Employer's Liability During Lockdown – Need To Clear The Air!

Relevant Notifications by Union Government, National Disaster Management Authority and NEC

India has been observing lockdown since last week of March 2020. Various orders/notifications issued by relevant authorities since the inception of lockdown concerning liabilities of employers are summed-up below:

D O No. M-11011/08/2020 – Media dated March 20, 2020 issued by Ministry of Labour and Employment

The Joint Secretary, Ministry of Labour and Employment, Government of India advised all the employers of public and private establishments to neither terminate their employees nor reduce their wages. Employers were also advised to treat their employees to be "on-duty" if the place of employment became non-operational due to Covid-19.

Some states and union territories namely Chandigarh, Haryana, Delhi, Maharashtra, Telangana and Kerala followed suit and issued similar notifications inter-alia advising employers to neither terminate their employees nor deduct salaries in these challenging times.

Order bearing No. 1-29/2020-PP (Pt II) dated March 24, 2020 issued by NDMA

Through this Order, the NDMA notified its decision to direct Ministries/ Departments of Government of India, State Governments and State Authorities to take measures for preventing the spread of Covid-19. NDMA also notified that necessary guidelines in this regard will be issued by the NEC under Section 10(2)(l) of the Act.

Order dated March 29, 2020 issued by Ministry of Home Affairs (as Chairman, NEC)

29 March Order is a crucial order issued by the NEC under Section 10(2)(l) of the Act. Through 29 March Order, the State and Union Territory Governments were directed to ensure that all the employers (whether industry or shops and commercial establishments) shall make payments to their workers on the due date without any deduction.

It is pertinent to mention that March 29 Order specifically protects a "worker" and as such its applicability cannot be limited only to a "workman" as defined under the Industrial Disputes Act, 1947.

29 March Order further provides that in case of any violation of the above, the respective State/ Union Territory Government shall take necessary action under the Act and District Magistrate/ Deputy Commissioner along-with Senior Superintendent of Police/ Superintendent of Police/ Deputy Commissioner of Police will be personally liable for implementation of the directions.

Communication dated April 1, 2020 by Ministry of Home Affairs to State/ UT Governments

On April 1, 2020, the Ministry of Home Affairs ("MHA") noted that various states and Union Territories were granting exemptions beyond permissible limits as described under various guidelines issued under the Act. The MHA requested State / UT Governments to implement lockdown measures and guidelines in its true letter and spirit.

Order dated May 17, 2020 issued by Ministry of Home Affairs (as Chairman, NEC)

By virtue of third recital of this Order, unless otherwise provided by the Order, all earlier orders issued by NEC shall cease to operate with effect from May 18, 2020. As a necessary corollary, March 29 Order ceases to operate from May 18, 2020.

Punishment for non-compliance

It would not be out of place to mention that Section 51 to 60 of the Act and Section 188 of the Indian Penal Code, 1860 makes non-compliance of all orders under the Act as punishable offences. Under Section 188 of the Indian Penal Code, 1860, an offender is liable to be punished with imprisonment up to 6 months, or with fine up to Rs.1000/-, or with both. Further, Section 51 of the Act makes a person who refuses to comply with any direction issued under the Act liable to be punished with imprisonment which may extend to 1 year or with fine, or with both.

May 17 Order – An invitation to more disputes?

Non-compliance of 29 March Order by an employer during March 29, 2020 to May 17, 2020 shall attract penal consequences as the offence already stands committed. Issuance of Order which comes into effect from May 18, 2020 cannot absolve criminal liability of an employer, who has already flouted 29 March Order. However, going forward, some employers may see cessation of 29 March Order as a safe license to fire employees without attracting any criminal liability.

