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Covid-19 and Payment of Wages

By April 18, 2020 May 1st, 2020 No Comments
Covid-19 and Payment of Wages

Covid-19 and Payment of Wages

During this situation of outbreak of Covid-19, we have been approached with many clients raising queries in relation to payment of salaries/wages to their employees, where there are low or rather no revenue generation in the company as there are no operations in the company due to the lock-down announced by the Government of India. On March 20, 2020, the Ministry of Labour and Employment, Government of India, through its letter to all employers’ association[1] has requested to all the employers of public/private establishments to extend their coordination by not terminating their employees, particularly casual or contractual workers from jobs or reduce their wages.

A. NOTIFICATION FROM GOVERNMENT OF INDIA:

The Ministry of Home Affairs, through its order[2] (“Order”) issued under the powers granted to it by the Disaster Management Act, 2005, among other things, clearly lays down the responsibility of the employer towards its workers during the lockdown caused by COVID-19 crisis as:

“All the employers, be it in the Industry or in 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.”

Based on the above extract from the Order, it is crystal clear that the same applies to workers, drawing wages, at their workplace. It also states that this is applicable only to those establishments that are closed during the lockdown. It is further observed that the Order does not explicitly defines “worker” and differentiate the categories of employees. Therefore, all the employers, whose establishments are closed during the ‘lock-down’ are mandated to pay wages to their employees without any deductions.

B. MEASURES BY STATE GOVERNMENTS:

In pursuance to the Order issued by the Ministry of Home Affairs, Government of India, certain States, such as State of Kerala[3], Karnataka[4], Madhya Pradesh[5], Assam[6], Arunachala Pradesh[7], Maharashtra[8], Telangana[9], Meghalaya[10] and Chhattisgarh[11] has issued orders where all the employers of the respective states are obligated to pay full wages to its employees without any deductions in a timely manner for the welfare of the employees.

On the other hand, the State of Haryana[12], Goa[13] and Orissa[14] had issued letters/directives requesting the employers to pay full wages to their respective employees without any deductions, whereas the remaining states have not issued any orders in relation to the payment of wages to its employees till date[15].

C. APPLICABILITY OF THE ORDER/STATE NOTIFICATIONS ON EXEMPTED ESTABLISHMENTS:

The Government of India, through its order no. 40-3/2020-D dated March 24, 2020 (“GO”), as amended through its order dated April 16, 2020[16] has exempted all industries/establishments providing essential commodities or services (“Exempted Establishments”) has been exempted and are permitted to operate during the lock-down.

Pursuant to the Order briefed herein-above, the Exempted Establishments are permitted to operate and as Exempted Establishments are permitted to carry on its operations, the employees of such Exempted Establishments are free to report for work and render their services. Therefore, an employee of such Exempted Establishments cannot refuse to report for work.

The Government of India, through Order, which is an extension to the above-mentioned GO, had stated in clause (iii) that all the employers shall make payment of wages of their workers, at their workplace, on the due date, without any deduction, for the period their establishments are under closure during the lockdown. However, Exempted Establishments, being exempted under the GO, are operating their business and therefore the clause does not apply to Exempted Establishments.

Therefore, if any employee denies to report for work, Exempted Establishments reserves the right to deduct their salaries, as per their policies.

D. CONCLUSION:

In light of the above analysis and by virtue of the Order, it is settled that all the employers, except the Exempted Establishments, are mandated to pay wages to their respective employees, including contractual employees without any deduction. It is pertinent to note that even though certain states have not issued any orders/notifications in relation to the payment of wages to the employees, the establishments which are closed during this lock-down, of all those states are obligated to pay the wages without any deductions by virtue of the Order by the Government of India. It is true that it would be painful for certain establishments and companies to pay wages to their employees when the establishment is completely closed and that no revenue is generated and we look upon the Government to provide certain relaxation to the companies/establishments.

However, it is possible for the employer to deduct wages and release the reduced salary to its employees, provided that they take prior written consent from the employees. Therefore, if it is bilaterally agreed by the employer and the employee in relation to the reduction of wages, the employers are free to deduct wages and process the reduced wage in favour of the employees.

Authors: Prashant Jain, Co-Founder & Partner; Abhishek Gupta, Associate

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. For any queries, the authors can be reached at (i) prashant@samistilegal.in (ii) abhishek@samistilegal.in.

Updated as on April 18, 2020

Image generation credits: https://www.canva.com/templates/

[1] D.O. No. M-11011/08/2020-Media

[2] Order No. No. 40-3/2020-DM-I(A) dated March 29,2020

[3] http://www.lc.kerala.gov.in/images/pdf/gos/002.PDF

[4]https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Orders/%E0%B2%86%E0%B2%A6%E0%B3%87%E0%B2%B6%E0%B2%97%E0%B2%B3%E0%B3%81_Revenue_Dept%209.pdf

[5] http://www.labour.mp.gov.in/KnowledgeSharing/public/View_Circular.aspx?id=8861

[6] https://covid19.assam.gov.in/wp-content/uploads/2020/03/The-Assam-COVID-19-Regulations2020.pdf

[7] Order No. F No L&E/COVID-19/01 dated March 23, 2020

[8] Order dated March 31,2020

[9] GO No. 160 dated March 23, 2020 (Further extended)

[10] http://meghalaya.gov.in/megcms/sites/default/files/circulars/Epidemic_Diseases.pdf

[11] Order No. F8/2020/12/NS/133 dated March 30,2020

[12] http://storage.hrylabour.gov.in/uploads/labour_laws/Y2020/March/W4/D28/1585384400.pdf

[13] No. CLE/PA/544/2020/890 dated March 24,2020

[14] Letter No. 2752/LC dated March 21, 2020

[15] Based on our research in the respective websites of the states, we have not found any orders/notifications.

[16] https://www.mha.gov.in/sites/default/files/MHA%20Order%20Dated%2016.4.2020%20on%20Consolidated%20Revised%20Guidelines.pdf

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