By - Sindhuja Kashyap on April 13, 2020
At a time when the world is taken by the Covid-19 storm, the Indian Government, in order to contain the spread, morbidity, and mortality, declared a nationwide lockdown. This lockdown restricted not just the movement of humans and material in the nation but also demanded the closure of all kinds of businesses, establishments, and shops (other than those providing essential services).
In a 21-day complete lockdown period (“Lockdown”), various manufacturing, trading, and other businesses have come to a standstill thereby leading to a failure in discharging of obligations from both ends of employer and employee. Various employers due to declining business and profit, are contemplating the process of laying off or retrenching their employees.
Any cessation can happen by way of closure, lockout or layoff only. It is pertinent to mention here that the closure due to lockdown can neither be considered as closure due to its temporary nature nor be considered as lockout due to the absence of any unreasonableness by employee causing difficulty to the employer.
Therefore, the only reasonable relaxation provided to the employer would be by way of lock-off wherein the employer fails, refuses, or is unable to employ workmen on account of a shortage of any resources or raw materials, accumulation of stocks, breakdown of machinery, or natural calamity. Lay-off in India is regulated either by the Industrial Disputes Act or by the contract between the employer and the employee.
We note that the employers are facing the conundrum of the status of their obligations during this lockdown period and we have tried answering a few of such queries below:
Ministry of Home Affairs (“MHA”) has, vide its order dated March 24, 2020 (“Lockdown Order”), declared a lockdown for a period of 21 days with effect from March 25, 2020.[1] This Lockdown Order mandated all commercial, private, and industrial establishments to be closed down and further provided various guidelines for implementation of this order. A number of essential services such as banks, insurance offices, print and electronic media, etc were exempted from such closure. Several state governments have also issued directions regarding the Lockdown detailing ‘essential services’ as would be applicable in their respective states.
It is mandatory to follow this Lockdown strictly since any violation will be punishable as per Section 51 to 60 of the Disaster Management Act, 2005 besides legal action under Section 188 of the Indian Penal Code.
At the outset, it is advisable to ensure that the business/establishment is covered under the essential services to claim an exemption under this Lockdown and remain operational. Once it is clear that the business/establishment falls under the ambit of essential services, it is recommended that the employer procures emergency passes (as applicable in their location) from the appropriate authority to ensure safe and hassle-free travel of their employees. In case the business/establishment does not fall under the ambit of essential services, employers are recommended to permit their employees to work from home to ensure they remain operational amidst the Lockdown.
Yes. The employee shall be deemed to be present and shall, therefore, be entitled to wages in full. It is important to understand that such a lockdown has been issued from the side of the employer at no fault of an employee therefore no unreasonable deductions are permitted. Further, all work from home as done by the employees shall be treated at par with the work as would have been done by them at the office. Therefore, the employer will have to pay wages in full to all employees, irrespective of the work done till the completion of Lockdown.
Section 5 of the Payment of Wages Act, 1936 clearly states that the payment of wages to the employees shall be made no later than the 7th day of the subsequent month. Therefore, under no circumstance can the payment be delayed post 7th of April, 2020. Further, various district magistrates have also issued orders regarding such date of payment of wages.
For instance, an order was issued by the Gautam Buddh Nagar district administration in Uttar Pradesh on March 28, 2020,[2] wherein all such establishments that were temporarily closed due to Lockdown, depending on their situation, were directed to make adequate arrangements to ensure the payments are provided to the workers on March 30 and 31 or April 3 and 4, 2020.
Yes. Irrespective of whether the employee is able to work from home or not, employers are mandated to pay wages in full for the period of Lockdown. MHA vide its order dated March 29, 2020,[3] has directed the state governments and appropriate authorities to ensure that all the employers make payment of wages to their workers.
It is pertinent to mention here that the word “employer” as used in this order is irrespective of it being an industry or shops & commercials establishments thereby bringing all employers across India under its ambit. Such payment of wages has to be done on the due date and shall under no circumstances be deduced. Further, this payment of wages has to be for the period the establishment/industry/shops are under closure during the Lockdown.
It is important for an employer to understand that the work from home brings with it a threat to confidentiality, data security, and productivity. Therefore, each employer should as per their business requirement, implement a policy to this effect wherein the employees are governed by the confidentiality and data privacy policies with regard to the assets of the employer being handled by them during work from home.
Further, employers must strategize with their IT team to understand and implement additional data security measures that would, in turn, ensure that the IT infrastructure and resources of the employer are protected. With regard to productivity, employers may want to bring into usage various appliances that would track the working hours of the employees. Additionally, employers may also want to have a team call on a daily/weekly basis to ensure each employee lists out the work done to their respective reporting heads.
