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Legal Obligations to Pay Wages during a Lockdown

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The outbreak of the global pandemic COVID-19 had put our lives at stake and to take preventive measures, the Government of India on March 14th, 2020 had declared this situation as a ‘notified disaster’ and following the same it had imposed a complete lockdown in certain states invoking the 123-year-old legislation viz Epidemic Disease Act, 1897. Considering the situation at hand due to the outbreak of COVID-19, The Central Government through the Ministry of Home Affairs, invoking Section 10 (2) (I) of the Disaster Management Act,2005 (DM Act) had declared a Nation-wide Lockdown on 24th March 2020 in order to contain the communal spread of the disease any further. 

Legal Obligations of the Government

The lockdown, as instructed by the Central Government is an emergency protocol that is used in times of exigency, as of now during the COVID-19 to prevent the communal spread of the virus. The central government, by referring provisions of the Disaster Management Act, 2005 had declared the lockdown. Also, the state government with reference to the Epidemic Diseases Act, 1897 had established the guidelines and directions for the citizens to follow. But that doesn’t guarantee the wages that an employee gets from a day long’s work, can it? So, the Government of India and State governments have called upon employers to pay wages for the lockdown period not only to the permanent workmen of an industrial establishment but also to contract workmen and inter-State migrant workers.

So, here comes the billion-dollar question, which pays them the wages? Is it the government that instructed the protocol or the Private Employers, who is held responsible?

Having to consider the legal provisions, Disaster Management Act, 2005 has no provisions that let the state or central government possess powers to say that the Private Employers had to pay wages to their employees despite not working during the time of a disaster.

  • It can be said that Section 35 (l) and 38 (l) of the act provides power to the Central and State government to take ‘such other matters as it deems necessary or expedient for the purpose of securing the effective implementation of the provisions of the DM act’ which is to say to manage the state without any crisis from happening.1

However, the scope of the act lets the government to frame policies and plans to meet the emergency. Epidemic Diseases Act, 1897 primarily aims at preventing the spread of epidemic diseases.

  • Section 2 of the act only enables the government to prescribe measures to prevent the outbreak of such disease or the spread thereof. The same certainly does not clothe the government with the power to direct a private employer to pay wages.2 However, paying wages to workers is undeniably a measure against the spread of COVID-19. Without wages, workers are deprived of any their lives where they can’t afford any health care and safety requirements.

The Ministry of Labour of Labour & Employment, The Government of India through its letter dated 20th of March, 2020 had advised all the employers of both public and private enterprises to not terminate their employees nor cut their pay but to transfer salaries to them. It is further stated that if any place of employment is to be made non-operational due to COVID-19 pandemic, the employees of such units will be deemed to be on duty. This order, according to Section 10 (2) (1) of the DM Act, 2005 is binding upon all the concerned parties that are aforementioned. But the Ministry of Home Affairs has consciously chosen to issue an advisory rather than resorting to a formal direction mandating the payment of wages during the period of lockdown. The Industrial Disputes Act, 1947 is a Special Law which mandates payment of lay-off compensation in the event of a natural calamity or other connected reasons.

  • Section 2 (kkk) of the act says if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason, then the same would fall within the definition of “Lay off”.
  • Section 25C of the act mandates employers for lay-offs and to pay a compensation equivalent to 50 per cent of the wages.
  • Section 25M (1) of the act requires an industrial establishment with more than 100 workmen to seek prior permission. However, such permission is not mandated if the lay-off is due to a natural calamity. The liability in this Special Law which is specific has restricted the payment of 50 percent of wages as compensation, being so the various directions/circulars/communications of the government can at best be advisory and not mandatory.3

To take an irrational approach, the directions issued by the government actually pave way for the employees to have a run of luck, not merely because of not working but also because the employee doesn’t have to contribute to the country’s economy or to his employer to earn the profit. That is to say, the employee doesn’t have to get his salary deducted for his conveyance expense nor for Provident Fund deduction and etcetera, as he usually gets. The aforementioned enactments are based on which the government has been giving directions during this epidemic scare.

Status quo around the World and in India

If we look into the status quo of considering the burden of lockdown would have on industries, governments across the globe have taken measures to aid the employers. Denmark has announced that it will cover 75 per cent of Wage Bills. Canada has implemented a wage subsidy scheme. England has provided for 80 per cent of average earnings to be subsidized. Australia has framed a “Job keeper” wage subsidy plan. Ireland has announced a Wage Subsidy scheme, which refunds employers up to 70 per cent of an employee’s wages. The Netherlands allocated a package covering compensation of up to 90 per cent of labour costs for companies expecting a reduction in revenues of 20 per cent or more, while New Zealand is to pay a lump sum 12-week wage subsidy to support employers severely affected by the impact of Covid-19.

Greece has provided an allowance of 800 Euros for employees of companies that have been affected due to the crisis. In Indonesia, the annual workers with an income below a given slab shall be exempted from income tax for a period of six months. The Brazilian informal workers shall receive a temporary new benefit of 120 dollars per month under certain conditions. Belgium has raised the benefit for temporary unemployment from 60% to 70% of Gross Wages and has issued help for those in self-employment.

As the nation-wide lockdown had been extended till May 3rd, 2020 it is rather likely that all business across all kinds of industries throughout the nation would have been severely impacted. If for any reason the government decides to extend the lockdown it should bear the wage burden and should not give any advisory for payment of full wages given as it lacks the authority to do so. It will be neither prudent nor fair to direct the employers to continue to pay the wages for their employees. So, the Indian Government would need to come up with a scheme or policy to subsidize employers towards the wages paid during the lockdown. The schemes can be linked to profits earned by the industrial enterprises and the wage bill for a month. And, in the absence of such measures, the industries, shops and all other commercial establishments, especially the small-scale industries will be put through hardships and most likely pushed to bankruptcy that would majorly impact on its workers and the country’s economic growth which may at the worst be able to outlast the pandemic itself.

Conclusion

Countries across the world are taking steps to encounter the difficulties faced due to the pandemic by rolling out special and stimulus packages schemes to enhance the capacities of employers to pay their employees. The Government while drawing a stimulus or a revival-plan to safeguard the country’s economy should keep in mind that subsidizing the wage cost for the lockdown period would be essentially helpful. These are fine legal issues which require attention by the lawmakers of the country who should also consider the human values and norms so as to fulfil the needs of the society in an appropriate manner.

Endnotes

1.  Disaster Management Act, 2005

2.  Epidemic Diseases Act, 1897

3.  The Industrial Disputes Act, 1947

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