Monday, December 5, 2022

FICCI seeks opinion on payment of full salaries to employees amid lock down

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The Federation of Indian Chambers of Commerce and Industries (FICCI), owing to the problem of lockdown due to outbreak of COVID-19, which has resulted in near standstill of Indian economy thereby, stopping all economic activities such as production, distribution and consumption on a large scale. Many of the companies are now standing on the verge of complete closure and most of them are now becoming insolvent.

On 27th of March, the Ministry of Labour and Employment issued a circular, advising various Industries/enterprises/companies/associations to not to retrench any employee and continue paying the wages/salaries. Thereafter, on 29th March, the Ministry of Home Affairs issued an order for constituting Empowered Committee under Disaster Management Act, 2005 and requiring payment of full wages to the workmen. These decisions have been taken by the Government in such a time when Indian businesses and commerce was already facing huge losses caused due to recession and now have been ordered to pay full salaries and wages during the period of lockdown when no economic activity is taking place has raised concerns among the business fora.

Amid these situations, the FICCI has sought legal opinion on “whether the employers will be liable and bound to remunerate its employees in the present-like situation when the work at the industry/enterprises/organizations/companies are affected or ceased owing to the outbreak of an epidemic and the subsequent lockdown by the government?”

Mr. Suren Uppal, Advocate answering the query and while opining said that in response to the issue, two situations arise namely:

  1. a) If some other vertical or verticals of the industry/commercial establishment/enterprise/organization is able function and it is not loss making or if it is possible for the employers to get the work done from home:

In such situations, the employers shall be mandated to comply with the order dated 29.03.2020 issued by the Ministry of Home Affairs and the applicable State Government or UT which requires mandatory payment of wages to the workmen for the period of lockdown.

  1. b) If it is not possible for the employer to get the work done from home, and there is cessation of work owing to which the said employer is financially and economically incapacitated and on the verge of closure, owing to the lock-down pursuant to COVID-19:

Significantly, the statutory legislations like Industrial Disputes Act, 1947, Payment of Wages Act, 1937, Code on Wages, 2019, Contract Labour Act, 1970, Inter-State Migrant Workmen Act, 1979, etc. do not envisage any situation of force-majeure or intervening circumstances like the present wherein the work is ceased owing to any epidemic or its implication relating to payment of wages. Even, vice-versa, there is no legislation in India mandating the payment of wages and salaries by the employer in case of forced shutting of businesses for a period of time due to force majeure conditions such as natural calamities.

Apart from the aforementioned, Mr. Uppal also submitted that although the financial sustenance of the industries/enterprises/companies/organizations is of paramount consideration, but the employers should take all measures to mitigate the losses and

  • Support the workmen/migrant workmen/casual works/contract workers who are unable to support and sustain during such challenges times as per the requirement of the Central Government, State Governments and on humanitarian grounds as termination or non-payment or reduction of wages would deepen the crisis and further weaken the financial condition.
  • Reduce or deduct the salaries of the employees who are not workmen, if the employer is able to break-even or support the business activities.
  • Keep the salaries/wages in abeyance for the period of lockdown in situations where owing to cessation of work, the company is incurring huge losses and on the verse of closure or become sick or insolvent.

Without an iota of doubt, it is being said by many experts that even if the situation provided by the outbreak of COVID-19 gets resolved, the economy which has taken a hit would require substantial steps from all shareholders including the Government to kick-start the economy and bring the businesses to the position of pre-COVID-19 crisis.

India Legal Bureau

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