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India: Supreme Court decision on the payment of wage during the lockdown

  • A Supreme Court decision pushes employers and trade unions to negotiate on the payment of wages during the lockdown 

On 29 March 2020, the Indian Ministry of Home Affairs issued an Order under Disaster Management Act 2005, obliging employers to pay full wages to employees during the lockdown. The Order was withdrawn 50 days later on18 May 2020. 

Employers’ association (Small Scale Industrial Manufacturers Association) and single companies filed 18 claims against this order for: not distinguishing between employers whose essential activity could continue during the lockdown and those employers who had to stop working; for the resulting financial consequences for employers; for not respecting the principle of salary against work. Some extracts from the claims: 

Notifications are unreasonable and arbitrary interference with the rights of petitioner Employers under Article 19(1)(g). Notifications are also contrary to the principles of Equal work Equal Pay and also No work No pay, for it does not differentiate between the workers who are working during the lockdown period in establishment such as the petitioner who have been permitted to operate during the lockdown period and the workers who had not worked at all”. 

Some petitioners claimed that employers should be given governmental subsidy equal to “70 to 80 percent of the wages for the lockdown period by utilising funds collected by Employee State Insurance Corporation or the PM Cares Fund or through any other Government funds/schemes”. Other employers were ready to pay 50 percent  of wages during this 50 -day period.  

The need to protect workers during the lockdown and to avoid mass movement of migrant workers (without financial resources) motivated the Government to issue this Order.  

The Court’s interim decision obliged the parties to try to resolve the dispute on the payment of wages for the 50 -day period between 29 March to 18 May 2020 by means of negotiation. It stated that “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”. 

This decision does not adequately clarify whether the government can impose  employers to pay  wages  foran employee  who was not working.  

Immediately after the Ministerial Order, the Federation of Indian Chambers of Commerce and Industry (FICCI)  requested a legal opinion on whether “organisations are bound by law to provide remuneration to employees in the current crisis-like situation, when organisations and businesses have either ceased, become insolvent or have been severely affected by the current pandemic and the subsequent lockdown”. Legal experts at the time indicated that “in cases where work from home is not possible, and the business in question is incurring financial losses so much so that it is financially and economically incapacitated to the point of pulling down the shutters in the current situation of lockdown, then such a business is not mandated by any existing law to provide for its employees”.