No. Utilisation of leave is the discretion of the employee (subject to requisite approvals) and cannot be forced upon by the employer. While the employer may suggest or recommend the usage of leaves to their employees, it can under no circumstances be forced.
Lockdown has not only brought economic crisis with itself but has also brought in such dilemmas and a ‘never seen before situation’. We recommend that employers to take into consideration, the following measures to reduce or mitigate their costs:
It is pertinent to mention here that when a workman has completed no less than one year of continuous service with the employer, then that workmen shall be entitled to compensation equivalent to 50 percent of the total basic wages and dearness allowance for the period of lay-off. An application seeking permission for such lay-off has to be made to the Labour Commissioner and the Labour Commissioner is bound to provide a reply within 60 days of such application.
While Lay-off does not require a notice to be served upon the employees, it is usually a time taking process, since the employers are expected to wait for permission from the Labour Commissioner before such lay-off. Therefore, it usually takes 45-70 days depending on the time taken by Labour Commissioner to permit such lay-off.
Non-statutory benefits and incentives: The employer may also at its discretion, governed by the agreement between the employer and employee and the internal policies, hold on to all non-statutory benefits and postpose incentives that the employee may be entitled to, till the completion of Lockdown, since these do not form part of wages and are not mandated to be paid by the employee under the present scenario.
Various states have issued notification/orders asking the employers to provide 28 days of paid leave to employees who have been asked to self-quarantine by the doctors/authorities. However, no leave for employees other than those instructed to self-quarantine by the authorities can be forced. For instance, an order was issued by the Gautam Buddh Nagar district administration in Uttar Pradesh on March 28, 2020[4], wherein any worker and employee who is infected with coronavirus and those employees/workers quarantined for suspected coronavirus for treatment were ordered to be provided with 28 days of paid leave.
No. There has not been any order/notification regarding compensation by the employer. Therefore, the same stands regulated by the employer’s internal policies.
Yes, spending of CSR funds for Covid-19 is an eligible CSR activity.[5] Funds may be spent on various activities relating to the promotion of health care, including preventive health care and sanitation and disaster management, in accordance with Schedule VII[6] of the Companies Act, 2013.
However, any programs/projects of CSR that only benefit the employees of the company and their families shall not be considered CSR activity and therefore would not qualify under Section 135 of the Companies Act, 2013.
For the betterment and safety of its employees, the employer can demand a medical certificate/good health certificate from an employee to be given by a registered medical practitioner certifying that the person is in good health. Such record, if obtained, has to be considered as confidential since an employee’s health and medical records are considered as Sensitive Personal Data or Information (SPDI) under the Information Technology Act, 2000 (“IT Act”) and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. Therefore, the employer must keep in mind the following:
While the Government advises/suggests the employer inform the appropriate authorities regarding employees having a travel history or those exhibiting symptoms of illness, there does not exist any mandate for the same.
No. The employee cannot refuse to report to work. However, the employee has the discretion of taking their paid/sick leaves, subject to requisite approvals and the internal policies of the employer.
In case an employee contracts the illness due to reporting to work, the employer is recommended to provide 14-28 days of paid leave to the employee for the purpose of recovery. Further, the employee if aggrieved may also file a claim against the employer for damages and compensation. A criminal action may also be initiated against the employer.
Central Government[7] and various state governments have issued numerous circulars/notifications stating that the employees of all units/establishments that are facing closure due to Lockdown shall be deemed to be on duty till such period. However, all these circulars by the governments are mostly advisory in nature and not an order.
Therefore, employers are not restricted to terminating their employees. In case the employer intends to terminate its employee, it is suggested that the employer in the first instance classify its employee as a “workman” or “non-workman”. In the case of workmen, retrenchment, as governed under the ID Act, shall be applicable wherein, the process must satisfy the following conditions.
Further, it is important to ensure that the workman has been given an opportunity to offer himself for re-employment and the last in the first out rule is duly followed by the employer. In the case of a non-workman, the terms and conditions as laid out in the employment agreement shall govern the termination.
It is pertinent to mention here that the Shops and commercial establishment act, of various states, apply to managerial and sub-managerial employees and the same must also be adhered to by the employer at the time of termination.
In case an employee is terminated during Lockdown, irrespective of the process duly followed by the employer, the employee may challenge the termination. If the termination is challenged internally, we recommend the employer conduct a domestic inquiry for the purpose of investigating the validity of such termination. However, the employee may challenge the termination before the appropriate labor officer/court. In such a case, it would not be farfetched to state that the court may, keeping the Lockdown in view, take a sympathetic approach towards the employee and may direct the employer to reinstate or compensate the employee.
