COVID-19, Unlawful Termination and Withheld Wages: Employee’s Perspective

Introduction

Due to the overwhelming response to our previous blog COVID-19 and Termination of Employment: A Labour Law Perspective, we have decided to provide employees with answers to some frequently posed questions. If you are an employer looking for alternatives to layoffs, check out our latest blog Alternatives to Layoffs & Retrenchment During COVID-19.

The COVID-19 pandemic has caused widespread layoffs that have led to a substantial portion of the workforce being unemployed. In such a scenario it is important for employees to know what they are entitled to in the event that they are laid off. This article addresses this concern and aims to provide employees with some clarity on how to deal with unlawful termination, withheld wages and other layoff related issues.

What Are Employees Entitled to?

Depending on the establishment an individual is employed in, the law applicable to layoffs/retrenchment is as follows: –

• The Industrial Disputes Act, 1947
• The Shops & Establishments Act applicable to the particular State
• Contract of Employment/Service

The Industrial Disputes Act, 1947

Workmen employed in establishments falling under the definition of the industry under Section-2(j) of the Act may be either laid off or retrenched. Employees in managerial/supervisory positions are excluded from the scope of the enactment. It is important to note that the Act does not confer any right to layoff on employers, the same may only be inferred from the relevant employment contract or from the applicable Standing Order. If a workman has been in continuous service for 240 days within a period of 12 months from the day of lay-off, he is entitled to compensation as a statutory right. This means that in case of failure of an employer to provide the same, an employee is entitled to take legal recourse to recover the same. The quantum of compensation to be paid amounts to 50% of the basic wages and dearness allowance that a workman would be entitled to had he not been laid off. However, workmen must note that payment of compensation is not a condition precedent to layoff, which means that layoff can be undertaken, and compensation may be paid following the same.

Workmen under the Act are also entitled to 21 days’ prior notice in case of any adverse change in terms of employment that are listed under the Fourth Schedule of the Act. These terms include wages, social security contributions, compensatory allowances, hours of work, rest periods, leave and holidays etc.

The Shops & Establishments Act

States in India have enacted Shops and Establishments acts that generally provide for a notice period for termination of employment or wages to be paid in lieu of the notice period in case it is not provided. Therefore, to understand your rights as an employee, you must refer to the enactment applicable to your respective State.

For example, in Karnataka, the statutory notice period under Section-39 of the Act is one month or the wages for the same duration. This is applicable to employees who have completed six months of continuous service. Similarly, other states’ shops and establishments act provide for such a notice period and wages in lieu thereof.

Contract of Employment/Service 

The contract signed between an employer and an employee prior to the latter’s induction into a job or a position is known as a contract of employment. It contains stipulations relating to nature and conditions of employment that have been mutually agreed upon by both parties. It is also common practice for employers to include provisions relating to notice period and compensation due in case the same is not provided. Here it is important to note that in no case can the notice period in an employment contract be lower than that which is statutorily provided. However, if the contract stipulates a longer notice period and corresponding wages to be paid in lieu thereof, then it takes precedence over the statutory provisions.

Now that we have a basic understanding of what an employee’s rights are under applicable laws, let us examine some FAQs we received on our blog which might be helpful to other individuals as well.

Recent Bombay High Court Judgement In Premier Employees Union Case

One of the key issues, in this case, pertained to eligibility for payment of wages during the lockdown and the application of the ‘no work no pay principle’.

The High Court analyzed the provisions of the MHA order and the State Government resolution and found that they covered all categories of workers whether contractual, outsourced, temporary or daily wagers. They applied to industries, private organizations, companies, shops and establishments as well. The Court read the Central Government order and the Maharashtra Government resolution conjointly and noted that their intention was clearly to mitigate the hardship created by the lockdown. The Court pointed out that the essence of the measures was to ensure payment of full salary/wages by employers to employees/workers during the period where their establishments were closed, it was for this reason that the latter was deemed to be on duty.

To this end, the court concluded that the principle of no work no pay has no application during the period of forced closure imposed by the lockdown. The court noted that the same was acknowledged implicitly in the Maharashtra Gvernment’s resolution as workers were deemed to be on duty and thus the possibility of layoff or pay cut during lockdown was foreclosed.

