‘No Pay, No Way’ – Impact of the Pandemic on the Indian Economy

With more than half of the world pushed back into recession, 2020 seems to be worse than the global financial crisis in 2007-08. With sharp-rise of cases across several countries, the economic damage in these countries would experience a steep increase. Moreover, the International Monetary Fund has predicted that this pandemic would instigate the worst recession since the Great Depression of 1929. As a preventive measure to the upcoming recession, governments have now started pressurizing employers to pay wages to their employees without doing any work.

 

Indian Government’s Reaction to Prevent Economy Crisis

Initially, a couple of State governments issued orders for a limited period. The governments of Telangana and Delhi in Government Orders dated March 22, invoked EDA to issue lockdown during March 22-31, and directed that this period shall be treated as a paid holiday for all employees in the shops and establishments (for Telangana) and in all the private establishments (Delhi). The government of Maharashtra has ordered (31 March) that all workers (including contract, temporary and daily-wage) in private factories and shops and establishments shall be deemed to be ‘on duty” and be paid full salary and allowances during the lockdown period. On March 29, the Government of India, to effectively implement the lockdown order and to mitigate the economic hardship of the migrant workers issued an order under Section 10(2)(1) of the NDMA. It directed the State governments and the Union Territories (SGs/UTs) to issue orders, compulsorily requiring all the employers in the industrial sector and shops and commercial establishments to pay wages to their workers at their workplaces on the due date without any deduction during their closure due to lockdown. Further, the SGs/UTs were directed to take necessary action against those violating these orders. According to Section 51(b) of the NDMA, non-compliance with the directives issued under it will be punishable with fine and/or imprisonment.

 

The Indian Government issued an order dated 29^th March, 2020 which stated that employers deducting wages of their employees during the lockdown period would be held legally accountable. The national lockdown was clamped by the Home Ministry by invoking the National Disaster Management Act, 2005 along with the Epidemic Diseases Act, 1897. The ministry stressed on the closure of all commercial and private establishments, all transport services, industrial establishments, educational institutions exempting essential services. The Government wants the employers of any kind not to deduct any salaries of their employees during this lockdown period. This article focusses on the legality of this order and how far does this hold good for employers to pay their employees in full without them doing any work.

 

The ‘No Work, No Pay’ Principle

The Hon’ble Supreme Court in the case of Chief Regional Manager, United India Insurance Company Limited v. Siraj Uddin Khan [Civil Appeal No. 5390 of 2019, decided on 11 July 2019] decided that no employee can claim wages for the period that he/she remained without leave or justification. In the present circumstances, neither the employees offer work nor the workers would be able to report their work. Also, not each and every work be completed through technology and also work from home cannot be thought of as an alternative to the works done at grass-root levels. Therefore, the principle of ‘No work, no pay’ cannot be invoked in the present circumstances. The Government of India order of 29^th March focusses on the hardship that would be faced by migrant workers by simply ignoring the fact how hard it can become for employers to pay wages without any work.

 

Legality of the Order

According to Section 2(vi) of the Payment of Wages Act, 1936, wages means the remuneration payable by the employer to the employee in lieu of the work done. In the present circumstances, when there is no work done by employees, it would become extremely difficult for an employer to pay wages for no work. This payment by an employee would then be considered as a charity and not wages. The Disaster Management Act fails to include provisions relating to the payment of wages, which calls for a reform in the said act.

 

The first part of GOI notification of 19^th March, which is the basis of the order dated 29^th March deals with the hardships that are faced by migrant workers and their wages to be paid by their employers, while the second part of the same order also talks about the payment of wages by all employers. When all the circulars and advisories are studied together, it is in no doubt that the government itself looks this as a moral obligation of the employers to fulfill.

 

Looking at the constitutional validity of the order, under Article 14 of the Indian Constitution, an action without an authority or without a force of law is to be termed as arbitrary and unsustainable. When we look at Section 10(2) of the Disaster Management Act, the government cannot be understood to have capacity to issue such orders. India has various types of industries (large, small, medium, micro), and therefore, a uniform order cannot be laid down. MSMEs would find it almost impossible to fulfill the requirements of the said order. It can be said that ultimately, that these industries are the engines which drive the whole economy of the country. If industries are compelled to pay wages to its employees without the industries not earning any revenue would lead to the collapse of such industries. This can be said to violate the right to carry on business with reasonable restrictions imposed as mentioned under Article 19(1)(g) of the Constitution. It is indeed the duty of the government to look for the employees during such period, and is not the duty of industries to do so.

 

What Next?

These are fine legal issues which require attention by the lawmakers. The Indian Government would need to come up with a scheme to subsidize employers towards the wages paid during the lockdown. The scheme can be linked to profits earned by the industrial establishment and the wage bill for a month. In the absence of such a scheme, private employers especially small and medium industries will be put through hardships that could even bankrupt them. The government while drawing a stimulus or revival plan for the economy should certainly consider subsiding the wage cost for the lockdown period, if not in entirety, at least in part. 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 it lacks the authority to do so. Maybe, the Govt can advise the establishments to bear/ pay only the necessary amount which is required for subsistence of living or payment of some school fee expenses, which are bare minimum for running the household; which is today being run with zero petrol expenditure, and zero entertainment expenses. Only a proportion of wage expense can be borne by the employers.