorize the government or the DMA committees to direct private employers to pay full wages to employees. This imposition cast on private employers could certainly be termed as arbitrary and unreasonable since it appears to have no rational nexus for achieving the objectives of the DM Act and is the overreach of powers. On the front of constitutional powers, there also has been the violation of the fundamental rights of the employers as payment of these wages amidst lockdown and without any revenue generation can result into insolvency of such industries or MSMEs and hence, their fundamental right to trade or business under Article 19 (1) (g) is violated. On the other hand, the government’s order of full wages has been a sine qua non-sequel to the lockdown order for the lockdown divorced from the mandate of wage payment will be nothing but the suspension of the right to life guaranteed under Article 21. Hence, there are problems from both ends as losing the grip of one end will tremendously affect the other.
While the Bombay HC decision of non-application of the principle is devoid of any legal reasoning and is mainly based on the humanitarian ground. It is the need of the hour to pay the wages but it cannot act as a general exception to the principle of no work no pay. The payment of wages would surely cast extra burden to the small shop owners and small businessmen. While there are various legislations to deal specifically with the employer-employee relation and these legislations provide for the deduction of wages in such circumstances, it is completely redundant to put the liability entirely on the employers. Only legal reasoning for the above decision can be the MHA notification disguised as a directive in line with the powers conferred by DMA and EDA. Such stretch of powers is likely to affect the employer-employee relationship as it has been seen and reported that many workers were not paid for the said period and also no action had been taken under the DMA. On the other hand, the SC in pursuance of the petitions filed before it also has directed the government to take any action against employers.
Another problem ensued from the notification is that the employers who have shut down their establishments in furtherance of the government’s order for lockdown are in a way unduly punished by mandating the payment of full wages and in a way their obedience is being punished while the employees are unjustly enriching without anything adding to the nation’s economy. But there are arguments against this proposition that the same workers are the main force behind any economy and not helping them when they need it the most would amount to attack their back.
While India is a welfare state yet the government is pressuring the private establishments for paying full wages. On the contrary, other countries have subsidized wages and did not put the burden on the employers alone. This could be done in India also by the government providing some amount and the rest can be paid by the employers. It would surely ease their burden and also would not act unfairly to the employers. On the other hand, employees will also get the wages directly into their account and need not look up to the employers for subsistence. Unlike the MHA notification, there also will be surety of getting wages to these workers.
CONCLUSION
To put the burden entirely on the employers is not only unfair but also destructive to their business. On the legal side also, it is impinging upon their rights under Articles 14 and 19 (1) (g) to do the same and if not paid, it is putting the life of workers on stake and not only the workers but the whole family subsisting on the wage would be affected. Hence to harmonize the issue, it is need of the hour that some economic burden of small industries and the shop owners need to be shared by the government.
That said, from a humanitarian perspective, the need to financially support workers through the pandemic is unquestionable but any scenario that contemplates the ultimate bankruptcy of businesses should no doubt be avoided. Similarly, the principle of no work no pay should not be applied in entirety in these testing times. As these workers have negligible to no savings and letting them on their condition would be the worst and rather not incentivize them to work in the post-Covid19 era. The government should meet the wages of the workers in tandem with employers. Only then we can follow the government’s guidelines and together can fight Corona.
On 18th may, MHA has revoked all the guidelines issued in furtherance of power under DMA. There is no more compulsion on the employers to pay full wages but still, the earlier guidelines are relevant, and also the question remains to be answered whether the government can mandate the private employers to pay full wages.