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 lay off 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 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.
1. What are the consequences that would follow in case an employee is terminated during this Lockdown?
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. 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.
2. What is the suggestive measure that an employer must take during this Lockdown to stay operational and fulfil its business goals?
At the outset, it is advisable to ensure that the business/establishment is covered under the essential services to claim for 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.
3. Are employers mandated to pay wages in full to all employees irrespective of whether they have worked or not during this 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.
4. Can the wages for the month of March 2020 be paid later than the 7th of April, 2020?
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 a 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, wherein all such establishments that were temporarily closed due to Lockdown, depending on their situation, were directed to make such adequate arrangements to ensure the payments are provided to the workers on March 30 and 31 or April 3 and 4, 2020.
5. Are employers, being an industry, also required to pay their employees in full, provided that an employee of an industry cannot work from home thereby leading to a standstill of the operation?
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, 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 the closure during the Lockdown.
6. Are there any specific formats/policies that the employers must follow while implementing work from home?
It is important for an employer to understand that the work from home brings with itself 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.
7. Can the employers enforce this Lockdown as leave (paid and unpaid as applicable) for each employee?
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.
8. What are certain suggestive measures during this Lockdown that may be considered by employers to reduce their cost?
Lockdown has not only brought economic crisis with itself but has also brought in such dilemmas and a ‘never seen before situation’. We recommend the employers to take into consideration, following measures to reduce or mitigate their costs:
- Business hours: Employers can contemplate reducing the number of hours of work thereby making a consequential reduction in the wage of the employee. However, it is pertinent to note that for the purpose of change in hours of work, if an employee is a workman as per Industrial Disputes Act, 1947 (“ID Act”), at least 21 days prior notice shall be given for such change. In the case of non-workmen, such change would be governed by the agreement between the employer and the employee. If the agreement does not provide for any specific clause providing the employer with the unilateral right to make such change, the employer would require the consent of the employee.
- Layoff: Lay off shall mean refusal by the employer to employ workmen on
account of a shortage of any resources or raw-materials, accumulation of
stocks, breakdown of machinery or natural calamity. For the purpose of Lay-off,
the ID Act provides for the following essentials
- There must be failure, refusal or inability on the part of the employer to give employment to a workman.
- The failure, refusal or inability should be on account of a shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery, or natural calamity, or any other connected reason.
- The workman’s name should be on the muster rolls of the industrial establishment.
- The workman should not have been retrenched.
It is pertinent to mention here that when a workman has completed a 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 the 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: Employer may also at its discretion, governed by the agreement between the employer and employee and the internal policies, hold on 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.
9. For employers falling under essential services, can leave be forced upon employees that the employers deem fit to have been infected or likely to be infected due to their travel history/existing symptoms of illness?
Various states have issued notification/order asking the employers to provide 28 days 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, 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.
10. Are employers required to compensate employees who have contracted the virus?
No. There has not been any order/notification regarding compensation by the employer. Therefore, the same stands regulated by the employer’s internal policies.
11. Can CSR funds be spent on activities related to Covid-19 disease? If yes, whether the programmes or projects of CSR of an employer for the employees of the company and their families would form part of Corporate Social Responsibility?
Yes, spending of CSR funds for Covid-19 is an eligible CSR activity. 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 of the Companies Act, 2013.
However, any programmes/projects of CSR that only benefit the employees of the company and their families shall not be considered as CSR activity and therefore would not qualify under Section 135 of the Companies Act, 2013.
12. Can the employers demand medical reports of employees whether sick or not to ensure the overall safety of the establishment? If yes, are there any specific measures to be taken by the employer for the privacy of such data?
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:
- Consent of the employee is obtained prior to procuring such certificate
- The information is treated as confidential information and shared within the business only on a need-to-know basis.
- The employee is made aware of the intention of usage of such information, intended recipients of such information and the details of its storage.
13. Are employers mandated to report to the government or appropriate authority regarding the employees who the employer thinks may have coronavirus due to symptoms of illness or any other reason?
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.
14. Can an employee falling under the essential service ambit, refuse to report to work during this Lockdown?
No. The employee cannot refuse to report to work. However, the employee has the discretion of taking its paid/sick leaves, subject to requisite approvals and the internal policies of the employer.
15. What happens if an employee is infected due to reporting to work (for essential services)?
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.
16. What are the ways in which an employer can consider terminating its employees?
Central Government and various state governments have issued numerous circulars/notifications stating that the employees of all units/establishment 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 “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.
- The workman must be in continuous service for not less than one year. Continuous service would mean the workman was employed for a period of at least twelve (12) calendar months and during those twelve (12) calendar months he had worked at least two hundred and forty (240) days. It is enough that he has worked for 240 days in a period of 12 months, it is not necessary that he should have been in the service of the employer for one whole year. In case the employee has been employed for a period of less than one year, the retrenchment process as per the Act would then not apply on such a workman and the employer shall be free to retrench such employee as per the contract.
- The workman has been given one-month’ s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice.
- The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months; and
- Notice to the Labour Commissioner has to be served by the employer informing him of such retrenchment and the reason behind the same.
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 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.
17. What are the consequences that would follow in case an employee is terminated during this Lockdown?
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 to conduct a domestic enquiry for the purpose of
investigating the validity of such termination. However, the employee may challenge the termination before the appropriate labour 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.