Based on the above facts and findings by the court the following questions emerged:

• Could the Central Government order and Maharashtra Government resolution be invoked in a situation where the management and workmen are engaged in industrial adjudication relating to non-payment of wages and suspension of work much prior to closure of establishments due to lockdown? In other words where the related cause of action arose prior to the lockdown?

Ans. The court noted that wages had not been paid since May 2019 and that the suspension of operations notice came into effect on 03.03.2020. The latter was still sub judice when lockdown came into force on 24.03.2020 and is still pending final orders. Therefore, the court reached the conclusion that the claim of the workmen to wages will not be covered by the Central Government order and the Maharashtra Government resolution.

The court noted that the above-mentioned measures would only cover a situation where an employee/worker was in employment as on the day the lockdown was declared and had received salary/wages for the previous month i.e. the month immediately preceding lockdown. The court then proceeds to examine a hypothetical situation to explain this further.

• Say an employee/worker is not in employment and has not been paid wages for one year prior to the declaration of the lockdown, is such an individual still eligible to avail the benefit of the Central Government order and the Maharashtra Government resolution?

Ans. The court answered the above question in the negative because for an individual to be deemed to be on duty, he/she must have been on duty on the date when the lockdown was declared to be entitled to the continuity of salary/wages during the lockdown.

I have been terminated/forced to resign and my wages have been withheld by my employer during the lockdown, what can I do?

It is well established that the Ministry of Home Affairs, as well as the Ministry of Labour & Employment and Ministry of Corporate Affairs, had directed employers to refrain from terminating the employment of employees. While the two latter notifications were advisory in nature, Order No. 40-3/2020-DM-I(A) issued by the Ministry of Home Affairs in the exercise of its powers under Section-10(2)(l) of the Disaster Management Act, 2005 directing all employers whether in industries or shops and commercial establishments to make payment of wages on the due date without any deductions for the period their establishments are under lockdown, is binding.

In such a situation you have the following remedies: –

• Filing a complaint with your State’s Labour Department

While this might seem like a feasible idea at first it often leads to little personal benefit for an employee. Judicial or even Arbitration/Conciliation proceedings are time-consuming and involve a significant amount of expenditure on part of the employee. Moreover, the adversarial procedure leads to a breakdown of relations and one-sided outcomes. Therefore, this should be the last resort for any employee who has been forced to resign/wrongfully terminated.

• Formal Complaint/Grievance Letter to Human Resource (HR) 

It is essential for an employee to exhaust this course of action before resorting to anything else. You can write a letter that puts forth your case and lists your grievances, you may also provide for the remedy/resolution that you seek. If the answer from your HR department is unsatisfactory, then you may resort to other remedies.

• Negotiation on unpaid wages between employees and employers

The interim order issued by the Supreme Court in the case of Ficus Pvt Ltd. & Ors. Vs. Union of India, recommends settlements being reached between employers and employees through voluntary negotiation. The advantage of such a remedy is that both parties explore the possibility of a solution without the interference of a third party. It allows both parties to express their relative positions freely and allows for greater understanding of the circumstances the other is placed in. It often leads to a cordial relationship being maintained even after the termination of employer-employee relations.

Conclusion

From the above it is clear eligibility for wages during lockdown depends on whether an employee was on duty on the date when the lockdown was declared. If the same is satisfied, that would mean they would be deemed to be on duty and thus entitled to the continuity of salary/wages during the lockdown. While this decision is confined in its applicability to the State of Maharashtra, it is definitely an indicator of how other High Courts might deal with similar questions.

On May 17^th the Ministry of Home Affairs released a notification that relaxed the obligation to mandatorily provide wages to employees, therefore we may assume that for the period between the first MHA Order and the May 17^th order, employees are eligible for salaries if they fulfill the above criteria, irrespective of whether they worked during this period or not.

Another important point to note is that negotiation and voluntary modes of mutual settlement must be resorted to before adopting adversarial means by approaching courts. This is due to the unique circumstances employers and employees find themselves in as well as the costs that are associated with the litigation route. There are also practical considerations such as the closure of courts and limited time for online hearings that make this an arduous course of action.

If you think the above points help you or your known community, please drop your thoughts in the comments below.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney. Simpliance makes no representations or warranties in relation to the information on this article.