The logic behind cessation of earlier orders issued by NEC seems to be the relaxation in lockdown guidelines. However, blanket release of 29 March Order may create an anomaly. On one hand, 29 March Order mandated the employer to pay wages to workers on the due date for the period their establishments are under closure during the lockdown. On the other hand, Clause 1 of the guidelines ("Guidelines") annexed with the Order specifically provide that the lockdown will continue till May 31, 2020 and as such there are still various establishments which will continue to be under closure at least till May 31, 2020. Protection of employers of such establishments from penal consequences in future, as against other employers who were earlier susceptible to penal consequences, may defeat the test of equality enshrined under Article 14 of the Constitution of India. In other words, employment in establishments where closure has been lifted cannot be treated equally with establishments which still continue to be under lockdown.

Moreover, certain State / Union Territory Governments had issued specific notifications/advisories to the employers. The Order does not specifically annul such notifications. Although Clause 11 of the Guidelines provide for strict enforcement of these Guidelines by State / Union Territory Governments, the necessity of specific clarifications cannot be dispensed with.

Prevailing judicial trend

Given the deteriorating financial stability and augmenting liquidity crisis, many employers of private establishments have already flouted 29 March Order thereby becoming susceptible to criminal action. Fearing criminal action for blatant violation of 29 March Order, a batch of petitioners approached the Supreme Court to seek protection. Vide order(s) dated May 15, 2020, the Supreme Court granted interim protection to only two petitioners^[1] for a period of one week. A perusal of the said order(s) further reveals that Supreme Court did not pass any observation on the non-operation of 29 March Order in rem. Similarly, on May 15, 2020 the Delhi High Court also appreciated the plight of employees of a car rental agency and issued notice on a petition^[2] seeking registration of FIR against employer for non-payment of wages during lockdown.

Although the employer-employee disputes arising due to lockdown are at a nascent stage, it appears that judicial trend prevailing during the currency of 29 March Order is in favour of employees. However, with the operation of Order and cessation of 29 March Order from May 18, 2020, a huge burden will be imposed on courts to balance the equities and protect the fundamental rights of employees.

Plight of private sector employees

The list of private employers and companies laying off their employees and/or mandating salary cuts is rapidly increasing. Reliance Industries, one of India's most valued companies has announced massive pay-cuts^[3]. Zomato has fired 13% of its workforce and has mandated a 50% salary cut of all employees^[4]. Many companies like Oyo have not only decided to cut salaries of their employees by 25 % but have also forced some employees to be on leave without pay for around 4 months (albeit with limited benefits)^[5]. Recently, Uber has also laid off 3500 employees (constituting 14% of its workforce) over a zoom call.^[6]

The plight of employees in private sector is grave. The condition is becoming worse each day as private employees are also bound by lopsided employment contracts which are blatantly misused by the employers. In these distressful times, it is almost impossible for laid off employees to attain a new job. The fear of being fired at the whims of the employer is giving sleepless nights to the employees.

Uniformity and unambiguity - Need of the hour

Penal consequences or no penal consequences, claims against employers for illegal termination of employments are set to rise. While adjudicating claims of innocent employees who lost their jobs due to the pandemic, Courts must take judicial notice of the fact that finding a new job in the current scenario is next to impossible. The following extract quoted in judgment delivered by Supreme Court in Exective Committee of Vaish Degree College, Shamli and Ors. v Lakshmi Narain and Ors.^[7], authored by Justice P N Bhagwati is relevant in this context:

"Where in a country like ours, large numbers of people are unemployed and it is extremely difficult to find employment, an employee who is discharged from service may have to remain without means of subsistence for a long period of time. Damages equivalent to one or two months wages would be poor consolation to him. They would be wholly insufficient to sustain him during the period of unemployment following upon his discharge. The provision of damages for wrongful termination of service was adequate at a time when an employee could without difficulty find other employment within the period of reasonable notice for which damages were given to him. But in conditions prevailing in our country, damages are a poor substitute for reinstatement : they fall for short of the redress which the situation requires."

Indeed, exceptional times need unprecedented measures. To conclude, formulation of a balanced uniform policy which protects livelihood and rights of employees while ensuring specific relief packages to employers, is the need of the hour!